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 ARTICLE 1
1-7 SECTION 1.01. Section 2303.407, Government Code, is amended
1-8 to read as follows:
1-9 Sec. 2303.407. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND.
1-10 When the department designates a business as an enterprise project,
1-11 the department shall allocate to the project the maximum number of
1-12 new permanent jobs or retained jobs eligible to be included in a
1-13 computation of a tax refund for the project. The number may not
1-14 exceed 250 [625] or a number equal to 110 percent of the number of
1-15 anticipated new permanent jobs or retained jobs specified in the
1-16 application for designation of the business as an enterprise
1-17 project under Section 2303.405, whichever is less.
1-18 SECTION 1.02. Section 2303.504, Government Code, is amended
1-19 to read as follows:
1-20 Sec. 2303.504. STATE TAX REFUNDS AND CREDITS [DEDUCTION];
1-21 REPORT. (a) Subject to Section 2303.516, an [An] enterprise
1-22 project is entitled to:
1-23 (1) a refund of state taxes under Section 151.429, Tax
1-24 Code; and
2-1 (2) a franchise tax credit under Subchapter P or Q,
2-2 Chapter 171 [deduction from taxable capital under Section
2-3 171.1015], Tax Code.
2-4 (b) Subject to Section 2303.516, a [A] qualified business is
2-5 entitled to a refund of state taxes under Sections 151.431 and
2-6 171.501, Tax Code.
2-7 (c) Not later than the 60th day after the last day of each
2-8 fiscal year, the comptroller shall report to the department the
2-9 statewide total of the tax refunds and credits made under this
2-10 section during that fiscal year.
2-11 SECTION 1.03. Subchapter G, Chapter 2303, Government Code, is
2-12 amended by adding Section 2303.516 to read as follows:
2-13 Sec. 2303.516. (a) The department may monitor a qualified
2-14 business or enterprise project to determine whether and to what
2-15 extent the business or project has followed through on any
2-16 commitments made by it or on its behalf under this chapter.
2-17 (b) The department may determine that the business or
2-18 project is not entitled to a refund or credit of state taxes under
2-19 Section 2303.504 if the department finds that:
2-20 (1) the business or project is not willing to
2-21 cooperate with the department in providing the department with the
2-22 information the department needs to make the determination under
2-23 Subsection (a); or
2-24 (2) the business or project has substantially failed
2-25 to follow through on any commitments made by it or on its behalf
2-26 under this chapter.
2-27 SECTION 1.04. Section 2310.404, Government Code, is amended
3-1 to read as follows:
3-2 Sec. 2310.404. STATE TAX REFUNDS AND CREDITS [DEDUCTION];
3-3 REPORT. (a) Subject to Section 2310.413, a [A] defense
3-4 readjustment project is eligible for:
3-5 (1) a refund of state taxes under Section 151.4291,
3-6 Tax Code;
3-7 (2) a franchise tax credit under Subchapter P or Q,
3-8 Chapter 171 [deduction from taxable capital under Section
3-9 171.1016], Tax Code; and
3-10 (3) the exclusion of receipts from service performed
3-11 in a readjustment zone in the determination of gross receipts from
3-12 business done in this state under Sections 171.103 and 171.1032,
3-13 Tax Code.
3-14 (b) Not later than the 60th day after the last day of each
3-15 fiscal year, the comptroller shall report to the department the
3-16 statewide total of the tax refunds or credits made under this
3-17 section during that fiscal year.
3-18 SECTION 1.05. Subchapter F, Chapter 2310, Government Code, is
3-19 amended by adding Section 2310.413 to read as follows:
3-20 Sec. 2310.413. (a) The department may monitor a defense
3-21 readjustment project to determine whether and to what extent the
3-22 project has followed through on any commitments made by it or on
3-23 its behalf under this chapter.
3-24 (b) The department may determine that the defense
3-25 readjustment project is not eligible for state tax refunds and
3-26 credits under Section 2310.404 if the department finds that:
3-27 (1) the project is not willing to cooperate with the
4-1 department in providing the department with the information the
4-2 department needs to make the determination under Subsection (a); or
4-3 (2) the project has substantially failed to follow
4-4 through on its commitments made by it or on its behalf under this
4-5 chapter.
