By Ellis S.R. No. 1186
76R18148 DAK-D
R E S O L U T I O N
1-1 BE IT RESOLVED by the Senate of the State of Texas, 76th
1-2 Legislature, Regular Session, 1999, That Senate Rule 12.03 be
1-3 suspended as provided by Senate Rule 12.08, to enable the
1-4 conference committee appointed to resolve the differences between
1-5 the house and senate versions of Senate Bill No. 441, relating to
1-6 tax exemptions and credits, to consider and take action on the
1-7 following matters:
1-8 (1) Senate Rules 12.03(3) and (4) are suspended to permit
1-9 the committee to add text incorporating a new Section 10 of the
1-10 bill, amending Section 171.002(d), Tax Code, to read as follows:
1-11 SECTION 10. Section 171.002(d), Tax Code, is amended to read
1-12 as follows:
1-13 (d) A [If the amount of tax computed for a corporation is
1-14 less than $100, the] corporation is not required to pay any tax
1-15 [that amount] and is not considered to owe any tax for a [that]
1-16 period if:
1-17 (1) the amount of tax computed for the corporation is
1-18 less than $100; or
1-19 (2) the amount of the corporation's gross receipts:
1-20 (A) from its entire business under Section
1-21 171.105 is less than $150,000; and
1-22 (B) from its entire business under Section
1-23 171.1051, including the amount excepted under Section 171.1051(a),
1-24 is less than $150,000.
2-1 Explanation: This change is necessary to provide an
2-2 exemption for certain small corporations from the franchise tax.
2-3 (2) Senate Rules 12.03(3) and (4) are suspended to permit
2-4 the committee to add text incorporating a new Section 11 of the
2-5 bill, amending Section 171.203(a), Tax Code, to read as follows:
2-6 SECTION 11. Section 171.203(a), Tax Code, is amended to read
2-7 as follows:
2-8 (a) A corporation on which the franchise tax is imposed,
2-9 regardless of whether the corporation is required to pay any tax,
2-10 shall file a report with the comptroller containing:
2-11 (1) the name of each corporation in which the
2-12 corporation filing the report owns a 10 percent or greater interest
2-13 and the percentage owned by the corporation;
2-14 (2) the name of each corporation that owns a 10
2-15 percent or greater interest in the corporation filing the report;
2-16 (3) the name, title, and mailing address of each
2-17 person who is an officer or director of the corporation on the date
2-18 the report is filed and the expiration date of each person's term
2-19 as an officer or director, if any;
2-20 (4) the name and address of the agent of the
2-21 corporation designated under Section 171.354 of this code; and
2-22 (5) the address of the corporation's principal office
2-23 and principal place of business.
2-24 Explanation: This change is necessary to provide that
2-25 certain corporations exempt from the franchise tax are subject to a
2-26 limited reporting requirement.
2-27 (3) Senate Rules 12.03(3) and (4) are suspended to permit
3-1 the committee to add text incorporating a new Section 12 of the
3-2 bill, amending Section 171.204, Tax Code, to read as follows:
3-3 SECTION 12. Section 171.204, Tax Code, is amended to read as
3-4 follows:
3-5 Sec. 171.204. INFORMATION REPORT. (a) Except as provided
3-6 by Subsection (b), to [To] determine eligibility for the exemption
3-7 provided by Section 171.2022, or to determine the amount of the
3-8 franchise tax or the correctness of a franchise tax report, the
3-9 comptroller may require an officer of a corporation that may be
3-10 subject to the tax imposed under this chapter to file an
3-11 information report with the comptroller stating the amount of the
3-12 corporation's taxable capital and earned surplus, or any other
3-13 information the comptroller may request.
3-14 (b) The comptroller may require an officer of a corporation
3-15 that does not owe any tax because of the application of Section
3-16 171.002(d)(2) to file an abbreviated information report with the
3-17 comptroller stating the amount of the corporation's gross receipts
3-18 from its entire business. The comptroller may not require a
3-19 corporation described by this subsection to file an information
3-20 report that requires the corporation to report or compute its
3-21 earned surplus or taxable capital.
3-22 Explanation: This change is necessary to provide that
3-23 certain corporations exempt from the franchise tax are subject to a
3-24 limited reporting requirement.
3-25 (4) Senate Rules 12.03(3) and (4) are suspended to permit
3-26 the committee to add text incorporating a new Section 13 of the
3-27 bill, adding Subchapter N, Chapter 171, Tax Code, to read as
4-1 follows:
4-2 SECTION 13. Chapter 171, Tax Code, is amended by adding
4-3 Subchapter N to read as follows:
4-4 SUBCHAPTER N. TAX CREDIT FOR ESTABLISHING DAY-CARE CENTER
4-5 OR PURCHASING CHILD-CARE SERVICES
4-6 Sec. 171.701. DEFINITIONS. In this subchapter:
4-7 (1) "Day-care center" has the meaning assigned by
4-8 Section 42.002, Human Resources Code.
4-9 (2) "Family home" has the meaning assigned by Section
4-10 42.002, Human Resources Code.
4-11 Sec. 171.702. CREDIT. A corporation that meets the
4-12 eligibility requirements under this subchapter is entitled to a
4-13 credit in the amount allowed by this subchapter against the tax
4-14 imposed under this chapter.
4-15 Sec. 171.703. CREDIT FOR DAY-CARE CENTER AND PURCHASED CHILD
4-16 CARE. (a) A corporation may claim a credit under this subchapter
4-17 only for a qualifying expenditure relating to:
4-18 (1) the establishment and operation of a day-care
4-19 center primarily to provide care for the children of employees of
4-20 the corporation or of the corporation and one or more other
4-21 entities sharing the costs of establishing and operating the
4-22 center; or
4-23 (2) the purchase of child-care services that are
4-24 actually provided to children of employees of the corporation at a:
4-25 (A) day-care center; or
4-26 (B) family home that is registered or listed
4-27 with the Department of Protective and Regulatory Services under
5-1 Chapter 42, Human Resources Code.
