BILL ANALYSIS S.B. 1658 By: Gallegos Finance 05-10-95 Committee Report (Amended) BACKGROUND Current law does not allow certain institutions of higher education to acquire real estate in exchange for a state sales or franchise tax credit granted to the property owner. PURPOSE As proposed, S.B. 1658 allows an institution of higher education to petition the Texas Higher Education Coordinating Board for approval to obtain the desired real estate in which the comptroller would be required to grant a property owner a franchise or sales tax credit within 10 days of the approval. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 111C, Tax Code, by adding Section 111.110, as follows: Sec. 111.110. TAX CREDIT FOR REAL PROPERTY CONTRIBUTED TO AN INSTITUTION OF HIGHER EDUCATION. (a) Requires the comptroller to issue a credit to be used by a taxpayer who qualifies for the credit against the payment of a tax imposed on the taxpayer for the franchise tax under Chapter 171 or if the taxpayer holds a direct payment permit for the sales and use tax under Chapter 151, for the tax, subject to the provisions of Chapter 55D, Education Code. (b) Provides that the credit applies to a tax originally due on or after the date the credit is issued but not later than the end of the 20th calendar year following the calendar year in which the credit was issued. (c) Prohibits a taxpayer from claiming a credit issued under this section in a calendar year in an amount greater than five percent of the total credit issued to that taxpayer. (d) Requires a taxpayer to include a statement containing certain information with a return or report showing an amount of tax due against which a taxpayer claims a credit under this section. (e) Authorizes the comptroller to recover an amount erroneously claimed as a credit in a jeopardy or deficiency determination issued before the fourth anniversary of the date on which the erroneous claim is filed. SECTION 2. Amends Chapter 55, Education Code, by adding Subchapter D, as follows: SUBCHAPTER D. TAX CREDIT FOR CONTRIBUTED REAL PROPERTY Sec. 55.51. PETITION FOR TAX CREDIT; QUALIFICATIONS. (a) Authorizes the governing board to petition the Texas Higher Education Coordinating Board (coordinating board), in accordance with the rules and regulations adopted under Section 61.027, for the issuance of a tax credit to the owner of the real estate in the amount provided by this subchapter in exchange for the owner's transfer of the parcel of real estate to the institution if the governing board of an institution determines that the funds to acquire a parcel of real estate may not be provided through the issuance of revenue bonds pursuant to this chapter. (b) Authorizes a taxpayer to qualify for a tax credit under this subchapter under certain conditions. Sec. 55.52. TAX CREDIT PETITION. (a) Requires the governing board to show or provide certain information in the petition before the coordinating board authorized by Section 55.51. (b) Requires the petition to include a fair market valuation study by an independent, certified real estate appraiser with not less than five years experience. Sec. 55.53. RULING BY COORDINATING BOARD. (a) Requires the coordinating board, in accordance with the rules and regulations adopted under Section 61.027, to grant or to deny the petition by the 90th day after the date the coordinating board receives a petition authorized by Section 55.51. (b) Requires the coordinating board to request, receive, and consider a report from the comptroller indicating certain information prior to deciding whether to grant or deny the petition. (c) Requires the coordinating board to issue a written notice of its ruling on a petition authorized by Section 55.51 within five days of such ruling and deliver its decision to the petitioning institution and to the comptroller. Sec. 55.54. ISSUANCE OF TAX CREDIT. (a) Requires the comptroller to issue a written notice to the owner of the parcel of real estate that a tax credit in an amount equal to 50 percent of the fair market value reported on the petition has been granted conditioned on the completion of the transfer of the parcel to the petitioning institution on or before August 31, 1996. (b) Prohibits the owner from claiming a tax credit before the owner files with the comptroller a statement signed by the property owner and the petitioning institution that the property transfer has been completed on or before August 31, 1996. Sec. 55.55. EXPIRATION DATE. Provides that this subchapter expires January 1, 1997. SECTION 3. Effective date: September 1, 1995. SECTION 4. Emergency clause.