4-6 SECTION 1.06. Sections 151.429(a) and (b), Tax Code, are
4-7 amended to read as follows:
4-8 (a) An enterprise project is eligible for a refund in the
4-9 amount provided by this section of the taxes imposed by this
4-10 chapter on purchases of:
4-11 (1) equipment or machinery sold to an enterprise
4-12 project for use in an enterprise zone;
4-13 (2) building materials sold to an enterprise project
4-14 for use in remodeling, rehabilitating, or constructing a structure
4-15 in an enterprise zone;
4-16 (3) labor for remodeling, rehabilitating, or
4-17 constructing a structure by an enterprise project in an enterprise
4-18 zone; [and]
4-19 (4) electricity and natural gas purchased and consumed
4-20 in the normal course of business in the enterprise zone;
4-21 (5) tangible personal property purchased and consumed
4-22 in the normal course of business in the enterprise zone; and
4-23 (6) taxable services.
4-24 (b) Subject to the limitations provided by Subsection (c) of
4-25 this section, an enterprise project qualifies for a refund of taxes
4-26 under this section of $5,000 [$2,000] for each new permanent job or
4-27 job that has been retained by the enterprise project for a
5-1 qualified employee.
5-2 SECTION 1.07. Section 151.4291(a), Tax Code, is amended to
5-3 read as follows:
5-4 (a) A defense readjustment project is eligible for a refund
5-5 in the amount provided by this section of the taxes imposed by this
5-6 chapter on purchases of:
5-7 (1) equipment or machinery sold to a defense
5-8 readjustment project for use in a readjustment zone;
5-9 (2) building materials sold to a defense readjustment
5-10 project for use in remodeling, rehabilitating, or constructing a
5-11 structure in a readjustment zone;
5-12 (3) labor for remodeling, rehabilitating, or
5-13 constructing a structure by a defense readjustment project in a
5-14 readjustment zone; [and]
5-15 (4) electricity and natural gas purchased and consumed
5-16 in the normal course of business in the readjustment zone;
5-17 (5) tangible personal property purchased and consumed
5-18 in the normal course of business in the readjustment zone; and
5-19 (6) taxable services.
5-20 SECTION 1.08. Section 171.751, Tax Code, is amended by
5-21 amending Subdivision (9) and adding Subdivisions (13)-(16) to read
5-22 as follows:
5-23 (9) "Qualifying job" means a new permanent full-time
5-24 job that:
5-25 (A) is located in:
5-26 (i) a strategic investment area; [or]
5-27 (ii) a county within this state with a
6-1 population of less than 50,000, if the job is created by a business
6-2 primarily engaged in agricultural processing; or
6-3 (iii) an enterprise zone or a readjustment
6-4 zone, regardless of whether the job meets the qualifications
6-5 prescribed by Paragraphs (B)-(F), if the job is created by a
6-6 qualified business that has been designated as an enterprise
6-7 project or defense readjustment project, respectively;
6-8 (B) requires at least 1,600 hours of work a
6-9 year;
6-10 (C) pays at least 110 percent of the county
6-11 average weekly wage for the county where the job is located;
6-12 (D) is covered by a group health benefit plan
6-13 for which the business pays at least 80 percent of the premiums or
6-14 other charges assessed under the plan for the employee;
6-15 (E) is not transferred from one area in this
6-16 state to another area in this state; and
6-17 (F) is not created to replace a previous
6-18 employee.
6-19 (13) "Defense readjustment project" means a person
6-20 designated by the Texas Department of Economic Development as a
6-21 defense readjustment project under Chapter 2310, Government Code,
6-22 on or after September 1, 2001.
6-23 (14) "Enterprise project" means a person designated by
6-24 the Texas Department of Economic Development as an enterprise
6-25 project under Chapter 2303, Government Code, on or after September
6-26 1, 2001.
6-27 (15) "Enterprise zone" has the meaning assigned that
7-1 term by Section 2303.003, Government Code.
7-2 (16) "Readjustment zone" has the meaning assigned that
7-3 term by Section 2310.001, Government Code.
