AN ACT
 1-1     relating to tax exemptions and credits.
 1-2           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-3           SECTION 1.  Subchapter A, Chapter 151, Tax Code, is amended
 1-4     by adding Sections 151.00393 and 151.00394 to read as follows:
 1-5           Sec. 151.00393.  INTERNET.  "Internet" means collectively the
 1-6     myriad of computer and telecommunications facilities, including
 1-7     equipment and operating software, that comprise the interconnected
 1-8     worldwide network of networks that employ the Transmission Control
 1-9     Protocol/Internet Protocol, or any predecessor or successor
1-10     protocols to the protocol, to communicate information of all kinds
1-11     by wire or radio.
1-12           Sec. 151.00394.  INTERNET ACCESS SERVICE.  (a)  "Internet
1-13     access service" means a service that enables users to access
1-14     content, information, electronic mail, or other services offered
1-15     over the Internet and may also include access to proprietary
1-16     content, information, and other services as part of a package of
1-17     services offered to consumers.  The term does not include
1-18     telecommunications services.
1-19           (b)  "Internet access service" does not include and the
1-20     exemption under Section 151.325 does not apply to any other taxable
1-21     service listed in Section 151.0101(a), unless the taxable service
1-22     is provided in conjunction with and is merely incidental to the
1-23     provision of Internet access service.
1-24           (c)  On and after October 1, 1999, "Internet access service"
 2-1     is not included in the definitions of "data processing service" and
 2-2     "information service."
 2-3           SECTION 2.  Subsection (a), Section 151.0101, Tax Code, is
 2-4     amended to read as follows:
 2-5           (a)  "Taxable services" means:
 2-6                 (1)  amusement services;
 2-7                 (2)  cable television services;
 2-8                 (3)  personal services;
 2-9                 (4)  motor vehicle parking and storage services;
2-10                 (5)  the repair, remodeling, maintenance, and
2-11     restoration of tangible personal property, except:
2-12                       (A)  aircraft;
2-13                       (B)  a ship, boat, or other vessel, other than:
2-14                             (i)  a taxable boat or motor as defined by
2-15     Section 160.001;
2-16                             (ii)  a sports fishing boat; or
2-17                             (iii)  any other vessel used for pleasure;
2-18                       (C)  the repair, maintenance, and restoration of
2-19     a motor vehicle; and
2-20                       (D)  the repair, maintenance, creation, and
2-21     restoration of a computer program, including its development and
2-22     modification, not sold by the person performing the repair,
2-23     maintenance, creation, or restoration service;
2-24                 (6)  telecommunications services;
2-25                 (7)  credit reporting services;
2-26                 (8)  debt collection services;
 3-1                 (9)  insurance services;
 3-2                 (10)  information services;
 3-3                 (11)  real property services;
 3-4                 (12)  data processing services;
 3-5                 (13)  real property repair and remodeling;
 3-6                 (14)  security services; [and]
 3-7                 (15)  telephone answering services; and
 3-8                 (16)  Internet access service.
 3-9           SECTION 3.  Section 151.0103, Tax Code, is amended to read as
3-10     follows:
3-11           Sec. 151.0103.  TELECOMMUNICATIONS SERVICES.  For the
3-12     purposes of this title only, "telecommunications services" means
3-13     the electronic or electrical transmission, conveyance, routing, or
3-14     reception of sounds, signals, data, or information utilizing wires,
3-15     cable, radio waves, microwaves, satellites, fiber optics, or any
3-16     other method now in existence or that may be devised, including but
3-17     not limited to long-distance telephone service.  The term does not
3-18     include:
3-19                 (1)  the storage of data or information for subsequent
3-20     retrieval or the processing, or reception and processing, of data
3-21     or information intended to change its form or content; [or]
3-22                 (2)  the sale or use of a telephone prepaid calling
3-23     card; or
3-24                 (3)  Internet access service.
3-25           SECTION 4.  Subsection (b), Section 151.3111, Tax Code, is
3-26     amended to read as follows:
 4-1           (b)  Subsection (a) of this section does not apply to the
 4-2     performance of a service on:
 4-3                 (1)  tangible personal property that would be exempted
 4-4     solely because of the exempt status of the seller of the property;
 4-5                 (2)  tangible personal property that is exempted solely
 4-6     because of the application of Section 151.303, 151.304, or 151.306
 4-7     of this code;
 4-8                 (3)  motor vehicles, trailers, or semitrailers as
 4-9     defined, taxed, or exempted by Chapter 152 of this code;
4-10                 (4)  a taxable boat or motor as defined by Section
4-11     160.001; [or]
4-12                 (5)  machinery and equipment with a purchase price
4-13     greater than $50,000 used exclusively in a commercial timber
4-14     operation as described by Section 151.3161(a); or
4-15                 (6)  tangible personal property exempt under Section
4-16     151.326.
4-17           SECTION 5.  Subsection (a), Section 151.313, Tax Code, is
4-18     amended to read as follows:
4-19           (a)  The following items are exempted from the taxes imposed
4-20     by this chapter:
4-21                 (1)  a drug or medicine, other than insulin, if
4-22     prescribed or dispensed for a human or animal by a licensed
4-23     practitioner of the healing arts;
4-24                 (2)  insulin;
4-25                 (3)  a drug or medicine, without regard to whether it
4-26     is prescribed or dispensed by a licensed practitioner of the
 5-1     healing arts, that is labeled with a national drug code issued by
 5-2     the federal Food and Drug Administration;
 5-3                 (4)  a hypodermic syringe or needle;
 5-4                 (5) [(4)]  a brace; hearing aid or audio loop;
 5-5     orthopedic, dental, or prosthetic device; ileostomy, colostomy, or
 5-6     ileal  bladder appliance; or supplies or replacement parts for the
 5-7     listed items;
 5-8                 (6) [(5)]  a therapeutic appliance, device, and any
 5-9     related supplies specifically designed for those products, if
5-10     dispensed or prescribed by a licensed practitioner of the healing
5-11     arts, when those items are purchased and used by an individual for
5-12     whom the items listed in this subdivision were dispensed or
5-13     prescribed;
5-14                 (7) [(6)]  corrective lens and necessary and related
5-15     supplies, if dispensed or prescribed by an ophthalmologist or
5-16     optometrist;
5-17                 (8) [(7)]  specialized printing or signalling equipment
5-18     used by the deaf for the purpose of enabling the deaf to
5-19     communicate through the use of an ordinary telephone and all
5-20     materials, paper, and printing ribbons used in that equipment;
5-21                 (9) [(8)]  a braille wristwatch, braille writer,
5-22     braille paper and braille electronic equipment that connects to
5-23     computer equipment, and the necessary adaptive devices and adaptive
5-24     computer software;
5-25                 (10) [(9)]  each of the following items if purchased
5-26     for use by the blind to enable them to function more independently:
 6-1     a slate and stylus, print enlarger, light probe, magnifier, white
 6-2     cane, talking clock, large print terminal, talking terminal, or
 6-3     harness for guide dog; [and]
 6-4                 (11) [(10)]  hospital beds; and
 6-5                 (12)  blood glucose monitoring test strips.
