By Turner of Coleman H.B. No. 2737 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 tax incentives for certain agricultural processing 1-3 companies locating or expanding in this state. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subchapter H, Chapter 151, Tax Code, is amended 1-6 by adding Section 151.3185 to read as follows: 1-7 Sec. 151.3185. TAXABLE ITEMS SOLD OR USED BY CERTAIN 1-8 AGRICULTURAL PROCESSORS. (a) In this section: 1-9 (1) "Agricultural processor" means a person who is or 1-10 proposes to be engaged in processing an agricultural product. 1-11 (2) "Agricultural product" means an agricultural, 1-12 horticultural, viticultural, or vegetable product, bees, honey, 1-13 fish or other seafood, livestock, and poultry. 1-14 (3) "Economically distressed county" means a county 1-15 that: 1-16 (A) has a per capita income that averaged 25 1-17 percent below the state average for the most recent three 1-18 consecutive years for which statistics are available and an 1-19 unemployment rate that averaged 25 percent above the state average 1-20 for the most recent three consecutive years for which statistics 1-21 are available; or 2-1 (B) is adjacent to an international border. 2-2 (4) "Qualified agricultural processor" means an 2-3 agricultural processor who meets the qualifications prescribed by 2-4 Subsection (c). 2-5 (5) "Rural county" means a county with a population of 2-6 less than 250,000. 2-7 (b) A taxable item purchased, leased, rented, stored, or 2-8 used by the agricultural processing business of a qualified 2-9 agricultural processor is exempted from the taxes imposed by this 2-10 chapter. 2-11 (c) An agricultural processor qualifies for the exemption 2-12 provided by this section only if the processor: 2-13 (1) establishes a new agricultural processing business 2-14 in a rural county or economically distressed county or expands an 2-15 existing agricultural processing business located in a rural county 2-16 or economically distressed county; and 2-17 (2) makes a capital investment of not less than 2-18 $100,000 in establishing or expanding the business in the location 2-19 described by Subdivision (1). 2-20 (d) A qualified agricultural processor that is not a 2-21 corporation subject to taxation under Chapter 171 may claim the 2-22 exemption provided by this section only until the third anniversary 2-23 of the date on which the processor begins constructing or expanding 2-24 a facility that is necessary or essential to the agricultural 2-25 processing business described by Subsection (c) or enters into a 3-1 lease for such a facility. 3-2 (e) A qualified agricultural processor that is a corporation 3-3 subject to taxation under Chapter 171 may claim the exemption 3-4 provided by this section only until the first anniversary of the 3-5 date on which the processor begins constructing or expanding a 3-6 facility that is necessary or essential to the agricultural 3-7 processing business described by Subsection (c) or enters into a 3-8 lease for such a facility. 3-9 (f) A corporation must apply to the comptroller for the 3-10 exemption provided by this section. The burden of establishing 3-11 entitlement to the exemption is on the agricultural processor. 3-12 SECTION 2. Chapter 171, Tax Code, is amended by adding 3-13 Subchapter N to read as follows: 3-14 SUBCHAPTER N. CREDIT FOR CERTAIN AGRICULTURAL PROCESSORS 3-15 Sec. 171.701. DEFINITIONS. In this subchapter: 3-16 (1) "Agricultural processor" has the meaning assigned 3-17 by Section 151.3185. 3-18 (2) "Agricultural product" has the meaning assigned by 3-19 Section 151.3185. 3-20 (3) "Economically distressed county" has the meaning 3-21 assigned by Section 151.3185. 3-22 (4) "New permanent employee" means a new employee, 3-23 other than a private contractor, hired by a corporation for a 3-24 position that requires at least 1,600 hours of work a year and is 3-25 intended to be held by one employee during the entire year. 4-1 (5) "Rural county" has the meaning assigned by Section 4-2 151.3185. 4-3 Sec. 171.702. ENTITLEMENT TO CREDIT. A corporation is 4-4 entitled to a credit in the amount and under the conditions and 4-5 limitations provided by this subchapter against the tax imposed 4-6 under this chapter. 4-7 Sec. 171.703. TYPES OF CORPORATIONS THAT QUALIFY FOR CREDIT. 4-8 (a) A corporation qualifies for a credit under this subchapter if 4-9 the corporation is an agricultural processor that: 4-10 (1) establishes a new agricultural processing business 4-11 in a rural county or economically distressed county or expands an 4-12 existing agricultural processing business located in a rural county 4-13 or economically distressed county; and 4-14 (2) makes an overall investment relating to the 4-15 establishment or expansion in a privilege period that is equal to 4-16 at least $250,000 as computed under Subsection (b). 4-17 (b) The value of a corporation's overall investment in 4-18 establishing or expanding an agricultural processing business in a 4-19 rural county or economically distressed county is computed by 4-20 multiplying the corporation's capital investment made in 4-21 establishing or expanding the business by the value of the new 4-22 permanent jobs created by the corporation as computed under 4-23 Subsection (c). 