7-4 SECTION 1.09. Section 171.752(b), Tax Code, is amended to
7-5 read as follows:
7-6 (b) A corporation may claim a credit or take a carryforward
7-7 credit without regard to whether the strategic investment area,
7-8 enterprise zone, or readjustment zone in which it created the
7-9 qualifying jobs subsequently loses its designation as a strategic
7-10 investment area, enterprise zone, or readjustment zone, if
7-11 applicable.
7-12 SECTION 1.10. Section 171.754, Tax Code, is amended to read
7-13 as follows:
7-14 Sec. 171.754. LENGTH OF CREDIT. (a) Except as provided by
7-15 Subsection (b), the [The] credit established shall be claimed in
7-16 five equal installments of one-fifth the credit amount over the
7-17 five consecutive reports beginning with the report based upon the
7-18 period during which the qualifying jobs were created.
7-19 (b) Subject to Section 171.755, a corporation that has been
7-20 designated as an enterprise project or as a defense readjustment
7-21 project may claim the entire credit earned during an accounting
7-22 period against the taxes imposed for the corresponding reporting
7-23 period.
7-24 SECTION 1.11. Section 171.801, Tax Code, is amended by
7-25 amending Subdivision (2) and adding Subdivision (4) to read as
7-26 follows:
7-27 (2) "Qualified capital investment" means tangible
8-1 personal property first placed in service in a strategic investment
8-2 area, [or] first placed in service in a county with a population of
8-3 less than 50,000 by a corporation primarily engaged in agricultural
8-4 processing, or first placed in service in an enterprise zone or
8-5 defense readjustment zone by a qualified business that has been
8-6 designated as an enterprise project or readjustment project,
8-7 respectively, and that is described in Section 1245(a), Internal
8-8 Revenue Code, such as engines, machinery, tools, and implements
8-9 used in a trade or business or held for investment and subject to
8-10 an allowance for depreciation, cost recovery under the accelerated
8-11 cost recovery system, or amortization. The term does not include
8-12 real property or buildings and their structural components.
8-13 Property that is leased under a capitalized lease is considered a
8-14 "qualified capital investment," but property that is leased under
8-15 an operating lease is not considered a "qualified capital
8-16 investment." Property expensed under Section 179, Internal Revenue
8-17 Code, is not considered a "qualified capital investment."
8-18 (4) "Defense readjustment project," "enterprise
8-19 project," "enterprise zone," and "readjustment zone" have the
8-20 meanings assigned by Section 171.751.
8-21 SECTION 1.12. Section 171.802(c), Tax Code, is amended to
8-22 read as follows:
8-23 (c) A corporation may claim a credit or take a carryforward
8-24 credit without regard to whether the strategic investment area,
8-25 enterprise zone, or readjustment zone in which it made the
8-26 qualified capital investment subsequently loses its designation as
8-27 a strategic investment area, enterprise zone, or readjustment zone,
9-1 if applicable.
9-2 SECTION 1.13. Section 171.804, Tax Code, is amended to read
9-3 as follows:
9-4 Sec. 171.804. LENGTH OF CREDIT. (a) Except as provided by
9-5 Subsection (b), the [The] credit established shall be claimed in
9-6 five equal installments of one-fifth the credit amount over the
9-7 five consecutive reports beginning with the report based upon the
9-8 period during which the qualified capital investment was made.
9-9 (b) Subject to Section 171.805, a corporation that has been
9-10 designated as an enterprise project or as a defense readjustment
9-11 project may claim the entire credit earned during an accounting
9-12 period against the taxes imposed for the corresponding reporting
9-13 period.
9-14 SECTION 1.14. Section 171.721, Tax Code, is amended to read
9-15 as follows:
9-16 Sec. 171.721. DEFINITIONS. In this subchapter:
9-17 (1) "Base amount," "basic research payment," and
9-18 "qualified research expense" have the meanings assigned those terms
9-19 by Section 41, Internal Revenue Code, except that all such payments
9-20 and expenses must be for research conducted within this state.
