Enrolled Bill Summary

            Senate Bill 441 makes changes to the Tax Code relating to tax exemptions and credits. The act exempts from sales and use taxation blood glucose monitoring strips and certain over-the-counter drugs and medication, exempts Internet access service in an amount not to exceed the first $25 of a monthly charge, and exempts 20 percent of the value of data processing services and information services. It establishes a three-day exemption for purchases of certain clothing and footwear, starting on the first Friday of each August. Beginning in 2000, a local taxing authority may repeal the local tax portion of the clothing and footwear exemption. The act establishes repeal and tax reinstatement procedures for this and any other sales and use tax exemptions for which state law allows local repeal.

            Franchise tax provisions expand the exemption for small corporations to include those whose gross receipts total less than $150,000. The comptroller may require such a corporation to file an abbreviated information report but may not require it to report or compute its earned surplus or taxable capital.

            New code subchapters provide franchise tax credits for research and development, job creation, qualified capital investments, contributions to school-age child care, and day care provision to a corporation's employees. The first three credits expire at the end of 2009, and the maximum credit for the three is 50 percent of the tax due. A corporation is eligible for the research and development credit or job creation credit, but not both, and similarly may receive only the capital investment credit or an enterprise zone franchise tax reduction. The research and development credit is doubled for research and development in a strategic investment area, defined to include counties with high unemployment and low per-capita income and certain federally designated communities. The job creation credit applies to activity in certain locations, including strategic investment areas, by qualified businesses, in specified industries, that meet wage, group health benefit, and other criteria. Corporations that transfer jobs only intrastate do not qualify. The capital investment credit applies to certain investments of $500,000 or more by corporations meeting wage, group health benefit, and other criteria.

            New reporting and informational requirements are imposed on the comptroller relating to exemptions and credits contained in the act.

            Clothing and footwear provisions take effect June 3, 1999. Franchise tax provisions, except for those related to the comptroller's report on the small corporation exemption expansion, take effect January 1, 2000. The exemptions on glucose strips and over-the-counter drugs and medications take effect April 1, 2000. The remainder of the act takes effect October 1, 1999.