5-2 (b) A qualifying expenditure includes an expenditure for:
5-3 (1) planning the day-care center;
5-4 (2) preparing a site to be used for the day-care
5-5 center;
5-6 (3) constructing the day-care center;
5-7 (4) renovating or remodeling a structure to be used
5-8 for the day-care center;
5-9 (5) purchasing equipment necessary in the use of the
5-10 day-care center and installed for permanent use in or immediately
5-11 adjacent to the day-care center, including kitchen appliances and
5-12 other food preparation equipment;
5-13 (6) expanding the day-care center;
5-14 (7) maintaining and operating the day-care center,
5-15 including paying direct administration and staff costs; or
5-16 (8) purchasing all or part of child-care services that
5-17 are actually provided to children of employees of the corporation
5-18 at a day-care center or registered or listed family home.
5-19 (c) The amount of the credit is equal to the lesser of:
5-20 (1) $50,000;
5-21 (2) 50 percent of the corporation's qualifying
5-22 expenditures; or
5-23 (3) the amount of the limitation provided by Section
5-24 171.705(b).
5-25 (d) If a corporation shares in the cost of establishing and
5-26 operating a day-care center, the corporation is entitled to a
5-27 credit for the qualifying expenditures made by that corporation,
6-1 subject to the limitation prescribed by Subsection (c).
6-2 Sec. 171.704. APPLICATION FOR CREDIT. (a) A corporation
6-3 must apply for a credit under this subchapter on or with the tax
6-4 report for the period for which the credit is claimed.
6-5 (b) If the corporation is claiming a credit for a qualifying
6-6 expenditure for purchasing child-care services, the corporation
6-7 must maintain proof that the services were actually provided to
6-8 children of employees of the corporation at a day-care center or
6-9 registered or listed family home.
6-10 (c) The comptroller shall adopt a form for the application
6-11 for the credit. A corporation must use this form in applying for
6-12 the credit.
6-13 Sec. 171.705. PERIOD FOR WHICH CREDIT MAY BE CLAIMED. (a)
6-14 A corporation may claim a credit under this subchapter for
6-15 qualifying expenditures made during an accounting period only
6-16 against the tax owed for the corresponding reporting period.
6-17 (b) A corporation may not claim a credit in an amount that
6-18 exceeds 90 percent of the amount of tax due for the report.
6-19 Sec. 171.706. ASSIGNMENT PROHIBITED. A corporation may not
6-20 convey, assign, or transfer the credit allowed under this
6-21 subchapter to another entity unless all of the assets of the
6-22 corporation are conveyed, assigned, or transferred in the same
6-23 transaction.
6-24 Sec. 171.707. BIENNIAL REPORT BY COMPTROLLER. (a) Before
6-25 the beginning of each regular session of the legislature, the
6-26 comptroller shall submit to the governor, the lieutenant governor,
6-27 and the speaker of the house of representatives a report that
7-1 states:
7-2 (1) the total amount of qualifying expenditures
7-3 incurred by corporations that claim a credit under this subchapter;
7-4 (2) the total amount of credits applied against the
7-5 tax under this chapter and the amount of unused credits including:
7-6 (A) the total amount of franchise tax due by
7-7 corporations claiming a credit under this subchapter before and
7-8 after the application of the credit;
7-9 (B) the average percentage reduction in
7-10 franchise tax due by corporations claiming a credit under this
7-11 subchapter;
7-12 (C) the percentage of tax credits that were
7-13 awarded to corporations with fewer than 100 employees; and
7-14 (D) the two-digit standard industrial
7-15 classification of corporations claiming a credit under this
7-16 subchapter;
7-17 (3) the geographical distribution of qualifying
7-18 expenditures giving rise to a credit authorized by this subchapter;
7-19 (4) the impact of the credit provided by this
7-20 subchapter on promoting economic development in this state; and
7-21 (5) the impact of the credit provided under this
7-22 subchapter on state tax revenues.
7-23 (b) The final report issued prior to the expiration of this
7-24 subchapter shall include historical information on the credit
7-25 authorized under this subchapter.
7-26 (c) The comptroller may not include in the report
7-27 information that is confidential by law.
8-1 (d) For purposes of this section, the comptroller may
8-2 require a corporation that claims a credit under this subchapter to
8-3 submit information, on a form provided by the comptroller, on the
8-4 location of the corporation's qualifying expenditures and any other
8-5 information necessary to complete the report required under this
8-6 section.
8-7 Explanation: This change is necessary to provide a franchise
8-8 tax credit for establishing a day-care center or purchasing
8-9 child-care services.
8-10 (5) Senate Rules 12.03(3) and (4) are suspended to permit
8-11 the committee to add text incorporating a new Section 14 of the
8-12 bill, adding Subchapter O, Chapter 171, Tax Code, to read as
8-13 follows:
8-14 SECTION 14. Chapter 171, Tax Code, is amended by adding
8-15 Subchapter O to read as follows:
8-16 SUBCHAPTER O. TAX CREDIT FOR CERTAIN RESEARCH AND
8-17 DEVELOPMENT ACTIVITIES
8-18 Sec. 171.721. DEFINITIONS. In this subchapter:
8-19 (1) "Base amount," "basic research payment," and
8-20 "qualified research expense" have the meanings assigned those terms
8-21 by Section 41, Internal Revenue Code, except that all such payments
8-22 and expenses must be for research conducted within this state.
