By Solis, Capelo, Seaman, Martinez Fischer, H.B. No. 2686
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to tax incentives for certain businesses located in
1-3 enterprise zones, defense readjustment zones, or strategic
1-4 investment areas.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Section 2303.407, Government Code, is amended to
1-7 read as follows:
1-8 Sec. 2303.407. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND.
1-9 When the department designates a business as an enterprise project,
1-10 the department shall allocate to the project the maximum number of
1-11 new permanent jobs or retained jobs eligible to be included in a
1-12 computation of a tax refund for the project. The number may not
1-13 exceed 250 [625] or a number equal to 110 percent of the number of
1-14 anticipated new permanent jobs or retained jobs specified in the
1-15 application for designation of the business as an enterprise
1-16 project under Section 2303.405, whichever is less.
1-17 SECTION 2. Section 2303.504, Government Code, is amended to
1-18 read as follows:
1-19 Sec. 2303.504. STATE TAX REFUNDS AND CREDITS [DEDUCTION];
1-20 REPORT. (a) Subject to Section 2303.516, an [An] enterprise
1-21 project is entitled to:
1-22 (1) a refund of state taxes under Section 151.429, Tax
1-23 Code; and
1-24 (2) a franchise tax credit under Subchapter P or Q,
1-25 Chapter 171 [deduction from taxable capital under Section
2-1 171.1015], Tax Code.
2-2 (b) Subject to Section 2303.516, a [A] qualified business is
2-3 entitled to a refund of state taxes under Sections 151.431 and
2-4 171.501, Tax Code.
2-5 (c) Not later than the 60th day after the last day of each
2-6 fiscal year, the comptroller shall report to the department the
2-7 statewide total of the tax refunds and credits made under this
2-8 section during that fiscal year.
2-9 SECTION 3. Subchapter G, Chapter 2303, Government Code, is
2-10 amended by adding Section 2303.516 to read as follows:
2-11 Sec. 2303.516. (a) The department may monitor a qualified
2-12 business or enterprise project to determine whether and to what
2-13 extent the business or project has followed through on any
2-14 commitments made by it or on its behalf under this chapter.
2-15 (b) The department may determine that the business or
2-16 project is not entitled to a refund or credit of state taxes under
2-17 Section 2303.504 if the department finds that:
2-18 (1) the business or project is not willing to
2-19 cooperate with the department in providing the department with the
2-20 information the department needs to make the determination under
2-21 Subsection (a); or
2-22 (2) the business or project has substantially failed
2-23 to follow through on any commitments made by it or on its behalf
2-24 under this chapter.
2-25 SECTION 4. Section 2310.404, Government Code, is amended to
2-26 read as follows:
2-27 Sec. 2310.404. STATE TAX REFUNDS AND CREDITS [DEDUCTION];
3-1 REPORT. (a) Subject to Section 2310.413, a [A] defense
3-2 readjustment project is eligible for:
3-3 (1) a refund of state taxes under Section 151.4291,
3-4 Tax Code;
3-5 (2) a franchise tax credit under Subchapter P or Q,
3-6 Chapter 171 [deduction from taxable capital under Section
3-7 171.1016], Tax Code; and
3-8 (3) the exclusion of receipts from service performed
3-9 in a readjustment zone in the determination of gross receipts from
3-10 business done in this state under Sections 171.103 and 171.1032,
3-11 Tax Code.
3-12 (b) Not later than the 60th day after the last day of each
3-13 fiscal year, the comptroller shall report to the department the
3-14 statewide total of the tax refunds or credits made under this
3-15 section during that fiscal year.
3-16 SECTION 5. Subchapter F, Chapter 2303, Government Code, is
3-17 amended by adding Section 2310.413 to read as follows:
3-18 Sec. 2310.413. (a) The department may monitor a defense
3-19 readjustment project to determine whether and to what extent the
3-20 project has followed through on any commitments made by it or on
3-21 its behalf under this chapter.
3-22 (b) The department may determine that the defense
3-23 readjustment project is not eligible for state tax refunds and
3-24 credits under Section 2310.404 if the department finds that:
3-25 (1) the project is not willing to cooperate with the
3-26 department in providing the department with the information the
3-27 department needs to make the determination under Subsection (a); or
4-1 (2) the project has substantially failed to follow
4-2 through on its commitments made by it or on its behalf under this
4-3 chapter.
4-4 SECTION 6. Sections 151.429(a) and (b), Tax Code, are amended
4-5 to read as follows:
4-6 (a) An enterprise project is eligible for a refund in the
4-7 amount provided by this section of the taxes imposed by this
4-8 chapter on purchases of:
4-9 (1) equipment or machinery sold to an enterprise
4-10 project for use in an enterprise zone;
4-11 (2) building materials sold to an enterprise project
4-12 for use in remodeling, rehabilitating, or constructing a structure
4-13 in an enterprise zone;
4-14 (3) labor for remodeling, rehabilitating, or
4-15 constructing a structure by an enterprise project in an enterprise
4-16 zone; [and]
4-17 (4) electricity and natural gas purchased and consumed
4-18 in the normal course of business in the enterprise zone;
4-19 (5) tangible personal property purchased and consumed
4-20 in the normal course of business in the enterprise zone; and
4-21 (6) taxable services.
