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.