 6-6           SECTION 6.  Subchapter H, Chapter 151, Tax Code, is amended
 6-7     by adding Section 151.325 to read as follows:
 6-8           Sec. 151.325.  BASIC FEE FOR INTERNET ACCESS SERVICE.
 6-9     (a)  The sale, use, or other consumption in this state of Internet
6-10     access service is exempted from the taxes imposed by this chapter
6-11     in an amount not to exceed the first $25 of a monthly charge.
6-12           (b)  The exemption provided by this section applies without
6-13     regard to:
6-14                 (1)  whether the Internet access service is bundled
6-15     with another service, including any other taxable service listed in
6-16     Section 151.0101(a); or
6-17                 (2)  the billing period used by the service provider.
6-18           (c)  The exemption in this section applies to the total sales
6-19     price the service provider charges for Internet access to a
6-20     purchaser, without regard to whether the service provider charges
6-21     one lump-sum amount or separately bills the purchaser for each
6-22     user.
6-23           SECTION 7.  Subchapter H, Chapter 151, Tax Code, is amended
6-24     by adding Section 151.326 to read as follows:
6-25           Sec. 151.326.  CLOTHING AND FOOTWEAR FOR LIMITED PERIOD.
6-26     (a)  The sale of an article of clothing or footwear designed to be
 7-1     worn on or about the human body is exempted from the taxes imposed
 7-2     by this chapter if:
 7-3                 (1)  the sales price of the article is less than $100;
 7-4     and
 7-5                 (2)  the sale takes place during a period beginning at
 7-6     12:01 a.m. on the first Friday in August and ending at 12 midnight
 7-7     on the following Sunday.
 7-8           (b)  This section does not apply to:
 7-9                 (1)  any special clothing or footwear that is primarily
7-10     designed for athletic activity or protective use and that is not
7-11     normally worn except when used for the athletic activity or
7-12     protective use for which it is designed;
7-13                 (2)  accessories, including jewelry, handbags, luggage,
7-14     umbrellas, wallets, watches, and similar items carried on or about
7-15     the human body, without regard to whether worn on the body in a
7-16     manner characteristic of clothing; and
7-17                 (3)  the rental of clothing or footwear.
7-18           (c)  On or after January 1, 2000, the governing body of a
7-19     local taxing authority may repeal the application of this exemption
7-20     in the manner provided by Chapter 326.
7-21           SECTION 8.  Subchapter H, Chapter 151, Tax Code, is amended
7-22     by adding Section 151.351 to read as follows:
7-23           Sec. 151.351.  INFORMATION SERVICES AND DATA PROCESSING
7-24     SERVICES.  There is exempted from the taxes imposed by this chapter
7-25     20 percent of the value of information services and data processing
7-26     services.
 8-1           SECTION 9.  Subtitle C, Title 3, Tax Code, is amended by
 8-2     adding Chapter 326 to read as follows:
 8-3        CHAPTER 326.  STATE SALES AND USE TAX EXEMPTIONS IN RELATION
 8-4                        TO LOCAL SALES AND USE TAXES
 8-5           Sec. 326.001.  APPLICABILITY.  This chapter applies to local
 8-6     sales and use taxes administered and computed under this subtitle
 8-7     and to which this subtitle applies, including a tax imposed under:
 8-8                 (1)  Chapter 285, 775, or 776, Health and Safety Code;
 8-9                 (2)  Chapter 326, 334, 335, 363, 377, 383, or 384,
8-10     Local Government Code;
8-11                 (3)  Chapter 451, 452, 453, or 457, Transportation
8-12     Code;
8-13                 (4)  the Development Corporation Act of 1979 (Article
8-14     5190.6, Vernon's Texas Civil Statutes);
8-15                 (5)  Section 13A, Chapter 35, Acts of the 59th
8-16     Legislature, Regular Session, 1965, as added by Chapter 66, Acts of
8-17     the 71st Legislature, Regular Session, 1989;
8-18                 (6)  Chapter 598, Acts of the 71st Legislature, Regular
8-19     Session, 1989;
8-20                 (7)  Chapter 1316, Acts of the 75th Legislature,
8-21     Regular Session, 1997; or
8-22                 (8)  Chapter 289, Acts of the 73rd Legislature, Regular
8-23     Session, 1993.
8-24           Sec. 326.002.  STATE EXEMPTIONS.  Notwithstanding any other
8-25     law, an exemption to the state sales and use tax provided by
8-26     Chapter 151 does not apply to a local sales and use tax to which
 9-1     this chapter applies if:
 9-2                 (1)  the governing body of the local taxing authority
 9-3     repeals the exemption in the manner provided by Section 326.003;
 9-4     and
 9-5                 (2)  the exemption provided by Chapter 151 specifically
 9-6     provides that the governing body of the local taxing authority may
 9-7     repeal the exemption in the manner provided by this chapter.
 9-8           Sec. 326.003.  REPEAL BY LOCAL TAXING AUTHORITY.  (a)  The
 9-9     governing body of a taxing authority may by a majority vote adopt
9-10     an appropriate order, including an ordinance, to repeal the
9-11     application of an exemption described by Section 326.002.
9-12           (b)  The governing body must hold a public hearing before
9-13     taking a vote.
9-14           (c)  A taxing authority that has repealed the application of
9-15     an exemption under this section may in the same manner reinstate
9-16     the exemption.
9-17           (d)  A vote of the governing body of a taxing authority
9-18     repealing the application or reinstating the exemption must be
9-19     entered in the minutes for the meeting.  The secretary of the
9-20     taxing authority shall send to the comptroller by certified or
9-21     registered mail a copy of the order adopted under this section.
9-22           Sec. 326.004.  EFFECTIVE DATE.  The repeal of the application
9-23     of the exemption or a reinstated exemption under Section 326.003
9-24     takes effect within the taxing authority on the first day of the
9-25     first calendar quarter occurring after the expiration of the first
9-26     complete calendar quarter occurring after the date on which the
 10-1    comptroller receives a copy of the order adopted under that
 10-2    section.
 10-3          SECTION 10.  Subsection (d), Section 171.002, Tax Code, is
 10-4    amended to read as follows:
 10-5          (d)  A [If the amount of tax computed for a corporation is
 10-6    less than $100, the] corporation is not required to pay any tax
 10-7    [that amount] and is not considered to owe any tax for a [that]
 10-8    period if:
 10-9                (1)  the amount of tax computed for the corporation is
10-10    less than $100; or
10-11                (2)  the amount of the corporation's gross receipts:
10-12                      (A)  from its entire business under Section
10-13    171.105 is less than $150,000; and
10-14                      (B)  from its entire business under Section
10-15    171.1051, including the amount excepted under Section 171.1051(a),
10-16    is less than $150,000.
10-17          SECTION 11.  Subsection (a), Section 171.203, Tax Code, is
10-18    amended to read as follows:
10-19          (a)  A corporation on which the franchise tax is imposed,
10-20    regardless of whether the corporation is  required to pay any tax,
10-21    shall file a report with the comptroller containing:
10-22                (1)  the name of each corporation in which the
10-23    corporation filing the report owns a 10 percent or greater interest
10-24    and the percentage owned by the corporation;
10-25                (2)  the name of each corporation that owns a 10
10-26    percent or greater interest in the corporation filing the report;
 11-1                (3)  the name, title, and mailing address of each
 11-2    person who is an officer or director of the corporation on the date
 11-3    the report is filed and the expiration date of each person's term
 11-4    as an officer or director, if any;
 11-5                (4)  the name and address of the agent of the
 11-6    corporation designated under Section 171.354 of this code; and
 11-7                (5)  the address of the corporation's principal office
 11-8    and principal place of business.