8-23 (2) "Strategic investment area" means an area that is
8-24 determined by the comptroller under Section 171.726 that is:
8-25 (A) a county within this state with above state
8-26 average unemployment and below state average per capita income; or
8-27 (B) an area within this state that is a
9-1 federally designated urban enterprise community or an urban
9-2 enhanced enterprise community.
9-3 Sec. 171.722. ELIGIBILITY. (a) A corporation is eligible
9-4 for a credit against the tax imposed under this chapter in the
9-5 amount and under the conditions and limitations provided by this
9-6 subchapter.
9-7 (b) A corporation may claim a credit under Section
9-8 171.723(d) or take a carryforward credit without regard to whether
9-9 the strategic investment area in which it made qualified research
9-10 expenses and basic research payments subsequently loses its
9-11 designation as a strategic investment area.
9-12 Sec. 171.723. CALCULATION OF CREDIT. (a) The credit for
9-13 any report equals five percent of the sum of:
9-14 (1) the excess of qualified research expenses incurred
9-15 in this state during the period upon which the tax is based over
9-16 the base amount for this state; and
9-17 (2) the basic research payments determined under
9-18 Section 41(e)(1)(A), Internal Revenue Code, for this state during
9-19 the period upon which the tax is based.
9-20 (b) A corporation may elect to compute the credit for
9-21 qualified research expenses incurred in this state in a manner
9-22 consistent with the alternative incremental credit described in
9-23 Section 41(c)(4), Internal Revenue Code, only if for the
9-24 corresponding federal tax period:
9-25 (1) a federal election was made to compute the federal
9-26 credit under Section 41(c)(4), Internal Revenue Code;
9-27 (2) the corporation was a member of a consolidated
10-1 group for which a federal election was made under Section 41(c)(4),
10-2 Internal Revenue Code; or
10-3 (3) the corporation did not claim the federal credit
10-4 under Section 41(a)(1), Internal Revenue Code.
10-5 (c) For purposes of the alternate credit computation method
10-6 in Subsection (b), the credit percentages applicable to qualified
10-7 research expenses described in Sections 41(c)(4)(A)(i), (ii), and
10-8 (iii), Internal Revenue Code, are 0.41 percent, 0.55 percent, and
10-9 0.69 percent, respectively.
10-10 (d) In computing the credit under this section, a
10-11 corporation may multiply by two the amount of any qualified
10-12 research expenses and basic research payments made in a strategic
10-13 investment area.
10-14 (e) The burden of establishing entitlement to and the value
10-15 of the credit is on the corporation.
10-16 (f) For the purposes of this section, "gross receipts" as
10-17 used in Section 41, Internal Revenue Code, means gross receipts as
10-18 determined under Section 171.1032.
10-19 Sec. 171.724. LIMITATIONS. (a) The total credit claimed
10-20 under this subchapter for a report, including the amount of any
10-21 carryforward credit under Section 171.725, may not exceed 50
10-22 percent of the amount of franchise tax due for the report before
10-23 any other applicable tax credits.
10-24 (b) The total credit claimed under this subchapter and
10-25 Subchapters P and Q for a report, including the amount of any
10-26 carryforward credits, may not exceed the amount of franchise tax
10-27 due for the report after any other applicable credits.
11-1 (c) A corporation that establishes its eligibility for a
11-2 credit under this subchapter is not eligible to establish a credit
11-3 under Subchapter P.
11-4 Sec. 171.725. CARRYFORWARD. If a corporation is eligible
11-5 for a credit that exceeds the limitation under Section 171.724(a)
11-6 or (b), the corporation may carry the unused credit forward for not
11-7 more than 20 consecutive reports. A credit carryforward from a
11-8 previous report is considered to be utilized before the current
11-9 year credit.
11-10 Sec. 171.726. DETERMINATION OF STRATEGIC INVESTMENT AREAS.
11-11 (a) Not later than September 1 each year, the comptroller shall
11-12 determine areas that qualify as strategic investment areas using
11-13 the most recently completed full calendar year data available on
11-14 that date and, not later than October 1, shall publish a list and
11-15 map of the designated areas.
11-16 (b) The designation is effective for the following calendar
11-17 year for purposes of credits available under this subchapter.
11-18 Sec. 171.727. BIENNIAL REPORT BY COMPTROLLER. (a) Before
11-19 the beginning of each regular session of the legislature, the
11-20 comptroller shall submit to the governor, the lieutenant governor,
11-21 and the speaker of the house of representatives a report that
11-22 states:
11-23 (1) the total amount of expenses and payments incurred
11-24 by corporations that claim a credit under this subchapter;
11-25 (2) the total amount of credits applied against the
11-26 tax under this chapter and the amount of unused credits including:
11-27 (A) the total amount of franchise tax due by
12-1 corporations claiming a credit under this subchapter before and
12-2 after the application of the credit;
12-3 (B) the average percentage reduction in
12-4 franchise tax due by corporations claiming a credit under this
12-5 subchapter;
12-6 (C) the percentage of tax credits that were
12-7 awarded to corporations with fewer than 100 employees; and
12-8 (D) the two-digit standard industrial
12-9 classification of corporations claiming a credit under this
12-10 subchapter;
12-11 (3) the geographical distribution of expenses and
12-12 payments giving rise to a credit authorized by this subchapter;
12-13 (4) the impact of the credit provided by this
12-14 subchapter on the amount of research and development performed in
12-15 this state and employment in research and development in this
12-16 state; and
12-17 (5) the impact of the credit provided under this
12-18 subchapter on employment, capital investment, and personal income
12-19 in this state and on state tax revenues.
12-20 (b) The final report issued prior to the expiration of this
12-21 subchapter shall include historical information on the credit
12-22 authorized under this subchapter.