4-22 (b) Subject to the limitations provided by Subsection (c) of
4-23 this section, an enterprise project qualifies for a refund of taxes
4-24 under this section of $5,000 [$2,000] for each new permanent job or
4-25 job that has been retained by the enterprise project for a
4-26 qualified employee.
4-27 SECTION 7. Section 151.4291(a), Tax Code, is amended to read
5-1 as follows:
5-2 (a) A defense readjustment project is eligible for a refund
5-3 in the amount provided by this section of the taxes imposed by this
5-4 chapter on purchases of:
5-5 (1) equipment or machinery sold to a defense
5-6 readjustment project for use in a readjustment zone;
5-7 (2) building materials sold to a defense readjustment
5-8 project for use in remodeling, rehabilitating, or constructing a
5-9 structure in a readjustment zone;
5-10 (3) labor for remodeling, rehabilitating, or
5-11 constructing a structure by a defense readjustment project in a
5-12 readjustment zone; [and]
5-13 (4) electricity and natural gas purchased and consumed
5-14 in the normal course of business in the readjustment zone;
5-15 (5) tangible personal property purchased and consumed
5-16 in the normal course of business in the readjustment zone; and
5-17 (6) taxable services.
5-18 SECTION 8. Section 171.751, Tax Code, is amended by amending
5-19 Subdivision (9) and adding Subdivisions (13)-(16) to read as
5-20 follows:
5-21 (9) "Qualifying job" means a new permanent full-time
5-22 job that:
5-23 (A) is located in:
5-24 (i) a strategic investment area; [or]
5-25 (ii) a county within this state with a
5-26 population of less than 50,000, if the job is created by a business
5-27 primarily engaged in agricultural processing; or
6-1 (iii) an enterprise zone or a readjustment
6-2 zone, regardless of whether the job meets the qualifications
6-3 prescribed by Paragraphs (B)-(F), if the job is created by a
6-4 qualified business that has been designated as an enterprise
6-5 project or defense readjustment project, respectively;
6-6 (B) requires at least 1,600 hours of work a
6-7 year;
6-8 (C) pays at least 110 percent of the county
6-9 average weekly wage for the county where the job is located;
6-10 (D) is covered by a group health benefit plan
6-11 for which the business pays at least 80 percent of the premiums or
6-12 other charges assessed under the plan for the employee;
6-13 (E) is not transferred from one area in this
6-14 state to another area in this state; and
6-15 (F) is not created to replace a previous
6-16 employee.
6-17 (13) "Defense readjustment project" means a person
6-18 designated by the Texas Department of Economic Development as a
6-19 defense readjustment project under Chapter 2310, Government Code,
6-20 on or after September 1, 2001.
6-21 (14) "Enterprise project" means a person designated by
6-22 the Texas Department of Economic Development as an enterprise
6-23 project under Chapter 2303, Government Code, on or after September
6-24 1, 2001.
6-25 (15) "Enterprise zone" has the meaning assigned that
6-26 term by Section 2303.003, Government Code.
6-27 (16) "Readjustment zone" has the meaning assigned that
7-1 term by Section 2310.001, Government Code.
7-2 SECTION 9. Section 171.752(b), Tax Code, is amended to read
7-3 as follows:
7-4 (b) A corporation may claim a credit or take a carryforward
7-5 credit without regard to whether the strategic investment area,
7-6 enterprise zone, or readjustment zone in which it created the
7-7 qualifying jobs subsequently loses its designation as a strategic
7-8 investment area, enterprise zone, or readjustment zone, if
7-9 applicable.
7-10 SECTION 10. Section 171.754, Tax Code, is amended to read as
7-11 follows:
7-12 Sec. 171.754. LENGTH OF CREDIT. (a) Except as provided by
7-13 Subsection (b), the [The] credit established shall be claimed in
7-14 five equal installments of one-fifth the credit amount over the
7-15 five consecutive reports beginning with the report based upon the
7-16 period during which the qualifying jobs were created.
7-17 (b) Subject to Section 171.755, a corporation that has been
7-18 designated as an enterprise project or as a defense readjustment
7-19 project may claim the entire credit earned during an accounting
7-20 period against the taxes imposed for the corresponding reporting
7-21 period.
7-22 SECTION 11. Section 171.801, Tax Code, is amended by amending
7-23 Subdivision (2) and adding Subdivision (4) to read as follows:
7-24 (2) "Qualified capital investment" means tangible
7-25 personal property first placed in service in a strategic investment
7-26 area, [or] first placed in service in a county with a population of
7-27 less than 50,000 by a corporation primarily engaged in agricultural
8-1 processing, or first placed in service in an enterprise zone or
8-2 defense readjustment zone by a qualified business that has been
8-3 designated as an enterprise project or readjustment project,
8-4 respectively, and that is described in Section 1245(a), Internal
8-5 Revenue Code, such as engines, machinery, tools, and implements
8-6 used in a trade or business or held for investment and subject to
8-7 an allowance for depreciation, cost recovery under the accelerated
8-8 cost recovery system, or amortization. The term does not include
8-9 real property or buildings and their structural components.