 11-9          SECTION 12.  Section 171.204, Tax Code, is amended to read as
11-10    follows:
11-11          Sec. 171.204.  INFORMATION REPORT.  (a)  Except as provided
11-12    by Subsection (b), to [To] determine eligibility for the exemption
11-13    provided by Section 171.2022, or to determine the amount of the
11-14    franchise tax or the correctness of a franchise tax report, the
11-15    comptroller may require an officer of a corporation that may be
11-16    subject to the tax imposed under this chapter to file an
11-17    information report with the comptroller stating the amount of the
11-18    corporation's taxable capital and earned surplus, or any other
11-19    information the comptroller may request.
11-20          (b)  The comptroller may require an officer of a corporation
11-21    that does not owe any tax because of the application of Section
11-22    171.002(d)(2) to file an abbreviated information report with the
11-23    comptroller stating the amount of the corporation's gross receipts
11-24    from its entire business.  The comptroller may not require a
11-25    corporation described by this subsection to file an information
11-26    report that requires the corporation to report or compute its
 12-1    earned surplus or taxable capital.
 12-2          SECTION 13.  Chapter 171, Tax Code, is amended by adding
 12-3    Subchapter N to read as follows:
 12-4        SUBCHAPTER N.  TAX CREDIT FOR ESTABLISHING DAY-CARE CENTER
 12-5                     OR PURCHASING CHILD-CARE SERVICES
 12-6          Sec. 171.701.  DEFINITIONS.  In this subchapter:
 12-7                (1)  "Day-care center" has the meaning assigned by
 12-8    Section 42.002, Human Resources Code.
 12-9                (2)  "Family home" has the meaning assigned by Section
12-10    42.002, Human Resources Code.
12-11          Sec. 171.702.  CREDIT.  A corporation that meets the
12-12    eligibility requirements under this subchapter is entitled to a
12-13    credit in the amount allowed by this subchapter against the tax
12-14    imposed under this chapter.
12-15          Sec. 171.703.  CREDIT FOR DAY-CARE CENTER AND PURCHASED CHILD
12-16    CARE.  (a)  A corporation may claim a credit under this subchapter
12-17    only for a qualifying expenditure relating to:
12-18                (1)  the establishment and operation of a day-care
12-19    center primarily to provide care for the children of employees of
12-20    the corporation or of the corporation and one or more other
12-21    entities sharing the costs of establishing and operating the
12-22    center; or
12-23                (2)  the purchase of child-care services that are
12-24    actually provided to children of employees of the corporation at a:
12-25                      (A)  day-care center; or
12-26                      (B)  family home that is registered or listed
 13-1    with the Department of Protective and Regulatory Services under
 13-2    Chapter 42, Human Resources Code.
 13-3          (b)  A qualifying expenditure includes an expenditure for:
 13-4                (1)  planning the day-care center;
 13-5                (2)  preparing a site to be used for the day-care
 13-6    center;
 13-7                (3)  constructing the day-care center;
 13-8                (4)  renovating or remodeling a structure to be used
 13-9    for the day-care center;
13-10                (5)  purchasing equipment necessary in the use of the
13-11    day-care center and installed for permanent use in or immediately
13-12    adjacent to the day-care center, including kitchen appliances and
13-13    other food preparation equipment;
13-14                (6)  expanding the day-care center;
13-15                (7)  maintaining and operating the day-care center,
13-16    including paying direct administration and staff costs; or
13-17                (8)  purchasing all or part of child-care services that
13-18    are actually provided to children of employees of the corporation
13-19    at a day-care center or registered or listed family home.
13-20          (c)  The amount of the credit is equal to the lesser of:
13-21                (1)  $50,000;
13-22                (2)  50 percent of the corporation's qualifying
13-23    expenditures; or
13-24                (3)  the amount of the limitation provided by Section
13-25    171.705(b).
13-26          (d)  If a corporation shares in the cost of establishing and
 14-1    operating a day-care center, the corporation is entitled to a
 14-2    credit for the qualifying expenditures made by that corporation,
 14-3    subject to the limitation prescribed by Subsection (c).
 14-4          Sec. 171.704.  APPLICATION FOR CREDIT.  (a)  A corporation
 14-5    must apply for a credit under this subchapter on or with the tax
 14-6    report for the period for which the credit is claimed.
 14-7          (b)  If the corporation is claiming a credit for a qualifying
 14-8    expenditure for purchasing child-care services, the corporation
 14-9    must maintain proof that the services were actually provided to
14-10    children of employees of the corporation at a day-care center or
14-11    registered or listed family home.
14-12          (c)  The comptroller shall adopt a form for the application
14-13    for the credit.  A corporation must use this form in applying for
14-14    the credit.
14-15          Sec. 171.705.  PERIOD FOR WHICH CREDIT MAY BE CLAIMED.
14-16    (a)  A corporation may claim a credit under this subchapter for
14-17    qualifying expenditures made during an accounting period only
14-18    against the tax owed for the corresponding reporting period.
14-19          (b)  A corporation may not claim a credit in an amount that
14-20    exceeds 90 percent of the amount of tax due for the report.
14-21          Sec. 171.706.  ASSIGNMENT PROHIBITED.  A corporation may not
14-22    convey, assign, or transfer the credit allowed under this
14-23    subchapter  to another entity unless all of the assets of the
14-24    corporation are conveyed, assigned, or transferred in the same
14-25    transaction.
14-26          Sec. 171.707.  BIENNIAL REPORT BY COMPTROLLER.  (a)  Before
 15-1    the beginning of each regular session of the legislature, the
 15-2    comptroller shall submit to the governor, the lieutenant governor,
 15-3    and the speaker of the house of representatives a report that
 15-4    states:
 15-5                (1)  the total amount of qualifying expenditures
 15-6    incurred by corporations that claim a credit under this subchapter;
 15-7                (2)  the total amount of credits applied against the
 15-8    tax under this chapter and the amount of unused credits including:
 15-9                      (A)  the total amount of franchise tax due by
15-10    corporations claiming a credit under this subchapter before and
15-11    after the application of the credit;
15-12                      (B)  the average percentage reduction in
15-13    franchise tax due by corporations claiming a credit under this
15-14    subchapter;
15-15                      (C)  the percentage of tax credits that were
15-16    awarded to corporations with fewer than 100 employees; and
15-17                      (D)  the two-digit standard industrial
15-18    classification of corporations claiming a credit under this
15-19    subchapter;
15-20                (3)  the geographical distribution of qualifying
15-21    expenditures giving rise to a credit authorized by this subchapter;
15-22                (4)  the impact of the credit provided by this
15-23    subchapter on promoting economic development in this state; and
15-24                (5)  the impact of the credit provided under this
15-25    subchapter on state tax revenues.
