By Oliveira H.B. No. 563
76R1318 CBH-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to tax incentives for certain businesses located in
1-3 counties in this state with high or very high unemployment.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 111, Tax Code, is amended by adding
1-6 Subchapter G to read as follows:
1-7 SUBCHAPTER G. BUSINESS TAX INCENTIVES IN CERTAIN AREAS
1-8 Sec. 111.351. DEFINITIONS. In this subchapter:
1-9 (1) "Group health benefit plan" means:
1-10 (A) a health plan provided by a health
1-11 maintenance organization established under the Texas Health
1-12 Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance
1-13 Code);
1-14 (B) a health benefit plan approved by the
1-15 commissioner of insurance; or
1-16 (C) a self-funded or self-insured employee
1-17 welfare benefit plan that provides health benefits and is
1-18 established in accordance with the Employee Retirement Income
1-19 Security Act of 1974 (29 U.S.C. Section 1001 et seq., as amended).
1-20 (2) "High unemployment county" means a county in which
1-21 the average rate of unemployment during the most recent 12-month
1-22 period for which data are available was at least 1.3 times, but
1-23 less than two times, the state average for that period.
1-24 (3) "Qualified business" means a person who meets the
2-1 qualifications prescribed by Section 111.352.
2-2 (4) "Very high unemployment county" means a county in
2-3 which the average rate of unemployment during the most recent
2-4 12-month period for which data are available was at least two times
2-5 the state average for that period.
2-6 Sec. 111.352. TYPES OF BUSINESSES THAT QUALIFY FOR TAX
2-7 EXEMPTION. A business qualifies for a tax refund or credit under
2-8 this subchapter if the business otherwise complies with this
2-9 subchapter and is:
2-10 (1) located or conducts business in a high
2-11 unemployment county or very high unemployment county; and
2-12 (2) in one of the following categories of the 1987
2-13 Standard Industrial Classification Manual published by the federal
2-14 Office of Management and Budget:
2-15 (A) manufacturing-processing, classified as
2-16 2011-3999;
2-17 (B) warehousing, classified as 4221-4226;
2-18 (C) distribution, classified as 5012-5199;
2-19 (D) data processing, classified as 7371-7379; or
2-20 (E) central administrative offices, classified
2-21 as Auxiliary Code 1, but only if the office is primarily engaged in
2-22 performing management and other administrative functions centrally
2-23 for other establishments of the same enterprise.
2-24 Sec. 111.353. STATE TAX REFUND OR CREDIT. (a) A qualified
2-25 business that meets the eligibility requirements under this
2-26 subchapter is entitled to:
2-27 (1) a refund in the amount allowed by this subchapter
3-1 of state sales and use taxes imposed under Chapter 151 and paid by
3-2 the business; and
3-3 (2) a credit in the amount allowed by this subchapter
3-4 against the franchise tax imposed under Chapter 171.
3-5 (b) A business may qualify under more than one provision of
3-6 this subchapter.
3-7 (c) Notwithstanding any other provision of this subchapter,
3-8 a refund or credit may not exceed the amount of:
3-9 (1) net state sales and use taxes paid by the
3-10 qualified business, after any applicable credit, in the year in
3-11 which the refund is requested; or
3-12 (2) franchise tax due for the report on which the
3-13 credit is claimed.
3-14 Sec. 111.354. REFUND OR CREDIT FOR JOB CREATION. (a) In
3-15 this section, "new permanent employee" means a new employee, other
3-16 than a private contractor, hired by a qualified business for a
3-17 position that:
3-18 (1) requires at least 1,600 hours of work a year;
3-19 (2) is intended to be held by one employee during the
3-20 entire year; and
3-21 (3) is covered by a group health benefit plan for
3-22 which the business pays at least 80 percent of the premiums or
3-23 other charges assessed under the plan.
3-24 (b) A qualified business may claim a refund or credit under
3-25 this section only if:
3-26 (1) the business hires at least one new permanent
3-27 employee to work in a high unemployment or very high unemployment
4-1 county;
4-2 (2) the new permanent employee remains continuously
4-3 employed with the business for at least one year;
4-4 (3) the new permanent employee performs duties that
4-5 are directly related to the business classification under which the
4-6 business qualified under Section 111.352;
4-7 (4) the business pays the new permanent employee the
4-8 wage required by Subsection (d);
4-9 (5) the business had, for at least 40 weeks during the
4-10 year in which the business hired the new permanent employee, at
4-11 least five full-time employees at the location at which the new
4-12 permanent employee works; and
4-13 (6) the new permanent employee is not hired to replace
4-14 a previous employee.
