By Oliveira H.B. No. 2730
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the authorization of certain franchise tax incentives
1-3 promoting economic development.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 171, Tax Code, is amended by adding
1-6 Subchapter O to read as follows:
1-7 SUBCHAPTER O. TAX CREDIT FOR CERTAIN RESEARCH
1-8 AND DEVELOPMENT ACTIVITIES
1-9 Sec. 171.721. DEFINITIONS. In this subchapter:
1-10 (1) "Base amount," "basic research payment," and
1-11 "qualified research expense" have the meanings assigned those terms
1-12 by Section 41, Internal Revenue Code of 1986, except that all such
1-13 payments and expenses must be for research conducted within this
1-14 state.
1-15 (2) "Strategic investment area" means a county with
1-16 above state average unemployment and below state average per capita
1-17 income.
1-18 Sec. 171.722. ELIGIBILITY. (a) A corporation is eligible
1-19 for a credit against the tax imposed under this chapter in the
1-20 amount and under the conditions and limitations provided by this
1-21 subchapter.
2-1 (b) A corporation may claim a credit pursuant to Section
2-2 171.723(b) or take a carryforward credit without regard to whether
2-3 the county in which it made qualified research expenses and basic
2-4 research payments subsequently loses its designation as a strategic
2-5 investment area.
2-6 Sec. 171.723. CALCULATION OF CREDIT. (a) The credit for
2-7 any report equals five percent of the sum of:
2-8 (1) the excess of qualified research expenses incurred
2-9 in this state during the period upon which the tax is based over
2-10 the base amount for this state; and
2-11 (2) the basic research payments determined under
2-12 Section 41(e)(1)(A), Internal Revenue Code, for this state during
2-13 the period upon which the tax is based.
2-14 (b) In computing the credit under Subsection (a), a
2-15 corporation may double the amount of any qualified research
2-16 expenses and basic research payments made in a strategic investment
2-17 area as determined by the comptroller under Section 171.726.
2-18 (c) The burden of establishing entitlement to and the value
2-19 of the credit is on the corporation.
2-20 Sec. 171.724. LIMITATIONS. (a) The total credit claimed
2-21 under this subchapter for a report, including the amount of any
2-22 carryforward credit under Section 171.725, may not exceed 50
2-23 percent of the amount of net franchise tax due for the report after
2-24 any other applicable tax credits. This limitation applies to the
2-25 cumulative amount of credit, including carryforwards, claimed by
3-1 the corporation under this chapter for the period upon which the
3-2 tax is based.
3-3 (b) The amount of the credit may not reduce the tax below
3-4 zero.
3-5 (c) A corporation that establishes its eligibility for a
3-6 credit under this subchapter is not eligible to claim a credit
3-7 under Subchapter P.
3-8 Sec. 171.725. CARRYFORWARD. If a corporation is eligible
3-9 for a credit that exceeds the limitation under Section 171.724(a),
3-10 the corporation may carry the unused credit forward for not more
3-11 than five consecutive reports.
3-12 Sec. 171.726. DETERMINATION OF STRATEGIC INVESTMENT AREAS.
3-13 The comptroller shall determine strategic investment areas on an
3-14 annual basis using the most current available data and shall
3-15 publish a list and map of strategic investment areas by December 31
3-16 of each year.
3-17 Sec. 171.727. BIENNIAL REPORT TO LEGISLATURE BY COMPTROLLER.
3-18 (a) Before the beginning of each regular session of the
3-19 legislature, the comptroller shall submit to the members of the
3-20 legislature a report that states:
3-21 (1) the total amount of expenses and payments incurred
3-22 by corporations that claim a credit under Section 171.723;
3-23 (2) the total amount of credits applied against the
3-24 tax under this chapter and the amount of unused credits;
3-25 (3) the geographical distribution of expenses and
4-1 payments giving rise to a credit authorized by this subchapter;
4-2 (4) the impact of the credit provided by this
4-3 subchapter on the amount of research and development performed in
4-4 this state and employment in research and development in this
4-5 state; and
4-6 (5) the impact of the credit provided under this
4-7 subchapter on employment, capital investment, and personal income
4-8 in this state and state tax revenues.
4-9 (b) The final report issued prior to the expiration of this
4-10 subchapter shall include historical information on the credit
4-11 authorized under this subchapter.
4-12 (c) The comptroller may not include in the report
4-13 information that is confidential by law.
