BILL ANALYSIS



S.B. 345
By: Brown (Uher)
May 16, 1995
Committee Report (Amended)


BACKGROUND

Chapter 312, Tax Code, which authorizes tax abatements in a
reinvestment zone, expires September 1, 1995.  If allowed to
expire, cities, counties, and other local units of government will
no longer be able to offer tax abatements as incentives to attract
investments.  Additionally, there has been a reduction in the
growth of school district abatements since the enactment of 
SB 7 (73rd Regular Session).  SB 7 contained a provision
prohibiting the Comptroller from deducting abated value from market
value if the abatement was granted after May 31, 1993.

PURPOSE

S.B. 345 entitles an eligible person to a refund of state taxes for
school taxes paid on property that is subject to a tax abatement
agreement with a city or county under Chapter 312, Tax Code.  The
bill also extends the sunset date for the Property Redevelopment
and Tax Abatement Act to 2001.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is
expressly granted to the Comptroller of Public Accounts in SECTION
1 of the bill.

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 111, Tax Code, by adding Subchapter F,
as follows:

SUBCHAPTER F.  TAX REFUND FOR ECONOMIC DEVELOPMENT

Section 111.301.  REFUND OF STATE TAXES; APPLICATION FOR REFUND.  

     (a) Entitles an eligible person to a refund of state sales and
use taxes and state franchise      taxes paid in a calendar year
for which the person paid ad valorem taxes to a school      district for property in that year that meets certain criteria.

     (b) Provides that no refund will be made if the person makes
a payment in lieu of taxes    to a municipality or county during
the period of a tax abatement agreement between the    person and
the municipality or county.

     (c) Prohibits the amount of a refund from exceeding the amount
of net state sales and   state franchise taxes paid by the person,
after any applicable tax credit.  Entitles a person    to a refund
for five years or the duration of the tax abatement agreement
whichever is   less.  Prohibits a person from applying for a refund
after the date of the cancellation of   the agreement or the date
of relocation of the person's business outside the zone.

     (d) Sets forth requirements for a person or business to be
eligible for the tax refund.

     (e) Provides that application for the refund is to the
comptroller.  Sets forth information    that must be included in
the application.

     (f) Provides that a refund does not earn interest.


     (g) Requires a person applying for a refund to certify to the
comptroller that the person   complies with each term of the
agreement entered into with a municipality or county.

     (h) Prohibits the comptroller from acting on an application
until the relevant agreement  is on file with the comptroller and
the Texas Department of Commerce.

     (i) Prohibits the comptroller from acting on the refund
application until the person comes      into compliance if the
comptroller determines that the person applying for the refund is     not in compliance with the agreement.  Requires the
comptroller to notify the municipality  or county of the person's
noncompliance.

     (j) Authorizes the comptroller to grant a person not in
compliance a temporary waiver if   the comptroller determines that
the person's noncompliance is the result of a natural  disaster.

     (k) Authorizes the comptroller to conduct any audit determined
necessary for enforcement     or administration of this subchapter.

Section 111.302.  ISSUANCE OF TAX REFUND; AMOUNT OF REFUND.

     (a) Requires the comptroller to issue a refund for a tax year
in which the applicant has    paid the ad valorem taxes imposed by
a school district on the person's property.

     (b) Requires the refund, if the person qualifies for the
refund, to be issued before the    120th day after the date the
application is filed with the comptroller.

     (c) Provides that the amount of the refund is equal to 80% of
the portion of the ad    valorem taxes paid to a school district by
the person for the applicable tax year on the     property that the
person would not have been required to pay if the school district
had  entered into an agreement covering the property that included
the same terms as the    applicable municipal or county agreement.

Section 111.303.  RULES AND FORMS.  

     (a) Requires the comptroller, by rule, to adopt rules and
forms for the administration of    this subchapter.  Requires the
rules to include a schedule of the state taxes to which this     subchapter applies.

     (b) Requires the comptroller to provide without charge one
copy of the rules and forms   to each person applying for the
refund.

Section 111.304.  EVALUATION; ANNUAL REPORT.  Requires the
comptroller to submit an annual report to the legislature by
December 1, 1999, and December 1 of each subsequent year.  Sets
forth information to be included in the report.