4-15 (c) Notwithstanding Subdivision (b)(1), a qualified business
4-16 that is a central administrative office must hire at least 40 new
4-17 permanent employees to be eligible for the refund or credit under
4-18 this section. For purposes of determining the amount of a refund
4-19 or credit under Subsection (f), each block of 40 new permanent
4-20 employees is considered one new permanent employee.
4-21 (d) A qualified business located in a high unemployment
4-22 county must pay the new permanent employee a wage that is at least
4-23 equal to 110 percent of the annualized average weekly wage in the
4-24 county. A qualified business located in a very high unemployment
4-25 area must pay the new permanent employee a wage that is at least
4-26 equal to the annualized average weekly wage in the county.
4-27 (e) An employee hired to fill a position transferred from
5-1 one area of the state to another area is not considered to be a
5-2 permanent new employee for purposes of this section. However, if a
5-3 qualified business transfers a position for which the business is
5-4 receiving a refund or credit under this section to another high
5-5 unemployment or very high unemployment county, the transfer does
5-6 not affect the refund or credit.
5-7 (f) A qualified business located in a high unemployment
5-8 county is entitled to a total refund or credit of $5,000 for each
5-9 new permanent employee. A qualified business located in a very
5-10 high unemployment county is entitled to a total refund or credit of
5-11 $10,000 for each new permanent employee. The business must take
5-12 each refund or credit in four equal installments.
5-13 (g) A qualified business may determine whether to apply for
5-14 a refund or credit, or both, provided that the total amount claimed
5-15 does not exceed the amount the business is entitled to receive
5-16 under Subsection (f).
5-17 (h) A refund or credit related to a particular new permanent
5-18 employee of a qualified business expires if the number of full-time
5-19 employees working at that employee's location falls below the
5-20 number of employees at that location on the day after that employee
5-21 was hired.
5-22 Sec. 111.355. REFUND OR CREDIT FOR WORKER TRAINING. (a) A
5-23 qualified business may claim a refund or credit under this section
5-24 only if:
5-25 (1) the business trains, during a tax year, at least
5-26 five full-time employees who work at a location at which the
5-27 business is eligible to claim a refund or credit under Section
6-1 111.356;
6-2 (2) the employees are not classified as exempt under
6-3 the Fair Labor Standards Act of 1938 (29 U.S.C. Section 201 et
6-4 seq., as amended);
6-5 (3) the employees perform duties that are directly
6-6 related to the business classification under which the business
6-7 qualified under Section 111.352;
6-8 (4) the business pays the employees the wage required
6-9 by Subsection (b) after the training is completed;
6-10 (5) the employees are covered by a group health
6-11 benefit plan for which the business pays at least 80 percent of the
6-12 premiums or other charges assessed under the plan; and
6-13 (6) the business pays all of the costs of the training
6-14 and does not receive reimbursement or other assistance for that
6-15 training under any other state or federal law.
6-16 (b) A qualified business located in a high unemployment
6-17 county must pay the trained employees a wage that is at least equal
6-18 to 110 percent of the annualized average weekly wage in the county.
6-19 A qualified business located in a very high unemployment county
6-20 must pay the trained employees a wage that is at least equal to the
6-21 annualized average weekly wage in the county.
6-22 (c) A qualified business located in a high unemployment
6-23 county is entitled to a total refund or credit of $500 for each
6-24 trained employee. A qualified business located in a very high
6-25 unemployment county is entitled to a total refund or credit of
6-26 $1,000 for each trained employee.
6-27 (d) A qualified business may determine whether to apply for
7-1 a refund or credit, or both, provided that the total amount claimed
7-2 does not exceed the amount the business is entitled to receive
7-3 under Subsection (c).
7-4 (e) Notwithstanding any other provision of this section, a
7-5 qualified business is not entitled to a refund or credit related to
7-6 a particular trained employee if, before the business applies for
7-7 the refund or credit under Section 111.357, the number of full-time
7-8 employees working at that employee's location falls below the
7-9 number of employees at that location on the day after that employee
7-10 completed the training.
7-11 Sec. 111.356. REFUND OR CREDIT FOR MACHINERY AND EQUIPMENT.
7-12 (a) In this section:
7-13 (1) "Base year" means, of the three preceding taxable
7-14 years, the year in which the qualified business had the most
7-15 machinery and equipment.
7-16 (2) "Machinery and equipment" means engines,
7-17 machinery, tools, and implements, other than rolling stock, that
7-18 are capitalized by the qualified business for tax purposes under
7-19 the Internal Revenue Code of 1986, as amended.