4-14 (d) For purposes of this section, the comptroller may
4-15 require a corporation that claims a credit under this subchapter to
4-16 submit information, on a form provided by the comptroller on the
4-17 location of the corporation's research expenses and payments in
4-18 this state and any other information necessary to complete the
4-19 report required under this section.
4-20 Sec. 171.728. COMPTROLLER POWERS AND DUTIES. The
4-21 comptroller shall adopt rules and forms necessary to implement this
4-22 subchapter.
4-23 Sec. 171.729. EXPIRATION. (a) This subchapter expires
4-24 December 31, 2007.
4-25 (b) The expiration of this subchapter does not affect the
5-1 carryforward of a credit under Section 171.725 for those credits to
5-2 which a corporation is eligible before the date this subchapter
5-3 expires.
5-4 SECTION 2. Chapter 171, Tax Code, is amended by adding
5-5 Subchapter P to read as follows:
5-6 SUBCHAPTER P. TAX CREDITS FOR
5-7 CERTAIN JOB CREATION ACTIVITIES
5-8 Sec. 171.751. DEFINITIONS. In this subchapter:
5-9 (1) "County average weekly wage" means the average
5-10 weekly wage for all covered employment in the county as computed by
5-11 the Texas Workforce Commission.
5-12 (2) "Central administrative offices" means an
5-13 establishment primarily engaged in performing management or support
5-14 services for other establishments of the same enterprise. An
5-15 enterprise consists of all establishments having more than 50
5-16 percent common direct or indirect ownership.
5-17 (3) "Data processing" means an establishment primarily
5-18 engaged in activities described in categories 7371-7379 of the 1987
5-19 Standard Industrial Classification Manual published by the federal
5-20 Office of Management and Budget.
5-21 (4) "Group health benefit plan" means:
5-22 (A) a health plan provided by a health
5-23 maintenance organization established under the Texas Health
5-24 Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance
5-25 Code);
6-1 (B) a health benefit plan approved by the
6-2 commissioner of insurance; or
6-3 (C) a self-funded or self-insured employee
6-4 welfare benefit plan that provides health benefits and is
6-5 established in accordance with the Employee Retirement Income
6-6 Security Act of 1974 (29 U.S.C. Section 1001 et seq.), as amended.
6-7 (5) "Manufacturing" means an establishment primarily
6-8 engaged in activities described in categories 2011-3999 of the 1987
6-9 Standard Industrial Classification Manual published by the federal
6-10 Office of Management and Budget.
6-11 (6) "Qualified business" means an establishment
6-12 primarily engaged in central administrative offices, data
6-13 processing, manufacturing, research and development, warehousing or
6-14 distribution.
6-15 (7) "Qualifying job" means a new permanent full-time
6-16 job that:
6-17 (A) requires at least 1,600 hours of work a
6-18 year;
6-19 (B) pays at least 110 percent of the county
6-20 average weekly wage for the county where the job is located;
6-21 (C) is covered by a group health benefit plan
6-22 for which the business pays at least 80 percent of the premiums or
6-23 other charges assessed under the plan for the employee;
6-24 (D) is not transferred from one area in this
6-25 state to another area in this state; and
7-1 (E) is not created to replace a previous
7-2 employee.
7-3 (8) "Research and development" means an establishment
7-4 primarily engaged in activities described in category 8731 of the
7-5 1987 Standard Industrial Classification Manual published by the
7-6 federal Office of Management and Budget.
7-7 (9) "Strategic investment area" has the meaning
7-8 assigned that term by Section 171.721.
7-9 (10) "Warehousing and distribution" means an
7-10 establishment primarily engaged in activities described in
7-11 categories 4221-4226 and categories 5012-5199 of the 1987 Standard
7-12 Industrial Classification Manual published by the federal Office of
7-13 Management and Budget.
7-14 Sec. 171.752. ELIGIBILITY. (a) A corporation is eligible
7-15 for a credit against the tax imposed by this chapter if the
7-16 corporation:
7-17 (1) is a qualified business as defined in Section
7-18 171.751;
7-19 (2) creates a minimum of 10 qualifying jobs in a
7-20 strategic investment area as determined by the comptroller under
7-21 Section 171.726, and
7-22 (3) pays an average weekly wage, for the year in which
7-23 credits are claimed, of at least 110 percent of the county average
7-24 weekly wage for the county where the qualifying jobs are located.