15-26          (b)  The final report issued prior to the expiration of this
 16-1    subchapter shall include historical information on the credit
 16-2    authorized under this subchapter.
 16-3          (c)  The comptroller may not include in the report
 16-4    information that is confidential by law.
 16-5          (d)  For purposes of this section, the comptroller may
 16-6    require a corporation that claims a credit under this subchapter to
 16-7    submit information, on a form provided by the comptroller, on the
 16-8    location of the corporation's qualifying expenditures and any other
 16-9    information necessary to complete the report required under this
16-10    section.
16-11          SECTION 14.  Chapter 171, Tax Code, is amended by adding
16-12    Subchapter O to read as follows:
16-13            SUBCHAPTER O.  TAX CREDIT FOR CERTAIN RESEARCH AND
16-14                          DEVELOPMENT ACTIVITIES
16-15          Sec. 171.721.  DEFINITIONS.  In this subchapter:
16-16                (1)  "Base amount," "basic research payment," and
16-17    "qualified research expense" have the meanings assigned those terms
16-18    by Section 41, Internal Revenue Code, except that all such payments
16-19    and expenses must be for research conducted within this state.
16-20                (2)  "Strategic investment area" means an area that is
16-21    determined by the comptroller under Section 171.726 that is:
16-22                      (A)  a county within this state with above state
16-23    average unemployment and below state average per capita income; or
16-24                      (B)  an area within this state that is a
16-25    federally designated urban enterprise community or an urban
16-26    enhanced enterprise community.
 17-1          Sec. 171.722.  ELIGIBILITY.  (a)  A corporation is eligible
 17-2    for a credit against the tax imposed under this chapter in the
 17-3    amount and under the conditions and limitations provided by this
 17-4    subchapter.
 17-5          (b)  A corporation may claim a credit under Section
 17-6    171.723(d) or take a carryforward credit without regard to whether
 17-7    the strategic investment area in which it made qualified research
 17-8    expenses and basic research payments subsequently loses its
 17-9    designation as a strategic investment area.
17-10          Sec. 171.723.  CALCULATION OF CREDIT.  (a)  The credit for
17-11    any report equals five percent of the sum of:
17-12                (1)  the excess of qualified research expenses incurred
17-13    in this state during the period upon which the tax is based over
17-14    the base amount for this state; and
17-15                (2)  the basic research payments determined under
17-16    Section 41(e)(1)(A), Internal Revenue Code, for this state during
17-17    the period upon which the tax is based.
17-18          (b)  A corporation may elect to compute the credit for
17-19    qualified research expenses incurred in this state in a manner
17-20    consistent with the alternative incremental credit described in
17-21    Section 41(c)(4), Internal Revenue Code, only if for the
17-22    corresponding federal tax period:
17-23                (1)  a federal election was made to compute the federal
17-24    credit under Section 41(c)(4), Internal Revenue Code;
17-25                (2)  the corporation was a member of a consolidated
17-26    group for which a federal election was made under Section 41(c)(4),
 18-1    Internal Revenue Code; or
 18-2                (3)  the corporation did not claim the federal credit
 18-3    under Section 41(a)(1), Internal Revenue Code.
 18-4          (c)  For purposes of the alternate credit computation method
 18-5    in Subsection (b), the credit percentages applicable to qualified
 18-6    research expenses described in Sections 41(c)(4)(A)(i), (ii), and
 18-7    (iii), Internal Revenue Code, are 0.41 percent, 0.55 percent, and
 18-8    0.69 percent, respectively.
 18-9          (d)  In computing the credit under this section, a
18-10    corporation may multiply by two the amount of any qualified
18-11    research expenses and basic research payments made in a strategic
18-12    investment area.
18-13          (e)  The burden of establishing entitlement to and the value
18-14    of the credit is on the corporation.
18-15          (f)  For the purposes of this section, "gross receipts" as
18-16    used in Section 41, Internal Revenue Code, means gross receipts as
18-17    determined under Section 171.1032.
18-18          Sec. 171.724.  LIMITATIONS.  (a)  The total credit claimed
18-19    under this subchapter for a report, including the amount of any
18-20    carryforward credit under Section 171.725, may not exceed 50
18-21    percent of the amount of franchise tax due for the report before
18-22    any other applicable tax credits.
18-23          (b)  The total credit claimed under this subchapter and
18-24    Subchapters P and Q for a report, including the amount of any
18-25    carryforward credits, may not exceed the amount of franchise tax
18-26    due for the report after any other applicable credits.
 19-1          (c)  A corporation that establishes its eligibility for a
 19-2    credit under this subchapter is not eligible to establish a credit
 19-3    under Subchapter P.
 19-4          Sec. 171.725.  CARRYFORWARD.  If a corporation is eligible
 19-5    for a credit that exceeds the limitation under Section 171.724(a)
 19-6    or (b), the corporation may carry the unused credit forward for not
 19-7    more than 20 consecutive reports.  A credit carryforward from a
 19-8    previous report is considered to be utilized before the current
 19-9    year credit.
19-10          Sec. 171.726.  DETERMINATION OF STRATEGIC INVESTMENT AREAS.
19-11    (a)  Not later than September 1 each year, the comptroller shall
19-12    determine areas that qualify as strategic investment areas using
19-13    the most recently completed full calendar year data available on
19-14    that date and, not later than October 1, shall publish a list and
19-15    map of the designated areas.
19-16          (b)  The designation is effective for the following calendar
19-17    year for purposes of credits available under this subchapter.
19-18          Sec. 171.727.  BIENNIAL REPORT BY COMPTROLLER.  (a)  Before
19-19    the beginning of each regular session of the legislature, the
19-20    comptroller shall submit to the governor, the lieutenant governor,
19-21    and the speaker of the house of representatives a report that
19-22    states:
19-23                (1)  the total amount of expenses and payments incurred
19-24    by corporations that claim a credit under this subchapter;
19-25                (2)  the total amount of credits applied against the
19-26    tax under this chapter and the amount of unused credits including:
 20-1                      (A)  the total amount of franchise tax due by
 20-2    corporations claiming a credit under this subchapter before and
 20-3    after the application of the credit;
 20-4                      (B)  the average percentage reduction in
 20-5    franchise tax due by corporations claiming a credit under this
 20-6    subchapter;
 20-7                      (C)  the percentage of tax credits that were
 20-8    awarded to corporations with fewer than 100 employees; and
 20-9                      (D)  the two-digit standard industrial
20-10    classification of corporations claiming a credit under this
20-11    subchapter;
20-12                (3)  the geographical distribution of expenses and
20-13    payments giving rise to a credit authorized by this subchapter;
20-14                (4)  the impact of the credit provided by this
20-15    subchapter on the amount of research and development performed in
20-16    this state and employment in research and development in this
20-17    state; and
20-18                (5)  the impact of the credit provided under this
20-19    subchapter on employment, capital investment, and personal income
20-20    in this state and on state tax revenues.
20-21          (b)  The final report issued prior to the expiration of this
20-22    subchapter shall include historical information on the credit
20-23    authorized under this subchapter.
20-24          (c)  The comptroller may not include in the report
20-25    information that is confidential by law.