9-21 (2) "Strategic investment area" means an area that is
9-22 determined by the comptroller under Section 171.726 that is:
9-23 (A) a county within this state with above state
9-24 average unemployment and below state average per capita income;
9-25 [or]
9-26 (B) an area within this state that is a
9-27 federally designated urban enterprise community or an urban
10-1 enhanced enterprise community; or
10-2 (C) a county within this state that has a
10-3 spaceport, as defined by Section 4D, Development Corporation Act of
10-4 1979 (Article 5190.6, Vernon's Texas Civil Statutes), as added by
10-5 Chapter 1537, Acts of the 76th Legislature, Regular Session, 1999,
10-6 within its boundaries.
10-7 SECTION 1.15. Sections 171.1015, 171.1016, and 171.805(c),
10-8 Tax Code, are repealed.
10-9 SECTION 1.16. (a) Except as provided by Subsection (b) of
10-10 this section, this article takes effect September 1, 2001. The
10-11 changes in law made by this article apply only to an enterprise
10-12 project or defense readjustment project designated by the Texas
10-13 Department of Economic Development as such a project on or after
10-14 September 1, 2001. An enterprise project or defense readjustment
10-15 project designated before that date is governed by the law in
10-16 effect on the date it was designated, and that law is continued in
10-17 effect for that purpose.
10-18 (b) Sections 1.08-1.14 of this article take effect September
10-19 1, 2003, and apply to a report originally due on or after that
10-20 date. Notwithstanding any other law, an enterprise project or
10-21 defense readjustment project designated on or after September 1,
10-22 2001, may, beginning on the date the project is designated,
10-23 establish credits as provided by the changes in law made by
10-24 Sections 1.08-1.13 of this article but may only claim the credits
10-25 on reports originally due on or after September 1, 2003.
10-26 (c) Subject to Section 151.429(f), Tax Code, an enterprise
10-27 project or defense readjustment project designated on or after
11-1 September 1, 2001, may apply for a refund for which the project is
11-2 entitled under Sections 151.429(a)(1)-(4), Tax Code, as provided by
11-3 Section 151.429, Tax Code. The comptroller may pay the refund as
11-4 provided by Section 151.429, Tax Code, and other law.
11-5 (d) Subject to Section 151.429(f), Tax Code, an enterprise
11-6 project or defense readjustment project designated on or after
11-7 September 1, 2001, may accrue the right to a refund for which the
11-8 project is entitled under Sections 151.429(a)(5) and (6), Tax Code,
11-9 as added by this article, and may apply for that refund as provided
11-10 by Section 151.429, Tax Code. However, the comptroller may not pay
11-11 a refund described by this subsection before September 1, 2003.
11-12 Notwithstanding any other law, for purposes of determining whether
11-13 interest accrues on a refund application submitted before September
11-14 1, 2003, the comptroller is considered to have made a final
11-15 decision on the application for the refund on September 1, 2003.
11-16 (e) The change in law made by this article does not affect
11-17 taxes imposed before the effective date of this article, and the
11-18 former law is continued in effect for purposes of the liability for
11-19 and collection of those taxes.
11-20 ARTICLE 2
11-21 SECTION 2.01. Section 2303.407, Government Code, is amended
11-22 to read as follows:
11-23 Sec. 2303.407. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND.
11-24 When the department designates a business as an enterprise project,
11-25 the department shall allocate to the project the maximum number of
11-26 new permanent jobs or retained jobs eligible to be included in a
11-27 computation of a tax refund for the project. The number may not
12-1 exceed 625 or a number equal to 110 percent of the number of
12-2 anticipated new permanent jobs or retained jobs specified in the
12-3 application for designation of the business as an enterprise
12-4 project under Section 2303.405, whichever is less.
12-5 SECTION 2.02. Section 2303.504, Government Code, is amended
12-6 to read as follows:
12-7 Sec. 2303.504. STATE TAX REFUNDS [AND DEDUCTION]; REPORT.
12-8 (a) Subject to Section 2303.516, an [An] enterprise project is
12-9 entitled to[:]
12-10 [(1)] a refund of state taxes under Section 151.429,
12-11 Tax Code[; and]
12-12 [(2) a deduction from taxable capital under Section
12-13 171.1015, Tax Code].