7-25 (b) A corporation may claim a credit or take a carryforward
8-1 credit without regard to whether the county in which it created the
8-2 qualifying jobs subsequently loses its designation as a strategic
8-3 investment area.
8-4 Sec. 171.753. CALCULATION OF CREDIT. A corporation's credit
8-5 equals 25 percent of the total wages and salaries paid by the
8-6 corporation for qualifying jobs.
8-7 Sec. 171.754. LENGTH OF CREDIT. The credit shall be taken
8-8 in five equal installments of one-fifth the credit amount over the
8-9 five consecutive reports beginning with the report based upon the
8-10 period during which the qualifying jobs were created.
8-11 Sec. 171.755. LIMITATIONS. (a) The total credit claimed
8-12 under this subchapter for a report, including the amount of any
8-13 carryforward credit under Section 171.756, may not exceed the
8-14 amount of net franchise tax due for the report after any other
8-15 applicable tax credits. This limitation applies to the cumulative
8-16 amount of credit, including carryforwards, claimed by the
8-17 corporation under this chapter for the period upon which the tax is
8-18 based.
8-19 (b) The amount of the credit may not reduce the tax below
8-20 zero.
8-21 (c) A corporation that establishes its eligibility for a
8-22 credit under this subchapter is not eligible to claim a credit
8-23 under Subchapter O.
8-24 Sec. 171.756. CARRYFORWARD. (a) If a corporation is
8-25 eligible for a credit that exceeds the limitation under Section
9-1 171.755(a), the corporation may carry the unused credit forward for
9-2 not more than five consecutive reports.
9-3 (b) A carryforward is considered the remaining portion of an
9-4 installment that cannot be claimed in the current year because of
9-5 the tax limitation under Section 171.755. A carryforward is added
9-6 to the next year's installment of the credit in determining the tax
9-7 limitation for that year. If that total credit is limited under
9-8 Section 171.755, the carryforward is considered to be utilized
9-9 before the current year installment.
9-10 Sec. 171.757. CERTIFICATION OF ELIGIBILITY. (a) For the
9-11 initial and each succeeding report in which a credit is claimed
9-12 under this subchapter, the corporation shall file with its report,
9-13 on a form provided by the comptroller, information that
9-14 sufficiently demonstrates that the corporation is eligible for the
9-15 credit and is in compliance with Section 171.752.
9-16 (b) The burden of establishing entitlement to and the value
9-17 of the credit is on the corporation.
9-18 (c) If, in one of the five years in which the installment of
9-19 a credit accrues, the number of the corporation's full-time
9-20 employees falls below the number of full-time employees the
9-21 corporation had in the year in which the corporation qualified for
9-22 the credit, the credit expires and the corporation may not take any
9-23 remaining installment of the credit.
9-24 (d) Notwithstanding subsection (c), the corporation may,
9-25 however, take the portion of an installment that accrued in a
10-1 previous year and was carried forward to the extent permitted under
10-2 Section 171.756.
10-3 Sec. 171.758. ASSIGNMENT PROHIBITED. A corporation may not
10-4 convey, assign, or transfer the credit allowed under this
10-5 subchapter to another entity unless all of the assets of the
10-6 corporation are conveyed, assigned, or transferred in the same
10-7 transaction.
10-8 Sec. 171.759. BIENNIAL REPORT TO LEGISLATURE BY COMPTROLLER.
10-9 (a) Before the beginning of each regular session of the
10-10 legislature, the comptroller shall submit to the members of the
10-11 legislature a report that states:
10-12 (1) the total number of jobs created by corporations
10-13 that claim a credit under this subchapter and the average annual
10-14 wage of those jobs;
10-15 (2) the total amount of credits applied against the
10-16 tax under this chapter and the amount of unused credits;
10-17 (3) the breakdown of the type of qualified businesses
10-18 that claim a credit under this subchapter;
10-19 (4) the geographical distribution of the credits
10-20 claimed under this subchapter; and
10-21 (5) the impact of the credit provided under this
10-22 subchapter on employment, personal income, and capital investment
10-23 in this state and on state tax revenues.
10-24 (b) The final report issued prior to the expiration of this
10-25 subchapter shall include historical information on the credit
11-1 authorized under this subchapter.
11-2 (c) The comptroller may not include in the report
11-3 information that is confidential by law.