8-10 Property that is leased under a capitalized lease is considered a
8-11 "qualified capital investment," but property that is leased under
8-12 an operating lease is not considered a "qualified capital
8-13 investment." Property expensed under Section 179, Internal Revenue
8-14 Code, is not considered a "qualified capital investment."
8-15 (4) "Defense readjustment project," "enterprise
8-16 project," "enterprise zone," and "readjustment zone" have the
8-17 meanings assigned by Section 171.751.
8-18 SECTION 12. Section 171.802(c), Tax Code, is amended to read
8-19 as follows:
8-20 (c) A corporation may claim a credit or take a carryforward
8-21 credit without regard to whether the strategic investment area,
8-22 enterprise zone, or readjustment zone in which it made the
8-23 qualified capital investment subsequently loses its designation as
8-24 a strategic investment area, enterprise zone, or readjustment zone,
8-25 if applicable.
8-26 SECTION 13. Section 171.804, Tax Code, is amended to read as
8-27 follows:
9-1 Sec. 171.804. LENGTH OF CREDIT. (a) Except as provided by
9-2 Subsection (b), the [The] credit established shall be claimed in
9-3 five equal installments of one-fifth the credit amount over the
9-4 five consecutive reports beginning with the report based upon the
9-5 period during which the qualified capital investment was made.
9-6 (b) Subject to Section 171.805, a corporation that has been
9-7 designated as an enterprise project or as a defense readjustment
9-8 project may claim the entire credit earned during an accounting
9-9 period against the taxes imposed for the corresponding reporting
9-10 period.
9-11 SECTION 14. Section 171.721, Tax Code, is amended to read as
9-12 follows:
9-13 Sec. 171.721. DEFINITIONS. In this subchapter:
9-14 (1) "Base amount," "basic research payment," and
9-15 "qualified research expense" have the meanings assigned those terms
9-16 by Section 41, Internal Revenue Code, except that all such payments
9-17 and expenses must be for research conducted within this state.
9-18 (2) "Strategic investment area" means an area that is
9-19 determined by the comptroller under Section 171.726 that is:
9-20 (A) a county within this state with above state
9-21 average unemployment and below state average per capita income;
9-22 [or]
9-23 (B) an area within this state that is a
9-24 federally designated urban enterprise community or an urban
9-25 enhanced enterprise community; or
9-26 (C) a county within this state that has a
9-27 spaceport, as defined by Section 4D, Development Corporation Act of
10-1 1979 (Article 5190.6, Vernon's Texas Civil Statutes), as added by
10-2 Chapter 1537, Acts of the 76th Legislature, Regular Session, 1999,
10-3 within its boundaries.
10-4 SECTION 15. Sections 171.1015, 171.1016, and 171.805(c), Tax
10-5 Code, are repealed.
10-6 SECTION 16. (a) Except as provided by Subsection (b) of this
10-7 section, this Act takes effect September 1, 2001. The changes in
10-8 law made by this Act apply only to an enterprise project or defense
10-9 readjustment project designated by the Texas Department of Economic
10-10 Development as such a project on or after September 1, 2001. An
10-11 enterprise project or defense readjustment project designated
10-12 before that date is governed by the law in effect on the date it
10-13 was designated, and that law is continued in effect for that
10-14 purpose.
10-15 (b) Sections 8-13 of this Act take effect January 1, 2003,
10-16 and apply to a report originally due on or after that date.
10-17 Notwithstanding any other law, an enterprise project or defense
10-18 readjustment project designated on or after January 1, 2001, may,
10-19 beginning on the date the project is designated, establish credits
10-20 as provided by the changes in law made by Sections 8-13 of this Act
10-21 but may only claim the credits on reports due on or after January
10-22 1, 2003.
10-23 (c) Subject to Section 151.429(f), Tax Code, an enterprise
10-24 project or defense readjustment project designated on or after
10-25 September 1, 2001, may apply for a refund for which the project is
10-26 entitled under Sections 151.429(a)(1)-(4), Tax Code, as provided by
10-27 Section 151.429, Tax Code. The comptroller may pay the refund as
11-1 provided by Section 151.429, Tax Code, and other law.
11-2 (d) Subject to Section 151.429(f), Tax Code, an enterprise
11-3 project or defense readjustment project designated on or after
11-4 September 1, 2001, may accrue the right to a refund for which the
11-5 project is entitled under Sections 151.429(a)(5) and (6), Tax Code,
11-6 as added by this Act, and may apply for that refund as provided by
11-7 Section 151.429, Tax Code. However, the comptroller may not pay a
11-8 refund described by this subsection before September 1, 2003.
11-9 Notwithstanding any other law, for purposes of determining whether
11-10 interest accrues on a refund application submitted before September
11-11 1, 2003, the comptroller is considered to have made a final
11-12 decision on the application for the refund on September 1, 2003.
11-13 (e) The change in law made by this Act does not affect taxes
11-14 imposed before the effective date of this Act, and the former law
11-15 is continued in effect for purposes of the liability for and
11-16 collection of those taxes.