12-14 (b) Subject to Section 2303.516, a [A] qualified business is
12-15 entitled to a refund of state taxes under Sections 151.431 and
12-16 171.501, Tax Code.
12-17 (c) Not later than the 60th day after the last day of each
12-18 fiscal year, the comptroller shall report to the department the
12-19 statewide total of the tax refunds made under this section during
12-20 that fiscal year.
12-21 SECTION 2.03. Section 2310.404, Government Code, is amended
12-22 to read as follows:
12-23 Sec. 2310.404. STATE TAX REFUNDS [AND DEDUCTION]; REPORT.
12-24 (a) Subject to Section 2310.413, a [A] defense readjustment
12-25 project is eligible for:
12-26 (1) a refund of state taxes under Section 151.4291,
12-27 Tax Code; and
13-1 (2) [a deduction from taxable capital under Section
13-2 171.1016, Tax Code; and]
13-3 [(3)] the exclusion of receipts from service performed
13-4 in a readjustment zone in the determination of gross receipts from
13-5 business done in this state under Sections 171.103 and 171.1032,
13-6 Tax Code.
13-7 (b) Not later than the 60th day after the last day of each
13-8 fiscal year, the comptroller shall report to the department the
13-9 statewide total of the tax refunds made under this section during
13-10 that fiscal year.
13-11 SECTION 2.04. Sections 151.429(a) and (b), Tax Code, are
13-12 amended to read as follows:
13-13 (a) An enterprise project is eligible for a refund in the
13-14 amount provided by this section of the taxes imposed by this
13-15 chapter on purchases of:
13-16 (1) equipment or machinery sold to an enterprise
13-17 project for use in an enterprise zone;
13-18 (2) building materials sold to an enterprise project
13-19 for use in remodeling, rehabilitating, or constructing a structure
13-20 in an enterprise zone;
13-21 (3) labor for remodeling, rehabilitating, or
13-22 constructing a structure by an enterprise project in an enterprise
13-23 zone; and
13-24 (4) electricity and natural gas purchased and consumed
13-25 in the normal course of business in the enterprise zone.
13-26 (b) Subject to the limitations provided by Subsection (c) of
13-27 this section, an enterprise project qualifies for a refund of taxes
14-1 under this section of $2,000 for each new permanent job or job that
14-2 has been retained by the enterprise project for a qualified
14-3 employee.
14-4 SECTION 2.05. Section 151.4291(a), Tax Code, is amended to
14-5 read as follows:
14-6 (a) A defense readjustment project is eligible for a refund
14-7 in the amount provided by this section of the taxes imposed by this
14-8 chapter on purchases of:
14-9 (1) equipment or machinery sold to a defense
14-10 readjustment project for use in a readjustment zone;
14-11 (2) building materials sold to a defense readjustment
14-12 project for use in remodeling, rehabilitating, or constructing a
14-13 structure in a readjustment zone;
14-14 (3) labor for remodeling, rehabilitating, or
14-15 constructing a structure by a defense readjustment project in a
14-16 readjustment zone; and
14-17 (4) electricity and natural gas purchased and consumed
14-18 in the normal course of business in the readjustment zone.
14-19 SECTION 2.06. Section 171.751(9), Tax Code, is amended to
14-20 read as follows:
14-21 (9) "Qualifying job" means a new permanent full-time
14-22 job that:
14-23 (A) is located in:
14-24 (i) a strategic investment area; or
14-25 (ii) a county within this state with a
14-26 population of less than 50,000, if the job is created by a business
14-27 primarily engaged in agricultural processing;
15-1 (B) requires at least 1,600 hours of work a
15-2 year;
15-3 (C) pays at least 110 percent of the county
15-4 average weekly wage for the county where the job is located;
15-5 (D) is covered by a group health benefit plan
15-6 for which the business pays at least 80 percent of the premiums or
15-7 other charges assessed under the plan for the employee;
15-8 (E) is not transferred from one area in this
15-9 state to another area in this state; and
15-10 (F) is not created to replace a previous
15-11 employee.