11-4 (d) For purposes of this section, the comptroller may
11-5 require a corporation that claims a credit under this subchapter to
11-6 submit information, on a form provided by the comptroller, on the
11-7 location of the corporation's job creation in this state and any
11-8 other information necessary to complete the report required under
11-9 this section.
11-10 Sec. 171.760. COMPTROLLER POWERS AND DUTIES. The
11-11 comptroller shall adopt rules and forms necessary to implement this
11-12 subchapter.
11-13 Sec. 171.761. EXPIRATION. (a) This subchapter expires
11-14 December 31, 2007.
11-15 (b) The expiration of this subchapter does not affect the
11-16 carryforward of a credit under Section 171.756 or those credits to
11-17 which a corporation is eligible before the date this subchapter
11-18 expires.
11-19 SECTION 3. Chapter 171, Tax Code, is amended by adding
11-20 Subchapter Q to read as follows:
11-21 SUBCHAPTER Q. TAX CREDITS FOR CERTAIN CAPITAL INVESTMENTS
11-22 Sec. 171.800. DEFINITIONS. In this subchapter:
11-23 (1) "Central administrative offices," "county average
11-24 weekly wage," "data processing," "manufacturing," "qualified
11-25 business," "research and development," and "warehousing and
12-1 distribution" have the meanings assigned those terms by Section
12-2 171.751.
12-3 (2) "Capitalized lease" means a transaction which is
12-4 classified as a purchase for federal income tax purposes even
12-5 though it is denominated as a "lease."
12-6 (3) "Qualified capital investment" means tangible
12-7 personal property that is defined in Section 1245(a) of the
12-8 Internal Revenue Code, such as engines, machinery, tools and
12-9 implements used in a trade or business or held for investment and
12-10 subject to an allowance for depreciation, cost recovery under
12-11 Accelerated Cost Recovery System, or amortization. It does not
12-12 include real property, buildings and their structural components.
12-13 Property that is leased under a capitalized lease is considered
12-14 "qualified capital investment," but property that is leased under
12-15 an operating lease is not considered "qualified capital
12-16 investment." Property expensed under Section 179 of the Internal
12-17 Revenue Code is not considered "qualified capital investment."
12-18 (4) "Strategic investment area" has the meaning
12-19 assigned that term by Section 171.721.
12-20 Sec. 171.801. ELIGIBILITY. (a) A corporation is eligible
12-21 for a credit against the tax imposed under this chapter in the
12-22 amount and under the conditions and limitations provided by this
12-23 subchapter.
12-24 (b) To qualify for the credit authorized under this
12-25 subchapter, a qualified business must:
13-1 (1) make a minimum $500,000 qualified capital
13-2 investment in a strategic investment area as determined by the
13-3 comptroller under Section 171.726; and
13-4 (2) pay an average weekly wage, at the location with
13-5 respect to which the credit is claimed, which is at least 110
13-6 percent of the county average weekly wage.
13-7 (c) A corporation may claim a credit or take a carryforward
13-8 credit without regard to whether the county in which it made the
13-9 qualified capital investment subsequently loses its designation as
13-10 a strategic investment area.
13-11 Sec. 171.802. CALCULATION OF CREDIT. A corporation's credit
13-12 equals 15 percent of the qualified capital investment.
13-13 Sec. 171.803. LENGTH OF CREDIT. The credit shall be taken
13-14 in five equal installments of one-fifth the credit amount over the
13-15 five consecutive reports beginning with the report based upon the
13-16 period during which the qualified capital investment was made.
13-17 Sec. 171.804. LIMITATIONS. (a) The total credit claimed
13-18 under this subchapter for a report, including the amount of any
13-19 carryforward credit under Section 171.805, may not exceed the
13-20 amount of net franchise tax due for the report after any other
13-21 applicable tax credits. This limitation applies to the cumulative
13-22 amount of credit, including carryforwards, claimed by the
13-23 corporation under this chapter for the period upon which the tax is
13-24 based.
13-25 (b) The amount of the credit may not reduce the tax below
14-1 zero.
14-2 (c) A corporation that establishes its eligibility for a
14-3 credit under this subchapter is not eligible to claim a franchise
14-4 tax reduction authorized under Section 171.1015, Tax Code.
14-5 Sec. 171.805. CARRYFORWARD. If a corporation is eligible
14-6 for a credit that exceeds the limitation under Section 171.804(a),
14-7 the corporation may carry the unused credit forward for not more
14-8 than five consecutive reports.
