BILL ANALYSIS



S.B. 1658
By: Gallegos (Coleman)
May 18, 1995
Committee Report (Unamended)


BACKGROUND

Subchapter C (Settlements, Refunds, and Credits), Chapter 111, Tax
Code, authorizes the Comptroller to issue tax credits in certain
situations.  Chapter 55 (Financing Permanent Improvements),
Education Code, establishes procedures for institutions of higher
education to acquire, purchase, construct and operate any property,
buildings or structures and the methods to pay for those
improvements.  Other than gift, there is often no other method for
institutions of higher education to obtain property for expansion
without incurring debt (issuing revenue bonds).

Currently there is no method for the state to issue tax credits for
an institution of higher education to acquire real property.

PURPOSE

This bill allows a landowner to donate property to a certain
institution of higher education in exchange for a tax credit from
the state in the amount of 50% of the fair market value of the land
against the payment of franchise taxes or sales & use taxes .

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency, or institution.

SECTION BY SECTION ANALYSIS

Section 1. Amends Subchapter C, Chapter 111, Tax Code, by adding
           Section 111.110 TAX CREDIT FOR REAL PROPERTY CONTRIBUTED
           TO AN INSTITUTION OF HIGHER EDUCATION.

     (a) Authorizes the comptroller to issue a credit against the
     payment of franchise taxes or sales & use taxes in exchange
     for the donation of real property to an institution of higher
     education.

     (b) Credits must be used within 20 years of receipt.

     (c) Limits the amount of credit claimed by a taxpayer for any
     one calendar year, to 5% of the total credit issued to that
     taxpayer.

     (d) Requires the taxpayer to self-report the status of
     credits.  Reports must contain: (1) the original amount of the
     credit and its date of issue; (2) the total amount of credit
     previously claimed by the taxpayer; (3) the amount of credit
     claimed on the attached return; (4) the remaining unused
     credit amount; and (5) the calendar year in which the credit
     expires.

     (e) Allows the comptroller to recover an amount erroneously
     claimed as a credit in a jeopardy or deficiency determination
     before the 4th anniversary of the date on which the erroneous
     claim is filed.


SECTION 2. Amends Chapter 55, Education Code, by adding Subchapter
           D, TAX CREDIT FOR CONTRIBUTED REAL PROPERTY.

     55.51  PETITION FOR TAX CREDIT; QUALIFICATIONS.  (a) Requires
     a public college or university to determine that revenue bond
     financing is not available for the acquisition of real
     property and allows for petitioning of the Texas Higher
     Education Coordinating Board for the issuance of a tax credit
     to the owner of such real estate in exchange for the owner's
     transfer of the property.

     (b) Establishes taxpayer qualifications: (1) the parcel of
     real estate is located in a county with a population of more
     than 2,500,000; (2) the institution seeking ownership of the
     property has more than 29,000 students at its facility in the
     county; and (3) the property is transferred on or before
     August 31, 1996.

     55.52  TAX CREDIT PETITION.  Requires the petition to show:
     (1) the desired parcel has been included in the most recent
     campus facilities plan or similar master plan; (2) the desired
     parcel is being offered or proposed for sale on the open
     market; (3) an estimate of the current fair market value of
     the parcel(s); and (4) the basis for the determination that
     revenue bond funding may not be available.  The estimate of
     fair market value shall be completed and signed by an
     independent certified real estate appraiser with at least 5
     years experience.

     55.53  RULING BY COORDINATING BOARD.  Establishes procedures
     for Coordinating Board action.

     (a) Establishes that the Coordinating Board shall make a
     ruling either granting or denying an application within 90
     days.

     (b) Prior to the decision to grant or deny an application, the
     coordinating board shall receive from the comptroller a report
     determining: (1) whether the estimate of fair market value in
     the petition is derived in a reasonable and professional
     manner; (2) whether the property owner currently owes any
     outstanding taxes; and (3) whether the owner of the real
     estate qualifies for the credit.

     (c) The Coordinating Board shall issue written notice of its
     ruling on a petition within 5 days.

     55.54  ISSUANCE OF TAX CREDIT.  (a) Requires the comptroller
     to issue a written notice within ten days of the petition
     being granted.  The tax credit is equal to 50 percent of the
     fair market value of the property, as reported on the
     petition, conditioned upon the completion of the transfer of
     the property on or before August 31, 1996.

     (b) Requires the property owner to file a report with the
     comptroller stating that the property has been transferred
     before August 31, 1996, before the owner can claim any tax
     credits.

     55.55 EXPIRATION DATE.  States that this subchapter expires
     January 1, 1997.

SECTION 3. Effective Date: September 1, 1995.

SECTION 4. Emergency Clause.

SUMMARY OF COMMITTEE ACTION

On May 18, 1995, the committee convened in a formal meeting and
considered S.B. 1658.  By a record vote of 8 ayes, 0 nays, 0
present not voting and 3 absent, the committee voted to report S.B.
1658 to the House without amendment with the recommendation that it
do pass.