12-23 (c) The comptroller may not include in the report
12-24 information that is confidential by law.
12-25 (d) For purposes of this section, the comptroller may
12-26 require a corporation that claims a credit under this subchapter to
12-27 submit information, on a form provided by the comptroller, on the
13-1 location of the corporation's research expenses and payments in
13-2 this state and any other information necessary to complete the
13-3 report required under this section.
13-4 Sec. 171.728. COMPTROLLER POWERS AND DUTIES. The
13-5 comptroller shall adopt rules and forms necessary to implement this
13-6 subchapter.
13-7 Sec. 171.729. EXPIRATION. (a) This subchapter expires
13-8 December 31, 2009.
13-9 (b) The expiration of this subchapter does not affect the
13-10 carryforward of a credit under Section 171.725 for those credits to
13-11 which a corporation is eligible before the date this subchapter
13-12 expires.
13-13 Sec. 171.730. TEMPORARY CREDIT RATES AND LIMITATIONS. (a)
13-14 Notwithstanding any other provision of this subchapter, this
13-15 section applies to a report originally due before January 1, 2002.
13-16 (b) For purposes of computing the credit under Section
13-17 171.723(a) for a report described by Subsection (a), the credit
13-18 equals four percent of the sum of:
13-19 (1) the excess of qualified research expenses incurred
13-20 in this state during the period upon which the tax is based over
13-21 the base amount for this state; and
13-22 (2) the basic research payments determined under
13-23 Section 41(e)(1)(A), Internal Revenue Code, for this state during
13-24 the period upon which the tax is based.
13-25 (c) For purposes of computing the credit under Section
13-26 171.723(d) for a report described by Subsection (a), a corporation
13-27 may multiply by 1.5 the amount of any qualified research expenses
14-1 and basic research payments made in a strategic investment area.
14-2 (d) The total credit claimed under this subchapter for a
14-3 report described by Subsection (a), including the amount of any
14-4 carryforward credit under Section 171.725, may not exceed 25
14-5 percent of the amount of franchise tax due for the report before
14-6 any other applicable tax credits.
14-7 (e) For purposes of the alternate credit computation method
14-8 in Section 171.723(b), the credit percentages applicable to
14-9 qualified research expenses described in Sections 41(c)(4)(A)(i),
14-10 (ii), and (iii), Internal Revenue Code, are 0.33 percent, 0.44
14-11 percent, and 0.55 percent, respectively.
14-12 (f) This section expires January 1, 2002.
14-13 (g) The expiration of this section does not affect the
14-14 carryforward of a credit under Section 171.725 for those credits to
14-15 which a corporation is eligible before the date this section
14-16 expires.
14-17 Explanation: This change is necessary to provide a franchise
14-18 tax credit for certain research and development activities.
14-19 (6) Senate Rules 12.03(3) and (4) are suspended to permit
14-20 the committee to add text incorporating a new Section 15 of the
14-21 bill, adding Subchapter P, Chapter 171, Tax Code, to read as
14-22 follows:
14-23 SECTION 15. Chapter 171, Tax Code, is amended by adding
14-24 Subchapter P to read as follows:
14-25 SUBCHAPTER P. TAX CREDITS FOR CERTAIN JOB CREATION ACTIVITIES
14-26 Sec. 171.751. DEFINITIONS. In this subchapter:
14-27 (1) "Agricultural processing" means an establishment
15-1 primarily engaged in activities described in categories 2011-2099,
15-2 2211, 2231, or 3111-3199 of the 1987 Standard Industrial
15-3 Classification Manual published by the federal Office of Management
15-4 and Budget.
15-5 (2) "Central administrative offices" means an
15-6 establishment primarily engaged in performing management or support
15-7 services for other establishments of the same enterprise. An
15-8 enterprise consists of all establishments having more than 50
15-9 percent common direct or indirect ownership.
15-10 (3) "County average weekly wage" means the average
15-11 weekly wage for all covered employment in the county as computed by
15-12 the Texas Workforce Commission.
15-13 (4) "Data processing" means an establishment primarily
15-14 engaged in activities described in categories 7371-7379 of the 1987
15-15 Standard Industrial Classification Manual published by the federal
15-16 Office of Management and Budget.
15-17 (5) "Distribution" means an establishment primarily
15-18 engaged in activities described in categories 5012-5199 of the 1987
15-19 Standard Industrial Classification Manual published by the federal
15-20 Office of Management and Budget.
15-21 (6) "Group health benefit plan" means:
15-22 (A) a health plan provided by a health
15-23 maintenance organization established under the Texas Health
15-24 Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance
15-25 Code);
15-26 (B) a health benefit plan approved by the
15-27 commissioner of insurance; or
16-1 (C) a self-funded or self-insured employee
16-2 welfare benefit plan that provides health benefits and is
16-3 established in accordance with the Employee Retirement Income
16-4 Security Act of 1974 (29 U.S.C. Section 1001 et seq.), as amended.
16-5 (7) "Manufacturing" means an establishment primarily
16-6 engaged in activities described in categories 2011-3999 of the 1987
16-7 Standard Industrial Classification Manual published by the federal
16-8 Office of Management and Budget.
16-9 (8) "Qualified business" means an establishment
16-10 primarily engaged in agricultural processing, central
16-11 administrative offices, distribution, data processing,
16-12 manufacturing, research and development, or warehousing.
