Texas Realtors Ready Attack on Professional Services Tax

A professional services tax, rejected a few years ago, is back on the table as state bean counters project a budgetary shortfall. It's somewhere between $2 billion to $10 billion, Stinson says, "depending on who you listen to."

Stinson and his taxation task force have been talking to state officials in a bid to avert a face-off when the legislature convenes. Stinson says talk always turns to a professional services tax or state income tax, a sure-fire political death warrant, when Texas coffers come up short.

TAR's task force is considering all options, but leaning right now toward lobbying hard for a corporate franchise tax revision to force LLPs to pay like everyone else. That tact too has failed in the past as newspapers and attorneys lobbied en masse to keep the exclusion. But, Stinson stresses, "we need to close that loophole." He says the state is losing a significant amount of money because LLPs aren't subject to the corporate franchise tax. Meanwhile, the LLP ranks are growing at a brisk pace.

As it stands, Texas professionals--medical, legal and real estate--pay a $200 annual professional fee in addition to license renewal costs. For a realtor, that means plunking down more than $500 every two years to renew a license.

Just last session, Rep. Rick Green of District 46 in San Marcos tried to get an 8.25% tax attached to real estate transactions. Green's bill failed as did the attempts in 1997 and the late 1980s to tax all professional services. Stinson says the task force will have a final report on a counterattack ready to present at TAR's annual convention scheduled for August in Houston.