20-26          (d)  For purposes of this section, the comptroller may
 21-1    require a corporation that claims a credit under this subchapter to
 21-2    submit information, on a form provided by the comptroller, on the
 21-3    location of the corporation's research expenses and payments in
 21-4    this state and any other information necessary to complete the
 21-5    report required under this section.
 21-6          Sec. 171.728.  COMPTROLLER POWERS AND DUTIES.  The
 21-7    comptroller shall adopt rules and forms necessary to implement this
 21-8    subchapter.
 21-9          Sec. 171.729.  EXPIRATION.  (a)  This subchapter expires
21-10    December 31, 2009.
21-11          (b)  The expiration of this subchapter does not affect the
21-12    carryforward of a credit under Section 171.725 for those credits to
21-13    which a corporation is eligible before the date this subchapter
21-14    expires.
21-15          Sec. 171.730.  TEMPORARY CREDIT RATES AND LIMITATIONS.
21-16    (a)  Notwithstanding any other provision of this subchapter, this
21-17    section applies to a report originally due before January 1, 2002.
21-18          (b)  For purposes of computing the credit under Section
21-19    171.723(a) for a report described by Subsection (a), the credit
21-20    equals four percent of the sum of:
21-21                (1)  the excess of qualified research expenses incurred
21-22    in this state during the period upon which the tax is based over
21-23    the base amount for this state; and
21-24                (2)  the basic research payments determined under
21-25    Section 41(e)(1)(A), Internal Revenue Code, for this state during
21-26    the period upon which the tax is based.
 22-1          (c)  For purposes of computing the credit under Section
 22-2    171.723(d) for a report described by Subsection (a), a corporation
 22-3    may multiply by 1.5 the amount of any qualified research expenses
 22-4    and basic research payments made in a strategic investment area.
 22-5          (d)  The total credit claimed under this subchapter for a
 22-6    report described by Subsection (a), including the amount of any
 22-7    carryforward credit under Section 171.725, may not exceed 25
 22-8    percent of the amount of franchise tax due for the report before
 22-9    any other applicable tax credits.
22-10          (e)  For purposes of the alternate credit computation method
22-11    in Section 171.723(b), the credit percentages applicable to
22-12    qualified research expenses described in Sections 41(c)(4)(A)(i),
22-13    (ii), and (iii), Internal Revenue Code, are 0.33 percent, 0.44
22-14    percent, and 0.55 percent, respectively.
22-15          (f)  This section expires January 1, 2002.
22-16          (g)  The expiration of this section does not affect the
22-17    carryforward of a credit under Section 171.725 for those credits to
22-18    which a corporation is eligible before the date this section
22-19    expires.
22-20          SECTION 15.  Chapter 171, Tax Code, is amended by adding
22-21    Subchapter P to read as follows:
22-22      SUBCHAPTER P.  TAX CREDITS FOR CERTAIN JOB CREATION ACTIVITIES
22-23          Sec. 171.751.  DEFINITIONS.  In this subchapter:
22-24                (1)  "Agricultural processing" means an establishment
22-25    primarily engaged in activities described in categories 2011-2099,
22-26    2211, 2231, or 3111-3199 of the 1987 Standard Industrial
 23-1    Classification Manual published by the federal Office of Management
 23-2    and Budget.
 23-3                (2)  "Central administrative offices" means an
 23-4    establishment primarily engaged in performing management or support
 23-5    services for other establishments of the same enterprise.  An
 23-6    enterprise consists of all establishments having more than 50
 23-7    percent common direct or indirect ownership.
 23-8                (3)  "County average weekly wage" means the average
 23-9    weekly wage for all covered employment in the county as computed by
23-10    the Texas Workforce Commission.
23-11                (4)  "Data processing" means an establishment primarily
23-12    engaged in activities described in categories 7371-7379 of the 1987
23-13    Standard Industrial Classification Manual published by the federal
23-14    Office of Management and Budget.
23-15                (5)  "Distribution" means an establishment primarily
23-16    engaged in activities described in categories 5012-5199 of the 1987
23-17    Standard Industrial Classification Manual published by the federal
23-18    Office of Management and Budget.
23-19                (6)  "Group health benefit plan" means:
23-20                      (A)  a health plan provided by a health
23-21    maintenance organization established under the Texas Health
23-22    Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance
23-23    Code);
23-24                      (B)  a health benefit plan approved by the
23-25    commissioner of insurance; or
23-26                      (C)  a self-funded or self-insured employee
 24-1    welfare benefit plan that provides health benefits and is
 24-2    established in accordance with the Employee Retirement Income
 24-3    Security Act of 1974 (29 U.S.C. Section 1001 et seq.), as amended.
 24-4                (7)  "Manufacturing" means an establishment primarily
 24-5    engaged in activities described in categories 2011-3999 of the 1987
 24-6    Standard Industrial Classification Manual published by the federal
 24-7    Office of Management and Budget.
 24-8                (8)  "Qualified business" means an establishment
 24-9    primarily engaged in agricultural processing, central
24-10    administrative offices, distribution, data processing,
24-11    manufacturing, research and development, or warehousing.
24-12                (9)  "Qualifying job" means a new permanent full-time
24-13    job that:
24-14                      (A)  is located in:
24-15                            (i)  a strategic investment area; or
24-16                            (ii)  a county within this state with a
24-17    population of less than 50,000, if the job is created by a business
24-18    primarily engaged in agricultural processing;
24-19                      (B)  requires at least 1,600 hours of work a
24-20    year;
24-21                      (C)  pays at least 110 percent of the county
24-22    average weekly wage for the county where the job is located;
24-23                      (D)  is covered by a group health benefit plan
24-24    for which the business pays at least 80 percent of the premiums or
24-25    other charges assessed under the plan for the employee;
24-26                      (E)  is not transferred from one area in this
 25-1    state to another area in this state; and
 25-2                      (F)  is not created to replace a previous
 25-3    employee.
 25-4                (10)  "Research and development" means an establishment
 25-5    primarily engaged in activities described in category 8731 of the
 25-6    1987 Standard Industrial Classification Manual published by the
 25-7    federal Office of Management and Budget.
 25-8                (11)  "Strategic investment area" has the meaning
 25-9    assigned that term by Section 171.721.
25-10                (12)  "Warehousing" means an establishment primarily
25-11    engaged in activities described in categories 4221-4226 of the 1987
25-12    Standard Industrial Classification Manual published by the federal
25-13    Office of Management and Budget.
25-14          Sec. 171.752.  ELIGIBILITY.  (a)  A corporation is eligible
25-15    for a credit against the tax imposed under this chapter if the
25-16    corporation:
25-17                (1)  is a qualified business as defined in Section
25-18    171.751;
25-19                (2)  creates a minimum of 10 qualifying jobs; and
25-20                (3)  pays an average weekly wage, for the year in which
25-21    credits are claimed, of at least 110 percent of the county average
25-22    weekly wage for the county where the qualifying jobs are located.
25-23          (b)  A corporation may claim a credit or take a carryforward
25-24    credit without regard to whether the strategic investment area in
25-25    which it created the qualifying jobs subsequently loses its
25-26    designation as a strategic investment area, if applicable.