16-13 (9) "Qualifying job" means a new permanent full-time
16-14 job that:
16-15 (A) is located in:
16-16 (i) a strategic investment area; or
16-17 (ii) a county within this state with a
16-18 population of less than 50,000, if the job is created by a business
16-19 primarily engaged in agricultural processing;
16-20 (B) requires at least 1,600 hours of work a
16-21 year;
16-22 (C) pays at least 110 percent of the county
16-23 average weekly wage for the county where the job is located;
16-24 (D) is covered by a group health benefit plan
16-25 for which the business pays at least 80 percent of the premiums or
16-26 other charges assessed under the plan for the employee;
16-27 (E) is not transferred from one area in this
17-1 state to another area in this state; and
17-2 (F) is not created to replace a previous
17-3 employee.
17-4 (10) "Research and development" means an establishment
17-5 primarily engaged in activities described in category 8731 of the
17-6 1987 Standard Industrial Classification Manual published by the
17-7 federal Office of Management and Budget.
17-8 (11) "Strategic investment area" has the meaning
17-9 assigned that term by Section 171.721.
17-10 (12) "Warehousing" means an establishment primarily
17-11 engaged in activities described in categories 4221-4226 of the 1987
17-12 Standard Industrial Classification Manual published by the federal
17-13 Office of Management and Budget.
17-14 Sec. 171.752. ELIGIBILITY. (a) A corporation is eligible
17-15 for a credit against the tax imposed under this chapter if the
17-16 corporation:
17-17 (1) is a qualified business as defined in Section
17-18 171.751;
17-19 (2) creates a minimum of 10 qualifying jobs; and
17-20 (3) pays an average weekly wage, for the year in which
17-21 credits are claimed, of at least 110 percent of the county average
17-22 weekly wage for the county where the qualifying jobs are located.
17-23 (b) A corporation may claim a credit or take a carryforward
17-24 credit without regard to whether the strategic investment area in
17-25 which it created the qualifying jobs subsequently loses its
17-26 designation as a strategic investment area, if applicable.
17-27 Sec. 171.753. CALCULATION OF CREDIT. A corporation may
18-1 establish a credit equal to 25 percent of the total wages and
18-2 salaries paid by the corporation for qualifying jobs during the
18-3 period upon which the tax is based.
18-4 Sec. 171.754. LENGTH OF CREDIT. The credit established
18-5 shall be claimed in five equal installments of one-fifth the credit
18-6 amount over the five consecutive reports beginning with the report
18-7 based upon the period during which the qualifying jobs were
18-8 created.
18-9 Sec. 171.755. LIMITATIONS. (a) The total credit claimed
18-10 under this subchapter for a report, including the amount of any
18-11 carryforward credit under Section 171.756, may not exceed 50
18-12 percent of the amount of franchise tax due for the report before
18-13 any other applicable tax credits.
18-14 (b) The total credit claimed under this subchapter and
18-15 Subchapters O and Q for a report, including the amount of any
18-16 carryforward credits, may not exceed the amount of franchise tax
18-17 due for the report after any other applicable credits.
18-18 (c) A corporation that establishes its eligibility for a
18-19 credit under this subchapter is not eligible to establish a credit
18-20 under Subchapter O.
18-21 Sec. 171.756. CARRYFORWARD. (a) If a corporation is
18-22 eligible for a credit from an installment that exceeds the
18-23 limitations under Section 171.755(a) or (b), the corporation may
18-24 carry the unused credit forward for not more than five consecutive
18-25 reports.
18-26 (b) A carryforward is considered the remaining portion of an
18-27 installment that cannot be claimed in the current year because of
19-1 the tax limitation under Section 171.755. A carryforward is added
19-2 to the next year's installment of the credit in determining the tax
19-3 limitation for that year. A credit carryforward from a previous
19-4 report is considered to be utilized before the current year
19-5 installment.
19-6 Sec. 171.757. CERTIFICATION OF ELIGIBILITY. (a) For the
19-7 initial and each succeeding report in which a credit is claimed
19-8 under this subchapter, the corporation shall file with its report,
19-9 on a form provided by the comptroller, information that
19-10 sufficiently demonstrates that the corporation is eligible for the
19-11 credit and is in compliance with Section 171.752.
19-12 (b) The burden of establishing entitlement to and the value
19-13 of the credit is on the corporation.
19-14 (c) If, in one of the five years in which the installment of
19-15 a credit accrues, the number of the corporation's full-time
19-16 employees falls below the number of full-time employees the
19-17 corporation had in the year in which the corporation qualified for
19-18 the credit, the credit expires and the corporation may not take any
19-19 remaining installment of the credit.
19-20 (d) Notwithstanding Subsection (c), the corporation may,
19-21 however, take the portion of an installment that accrued in a
19-22 previous year and was carried forward to the extent permitted under
19-23 Section 171.756.
19-24 Sec. 171.758. ASSIGNMENT PROHIBITED. A corporation may not
19-25 convey, assign, or transfer the credit allowed under this
19-26 subchapter to another entity unless all of the assets of the
19-27 corporation are conveyed, assigned, or transferred in the same
20-1 transaction.
20-2 Sec. 171.759. BIENNIAL REPORT BY COMPTROLLER. (a) Before
20-3 the beginning of each regular session of the legislature, the
20-4 comptroller shall submit to the governor, the lieutenant governor,
20-5 and the speaker of the house of representatives a report that
20-6 states:
20-7 (1) the total number of jobs created by corporations
20-8 that claim a credit under this subchapter and the average and
20-9 median annual wage of those jobs;
20-10 (2) the total amount of credits applied against the
20-11 tax under this chapter and the amount of unused credits including:
20-12 (A) the total amount of franchise tax due by
20-13 corporations claiming a credit under this subchapter before and
20-14 after the application of the credit;
20-15 (B) the average percentage reduction in
20-16 franchise tax due by corporations claiming a credit under this
20-17 subchapter; and
20-18 (C) the percentage of tax credits that were
20-19 awarded to corporations with fewer than 100 employees;
20-20 (3) a breakdown of the two-digit standard industrial
20-21 classification of businesses claiming a credit under this
20-22 subchapter;
20-23 (4) the geographical distribution of the credits
20-24 claimed under this subchapter; and
20-25 (5) the impact of the credit provided under this
20-26 subchapter on employment, personal income, and capital investment
20-27 in this state and on state tax revenues.
