By: Sibley S.B. No. 1630
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the authorization of a franchise tax credit for certain
1-2 capital investments.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 171, Tax Code is amended by adding
1-5 Subchapter Q to read as follows:
1-6 SUBCHAPTER Q. TAX CREDITS FOR CERTAIN CAPITAL INVESTMENTS
1-7 Sec. 171.901. DEFINITIONS. In this subchapter:
1-8 (1) "County average weekly wage" means the average
1-9 weekly wage for all covered employment in the county as computed by
1-10 the Texas Workforce Commission.
1-11 (2) "Capitalized lease" means a transaction which is
1-12 classified as a purchase for federal income tax purposes even
1-13 though it is denominated as a "lease."
1-14 (3) "Manufacturing" means an establishment primarily
1-15 engaged in activities described in categories 2011-3999 of the 1987
1-16 Standard Industrial Classification Manual published by the federal
1-17 Office of Management and Budget.
1-18 (4) "Qualified business" means an establishment
1-19 primarily engaged in manufacturing or research and development.
1-20 (5) "Qualified capital investment" means tangible
1-21 personal property that is described in Section 1245(a) of the
1-22 Internal Revenue Code, such as engines, machinery, tools and
2-1 implements used in a trade or business or held for investment and
2-2 subject to an allowance for depreciation, cost recovery under
2-3 accelerated cost recovery system, or amortization. The term does
2-4 not include real property or buildings and their structural
2-5 components. Property that is leased under a capitalized lease is
2-6 considered "qualified capital investment," but property that is
2-7 leased under an operating lease is not considered "qualified
2-8 capital investment." Property expensed under Section 179 of the
2-9 Internal Revenue Code is not considered a "qualified capital
2-10 investment."
2-11 (6) "Research and development" means an establishment
2-12 primarily engaged in activities described in category 8731 of the
2-13 1987 Standard Industrial Classification Manual published by the
2-14 federal Office of Management and Budget.
2-15 Sec. 171.902. ELIGIBILITY. (a) A corporation is eligible
2-16 for a credit against the tax imposed under this chapter in the
2-17 amount and under the conditions and limitations provided by this
2-18 subchapter.
2-19 (b) To qualify for the credit authorized under this
2-20 subchapter, a qualified business must:
2-21 (1) make a minimum $100 million qualified capital
2-22 investment; and
2-23 (2) pay an average weekly wage, at the location with
2-24 respect to which the credit is claimed, which is at least 110
2-25 percent of the county average weekly wage.
2-26 Sec. 171.903. AMOUNT OF CREDIT. A corporation's credit
3-1 equals 7.5 percent of the qualified capital investment.
3-2 Sec. 171.904. LENGTH OF CREDIT. The credit shall be taken
3-3 in five equal installments of one-fifth the credit amount over the
3-4 five consecutive reports beginning with the report based upon the
3-5 period during which the qualifying investment was made.
3-6 Sec. 171.905. LIMITATIONS. (a) The total credit claimed
3-7 under this subchapter for a report, including the amount of any
3-8 carryforward credit under Section 171.906, may not exceed 50
3-9 percent of the amount of net franchise tax due for the period upon
3-10 which the tax is based after any other applicable tax credits.
3-11 This limitation applies to the cumulative amount of credit,
3-12 including carryforwards, claimed by the corporation under this
3-13 chapter for the period upon which the tax is based.
3-14 (b) The amount of the credit may not reduce the tax below
3-15 zero.
3-16 (c) A corporation that establishes its eligibility for a
3-17 credit under this subchapter is not eligible to claim a franchise
3-18 tax reduction authorized under Section 171.1015, Tax Code.
3-19 Sec. 171.906. CARRYFORWARD. (a) If a corporation is
3-20 eligible for a credit that exceeds the limitation under Section
3-21 171.905(a), the corporation may carry the unused credit forward for
3-22 not more than five consecutive reports.
