HBA-MPM H.B. 99 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 99 By: Howard Public Education 2/10/1999 Introduced BACKGROUND AND PURPOSE Currently, there are no tax incentives for corporations that make contributions to nonprofit scholarship funding organizations and public schools. H.B. 99 allows corporations who make contributions to these entities to take a tax credit. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 171, Tax Code, by adding Subchapter N, as follows: SUBCHAPTER N. TAX CREDIT FOR CERTAIN CONTRIBUTIONS TO NONPROFIT SCHOLARSHIP FUNDING ORGANIZATIONS AND PUBLIC SCHOOLS Sec. 171.701. PURPOSE. Sets forth the purpose and legislative intent. Sec. 171.702. DEFINITIONS. Defines "eligible school" as a public or nonpublic primary or secondary school that offers a general education to primary or secondary students, that does not discriminate based on certain factors, and that is located in Texas. Defines "nonprofit scholarship funding organization" as a charitable organization exempted from federal tax under Section 501(a), Internal Revenue Code (Exemption from Tax on Corporations, Certain Trusts, etc.; Exemption from Taxation), by being listed as an exempt organization under Section 501(c)(3) of the code, and that allocates at least 90 percent of annual revenue to scholarships for tuition, transportation, and textbook expenses to children enrolled in an eligible school. Sec. 171.703. CREDIT. Entitles a corporation to a tax credit if the corporation meets the eligibility requirements set forth in this subchapter. Sec. 171.704. CREDIT FOR CERTAIN CONTRIBUTIONS TO A NONPROFIT SCHOLARSHIP FUNDING ORGANIZATION OR PUBLIC SCHOOL. Entitles a corporation to a credit for the amount of money the corporation gives to a nonprofit scholarship funding organization or public school only if the contribution is used for tuition, transportation, or textbook expenses for children enrolled in eligible schools, and if the corporation does not designate a specific child as the beneficiary of the contribution. Sec. 171.705. LIMITATION. Limits the total credit claimed during a privilege period to 75 percent of the net franchise tax due for that period after all other tax credits for contributions to nonprofit scholarship funding are claimed, and a maximum of five percent of the net franchise tax due for that period after all other tax credits for contributions to public schools are claimed. Sec. 171.706. APPLICATION FOR CREDIT. Specifies that a corporation must apply for a credit on or with the tax report for the period the credit is claimed. Requires the comptroller of public accounts of the State of Texas (comptroller) to promulgate a form for the application of the credit, and requires a corporation to use this form when applying for credit. Requires the comptroller to prescribe the form and manner of proof required for a corporation to obtain the credit. Sec. 171.707. PERIOD FOR WHICH CREDIT MAY BE CLAIMED. Authorizes a corporation to claim a credit for a contribution during an accounting period only against the tax owed for the corresponding privilege period. Specifies that a contribution that exceeds the limitations set forth in Section 171.705 does not carry forward or backward and may not be used to create a business loss carryover. Sec. 171.708. TRANSFER OF CREDIT. Prohibits a corporation from conveying, assigning, or transferring the credit to another entity unless all of the corporation's assets are similarly conveyed, assigned, or transferred in the same transaction. SECTION 2. Provides that the provisions of this Act are not severable. If any provision of this Act is held to be invalid, the entire Act is invalid. SECTION 3. Makes application of this Act prospective. SECTION 4. Effective date: January 1, 2000. SECTION 5. Emergency clause.