21-1 (b) The final report issued prior to the expiration of this
21-2 subchapter shall include historical information on the credit
21-3 authorized under this subchapter.
21-4 (c) The comptroller may not include in the report
21-5 information that is confidential by law.
21-6 (d) For purposes of this section, the comptroller may
21-7 require a corporation that claims a credit under this subchapter to
21-8 submit information, on a form provided by the comptroller, on the
21-9 location of the corporation's job creation in this state and any
21-10 other information necessary to complete the report required under
21-11 this section.
21-12 (e) The comptroller shall provide notice to the members of
21-13 the legislature that the report required under this section is
21-14 available on request.
21-15 Sec. 171.760. COMPTROLLER POWERS AND DUTIES. The
21-16 comptroller shall adopt rules and forms necessary to implement this
21-17 subchapter.
21-18 Sec. 171.761. EXPIRATION. (a) This subchapter expires
21-19 December 31, 2009.
21-20 (b) The expiration of this subchapter does not affect the
21-21 carryforward of a credit under Section 171.756 or those credits for
21-22 which a corporation is eligible before the date this subchapter
21-23 expires.
21-24 Explanation: This change is necessary to provide a franchise
21-25 tax credit for certain job creation activities.
21-26 (7) Senate Rules 12.03(3) and (4) are suspended to permit
21-27 the committee to add text incorporating a new Section 16 of the
22-1 bill, adding Subchapter Q, Chapter 171, Tax Code, to read as
22-2 follows:
22-3 SECTION 16. Chapter 171, Tax Code, is amended by adding
22-4 Subchapter Q to read as follows:
22-5 SUBCHAPTER Q. TAX CREDITS FOR CERTAIN CAPITAL INVESTMENTS
22-6 Sec. 171.801. DEFINITIONS. In this subchapter:
22-7 (1) "Agricultural processing," "central administrative
22-8 offices," "county average weekly wage," "data processing,"
22-9 "distribution," "manufacturing," "qualified business," "research
22-10 and development," and "warehousing" have the meanings assigned
22-11 those terms by Section 171.751.
22-12 (2) "Qualified capital investment" means tangible
22-13 personal property first placed in service in a strategic investment
22-14 area, or first placed in service in a county with a population of
22-15 less than 50,000 by a corporation primarily engaged in agricultural
22-16 processing, and that is described in Section 1245(a), Internal
22-17 Revenue Code, such as engines, machinery, tools, and implements
22-18 used in a trade or business or held for investment and subject to
22-19 an allowance for depreciation, cost recovery under the accelerated
22-20 cost recovery system, or amortization. The term does not include
22-21 real property or buildings and their structural components.
22-22 Property that is leased under a capitalized lease is considered a
22-23 "qualified capital investment," but property that is leased under
22-24 an operating lease is not considered a "qualified capital
22-25 investment." Property expensed under Section 179, Internal Revenue
22-26 Code, is not considered a "qualified capital investment."
22-27 (3) "Strategic investment area" has the meaning
23-1 assigned that term by Section 171.721.
23-2 Sec. 171.802. ELIGIBILITY. (a) A qualified business is
23-3 eligible for a credit against the tax imposed under this chapter in
23-4 the amount and under the conditions and limitations provided by
23-5 this subchapter.
23-6 (b) To qualify for the credit authorized under this
23-7 subchapter, a qualified business must:
23-8 (1) pay an average weekly wage, at the location with
23-9 respect to which the credit is claimed, that is at least 110
23-10 percent of the county average weekly wage;
23-11 (2) offer coverage to all full-time employees at the
23-12 location with respect to which the credit is claimed by a group
23-13 health benefit plan, as defined by Section 171.751, for which the
23-14 business pays at least 80 percent of the premiums or other charges
23-15 assessed under the plan for the employees; and
23-16 (3) make a minimum $500,000 qualified capital
23-17 investment.
23-18 (c) A corporation may claim a credit or take a carryforward
23-19 credit without regard to whether the strategic investment area in
23-20 which it made the qualified capital investment subsequently loses
23-21 its designation as a strategic investment area, if applicable.
23-22 Sec. 171.803. CALCULATION OF CREDIT. A corporation may
23-23 establish a credit equal to 7.5 percent of the qualified capital
23-24 investment during the period upon which the tax is based.
23-25 Sec. 171.804. LENGTH OF CREDIT. The credit established
23-26 shall be claimed in five equal installments of one-fifth the credit
23-27 amount over the five consecutive reports beginning with the report
24-1 based upon the period during which the qualified capital investment
24-2 was made.
24-3 Sec. 171.805. LIMITATIONS. (a) The total credit claimed
24-4 under this subchapter for a report, including the amount of any
24-5 carryforward credit under Section 171.806, may not exceed 50
24-6 percent of the amount of franchise tax due for the report before
24-7 any other applicable tax credits.
24-8 (b) The total credit claimed under this subchapter and
24-9 Subchapters O and P for a report, including the amount of any
24-10 carryforward credits, may not exceed the amount of franchise tax
24-11 due for the report after any other applicable tax credits.
24-12 (c) A corporation that establishes its eligibility for a
24-13 credit under this subchapter is not eligible to claim a franchise
24-14 tax reduction authorized under Section 171.1015.
24-15 Sec. 171.806. CARRYFORWARD. (a) If a corporation is
24-16 eligible for a credit from an installment that exceeds the
24-17 limitation under Section 171.805(a) or (b), the corporation may
24-18 carry the unused credit forward for not more than five consecutive
24-19 reports.