15-12 SECTION 2.07. Section 171.752(b), Tax Code, is amended to
15-13 read as follows:
15-14 (b) A corporation may claim a credit or take a carryforward
15-15 credit without regard to whether the strategic investment area in
15-16 which it created the qualifying jobs subsequently loses its
15-17 designation as a strategic investment area, if applicable.
15-18 SECTION 2.08. Section 171.754, Tax Code, is amended to read
15-19 as follows:
15-20 Sec. 171.754. LENGTH OF CREDIT. The credit established shall
15-21 be claimed in five equal installments of one-fifth the credit
15-22 amount over the five consecutive reports beginning with the report
15-23 based upon the period during which the qualifying jobs were
15-24 created.
15-25 SECTION 2.09. Section 171.801(2), Tax Code, is amended to
15-26 read as follows:
15-27 (2) "Qualified capital investment" means tangible
16-1 personal property first placed in service in a strategic investment
16-2 area, or first placed in service in a county with a population of
16-3 less than 50,000 by a corporation primarily engaged in agricultural
16-4 processing, and that is described in Section 1245(a), Internal
16-5 Revenue Code, such as engines, machinery, tools, and implements
16-6 used in a trade or business or held for investment and subject to
16-7 an allowance for depreciation, cost recovery under the accelerated
16-8 cost recovery system, or amortization. The term does not include
16-9 real property or buildings and their structural components.
16-10 Property that is leased under a capitalized lease is considered a
16-11 "qualified capital investment," but property that is leased under
16-12 an operating lease is not considered a "qualified capital
16-13 investment." Property expensed under Section 179, Internal Revenue
16-14 Code, is not considered a "qualified capital investment."
16-15 SECTION 2.10. Section 171.802(c), Tax Code, is amended to
16-16 read as follows:
16-17 (c) A corporation may claim a credit or take a carryforward
16-18 credit without regard to whether the strategic investment area in
16-19 which it made the qualified capital investment subsequently loses
16-20 its designation as a strategic investment area, if applicable.
16-21 SECTION 2.11. Section 171.804, Tax Code, is amended to read
16-22 as follows:
16-23 Sec. 171.804. LENGTH OF CREDIT. The credit established shall
16-24 be claimed in five equal installments of one-fifth the credit
16-25 amount over the five consecutive reports beginning with the report
16-26 based upon the period during which the qualified capital investment
16-27 was made.
17-1 SECTION 2.12. Section 171.721, Tax Code, is amended to read
17-2 as follows:
17-3 Sec. 171.721. DEFINITIONS. In this subchapter:
17-4 (1) "Base amount," "basic research payment," and
17-5 "qualified research expense" have the meanings assigned those terms
17-6 by Section 41, Internal Revenue Code, except that all such payments
17-7 and expenses must be for research conducted within this state.
17-8 (2) "Strategic investment area" means an area that is
17-9 determined by the comptroller under Section 171.726 that is:
17-10 (A) a county within this state with above state
17-11 average unemployment and below state average per capita income; or
17-12 (B) an area within this state that is a
17-13 federally designated urban enterprise community or an urban
17-14 enhanced enterprise community.
17-15 SECTION 2.13. Sections 171.751(13)-(16), and Section
17-16 171.801(4), Tax Code, are repealed.
17-17 SECTION 2.14. (a) Except as provided by Subsection (b) of
17-18 this section, this article takes effect September 1, 2005.
17-19 (b) Sections 2.06-2.13 of this article take effect January
17-20 1, 2005, and apply to a report originally due on or after that
17-21 date.
17-22 (c) The change in law made by this article does not affect
17-23 taxes imposed before the effective date of this article, and the
17-24 former law is continued in effect for purposes of the liability for
17-25 and collection of those taxes.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2686 was passed by the House on May
4, 2001, by a non-record vote; and that the House concurred in
Senate amendments to H.B. No. 2686 on May 25, 2001, by a non-record
vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 2686 was passed by the Senate, with
amendments, on May 22, 2001, by a viva-voce vote.
_______________________________
Secretary of the Senate
APPROVED: __________________________
Date
__________________________
Governor