Sec. 383.106. LIMITATION ON ADOPTION OF TAX. (a) A district may adopt a tax under this subchapter only if as a result of adoption of the tax the combined rate of all local sales and use taxes imposed by political subdivisions having territory in the district will not exceed two percent.

(b) If, as a result of the imposition or increase in a sales and use tax by a municipality in which there is located a district with an existing sales and use tax or as a result of the annexation by a municipality of the territory in a district with an existing sales and use tax, the overlapping local sales and use taxes in the area in the district will exceed two percent, the district's sales and use tax rate is automatically reduced to a rate that when added to the combined rate of local sales and use taxes will equal two percent.

(c) If a district's tax rate is reduced in accordance with Subsection (b), the municipality shall make payments to the district equal to the amounts that would have been collected by the district had the municipality not imposed or increased its sales and use tax or annexed the area in the district, less amounts that the district collects following the municipality's levy of or increase in its sales and use tax or annexation of the area in the district. The payment shall be made by the municipality to the district within 10 days after the date of receipt of the money from the comptroller's office and shall continue only for so long as any bonds of the district are outstanding.

Added by Acts 1995, 74th Leg., ch. 995, Sec. 5, eff. Sept. 1, 1997. Renumbered from Tax Code Sec. 312.637(h) and amended by Acts 1997, 75th Leg., ch. 165, Sec. 23.05, eff. Sept. 1, 1997.