 26-1          Sec. 171.753.  CALCULATION OF CREDIT.  A corporation may
 26-2    establish a credit equal to 25 percent of the total wages and
 26-3    salaries paid by the corporation for qualifying jobs during the
 26-4    period upon which the tax is based.
 26-5          Sec. 171.754.  LENGTH OF CREDIT.  The credit established
 26-6    shall be claimed in five equal installments of one-fifth the credit
 26-7    amount over the five consecutive reports beginning with the report
 26-8    based upon the period during which the qualifying jobs were
 26-9    created.
26-10          Sec. 171.755.  LIMITATIONS.  (a)  The total credit claimed
26-11    under this subchapter for a report, including the amount of any
26-12    carryforward credit under Section 171.756, may not exceed 50
26-13    percent of the amount of franchise tax due for the report before
26-14    any other applicable tax credits.
26-15          (b)  The total credit claimed under this subchapter and
26-16    Subchapters O and Q for a report, including the amount of any
26-17    carryforward credits, may not exceed the amount of franchise tax
26-18    due for the report after any other applicable credits.
26-19          (c)  A corporation that establishes its eligibility for a
26-20    credit under this subchapter is not eligible to establish a credit
26-21    under Subchapter O.
26-22          Sec. 171.756.  CARRYFORWARD.  (a)  If a corporation is
26-23    eligible for a credit from an installment that exceeds the
26-24    limitations under Section 171.755(a) or (b), the corporation may
26-25    carry the unused credit forward for not more than five consecutive
26-26    reports.
 27-1          (b)  A carryforward is considered the remaining portion of an
 27-2    installment that cannot be claimed in the current year because of
 27-3    the tax limitation under Section 171.755.  A carryforward is added
 27-4    to the next year's installment of the credit in determining the tax
 27-5    limitation for that year.  A credit carryforward from a previous
 27-6    report is considered to be utilized before the current year
 27-7    installment.
 27-8          Sec. 171.757.  CERTIFICATION OF ELIGIBILITY.  (a)  For the
 27-9    initial and each succeeding report in which a credit is claimed
27-10    under this subchapter, the corporation shall file with its report,
27-11    on a form provided by the comptroller, information that
27-12    sufficiently demonstrates that the corporation is eligible for the
27-13    credit and is in compliance with Section 171.752.
27-14          (b)  The burden of establishing entitlement to and the value
27-15    of the credit is on the corporation.
27-16          (c)  If, in one of the five years in which the installment of
27-17    a credit accrues, the number of the corporation's full-time
27-18    employees falls below the number of full-time employees the
27-19    corporation had in the year in which the corporation qualified for
27-20    the credit, the credit expires and the corporation may not take any
27-21    remaining installment of the credit.
27-22          (d)  Notwithstanding Subsection (c), the corporation may,
27-23    however, take the portion of an installment that accrued in a
27-24    previous year and was carried forward to the extent permitted under
27-25    Section 171.756.
27-26          Sec. 171.758.  ASSIGNMENT PROHIBITED.  A corporation may not
 28-1    convey, assign, or transfer the credit allowed under this
 28-2    subchapter to another entity unless all of the assets of the
 28-3    corporation are conveyed, assigned, or transferred in the same
 28-4    transaction.
 28-5          Sec. 171.759.  BIENNIAL REPORT BY COMPTROLLER.  (a)  Before
 28-6    the beginning of each regular session of the legislature, the
 28-7    comptroller shall submit to the governor, the lieutenant governor,
 28-8    and the speaker of the house of representatives a report that
 28-9    states:
28-10                (1)  the total number of jobs created by corporations
28-11    that claim a credit under this subchapter and the average and
28-12    median annual wage of those jobs;
28-13                (2)  the total amount of credits applied against the
28-14    tax under this chapter and the amount of unused credits including:
28-15                      (A)  the total amount of franchise tax due by
28-16    corporations claiming a credit under this subchapter before and
28-17    after the application of the credit;
28-18                      (B)  the average percentage reduction in
28-19    franchise tax due by corporations claiming a credit under this
28-20    subchapter; and
28-21                      (C)  the percentage of tax credits that were
28-22    awarded to corporations with fewer than 100 employees;
28-23                (3)  a breakdown of the two-digit standard industrial
28-24    classification of businesses claiming a credit under this
28-25    subchapter;
28-26                (4)  the geographical distribution of the credits
 29-1    claimed under this subchapter; and
 29-2                (5)  the impact of the credit provided under this
 29-3    subchapter on employment, personal income, and capital investment
 29-4    in this state and on state tax revenues.
 29-5          (b)  The final report issued prior to the expiration of this
 29-6    subchapter shall include historical information on the credit
 29-7    authorized under this subchapter.
 29-8          (c)  The comptroller may not include in the report
 29-9    information that is confidential by law.
29-10          (d)  For purposes of this section, the comptroller may
29-11    require a corporation that claims a credit under this subchapter to
29-12    submit information, on a form provided by the comptroller, on the
29-13    location of the corporation's job creation in this state and any
29-14    other information necessary to complete the report required under
29-15    this section.
29-16          (e)  The comptroller shall provide notice to the members of
29-17    the legislature that the report required under this section is
29-18    available on request.
29-19          Sec. 171.760.  COMPTROLLER POWERS AND DUTIES.  The
29-20    comptroller shall adopt rules and forms necessary to implement this
29-21    subchapter.
29-22          Sec. 171.761.  EXPIRATION.  (a)  This subchapter expires
29-23    December 31, 2009.
29-24          (b)  The expiration of this subchapter does not affect the
29-25    carryforward of a credit under Section 171.756 or those credits for
29-26    which a corporation is eligible before the date this subchapter
 30-1    expires.
 30-2          SECTION 16.  Chapter 171, Tax Code, is amended by adding
 30-3    Subchapter Q to read as follows:
 30-4        SUBCHAPTER Q.  TAX CREDITS FOR CERTAIN CAPITAL INVESTMENTS
 30-5          Sec. 171.801.  DEFINITIONS.  In this subchapter:
 30-6                (1)  "Agricultural processing," "central administrative
 30-7    offices," "county average weekly wage," "data processing,"
 30-8    "distribution," "manufacturing," "qualified business," "research
 30-9    and development," and "warehousing" have the meanings assigned
30-10    those terms by Section 171.751.
30-11                (2)  "Qualified capital investment" means tangible
30-12    personal property first placed in service in a strategic investment
30-13    area, or first placed in service in a county with a population of
30-14    less than 50,000 by a corporation primarily engaged in agricultural
30-15    processing, and that is described in Section 1245(a), Internal
30-16    Revenue Code, such as engines, machinery, tools, and implements
30-17    used in a trade or business or held for investment and subject to
30-18    an allowance for depreciation, cost recovery under the accelerated
30-19    cost recovery system, or amortization.  The term does not include
30-20    real property or buildings and their structural components.
30-21    Property that is leased under a capitalized lease is considered a
30-22    "qualified capital investment," but property that is leased under
30-23    an operating lease is not considered a "qualified capital
30-24    investment."  Property expensed under Section 179, Internal Revenue
30-25    Code, is not considered a "qualified capital investment."
30-26                (3)  "Strategic investment area" has the meaning
 31-1    assigned that term by Section 171.721.