24-20 (b) A carryforward is considered the remaining portion of an
24-21 installment that cannot be claimed in the current year because of
24-22 the tax limitation under Section 171.805. A carryforward is added
24-23 to the next year's installment of the credit in determining the tax
24-24 limitation for that year. A credit carryforward from a previous
24-25 report is considered to be utilized before the current year
24-26 installment.
24-27 Sec. 171.807. CERTIFICATION OF ELIGIBILITY. (a) For the
25-1 initial and each succeeding report in which a credit is claimed
25-2 under this subchapter, the corporation shall file with its report,
25-3 on a form provided by the comptroller, information that
25-4 sufficiently demonstrates that the corporation is eligible for the
25-5 credit and is in compliance with Section 171.802.
25-6 (b) The burden of establishing entitlement to and the value
25-7 of the credit is on the qualified business.
25-8 (c) A credit expires under this subchapter and the
25-9 corporation may not take any remaining installment of the credit if
25-10 in one of the five years in which the installment of a credit
25-11 accrues, the qualified business:
25-12 (1) disposes of the qualified capital investment;
25-13 (2) takes the qualified capital investment out of
25-14 service;
25-15 (3) moves the qualified capital investment out of this
25-16 state; or
25-17 (4) fails to pay an average weekly wage as required by
25-18 Section 171.802.
25-19 (d) Notwithstanding Subsection (c), the corporation may take
25-20 the portion of an installment that accrued in a previous year and
25-21 was carried forward to the extent permitted under Section 171.806.
25-22 Sec. 171.808. ASSIGNMENT PROHIBITED. A corporation may not
25-23 convey, assign, or transfer the credit allowed under this
25-24 subchapter to another entity unless all of the assets of the
25-25 corporation are conveyed, assigned, or transferred in the same
25-26 transaction.
25-27 Sec. 171.809. BIENNIAL REPORT BY COMPTROLLER. (a) Before
26-1 the beginning of each regular session of the legislature, the
26-2 comptroller shall submit to the governor, the lieutenant governor,
26-3 and the speaker of the house of representatives a report that
26-4 states:
26-5 (1) the total amount of qualified capital investments
26-6 made by corporations that claim a credit under this subchapter and
26-7 the average and median wages paid by those corporations;
26-8 (2) the total amount of credits applied against the
26-9 tax under this chapter and the amount of unused credits, including:
26-10 (A) the total amount of franchise tax due by
26-11 corporations claiming a credit under this subchapter before and
26-12 after the application of the credit;
26-13 (B) the average percentage reduction in
26-14 franchise tax due by corporations claiming a credit under this
26-15 subchapter;
26-16 (C) the percentage of tax credits that were
26-17 awarded to corporations with fewer than 100 employees; and
26-18 (D) the two-digit standard industrial
26-19 classification of corporations claiming a credit under this
26-20 subchapter;
26-21 (3) the geographical distribution of the qualified
26-22 capital investments on which tax credit claims are made under this
26-23 subchapter; and
26-24 (4) the impact of the credit provided under this
26-25 subchapter on employment, capital investment, personal income, and
26-26 state tax revenues.
26-27 (b) The final report issued before the expiration of this
27-1 subchapter shall include historical information on the credit
27-2 authorized under this subchapter.
27-3 (c) The comptroller may not include in the report
27-4 information that is confidential by law.
27-5 (d) For purposes of this section, the comptroller may
27-6 require a corporation that claims a credit under this subchapter to
27-7 submit information, on a form provided by the comptroller, on the
27-8 location of the corporation's capital investment in this state and
27-9 any other information necessary to complete the report required
27-10 under this section.
27-11 (e) The comptroller shall provide notice to the members of
27-12 the legislature that the report required under this section is
27-13 available on request.
27-14 Sec. 171.810. COMPTROLLER POWERS AND DUTIES. The
27-15 comptroller shall adopt rules and forms necessary to implement this
27-16 subchapter.
27-17 Sec. 171.811. EXPIRATION. (a) This subchapter expires
27-18 December 31, 2009.
27-19 (b) The expiration of this subchapter does not affect the
27-20 carryforward of a credit under Section 171.806 or those credits for
27-21 which a corporation is eligible before the date this subchapter
27-22 expires.
27-23 Explanation: This change is necessary to provide a franchise
27-24 tax credit for certain capital investments.
27-25 (8) Senate Rules 12.03(3) and (4) are suspended to permit
27-26 the committee to add text incorporating a new Section 17 of the
27-27 bill, adding Subchapter R, Chapter 171, Tax Code, to read as
28-1 follows:
28-2 SECTION 17. Chapter 171, Tax Code, is amended by adding
28-3 Subchapter R to read as follows:
28-4 SUBCHAPTER R. TAX CREDIT FOR CONTRIBUTIONS TO
28-5 BEFORE AND AFTER SCHOOL PROGRAMS
28-6 Sec. 171.831. DEFINITION. In this subchapter, "school-age
28-7 child care" means care provided before and after school and during
28-8 the summer and holidays for children who are at least five years of
28-9 age but younger than 14 years of age.
28-10 Sec. 171.832. CREDIT. A corporation that meets the
28-11 eligibility requirements under this subchapter is entitled to a
28-12 credit in the amount allowed by this subchapter against the tax
28-13 imposed under this chapter.
