By Eiland                                             H.B. No. 1170
         77R3618 CBH-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to an exemption from the sales and use tax for taxable
 1-3     items used in the performance of a space flight contract.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  Subchapter H, Chapter 151, Tax Code, is amended
 1-6     by adding Section 151.355 to read as follows:
 1-7           Sec. 151.355.  TAXABLE ITEMS USED IN PERFORMANCE OF SPACE
 1-8     FLIGHT CONTRACT.  (a)  In this section:
 1-9                 (1)  "Space flight contract" means a contract with the
1-10     United States Department of Defense, the National Aeronautics and
1-11     Space Administration, or another nongovernmental party for the use
1-12     or provision of taxable items related to the development,
1-13     construction or fabrication, testing, research and development,
1-14     vehicle assembly, processing, remodeling, repair, operation, or
1-15     maintenance of space vehicles and related facilities.
1-16                 (2)  "Space vehicles and related facilities" means
1-17     tangible personal property that:
1-18                       (A)  has space flight capability, including a
1-19     space shuttle, orbital space facility, space propulsion system,
1-20     satellite, or space station of any kind;
1-21                       (B)  is placed on or used aboard property
1-22     described by Subdivision (A); or
1-23                       (C)  is an integral part of and is used in
1-24     support of a space flight, including tangible personal property
 2-1     used in training, launch, ground support, landing, and recovery
 2-2     activities.
 2-3           (b)  A taxable item sold, leased, rented to, or stored, used,
 2-4     or consumed by a person in the performance of a space flight
 2-5     contract is exempt from the taxes imposed by this chapter if the
 2-6     item is included as an  allowable direct or indirect item of cost
 2-7     under 48 C.F.R. Section 9904.418-30, 48 C.F.R. Section 52.216-7, 48
 2-8     C.F.R. Subpart 31.2, or similar federal regulations, regardless of
 2-9     whether the contract is a cost-reimbursement contract.
2-10           (c)  This section does not apply to a part of direct or
2-11     indirect costs allocated to a contract that is not a space flight
2-12     contract.
2-13           SECTION 2.  (a)  This Act takes effect July 1, 2001, if it
2-14     receives a vote of two-thirds of all the members elected to each
2-15     house, as provided by Section 39, Article III, Texas Constitution.
2-16     If this Act does not receive the vote necessary for effect on that
2-17     date, this Act takes effect October 1, 2001.
2-18           (b)  The change in law made by this Act does not affect taxes
2-19     imposed before the effective date of this Act, and the former law
2-20     is continued in effect for purposes of the liability for and
2-21     collection of those taxes.