3-23 (b) A carryforward is considered the remaining portion of an
3-24 installment that cannot be claimed in the current year because of
3-25 the 50 percent tax limitation. A carryforward is added to the next
3-26 year's installment of the credit in determining the 50 percent tax
4-1 limitation for that year. If that total credit is limited because
4-2 of the 50 percent test, the carryforward is considered to be
4-3 utilized before the current year installment.
4-4 Sec. 171.907. CERTIFICATION OF ELIGIBILITY. (a) For the
4-5 initial and each succeeding report in which a credit is claimed
4-6 under this subchapter, the corporation shall file with its report,
4-7 on a form provided by the comptroller, information that
4-8 sufficiently demonstrates that the corporation is eligible for the
4-9 credit and is in compliance with Section 171.902 of this Act.
4-10 (b) The burden of establishing entitlement to and the value
4-11 of the credit is on the qualified business.
4-12 (c) A credit expires under this subchapter and the
4-13 corporation may not take any remaining installment of the credit if
4-14 in one of the five years in which the installment of a credit
4-15 accrues, the qualified business:
4-16 (1) disposes of the qualified capital investment;
4-17 (2) takes the qualified capital investment out of
4-18 service; or
4-19 (3) moves the qualified capital investment out of this
4-20 state.
4-21 (d) Notwithstanding Subsection (c), the corporation may take
4-22 the portion of an installment that accrued in a previous year and
4-23 was carried forward to the extent permitted under Section 171.906.
4-24 Sec. 171.908. ASSIGNMENT PROHIBITED. A corporation may not
4-25 convey, assign, or transfer the credit allowed under this
4-26 subchapter to another entity unless all of the assets of the
5-1 corporation are conveyed, assigned, or transferred in the same
5-2 transaction.
5-3 Sec. 171.909. BIENNIAL REPORT TO LEGISLATURE BY COMPTROLLER.
5-4 (a) Before the beginning of each regular session of the
5-5 legislature, the comptroller shall submit to the members of the
5-6 legislature a report that states:
5-7 (1) the total amount of qualified capital investments
5-8 made by corporations that claim a credit under this subchapter;
5-9 (2) the total amount of credits applied against the
5-10 tax under this chapter and the amount of unused credits;
5-11 (3) the geographical distribution of the qualified
5-12 capital investments upon which tax credit claims are made under
5-13 this subchapter; and
5-14 (4) the impact of the credit provided under this
5-15 subchapter on employment, capital investment, personal income, and
5-16 state tax revenues.
5-17 (b) The final report issued prior to the expiration of this
5-18 subchapter shall include historical information on the credit
5-19 authorized under this subchapter.
5-20 (c) The comptroller may not include in the report
5-21 information that is confidential by law.
5-22 (d) For purposes of this section, the comptroller may
5-23 require a corporation that claims a credit under this subchapter to
5-24 submit information, on a form provided by the comptroller, on the
5-25 location of the corporation's capital investment in this state and
5-26 any other information necessary to complete the report required
6-1 under this section.
6-2 Sec. 171.910. COMPTROLLER POWERS AND DUTIES. The
6-3 comptroller shall adopt rules and forms necessary to implement this
6-4 subchapter.
6-5 Sec. 171.911.EXPIRATION. (a) This subchapter expires
6-6 December 31, 2007.
6-7 (b) The expiration of this subchapter does not affect the
6-8 carryforward of a credit under Section 171.906 or those credits for
6-9 which a corporation is eligible before the date this subchapter
6-10 expires.
6-11 SECTION 2. This Act takes effect January 1, 2000, and
6-12 applies only to a report originally due on or after that date. A
6-13 corporation may only claim a credit under this Act for qualified
6-14 investments made, on or after that date.
6-15 SECTION 3. The importance of this legislation and the
6-16 crowded condition of the calendars in both houses create an
6-17 emergency and an imperative public necessity that the
6-18 constitutional rule requiring bills to be read on three several
6-19 days in each house be suspended, and this rule is hereby suspended.