77R10881 CBH-D
By Solis, Seaman H.B. No. 2686
Substitute the following for H.B. No. 2686:
By McClendon C.S.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 certain federally
1-4 designated zones.
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,
2-1 Chapter 171 [deduction from taxable capital under Section
2-2 171.1015], Tax Code.
2-3 (b) Subject to Section 2303.516, a [A] qualified business is
2-4 entitled to a refund of state taxes under Sections 151.431 and
2-5 171.501, Tax Code.
2-6 (c) Not later than the 60th day after the last day of each
2-7 fiscal year, the comptroller shall report to the department the
2-8 statewide total of the tax refunds and credits made under this
2-9 section during that fiscal year.
2-10 SECTION 3. Subchapter G, Chapter 2303, Government Code, is
2-11 amended by adding Section 2303.516 to read as follows:
2-12 Sec. 2303.516. (a) The department may monitor a qualified
2-13 business or enterprise project to determine whether and to what
2-14 extent the business or project has followed through on any
2-15 commitments made by it or on its behalf under this chapter.
2-16 (b) The department may determine that the business or
2-17 project is not entitled to a refund or credit of state taxes under
2-18 Section 2303.504 if the department finds that:
2-19 (1) the business or project is not willing to
2-20 cooperate with the department in providing the department with the
2-21 information the department needs to make the determination under
2-22 Subsection (a); or
2-23 (2) the business or project has substantially failed
2-24 to follow through on any commitments made by it or on its behalf
2-25 under this chapter.
2-26 SECTION 4. Section 2310.404, Government Code, is amended to
2-27 read as follows:
3-1 Sec. 2310.404. STATE TAX REFUNDS AND CREDITS [DEDUCTION];
3-2 REPORT. (a) Subject to Section 2310.413, a [A] defense
3-3 readjustment project is eligible for:
3-4 (1) a refund of state taxes under Section 151.4291,
3-5 Tax Code;
3-6 (2) a franchise tax credit under Subchapter P or Q,
3-7 Chapter 171 [deduction from taxable capital under Section
3-8 171.1016], Tax Code; and
3-9 (3) the exclusion of receipts from service performed
3-10 in a readjustment zone in the determination of gross receipts from
3-11 business done in this state under Sections 171.103 and 171.1032,
3-12 Tax Code.
3-13 (b) Not later than the 60th day after the last day of each
3-14 fiscal year, the comptroller shall report to the department the
3-15 statewide total of the tax refunds or credits made under this
3-16 section during that fiscal year.
3-17 SECTION 5. Subchapter F, Chapter 2303, Government Code, is
3-18 amended by adding Section 2310.413 to read as follows:
3-19 Sec. 2310.413. (a) The department may monitor a defense
3-20 readjustment project to determine whether and to what extent the
3-21 project has followed through on any commitments made by it or on
3-22 its behalf under this chapter.
3-23 (b) The department may determine that the defense
3-24 readjustment project is not eligible for state tax refunds and
3-25 credits under Section 2310.404 if the department finds that:
3-26 (1) the project is not willing to cooperate with the
3-27 department in providing the department with the information the
4-1 department needs to make the determination under Subsection (a); or
4-2 (2) the project has substantially failed to follow
4-3 through on its commitments made by it or on its behalf under this
4-4 chapter.
4-5 SECTION 6. Section 301.101, Labor Code, is amended to read as
4-6 follows:
4-7 Sec. 301.101. DEFINITIONS [DEFINITION]. In this subchapter:
4-8 (1) "Enterprise zone" has the meaning assigned by
4-9 Section 2303.003, Government Code.
4-10 (2) "Wages" [, "wages"] has the meaning assigned by
4-11 Sections 51(c)(1), (2), and (3), Internal Revenue Code of 1986 (26
4-12 U.S.C. Section 51).
