BILL ANALYSIS C.S.S.B. 345 By: Brown Finance 04-25-95 Committee Report (Substituted) BACKGROUND Tax abatements work as an incentive to bring businesses into this state. The state auditor recently concluded that tax abatements have been one of the most successful incentives in affecting business location decisions. The Property Redevelopment Tax Abatement Act expires on September 1, 1995. PURPOSE As proposed, C.S.S.B. 345 entitles an eligible person to a refund of state sales and use taxes and state franchise taxes for taxes paid on property in a reinvestment zone. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the state comptroller of public accounts under SECTION 1 (Section 111.304(a), Tax Code) of this 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 Sec. 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) 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 (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. (c) Sets forth requirements for a person or business to be eligible for the tax refund. (d) Provides that application for the refund is to the comptroller. Sets forth information that must be included in the application. (e) Requires the comptroller to make a refund in an amount equal to 80 percent of the amount shown on the state tax refund voucher (voucher) issued to a person under Section 111.303. Provides that a refund amount does not earn interest. (f) 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. (g) Prohibits the comptroller from acting on an application until the relevant agreement is on file with the comptroller and the Texas Department of Commerce (department). (h) 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. (i) 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. (j) Authorizes the comptroller to conduct any audit determined necessary for enforcement or administration of this subchapter. Sec. 111.302. APPLICATION FOR TAX REFUND VOUCHER. (a) Authorizes a person to apply to the comptroller for a voucher. (b) Sets forth requirements of the application. Sec. 111.303. ISSUANCE OF TAX REFUND VOUCHER; AMOUNT OF VOUCHER. (a) Requires the comptroller to issue a voucher 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 voucher, if the person qualifies for the voucher, to be issued before the 90th day after the date the application is filed with the comptroller. (c) Provides that the amount of the voucher is equal to 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. Sec. 111.304. 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. Sec. 111.305. 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(a), Tax Code, to require a taxing unit that designates a reinvestment zone (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, Tax Code, to require an area to be in the judgment of the governing body reasonably likely as a result of the designation to contribute to the economic development of the municipality in order to be designated as a zone. Deletes language regarding criteria that must be met for an area to be designated as a zone. SECTION 4. Amends Section 312.205(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, Tax Code, to provide that this chapter expires September 1, 2003, rather than 1995, if not continued in effect. SECTION 6. (a) Effective date: September 1, 1995. Makes application of this Act prospective beginning September 1,1995. (b) Effective date of Section 5: August 31, 1995. SECTION 7. Emergency clause.