SECTION 2.  Amends Section 312.005 (State Administration),
Subsection (a), Tax Code, to require a taxing unit that designates
a reinvestment zone or executes an agreement to deliver to the
department and to the comptroller before a certain date a report
providing, among other information: the guidelines and criteria
established for the zone, including subsequent amendments; a copy
of each agreement to which the taxing unit is a party; and any
other information required by the comptroller.  Deletes language
requiring information about the agreement to be included in the
report.

SECTION 3.  Amends Section 312.202 (Criteria for Reinvestment
Zone), Tax Code, regarding criteria for a reinvestment zone, to
delete specific criteria and allow the governing body to adopt any
criteria it deems reasonable.

SECTION 4.  Amends Section 312.205 (Specific Terms of Tax Abatement
Agreement), Subsection (a), Tax Code, to require an agreement under
Section 312.204 to contain, among other criteria: each term agreed
to by the owner of the property; require the owner of the property
to certify annually to the governing body of each taxing unit that
the owner is in compliance with each applicable term of the
agreement; and authorize the governing body of the municipality to
cancel or modify the agreement if the property owner fails to
comply with the agreement.

SECTION 5.  Amends Section 312.006 (Expiration Date), Tax Code, to
provide that this chapter expires September 1, 2001, rather than
1995, if not continued in effect.

SECTION 6.  (a) Effective date: September 1, 1995 [except as
provided by Subsection (b)].  Makes application of this Act
prospective beginning September 1, 1995.

(b) Effective date of Section 5: August 31, 1995.

SECTION 7.  Emergency clause.

EXPLANATION OF AMENDMENTS

COMMITTEE AMENDMENT #1 would reduce the eligibility threshold
regarding capitol improvements from  $10,000,000 to $5,000,000 in
order to qualify for a tax refund from the state.

COMMITTEE AMENDMENT #2 strikes Section 3 from the bill.  Section 3
deleted specific criteria designating a reinvestment zone and would
have instead allowed a governing body to adopt the criteria it
deemed reasonable.

COMMITTEE AMENDMENT #3 clarifies that the prohibition of a payment
or donation in lieu of taxes to the city or county found in Section
111.301(b) does not apply to payments pursuant to a contract with
an industrial district under Chapter 42, Local Government Code, or
to payments that do not in the aggregate exceed $5,000 in any year
of the abatement agreement.

SUMMARY OF COMMITTEE ACTION

Public notice was posted in accordance with the rules, and a public
hearing was held on May 9, 1995.  The committee considered S.B.
345, and Representative Uher explained the bill.  Without
objection, S.B. 345 was left pending before the committee.

On May 12, 1995, the committee convened in a formal meeting and
considered S.B. 345 on pending business.  The committee considered
3 amendments to the bill by Representative Finnell.  All 3 of the
amendments were adopted without objection.  By a record vote of 6
ayes, 0 nays, 0 present not voting and 5 absent, the committee
voted to report S.B. 345 to the House with amendments with the
recommendation that it do pass.

   Testimony received in favor of the bill (5/9/95):
     Kris Nielsen, representing herself
     Ravi K. Singhania, representing himself
     Phyllis Schneider, representing herself and the Tyler Economic
Development                Council, Inc.
     Dale Cummings, representing himself and the Texas Assn. of
Taxpayers
     Bill Allaway, representing the Texas Assn. of Taxpayers
     Rob Looney, representing the Texas Mid Continent Oil & Gas
Assn.
     Ron Dipprey, representing Dow Chemical North America
     Gary Pearson, representing BASF Corporation
     Phil Ritter, representing himself and Texas Instruments
Incorporated
     Joe Newman, representing himself and the Texas Economic
Development Council
     Wendell Westlake, representing himself and Dow Chemical
Company
     Kathryn K. Hillhouse, representing herself
     Michael White, representing the Greater Houston Partnership
     Dane Harris, representing the Texas Assn. of Business &
Chambers of Commerce
     Chris Shields, representing the Corpus Christi Business
Alliance and Alliance for            Quality Education
     Karin Richmond, representing herself