1-1  By:  Brown, Patterson                                  S.B. No. 345
    1-2        (In the Senate - Filed January 27, 1995; January 30, 1995,
    1-3  read first time and referred to Committee on Finance;
    1-4  April 25, 1995, reported adversely, with favorable Committee
    1-5  Substitute by the following vote:  Yeas 12, Nays 0; April 25, 1995,
    1-6  sent to printer.)
    1-7  COMMITTEE SUBSTITUTE FOR S.B. No. 345                    By:  Brown
    1-8                         A BILL TO BE ENTITLED
    1-9                                AN ACT
   1-10  relating to tax abatement, reinvestment zones, and the refund of
   1-11  certain taxes by the comptroller to reimburse certain taxes paid on
   1-12  property in a reinvestment zone.
   1-13        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
   1-14        SECTION 1.  Chapter 111, Tax Code, is amended by adding
   1-15  Subchapter F to read as follows:
   1-16          SUBCHAPTER F.  TAX REFUND FOR ECONOMIC DEVELOPMENT
   1-17        Sec. 111.301.  REFUND OF STATE TAXES; APPLICATION FOR REFUND.
   1-18  (a)  An eligible person is entitled to a refund of state sales and
   1-19  use taxes imposed under Chapter 151 and state franchise taxes
   1-20  imposed under Chapter 171 paid in a calendar year for which the
   1-21  person paid ad valorem taxes to a school district on property that
   1-22  in that year is:
   1-23              (1)  located in a reinvestment zone established under
   1-24  Chapter 312;
   1-25              (2)  exempt in whole or in part from the payment of ad
   1-26  valorem taxes imposed by a municipality or a county under a tax
   1-27  abatement agreement entered into with the municipality or county
   1-28  under Chapter 312; and
   1-29              (3)  not subject to a tax abatement agreement entered
   1-30  into by the school district.
   1-31        (b)  The amount of a refund may not exceed the amount of net
   1-32  state sales and use and state franchise taxes paid by the person,
   1-33  after any applicable tax credit, in that year.  A person is
   1-34  entitled to a refund under this section for the lesser of five
   1-35  years or the duration of the tax abatement agreement.  If the tax
   1-36  abatement agreement is cancelled or the person relocates the
   1-37  person's business outside the zone, a person may not apply for a
   1-38  refund after the date of the cancellation or the date of the
   1-39  relocation, as applicable.
   1-40        (c)  To be eligible for the refund:
   1-41              (1)  a person must have:
   1-42                    (A)  established a new business in the
   1-43  reinvestment zone;
   1-44                    (B)  expanded an existing business located in the
   1-45  reinvestment zone; or
   1-46                    (C)  modernized an existing business located in
   1-47  the reinvestment zone to retain jobs of employees of the business;
   1-48              (2)  that business must have had:
   1-49                    (A)  since the date the person entered into the
   1-50  tax abatement agreement with the municipality or county, an
   1-51  increase in the business's payroll of $3,000,000, specific to
   1-52  property located in this state according to records filed by the
   1-53  business with the Texas Employment Commission; or
   1-54                    (B)  since an initial comparison year beginning
   1-55  on or after January 1, 1996, an increase of at least $10,000,000 in
   1-56  the appraised value of the business's property subject to the tax
   1-57  abatement agreement with the municipality or county according to
   1-58  the appraisal rolls; and
   1-59              (3)  that person must have furnished the comptroller
   1-60  with a copy of the tax abatement agreement entered into by the
   1-61  person with the municipality or county.
   1-62        (d)  Application for the refund is to the comptroller.  The
   1-63  application must:
   1-64              (1)  include the state tax refund voucher issued to the
   1-65  person under Section 111.303; and
   1-66              (2)  have attached a tax receipt from the assessor and
   1-67  collector of taxes for the school district showing full payment of
   1-68  ad valorem taxes to the school district for the tax year for which
    2-1  the refund is sought.
    2-2        (e)  The comptroller shall make a refund under this section
    2-3  in an amount equal to 80 percent of the amount shown on the voucher
    2-4  issued to the person under Section 111.303.  A refund amount
    2-5  payable under this subchapter does not earn interest.
    2-6        (f)  A person applying for a refund must certify to the
    2-7  comptroller that the person is in compliance with each term of the
    2-8  tax abatement agreement entered into with the municipality or
    2-9  county.
   2-10        (g)  If the relevant tax abatement agreement has not been
   2-11  filed with the comptroller and the Texas Department of Commerce,
   2-12  the comptroller may not act on the application until the agreement
   2-13  is on file.
   2-14        (h)  If, after a review or audit, the comptroller determines
   2-15  that the person applying for the refund is not in compliance with
   2-16  each term of the appropriate tax abatement agreement, the
   2-17  comptroller may not act on the refund application until the person
   2-18  comes into compliance and shall notify the municipality or county
   2-19  of the person's noncompliance.
   2-20        (i)  The comptroller may grant to a person who is not in
   2-21  compliance with a tax abatement agreement a temporary waiver if the
   2-22  comptroller determines that the person's noncompliance is the
   2-23  result of a natural disaster.