28-14 Sec. 171.833. EXPENDITURES ELIGIBLE FOR CREDIT. (a) A
28-15 corporation may claim a credit under this subchapter only for a
28-16 qualifying expenditure relating to the operation of a school-age
28-17 child care program that is operated by:
28-18 (1) a nonprofit organization licensed under Chapter
28-19 42, Human Resources Code;
28-20 (2) a nonprofit, accredited educational facility or by
28-21 another nonprofit entity under contract with the educational
28-22 facility, if the Texas Education Agency or Southern Association of
28-23 Colleges and Schools has approved the curriculum content of the
28-24 program operated under the contract; or
28-25 (3) a county or municipality, if the governing body of
28-26 the county or municipality annually adopts standards of care by
28-27 order or ordinance that include minimum child-to-staff ratios,
29-1 staff qualifications, facility, health, and safety standards, and
29-2 mechanisms for monitoring and enforcing the standards.
29-3 (b) A qualifying expenditure includes an expenditure for:
29-4 (1) constructing, renovating, or remodeling a facility
29-5 or structure to be used by the program;
29-6 (2) purchasing necessary equipment, supplies, or food
29-7 to be used in the program; or
29-8 (3) operating the program, including administrative
29-9 and staff costs.
29-10 Sec. 171.834. AMOUNT; LIMITATIONS. (a) The amount of the
29-11 credit is equal to 30 percent of a corporation's qualifying
29-12 expenditures.
29-13 (b) A corporation may claim a credit under this subchapter
29-14 for a qualifying expenditure during an accounting period only
29-15 against the tax owed for the corresponding reporting period.
29-16 (c) A corporation may not claim a credit in an amount that
29-17 exceeds 50 percent of the amount of net franchise tax due, after
29-18 applying any other credits, for the reporting period.
29-19 Sec. 171.835. APPLICATION FOR CREDIT. (a) A corporation
29-20 must apply for a credit under this subchapter on or with the tax
29-21 report for the period for which the credit is claimed.
29-22 (b) The comptroller shall adopt a form for the application
29-23 for the credit. A corporation must use this form in applying for
29-24 the credit.
29-25 Sec. 171.836. ASSIGNMENT PROHIBITED. A corporation may not
29-26 convey, assign, or transfer a credit allowed under this subchapter
29-27 to another entity unless all of the assets of the corporation are
30-1 conveyed, assigned, or transferred in the same transaction.
30-2 Explanation: This change is necessary to provide a
30-3 franchise tax credit for contributions to before and after school
30-4 programs.
30-5 (9) Senate Rules 12.03(3) and (4) are suspended to permit
30-6 the committee to add text incorporating a new Section 18 of the
30-7 bill to read as follows:
30-8 SECTION 18. The comptroller may combine the reports required
30-9 under Subchapters N, O, P, and Q, Chapter 171, Tax Code, as added
30-10 by this Act, into a single report.
30-11 Explanation: This change is necessary to allow the
30-12 comptroller to combine certain required franchise tax reports into
30-13 a single report.
30-14 (10) Senate Rules 12.03(3) and (4) are suspended to permit
30-15 the committee to add text incorporating a new Section 19 of the
30-16 bill to read as follows:
30-17 SECTION 19. (a) Before the beginning of the 79th
30-18 Legislature, Regular Session, the comptroller of public accounts
30-19 shall report to the legislature and the governor on the effect that
30-20 exempting small corporations from the franchise tax under Section
30-21 171.002, Tax Code, as amended by this Act, has had on the economy
30-22 of this state, including on the creation of new jobs in this state.
30-23 (b) The report must include:
30-24 (1) an assessment of the intended purposes of the
30-25 exemptions and whether the exemptions are achieving those
30-26 objectives;
30-27 (2) an assessment of whether the exemptions have
31-1 created any problems in the administration of the franchise tax;
31-2 and
31-3 (3) a recommendation for retaining, eliminating, or
31-4 amending the exemptions.
31-5 (c) The comptroller of public accounts may include the
31-6 report in any other report made to the legislature.
31-7 Explanation: This change is necessary to require the
31-8 comptroller to prepare a report on the effect of the change in the
31-9 exemption for small corporations from the franchise tax.
31-10 (11) Senate Rules 12.03(3) and (4) are suspended to permit
31-11 the committee to add text incorporating a new Section 20 of the
31-12 bill, providing effective date and transitional provisions, to read
31-13 as follows:
31-14 SECTION 20. (a) Except as otherwise provided by this
31-15 section, this Act takes effect October 1, 1999.
31-16 (b) The changes in law made by this Act by amending Section
31-17 151.3111(b), Tax Code, and adding Section 151.326, Tax Code, take
31-18 effect on the earliest day that they may take effect under Section
31-19 39, Article III, Texas Constitution. The comptroller of public
31-20 accounts may adopt emergency rules for the implementation of those
31-21 provisions.
31-22 (c) The changes in law made by this Act by amending Section
31-23 151.313(a), Tax Code, take effect April 1, 2000.
31-24 (d) The changes in law made by this Act by amending Sections
31-25 171.002(d), 171.203(a), and 171.204, Tax Code, and adding
31-26 Subchapters N, O, P, Q, and R, Chapter 171, Tax Code, take effect
31-27 January 1, 2000, and apply only to a report originally due on or
32-1 after that date.
32-2 (e) A corporation may claim a credit under Subchapters N, O,
32-3 P, Q, and R, Chapter 171, Tax Code, as added by this Act, only for
32-4 expenses and payments incurred, qualified investments or
32-5 expenditures made, or new jobs created on or after January 1, 2000.
32-6 (f) The changes in law made by this Act do not affect taxes
32-7 imposed before the effective date of those changes, and the law in
32-8 effect before the effective date of those changes is continued in
32-9 effect for purposes of the liability for and collection of those
32-10 taxes.
32-11 Explanation: This change is necessary to provide for the
32-12 effective date of certain changes to law made by the bill and to
32-13 provide transition provisions for certain changes to law made by
32-14 the bill.