4-24 (c) The value of a new permanent job created by a 4-25 corporation is equal to: 5-1 (1) $0 for each new permanent employee hired by the 5-2 corporation to work at an agricultural processing business 5-3 established or expanded in a rural county or economically 5-4 distressed area if the corporation hires four or fewer new 5-5 permanent employees; 5-6 (2) $1,000 for each new permanent employee hired by 5-7 the corporation to work at an agricultural processing business 5-8 established or expanded in a rural county or economically 5-9 distressed area if the corporation hires at least five and not more 5-10 than 14 new permanent employees; 5-11 (3) $5,000 for each new permanent employee hired by 5-12 the corporation to work at an agricultural processing business 5-13 established or expanded in a rural county or economically 5-14 distressed area if the corporation hires at least 15 and not more 5-15 than 49 new permanent employees; and 5-16 (4) $10,000 for each new permanent employee hired by 5-17 the corporation to work at an agricultural processing business 5-18 established or expanded in a rural county or economically 5-19 distressed area if the corporation hires more than 49 new permanent 5-20 employees. 5-21 Sec. 171.704. AMOUNT OF CREDIT. (a) The total amount of 5-22 the credit for which a corporation may qualify during a privilege 5-23 period is equal to: 5-24 (1) two percent of the value of the corporation's 5-25 overall investment for the privilege period if the value is at 6-1 least $250,000 but not more than $500,000; 6-2 (2) four percent of the value of the corporation's 6-3 overall investment for the privilege period if the value is more 6-4 than $500,000 but not more than $1 million; 6-5 (3) six percent of the value of the corporation's 6-6 overall investment for the privilege period if the value is more 6-7 than $1 million but not more than $5 million; 6-8 (4) eight percent of the value of the corporation's 6-9 overall investment for the privilege period if the value is more 6-10 than $5 million but not more than $10 million; and 6-11 (5) 10 percent of the value of the corporation's 6-12 overall investment for the privilege period if the value is more 6-13 than $10 million. 6-14 (b) A credit related to a particular new permanent employee 6-15 expires if: 6-16 (1) the employee does not remain continuously employed 6-17 with the business for at least 90 days; or 6-18 (2) the number of full-time employees working at that 6-19 employee's location falls below the number of employees at that 6-20 location on the day after that employee was hired. 6-21 (c) A corporation that qualifies for a credit under this 6-22 subchapter must take the credit in five equal installments. 6-23 Sec. 171.705. LIMITATIONS. (a) The total credit claimed 6-24 under this subchapter for a privilege period may not exceed 50 6-25 percent of the amount of net franchise tax due for the privilege 7-1 period after any other applicable tax credits. 7-2 (b) The amount of the credit may not reduce the tax below 7-3 zero. 7-4 Sec. 171.706. CARRYOVER. If a corporation is entitled to 7-5 take a credit that exceeds the limitation prescribed by Section 7-6 171.705 for a privilege period, the corporation may carry the 7-7 credit forward to consecutive reports. 7-8 Sec. 171.707. CONVEYANCE, ASSIGNMENT, OR TRANSFER. A 7-9 corporation may not convey, assign, or transfer a credit to another 7-10 person. 7-11 Sec. 171.708. RULES. The comptroller shall adopt rules 7-12 necessary to implement this subchapter. 7-13 SECTION 3. Subchapter B, Chapter 403, Government Code, is 7-14 amended by adding Section 403.0255 to read as follows: 7-15 Sec. 403.0255. INCENTIVES FOR AGRICULTURAL PROCESSORS. The 7-16 comptroller shall promote awareness of incentives available to 7-17 companies that want to establish or expand an agricultural 7-18 processing business in this state. 7-19 SECTION 4. Chapter 12, Agriculture Code, is amended by 7-20 adding Section 12.0021 to read as follows: 7-21 Sec. 12.0021. INCENTIVES FOR AGRICULTURAL PROCESSORS. The 7-22 department shall recruit the governor's office and other state 7-23 agencies to participate in a coordinated campaign to increase 7-24 awareness of the incentives available to companies that want to 7-25 establish or expand an agricultural processing business in this 8-1 state. 8-2 SECTION 5. (a) This Act takes effect January 1, 2000. 8-3 (b) A corporation may claim an exemption or credit under 8-4 this Act only for a capital investment made or new permanent 8-5 employee hired on or after the effective date of this Act. 8-6 SECTION 6. The importance of this legislation and the 8-7 crowded condition of the calendars in both houses create an 8-8 emergency and an imperative public necessity that the 8-9 constitutional rule requiring bills to be read on three several 8-10 days in each house be suspended, and this rule is hereby suspended.