   2-24        (j)  The comptroller may conduct any audit that the
   2-25  comptroller determines necessary for the enforcement or
   2-26  administration of this subchapter.
   2-27        Sec. 111.302.  APPLICATION FOR TAX REFUND VOUCHER.  (a)  A
   2-28  person may apply to the comptroller for a state tax refund voucher.
   2-29        (b)  The application must:
   2-30              (1)  be made on the form prescribed by the comptroller;
   2-31              (2)  include sufficient information for the comptroller
   2-32  to determine the amount of school taxes paid on the property for a
   2-33  tax year; and
   2-34              (3)  contain the amount of the voucher under Section
   2-35  111.303(c).
   2-36        Sec. 111.303.  ISSUANCE OF TAX REFUND VOUCHER; AMOUNT OF
   2-37  VOUCHER.  (a)  The comptroller shall issue a tax refund voucher to
   2-38  a person for a tax year in which the person applying has paid the
   2-39  ad valorem taxes imposed by a school district on property of the
   2-40  person described by Section 111.301(a).
   2-41        (b)  If the person qualifies for the voucher, the voucher
   2-42  shall be issued before the 90th day after the date the application
   2-43  is filed with the comptroller.
   2-44        (c)  The amount of a tax refund voucher is equal to the
   2-45  portion of the ad valorem taxes paid to a school district by the
   2-46  person for the applicable tax year on the property that the person
   2-47  would not have been required to pay if the school district had
   2-48  entered into a tax abatement agreement covering the property that
   2-49  included the same terms, including terms governing the portion of
   2-50  the property that is to be exempt from taxation under the
   2-51  agreement, as the applicable municipal or county tax abatement
   2-52  agreement.
   2-53        Sec. 111.304.  RULES AND FORMS.  (a)  The comptroller by rule
   2-54  shall adopt rules and forms for the administration of this
   2-55  subchapter.  The rules must include a schedule of the state taxes
   2-56  to which this subchapter applies.
   2-57        (b)  The comptroller shall provide without charge one copy of
   2-58  the rules and forms to each person applying for a refund under this
   2-59  subchapter.
   2-60        Sec. 111.305.  EVALUATION; ANNUAL REPORT.  Not later than
   2-61  December 1, 1999, and December 1 of each subsequent year, the
   2-62  comptroller shall submit an annual report to the legislature.  The
   2-63  report:
   2-64              (1)  must document the applications for refunds filed
   2-65  with the comptroller under this subchapter;
   2-66              (2)  must document the refunds paid by the comptroller
   2-67  under this chapter;
   2-68              (3)  must contain relevant information obtained from
   2-69  the Texas Department of Commerce, including information to
   2-70  demonstrate the relationship between tax refunds under this
    3-1  subchapter and the economy; and
    3-2              (4)  may include any other relevant information that
    3-3  the comptroller determines is applicable to this subchapter or to
    3-4  Chapter 312.
    3-5        SECTION 2.  Subsection (a), Section 312.005, Tax Code, is
    3-6  amended to read as follows:
    3-7        (a)  The Texas Department of Commerce shall maintain a
    3-8  central registry of reinvestment zones designated under this
    3-9  chapter and of ad valorem tax abatement agreements executed under
   3-10  this chapter.  Each taxing unit that designates a reinvestment zone
   3-11  or executes a tax abatement agreement under this chapter shall
   3-12  deliver to the department and to the comptroller before April 1 of
   3-13  the year following the year in which the zone is designated or the
   3-14  agreement is executed a report providing the following information:
   3-15              (1)  for a reinvestment zone, a general description of
   3-16  the zone, including its size, the types of property located in it,
   3-17  <and> its duration, and the guidelines and criteria established for
   3-18  the reinvestment zone under Section 312.002, including subsequent
   3-19  amendments and modifications of the guidelines or criteria; <and>
   3-20              (2)  <for> a copy of each tax abatement agreement to
   3-21  which the taxing unit is a party; and
   3-22              (3)  any other information required by the comptroller
   3-23  to administer Subchapter F, Chapter 111<, the parties to the
   3-24  agreement, a general description of the property and the
   3-25  improvements or repairs to be made under the agreement, the portion
   3-26  of the property to be exempted, and duration of the agreement>.
