With most policy work done, the Legislature heads into the last week of session focused on budgets and taxes

Friday was the opposite-house floor cutoff, and most of the remaining bills reported below received floor action. If amended in the opposite house, the bills must return to their chamber of origin for concurrence, dispute, or conference committee to iron out differences. If passed in the form they came over, the bills head straight to the Governor for approval. Now that less than a week remains in the session, all remaining action will focus on budgets and taxes, with the House Finance Committee having met Saturday morning to consider several tax proposals assumed in the House and Senate operating budget proposals, including legislation to increase the tobacco tax, repeal the data center tax exemption, and repeal the tax preference for drug wholesalers. The committee ultimately advanced the bills related to the data center and drug wholesaler tax preferences but did not take action on the tobacco tax proposal. It is unclear how inaction on the tobacco tax bill could impact the budget negotiations.  The Senate Ways & Means Committee is meeting Monday and Tuesday. From there, it will be long days on the floor culminating in sine die adjournment on Thursday, March 12th.

Below are selected highlights from the past week, and a look at what’s to come in the final week. Additional bills being tracked, including those with upcoming action, are detailed in the attached bill report.

Taxes

• Income Tax: SB 6346 – the 9.9% “Millionaire’s Tax” – having cleared the Finance Committee the previous Friday, sat on the House floor all week while votes were counted and negotiations with Governor Ferguson took place. On Friday morning, a new striking amendment was released, with the Governor’s stated support, and the bill is rumored to be set for a floor vote on Monday. The striking amendment mostly re-allocates spending from the anticipated revenue to more of Governor Ferguson’s priorities, such as free meals for all K-12 students, an expanded Working Families Tax Credit and small business B&O relief, and the like. Notably, the proposal contains the Senate’s repeal of last year’s expanded sales tax on services, apart from advertising, and moves up that repeal to 2029. A related provision provides relief to non-profits, including trade associations, currently subject to sales tax on presentations and educational programming, and makes that repeal effective July 1 of this year. A coalition of business organizations primarily representing small business continues to strongly oppose the measure, citing insufficient protection of pass-through income. It is not confirmed that enough moderate House Democrats, wary of the proposal, have dropped their concerns or opposition, and internal vote-counting and whipping is transpiring through the weekend.    
• Local Government Taxing Authority:  HB 2442, expanding the use of local property tax revenues, authorizing a new 0.01 percent sales tax increase to fund child and family services, and expanding the authorized use of sales tax revenue by counties and cities, passed the Senate on Thursday on a tight 27-22 vote with bipartisan opposition. Given amendments by the Ways & Means Committee, it heads back to the House for concurrence or dispute.
• B&O Insurance Tax Exemption Removal: HB 2487, overturning the Envolve case by expanding the B&O tax to cover more activities of insurance companies currently subject to the premium tax, passed the House late Friday on a 51-44 vote after 29 floor amendments were disposed of. In the end, the bill was amended with a new striking amendment clarifying the exemption for annuity considerations, new intent language about avoiding double taxation, and some relief for insurers subject to the Advanced Computing Surcharge, as well as the ability to pay retroactive taxes on a payment plan. The bill heads to the Senate where it is set for public hearing in the Ways & Means Committee on Monday and a committee vote Tuesday.
• New Premium Tax Surcharge on Insurers: HB 2745, surcharging the insurance premium tax for one year from 2 percent to 2.75 percent to fund premium subsidies on the state healthcare exchange, was initially set for public hearing in the House Finance Committee this past Monday, but after an avalanche of opposition built over the previous weekend, it was pulled from hearing. This week, it momentarily showed up on the Senate Ways & Means hearing calendar for this coming Monday, but was pulled, citing an error. It appears dead for the session, but the desire for subsidy revenue remains very much alive.  

Sales Tax on Services

• SB 5814 Follow Up: SB 6113, the Department of Revenue’s “technical fix” bill, passed the House 92-4 on Friday, and heads back to the Senate for concurrence or dispute. This bill and its House companion at earlier stages of the process included some relief for associations subject to the sales tax for live online and in-person presentations, however, the latest House amendment removes these provisions. Rather, as noted above, they are being addressed in the income tax bill.    

Labor and Employment

• HB 2471, the NLRB “trigger” bill creating state-level labor relations regulation in the event federal law no longer pre-empts state law or the National Labor Relations Board declines or loses jurisdiction over labor disputes, passed the Senate on a 31-18 vote Wednesday, and has been delivered to the Governor for signature.
• HB 1155, banning non-compete agreements and limiting non-solicitation agreements, was voted off the Senate floor Thursday on a 30-19 vote. An amendment was adopted softening the non-solicitation restrictions, so the bill heads back to the House for concurrence or dispute.  
• HB 2105, the Attorney General’s Immigrant Worker Protection Act, requiring notice to current and former employees of a federal I-9 work eligibility audit, passed the Senate Thursday on a 27-21 vote. An amendment adopted in the Ways & Means Committee changed the 72-hour notice requirement to 5 business days and somewhat softened the penalties for non-compliance. It heads back to the House for concurrence or dispute.

Payroll-Tax-Funded Programs and Workers’ Compensation

• SB 5847, narrowing the Labor & Industries medical provider network and imposing penalties for employers found to have directed medical care, passed the House on Friday with a 67-28 vote, with floor amendments adopted requiring a trip back through the Senate for concurrence or dispute. The amendments addressed tangential issues elsewhere in the bill, and the Senate is likely to concur.
• SB 6136, requiring additional transparency in industrial insurance rate-setting, passed the House unanimously on Wednesday and heads to the Governor for signature.
• SB 5292, modifying the statutory basis for setting Paid Family & Medical Leave premium rates in favor of actuarial determination, passed the House Friday on a 95-1 vote, and heads to the Governor for signature.

Insurance

• SB 6248, adopting the NAIC model travel insurance regulation, passed the House Wednesday unanimously, and heads to the Governor for signature.  
• HB 2428, requiring proof of delivery for life insurance lapse notices, also passed the House unanimously on Wednesday and has been delivered to the Governor for signature.

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