7-20 (b) A qualified business may claim a refund or credit under
7-21 this section only if the business purchases or leases machinery
7-22 and equipment that is:
7-23 (1) used or designed to be used by the business for a
7-24 purpose that is directly related to the business classification
7-25 under which the business qualified under Section 111.352; and
7-26 (2) purchased, leased, or transferred into this state
7-27 at cost less depreciation and placed into service in a high
8-1 unemployment or very high unemployment county by the business.
8-2 (c) For purposes of computing the amount of the refund or
8-3 credit under Subsection (e), a qualified business that places
8-4 machinery and equipment into service in a high unemployment county
8-5 has an applicable threshold of $250,000. A qualified business that
8-6 places machinery and equipment into service in a very high
8-7 unemployment county has an applicable threshold of $0.
8-8 (d) For purposes of computing the amount of the refund or
8-9 credit under Subsection (e), a qualified business' eligible
8-10 investment is the lesser of:
8-11 (1) the cost of the machinery and equipment described
8-12 by Subsection (b) that is purchased or leased in a tax year; or
8-13 (2) the amount by which the cost of all of the
8-14 business' machinery and equipment in service at that location on
8-15 the last day of the tax year exceeds the cost of all of the
8-16 business' machinery and equipment in service at that location on
8-17 the last day of the base year.
8-18 (e) A qualified business is entitled to a total refund or
8-19 credit equal to seven percent of the difference between the
8-20 business' eligible investment and applicable threshold. The
8-21 business must take the refund or credit in seven equal
8-22 installments.
8-23 (f) A qualified business may determine whether to apply for
8-24 a refund or credit, or both, provided that the total amount claimed
8-25 does not exceed the amount the business is entitled to receive
8-26 under Subsection (e).
8-27 (g) A refund or credit related to particular equipment and
9-1 machinery expires on the day the qualified business:
9-2 (1) disposes of the machinery and equipment;
9-3 (2) takes the machinery and equipment out of service;
9-4 or
9-5 (3) moves the machinery and equipment out of this
9-6 state.
9-7 (h) If a refund or credit expires under Subsection (g), the
9-8 qualified business may claim for that tax year the portion of the
9-9 installment that the business would otherwise be entitled to
9-10 claim. However, the refund or credit may not exceed 50 percent of
9-11 the state sales and use taxes and franchise taxes due for that tax
9-12 year.
9-13 Sec. 111.357. PROCEDURE FOR CLAIMING REFUND OR CREDIT. (a)
9-14 An application for a refund or credit must be made to the
9-15 comptroller on a form prescribed by the comptroller.
9-16 (b) A qualified business must provide to the comptroller any
9-17 information the comptroller needs to determine the validity of an
9-18 application. The burden of establishing entitlement to and the
9-19 value of the refund or credit is on the business.
9-20 (c) A qualified business must apply for a refund of state
9-21 sales and use taxes under this subchapter before August 1 of the
9-22 year after the tax year in which the business becomes eligible for
9-23 the refund. A business must apply for a credit against franchise
9-24 taxes under this subchapter on or with the report for the next
9-25 privilege period after the period in which the business becomes
9-26 eligible for the credit. A qualified business may not apply for the
9-27 refund or credit for the tax year in which the business becomes
10-1 eligible for the refund or credit.
10-2 (d) A refund payable under this subchapter does not earn
10-3 interest.
10-4 Sec. 111.358. COMPTROLLER POWERS AND DUTIES. (a) The
10-5 comptroller shall adopt rules and forms for the administration of
10-6 this subchapter.
10-7 (b) The comptroller may conduct any audit the comptroller
10-8 determines necessary for the enforcement or administration of this
10-9 subchapter.
10-10 SECTION 2. A qualified business, as that term is defined by
10-11 Section 111.351, Tax Code, as added by this Act, may claim a refund
10-12 or credit under Subchapter G, Chapter 111, Tax Code, as added by
10-13 this Act, only for new permanent employees hired, employees
10-14 trained, and machinery and equipment purchased or leased, on or
10-15 after the effective date of this Act.
10-16 SECTION 3. This Act takes effect January 1, 2000, but only
10-17 if the constitutional amendment proposed by ___.J.R. No.___, 76th
10-18 Legislature, Regular Session, 1999, is approved by the voters. If
10-19 that amendment is not approved by the voters, this Act has no
10-20 effect.
10-21 SECTION 4. The importance of this legislation and the
10-22 crowded condition of the calendars in both houses create an
10-23 emergency and an imperative public necessity that the
10-24 constitutional rule requiring bills to be read on three several
10-25 days in each house be suspended, and this rule is hereby suspended,
10-26 and that this Act take effect and be in force according to its
10-27 terms, and it is so enacted.