   3-27        SECTION 3.  Section 312.202, Tax Code, is amended to read as
   3-28  follows:
   3-29        Sec. 312.202.  Criteria for Reinvestment Zone.  <(a)>  To be
   3-30  designated as a reinvestment zone under this subchapter, an area
   3-31  must<:>
   3-32              <(1)  substantially arrest or impair the sound growth
   3-33  of the municipality creating the zone, retard the provision of
   3-34  housing accommodations, or constitute an economic or social
   3-35  liability and be a menace to the public health, safety, morals, or
   3-36  welfare in its present condition and use because of the presence
   3-37  of:>
   3-38                    <(A)  a substantial number of substandard, slum,
   3-39  deteriorated, or deteriorating structures;>
   3-40                    <(B)  the predominance of defective or inadequate
   3-41  sidewalks or streets;>
   3-42                    <(C)  faulty size, adequacy, accessibility, or
   3-43  usefulness of lots;>
   3-44                    <(D)  unsanitary or unsafe conditions;>
   3-45                    <(E)  the deterioration of site or other
   3-46  improvements;>
   3-47                    <(F)  tax or special assessment delinquency
   3-48  exceeding the fair value of the land;>
   3-49                    <(G)  defective or unusual conditions of title;>
   3-50                    <(H)  conditions that endanger life or property
   3-51  by fire or other cause; or>
   3-52                    <(I)  any combination of these factors;>
   3-53              <(2)  be predominantly open and, because of obsolete
   3-54  platting, deterioration of structures or site improvements, or
   3-55  other factors, substantially impair or arrest the sound growth of
   3-56  the municipality;>
   3-57              <(3)  be in a federally assisted new community located
   3-58  in a home-rule municipality or in an area immediately adjacent to a
   3-59  federally assisted new community located in a home-rule
   3-60  municipality;>
   3-61              <(4)  be located entirely in an area that meets the
   3-62  requirements for federal assistance under Section 119 of the
   3-63  Housing and Community Development Act of 1974 (42 U.S.C. Section
   3-64  5318);>
   3-65              <(5)  encompass signs, billboards, or other outdoor
   3-66  advertising structures designated by the governing body of the
   3-67  municipality for relocation, reconstruction, or removal for the
   3-68  purpose of enhancing the physical environment of the municipality,
   3-69  which the legislature declares to be a public purpose; or>
   3-70              <(6)>  be in the judgment of the governing body
    4-1  reasonably likely as a result of the designation to contribute to
    4-2  the <retention or expansion of primary employment or to attract
    4-3  major investment in the zone that would be a benefit to the
    4-4  property and that would contribute to the> economic development of
    4-5  the municipality.
    4-6        <(b)  For purposes of this section, a federally assisted new
    4-7  community is a federally assisted area:>
    4-8              <(1)  that has received or will receive assistance in
    4-9  the form of loan guarantees under Title X of the National Housing
   4-10  Act (12 U.S.C. Section 1749aa et seq.); and>
   4-11              <(2)  a portion of which has received grants under
   4-12  Section 107 of the Housing and Community Development Act of 1974
   4-13  (42 U.S.C. Section 5307) made pursuant to the authority created by
   4-14  that section for grants in behalf of new communities assisted under
   4-15  Title VII of the Housing and Urban Development Act of 1970 or Title
   4-16  IV of the Housing and Urban Development Act of 1968 or in behalf of
   4-17  new community projects assisted under Title X of the National
   4-18  Housing Act (12 U.S.C. Section 1749aa et seq.).>
   4-19        SECTION 4.  Subsection (a), Section 312.205, Tax Code, is
   4-20  amended to read as follows:
   4-21        (a)  An agreement made under Section 312.204 must:
   4-22              (1)  list the kind, number, and location of all
   4-23  proposed improvements of the property;
   4-24              (2)  provide access to and authorize inspection of the
   4-25  property by municipal employees to ensure that the improvements or
   4-26  repairs are made according to the specifications and conditions of
   4-27  the agreement;
   4-28              (3)  limit the uses of the property consistent with the
   4-29  general purpose of encouraging development or redevelopment of the
   4-30  zone during the period that property tax exemptions are in effect;
   4-31  <and>
   4-32              (4)  provide for recapturing property tax revenue lost
   4-33  as a result of the agreement if the owner of the property fails to
   4-34  make the improvements or repairs as provided by the agreement;
   4-35              (5)  contain each term agreed to by the owner of the
   4-36  property;
   4-37              (6)  require the owner of property to certify annually
   4-38  to the governing body of each taxing unit that the owner is in
   4-39  compliance with each applicable term of the agreement; and
   4-40              (7)  provide that the governing body of the
   4-41  municipality may cancel or modify the agreement if the property
   4-42  owner fails to comply with the agreement.
   4-43        SECTION 5.  Section 312.006, Tax Code, is amended to read as
   4-44  follows:
   4-45        Sec. 312.006.  EXPIRATION DATE.  If not continued in effect,
   4-46  this chapter expires September 1, 2003 <1995>.
   4-47        SECTION 6.  (a)  Except as provided by Subsection (b) of this
   4-48  section, this Act takes effect September 1, 1995.  The change in
   4-49  law made by Section 1 of this Act applies only to a tax that is
   4-50  paid on or after September 1, 1995.
   4-51        (b)  Section 5 of this Act takes effect August 31, 1995.
   4-52        SECTION 7.  The importance of this legislation and the
   4-53  crowded condition of the calendars in both houses create an
   4-54  emergency and an imperative public necessity that the
   4-55  constitutional rule requiring bills to be read on three several
   4-56  days in each house be suspended, and this rule is hereby suspended.
   4-57                               * * * * *