 31-2          Sec. 171.802.  ELIGIBILITY.  (a)  A qualified business is
 31-3    eligible for a credit against the tax imposed under this chapter in
 31-4    the amount and under the conditions and limitations provided by
 31-5    this subchapter.
 31-6          (b)  To qualify for the credit authorized under this
 31-7    subchapter, a qualified business must:
 31-8                (1)  pay an average weekly wage, at the location with
 31-9    respect to which the credit is claimed, that is at least 110
31-10    percent of the county average weekly wage;
31-11                (2)  offer coverage to all full-time employees at the
31-12    location with respect to which the credit is claimed by a group
31-13    health benefit plan, as defined by Section 171.751, for which the
31-14    business pays at least 80 percent of the premiums or other charges
31-15    assessed under the plan for the employees; and
31-16                (3)  make a minimum $500,000 qualified capital
31-17    investment.
31-18          (c)  A corporation may claim a credit or take a carryforward
31-19    credit without regard to whether the strategic investment area in
31-20    which it made the qualified capital investment subsequently loses
31-21    its designation as a strategic investment area, if applicable.
31-22          Sec. 171.803.  CALCULATION OF CREDIT.  A corporation may
31-23    establish a credit equal to 7.5 percent of the qualified capital
31-24    investment during the period upon which the tax is based.
31-25          Sec. 171.804.  LENGTH OF CREDIT.  The credit established
31-26    shall be claimed in five equal installments of one-fifth the credit
 32-1    amount over the five consecutive reports beginning with the report
 32-2    based upon the period during which the qualified capital investment
 32-3    was made.
 32-4          Sec. 171.805.  LIMITATIONS.  (a)  The total credit claimed
 32-5    under this subchapter for a report, including the amount of any
 32-6    carryforward credit under Section 171.806, may not exceed 50
 32-7    percent of the amount of franchise tax due for the report before
 32-8    any other applicable tax credits.
 32-9          (b)  The total credit claimed under this subchapter and
32-10    Subchapters O and P for a report, including the amount of any
32-11    carryforward credits, may not exceed the amount of franchise tax
32-12    due for the report after any other applicable tax credits.
32-13          (c)  A corporation that establishes its eligibility for a
32-14    credit under this subchapter is not eligible to claim a franchise
32-15    tax reduction authorized under Section 171.1015.
32-16          Sec. 171.806.  CARRYFORWARD.  (a)  If a corporation is
32-17    eligible for a credit from an installment that exceeds the
32-18    limitation under Section 171.805(a) or (b), the corporation may
32-19    carry the unused credit forward for not more than five consecutive
32-20    reports.
32-21          (b)  A carryforward is considered the remaining portion of an
32-22    installment that cannot be claimed in the current year because of
32-23    the tax limitation under Section 171.805.  A carryforward is added
32-24    to the next year's installment of the credit in determining the tax
32-25    limitation for that year.  A credit carryforward from a previous
32-26    report is considered to be utilized before the current year
 33-1    installment.
 33-2          Sec. 171.807.  CERTIFICATION OF ELIGIBILITY.  (a)  For the
 33-3    initial and each succeeding report in which a credit is claimed
 33-4    under this subchapter, the corporation shall file with its report,
 33-5    on a form provided by the comptroller, information that
 33-6    sufficiently demonstrates that the corporation is eligible for the
 33-7    credit and is in compliance with Section 171.802.
 33-8          (b)  The burden of establishing entitlement to and the value
 33-9    of the credit is on the qualified business.
33-10          (c)  A credit expires under this subchapter and the
33-11    corporation may not take any remaining installment of the credit if
33-12    in one of the five years in which the installment of a credit
33-13    accrues, the qualified business:
33-14                (1)  disposes of the qualified capital investment;
33-15                (2)  takes the qualified capital investment out of
33-16    service;
33-17                (3)  moves the qualified capital investment out of this
33-18    state; or
33-19                (4)  fails to pay an average weekly wage as required by
33-20    Section 171.802.
33-21          (d)  Notwithstanding Subsection (c), the corporation may take
33-22    the portion of an installment that accrued in a previous year and
33-23    was carried forward to the extent permitted under Section 171.806.
33-24          Sec. 171.808.  ASSIGNMENT PROHIBITED.  A corporation may not
33-25    convey, assign, or transfer the credit allowed under this
33-26    subchapter to another entity unless all of the assets of the
 34-1    corporation are conveyed, assigned, or transferred in the same
 34-2    transaction.
 34-3          Sec. 171.809.  BIENNIAL REPORT BY COMPTROLLER.  (a)  Before
 34-4    the beginning of each regular session of the legislature, the
 34-5    comptroller shall submit to the governor, the lieutenant governor,
 34-6    and the speaker of the house of representatives a report that
 34-7    states:
 34-8                (1)  the total amount of qualified capital investments
 34-9    made by corporations that claim a credit under this subchapter and
34-10    the average and median wages paid by those corporations;
34-11                (2)  the total amount of credits applied against the
34-12    tax under this chapter and the amount of unused credits, including:
34-13                      (A)  the total amount of franchise tax due by
34-14    corporations claiming a credit under this subchapter before and
34-15    after the application of the credit;
34-16                      (B)  the average percentage reduction in
34-17    franchise tax due by corporations claiming a credit under this
34-18    subchapter;
34-19                      (C)  the percentage of tax credits that were
34-20    awarded to corporations with fewer than 100 employees; and
34-21                      (D)  the two-digit standard industrial
34-22    classification of corporations claiming a credit under this
34-23    subchapter;
34-24                (3)  the geographical distribution of the qualified
34-25    capital investments on which tax credit claims are made under this
34-26    subchapter; and
 35-1                (4)  the impact of the credit provided under this
 35-2    subchapter on employment, capital investment, personal income, and
 35-3    state tax revenues.
 35-4          (b)  The final report issued before the expiration of this
 35-5    subchapter shall include historical information on the credit
 35-6    authorized under this subchapter.
 35-7          (c)  The comptroller may not include in the report
 35-8    information that is confidential by law.
 35-9          (d)  For purposes of this section, the comptroller may
35-10    require a corporation that claims a credit under this subchapter to
35-11    submit information, on a form provided by the comptroller, on the
35-12    location of the corporation's capital investment in this state and
35-13    any other information necessary to complete the report required
35-14    under this section.
35-15          (e)  The comptroller shall provide notice to the members of
35-16    the legislature that the report required under this section is
35-17    available on request.
35-18          Sec. 171.810.  COMPTROLLER POWERS AND DUTIES.  The
35-19    comptroller shall adopt rules and forms necessary to implement this
35-20    subchapter.
35-21          Sec. 171.811.  EXPIRATION.  (a)  This subchapter expires
35-22    December 31, 2009.
35-23          (b)  The expiration of this subchapter does not affect the
35-24    carryforward of a credit under Section 171.806 or those credits for
35-25    which a corporation is eligible before the date this subchapter
35-26    expires.
