HBA-TYH C.S.H.B. 3049 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3049 By: Counts State Affairs 5/5/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE The Development Corporation Act (Act) of 1979 (Article 5190.6, V.T.C.S.) was passed to enhance and promote economic development. Section 3 of the Act states: the present and prospective right to gainful employment and general welfare of the people of this state require as a public purpose the promotion and development of new and expanded business enterprises. However, one or more economic development corporations chartered under the Act may have provided certain tax incentives and other benefits to businesses whose primary purpose is to influence the electoral process. This leads to subsidization of political activities with public tax dollars. C.S.H.B. 3049 clarifies that the legislature did not intend to grant tax breaks or other tax incentives to businesses or individuals that have substantially participated in contested elections. This bill also prohibits such activities and provides a mechanism to allow taxpayers subject to the economic development corporation tax to contest such expenditures of public money. 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 Article 5190.6, V.T.C.S. (Development Corporation Act of 1979), by adding Section 32A, as follows: Sec. 32A. (a) Defines "benefit," "measure," "political committee," "political contribution," and "political advertising." (b) Prohibits an economic development corporation (corporation) from knowingly entering into an agreement under which the corporation directly or indirectly provides a benefit to a person who engages in political activities for compensation, including a person who, in connection with a campaign for elective office or on a measure, provides the enumerated services. (c) Provides that if a corporation enters into an agreement prohibited by Subsection (b) of this section: _property owned by the corporation is not exempt from ad valorem taxation; _a taxable item sold, leased, or rented to or stored, used, or consumed by a corporation is not exempt from sales and use taxes imposed by Chapter 151 (Limited Sales, Excise, and Use Tax), Tax Code; and _the corporation is not exempt from the franchise tax imposed under Chapter 171 (Franchise Tax), Tax Code. (d) Provides that a person other than a corporation who enters into an agreement prohibited by Subsection (b) of this section commits a Class A misdemeanor. (e) Provides that a person other than a corporation who enters into an agreement prohibited by Subsection (b) of this section and who makes a false representation to induce the corporation to enter into the agreement commits a Class B misdemeanor. (f) Provides that a person other than a corporation who enters into an agreement prohibited by Subsection (b) of this section is liable to the state for a civil penalty not to exceed $10,000. (g) Authorizes an individual who resides within the jurisdiction of a corporation created under this article to bring a civil action alleging a violation of this section and seeking to enforce the terms of this article, enforce the terms of the articles of incorporation or bylaws of the corporation as provided by this Act, or void an act or agreement of the corporation that violates this article, or the terms of the articles of incorporation or the bylaws of the economic development corporation. SECTION 2. Effective date: September 1, 1999. SECTION 3. Makes application of this Act prospective. SECTION 4. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original bill by changing the caption from "relating to certain agreements between economic development corporations and persons engaged in certain political activities; providing civil and criminal penalties" to "relating to prohibiting certain agreements between economic development corporations and persons engaged in certain political activities; providing civil and criminal penalties." The substitute modifies the original bill in SECTION 1 (proposed Section 32A, Article 5190.6, V.T.C.S.), as follows: Sec. 32A. (a) Redesignated from Subsection (f) of original bill. Adds the definition of "political advertising." (b) Redesignated from Subsection (a) of original bill. Prohibits an economic development corporation (corporation) from knowingly entering into an agreement under which the corporation directly or indirectly provides a benefit to a person who provides services related to conducting a political poll or analyzing information received from a political poll, rather than provides polling, for compensation. Makes nonsubstantive changes. (c) Redesignated from Subsection (b) of original bill. Makes conforming and nonsubstantive changes. (d) Redesignated from Subsection (c) of original bill. Makes a conforming change. (e) Redesignated from Subsection (d) of original bill. Makes a conforming change. (f) Redesignated from Subsection (e) of original bill. Makes a conforming change. (g) Redesignated from SECTION 2 (proposed Section 32B, Article 5190.6, V.T.C.S.) of the original bill. Authorizes an individual who resides within the jurisdiction of a corporation created under this article to enforce the bylaws of the corporation adopted as provided by this act. Deletes references to enforcing the requirements of this Act and requiring compliance with the articles of incorporation or bylaws of this Act. or this article. Makes nonsubstantive changes. The substitute modifies the original bill by redesignating SECTIONS 3 (effective date), 4, and 5 (emergency clause) of the original bill to SECTIONS 2, 3, and 4, respectively.