14-9 (b) A carryforward is considered the remaining portion of an
14-10 installment that cannot be claimed in the current year because of
14-11 the tax limitation under Section 171.804. A carryforward is added
14-12 to the next year's installment of the credit in determining the tax
14-13 limitation for that year. If that total credit is limited under
14-14 Section 171.804, the carryforward is considered to be utilized
14-15 before the current year installment.
14-16 Sec. 171.806. CERTIFICATION OF ELIGIBILITY. (a) For the
14-17 initial and each succeeding report in which a credit is claimed
14-18 under this subchapter, the corporation shall file with its report,
14-19 on a form provided by the comptroller, information that
14-20 sufficiently demonstrates that the corporation is eligible for the
14-21 credit and is in compliance with Section 171.801.
14-22 (b) The burden of establishing entitlement to and the value
14-23 of the credit is on the qualified business.
14-24 (c) A credit expires under this subchapter and the
14-25 corporation may not take any remaining installment of the credit if
15-1 in one of the five years in which the installment of a credit
15-2 accrues, the qualified business:
15-3 (1) disposes of the qualified capital investment;
15-4 (2) takes the qualified capital investment out of
15-5 service;
15-6 (3) moves the qualified capital investment out of this
15-7 state; or
15-8 (4) fails to pay an average weekly wage as required by
15-9 Section 171.801.
15-10 (d) Notwithstanding subsection (c), the corporation may,
15-11 however, take the portion of an installment that accrued in a
15-12 previous year and was carried forward to the extent permitted under
15-13 Section 171.805.
15-14 Sec. 171.806. ASSIGNMENT PROHIBITED. A corporation may not
15-15 convey, assign, or transfer the credit allowed under this
15-16 subchapter to another entity unless all of the assets of the
15-17 corporation are conveyed, assigned, or transferred in the same
15-18 transaction.
15-19 Sec. 171.807. BIENNIAL REPORT TO LEGISLATURE BY COMPTROLLER.
15-20 (a) Before the beginning of each regular session of the
15-21 legislature, the comptroller shall submit to the members of the
15-22 legislature a report that states:
15-23 (1) the total amount of qualified capital investments
15-24 made by corporations that claim a credit under this subchapter;
15-25 (2) the total amount of credits applied against the
16-1 tax under this chapter and the amount of unused credits;
16-2 (3) the geographical distribution of the qualified
16-3 capital investments upon which tax credit claims are made under
16-4 this subchapter; and
16-5 (4) the impact of the credit provided under this
16-6 subchapter on employment, capital investment, personal income, and
16-7 state tax revenues.
16-8 (b) The final report issued prior to the expiration of this
16-9 subchapter shall include historical information on the credit
16-10 authorized under this subchapter.
16-11 (c) The comptroller may not include in the report
16-12 information that is confidential by law.
16-13 (d) For purposes of this section, the comptroller may
16-14 require a corporation that claims a credit under this subchapter to
16-15 submit information, on a form provided by the comptroller, on the
16-16 location of the corporation's capital investment in this state and
16-17 any other information necessary to complete the report required
16-18 under this section.
16-19 Sec. 171.808. COMPTROLLER POWERS AND DUTIES. The
16-20 comptroller shall adopt rules and forms necessary to implement this
16-21 subchapter.
16-22 Sec. 171.809. EXPIRATION. (a) This subchapter expires
16-23 December 31, 2007.
16-24 (b) The expiration of this subchapter does not affect the
16-25 carryforward of a credit under Section 171.805 or those credits to
17-1 which a corporation is eligible before the date this subchapter
17-2 expires.
17-3 SECTION 4. The comptroller of public accounts of the state
17-4 of Texas may combine the reports required under Subchapters O, P,
17-5 and Q, Chapter 171, Tax Code, as added by this Act, into a single
17-6 report.
17-7 SECTION 5. (a) This Act takes effect January 1, 2000, and
17-8 applies only to a report originally due on or after the effective
17-9 date of this Act. A corporation may claim a credit under this Act
17-10 only for expenses and payments incurred, qualified investment made
17-11 or new jobs created, on or after that date.
17-12 SECTION 6. The importance of this legislation and the
17-13 crowded condition of the calendars in both houses create an
17-14 emergency and an imperative public necessity that the
17-15 constitutional rule requiring bills to be read on three several
17-16 days in each house be suspended, and this rule is hereby suspended.