 36-1          SECTION 17.  Chapter 171, Tax Code, is amended by adding
 36-2    Subchapter R to read as follows:
 36-3              SUBCHAPTER R.  TAX CREDIT FOR CONTRIBUTIONS TO
 36-4                     BEFORE AND AFTER SCHOOL PROGRAMS
 36-5          Sec. 171.831.  DEFINITION.  In this subchapter, "school-age
 36-6    child care" means care provided before and after school and during
 36-7    the summer and holidays for children who are at least five years of
 36-8    age but younger than 14 years of age.
 36-9          Sec. 171.832.  CREDIT.  A corporation that meets the
36-10    eligibility requirements under this subchapter is entitled to a
36-11    credit in the amount allowed by this subchapter against the tax
36-12    imposed under this chapter.
36-13          Sec. 171.833.  EXPENDITURES ELIGIBLE FOR CREDIT.  (a)  A
36-14    corporation may claim a credit under this subchapter only for a
36-15    qualifying expenditure relating to the operation of a school-age
36-16    child care program that is operated by:
36-17                (1)  a nonprofit organization licensed under Chapter
36-18    42, Human Resources Code;
36-19                (2)  a nonprofit, accredited educational facility or by
36-20    another nonprofit entity under contract with the educational
36-21    facility, if the Texas Education Agency or Southern Association of
36-22    Colleges and Schools has approved the curriculum content of the
36-23    program operated under the contract; or
36-24                (3)  a county or municipality, if the governing body of
36-25    the county or municipality annually adopts standards of care by
36-26    order or ordinance that include minimum child-to-staff ratios,
 37-1    staff qualifications, facility, health, and safety standards, and
 37-2    mechanisms for monitoring and enforcing the standards.
 37-3          (b)  A qualifying expenditure includes an expenditure for:
 37-4                (1)  constructing, renovating, or remodeling a facility
 37-5    or structure to be used by the program;
 37-6                (2)  purchasing necessary equipment, supplies, or food
 37-7    to be used in the program; or
 37-8                (3)  operating the program, including administrative
 37-9    and staff costs.
37-10          Sec. 171.834.  AMOUNT; LIMITATIONS.  (a)  The amount of the
37-11    credit is equal to 30 percent of a corporation's qualifying
37-12    expenditures.
37-13          (b)  A corporation may claim a credit under this subchapter
37-14    for a qualifying expenditure during an accounting period only
37-15    against the tax owed for the corresponding reporting period.
37-16          (c)  A corporation may not claim a credit in an amount that
37-17    exceeds 50 percent of the amount of net franchise tax due, after
37-18    applying any other credits, for the reporting period.
37-19          Sec. 171.835.  APPLICATION FOR CREDIT.  (a)  A corporation
37-20    must apply for a credit under this subchapter on or with the tax
37-21    report for the period for which the credit is claimed.
37-22          (b)  The comptroller shall adopt a form for the application
37-23    for the credit.  A corporation must use this form in applying for
37-24    the credit.
37-25          Sec. 171.836.  ASSIGNMENT PROHIBITED.  A corporation may not
37-26    convey, assign, or transfer a credit allowed under this subchapter
 38-1    to another entity unless all of the assets of the corporation are
 38-2    conveyed, assigned, or transferred in the same transaction.
 38-3          SECTION 18.  The comptroller of public accounts of the State
 38-4    of Texas may combine the reports required under Subchapters N, O,
 38-5    P, and Q, Chapter 171, Tax Code, as added by this Act, into a
 38-6    single report.
 38-7          SECTION 19.  (a)  Before the beginning of the 79th
 38-8    Legislature, Regular Session, the comptroller of public accounts of
 38-9    the State of Texas shall report to the legislature and the governor
38-10    on the effect that exempting small corporations from the franchise
38-11    tax under Section 171.002, Tax Code, as amended by this Act, has
38-12    had on the economy of this state, including on the creation of new
38-13    jobs in this state.
38-14          (b)  The report must include:
38-15                (1)  an assessment of the intended purposes of the
38-16    exemptions and whether the exemptions are achieving those
38-17    objectives;
38-18                (2)  an assessment of whether the exemptions have
38-19    created any problems in the administration of the franchise tax;
38-20    and
38-21                (3)  a recommendation for retaining, eliminating, or
38-22    amending the exemptions.
38-23          (c)  The comptroller of public accounts of the State of Texas
38-24    may include the report in any other report made to the legislature.
38-25          SECTION 20.  (a)  Except as otherwise provided by this
38-26    section, this Act takes effect October 1, 1999.
 39-1          (b)  The changes in law made by this Act by amending
 39-2    Subsection (b), Section 151.3111, Tax Code, and adding Section
 39-3    151.326, Tax Code, take effect on the earliest day that they may
 39-4    take effect under Section 39, Article III, Texas Constitution.  The
 39-5    comptroller of public accounts of the State of Texas may adopt
 39-6    emergency rules for the implementation of those provisions.
 39-7          (c)  The changes in law made by this Act by amending
 39-8    Subsection (a), Section 151.313, Tax Code, take effect April 1,
 39-9    2000.
39-10          (d)  The changes in law made by this Act by amending
39-11    Subsection (d), Section 171.002, Subsection (a), Section 171.203,
39-12    and Section 171.204, Tax Code, and adding Subchapters N, O, P, Q,
39-13    and R, Chapter 171, Tax Code, take effect January 1, 2000, and
39-14    apply only to a report originally due on or after that date.
39-15          (e)  A corporation may claim a credit under Subchapters N, O,
39-16    P, Q, and R, Chapter 171, Tax Code, as added by this Act, only for
39-17    expenses and payments incurred, qualified investments or
39-18    expenditures made, or new jobs created on or after January 1, 2000.
39-19          (f)  The changes in law made by this Act do not affect taxes
39-20    imposed before the effective date of those changes, and the law in
39-21    effect before the effective date of those changes is continued in
39-22    effect for purposes of the liability for and collection of those
39-23    taxes.
39-24          SECTION 21.  The importance of this legislation and the
39-25    crowded condition of the calendars in both houses create an
39-26    emergency and an imperative public necessity that the
                                                                S.B. No. 441
 40-1    constitutional rule requiring bills to be read on three several
 40-2    days in each house be suspended, and this rule is hereby suspended,
 40-3    and that this Act take effect and be in force according to its
 40-4    terms, and it is so enacted.
         ________________________________   ________________________________
             President of the Senate              Speaker of the House
               I hereby certify that S.B. No. 441 passed the Senate on
         April 8, 1999, by a viva-voce vote; May 27, 1999, Senate refused to
         concur in House amendments and requested appointment of Conference
         Committee; May 28, 1999, House granted request of the Senate;
         May 30, 1999, Senate adopted Conference Committee Report by the
         following vote:  Yeas 30, Nays 0.
                                             _______________________________
                                                 Secretary of the Senate
               I hereby certify that S.B. No. 441 passed the House, with
         amendments, on May 26, 1999, by the following vote:  Yeas 140,
         Nays 0, three present not voting; May 28, 1999, House granted
         request of the Senate for appointment of Conference Committee;
         May 30, 1999, House adopted Conference Committee Report by the
         following vote:  Yeas 144, Nays 1, three present not voting.
                                             _______________________________
                                                 Chief Clerk of the House
         Approved:
         ________________________________
                      Date
         ________________________________
                    Governor