4-13 SECTION 7. Section 301.103(a), Labor Code, is amended to read
4-14 as follows:
4-15 (a) The amount of the refund allowed under this subchapter
4-16 is equal to 40 [20] percent of the total wages of each employee, up
4-17 to a maximum refund of $4,000 [$10,000 in wages] for each employee,
4-18 paid or incurred by a person for services rendered by an employee
4-19 of the person during the period beginning with the date the
4-20 employee begins work for the person and ending on the first
4-21 anniversary of that date.
4-22 SECTION 8. Sections 301.104 and 301.105, Labor Code, are
4-23 amended to read as follows:
4-24 Sec. 301.104. ELIGIBILITY. A person is eligible for the
4-25 refund for wages paid or incurred by the person, during each
4-26 calendar year for which the refund is claimed, only if:
4-27 (1) the wages paid or incurred by the person are for
5-1 services of an employee who is:
5-2 (A) a resident of this state; [and]
5-3 (B) a recipient of financial assistance and
5-4 services in accordance with Chapter 31, Human Resources Code; and
5-5 (C) performs at least 50 percent of the
5-6 employee's services for the person in an enterprise zone, federal
5-7 empowerment zone, or federal enterprise community;
5-8 (2) the person satisfies the certification
5-9 requirements under Section 301.105; and
5-10 (3) the person provides and pays for the benefit of
5-11 the employee a part of the cost of coverage under:
5-12 (A) a health plan provided by a health
5-13 maintenance organization established under the Texas Health
5-14 Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance
5-15 Code);
5-16 (B) a health benefit plan approved by the
5-17 commissioner of insurance; or
5-18 (C) a self-funded or self-insured employee
5-19 welfare benefit plan that provides health benefits and is
5-20 established in accordance with the Employee Retirement Income
5-21 Security Act of 1974 (29 U.S.C. 1001 et seq.)
5-22 Sec. 301.105. CERTIFICATION. A person is not eligible for
5-23 the refund for wages paid or incurred by the person unless the
5-24 person has received a written certification from the commission
5-25 that the employee:
5-26 (1) is a recipient of financial assistance and
5-27 services on or before the day the employee begins employment with
6-1 the person; and
6-2 (2) performs at least 50 percent of the employee's
6-3 services for the person in an enterprise zone, federal empowerment
6-4 zone, or federal enterprise community.
6-5 SECTION 9. Sections 151.429(a) and (b), Tax Code, are amended
6-6 to read as follows:
6-7 (a) An enterprise project is eligible for a refund in the
6-8 amount provided by this section of the taxes imposed by this
6-9 chapter on purchases of:
6-10 (1) equipment or machinery sold to an enterprise
6-11 project for use in an enterprise zone;
6-12 (2) building materials sold to an enterprise project
6-13 for use in remodeling, rehabilitating, or constructing a structure
6-14 in an enterprise zone;
6-15 (3) labor for remodeling, rehabilitating, or
6-16 constructing a structure by an enterprise project in an enterprise
6-17 zone; [and]
6-18 (4) electricity and natural gas purchased and consumed
6-19 in the normal course of business in the enterprise zone;
6-20 (5) tangible personal property purchased and consumed
6-21 in the normal course of business in the enterprise zone; and
6-22 (6) taxable services.
6-23 (b) Subject to the limitations provided by Subsection (c) of
6-24 this section, an enterprise project qualifies for a refund of taxes
6-25 under this section of $5,000 [$2,000] for each new permanent job or
6-26 job that has been retained by the enterprise project for a
6-27 qualified employee.
7-1 SECTION 10. Section 151.4291(a), Tax Code, is amended to read
7-2 as follows:
7-3 (a) A defense readjustment project is eligible for a refund
7-4 in the amount provided by this section of the taxes imposed by this
7-5 chapter on purchases of:
7-6 (1) equipment or machinery sold to a defense
7-7 readjustment project for use in a readjustment zone;
7-8 (2) building materials sold to a defense readjustment
7-9 project for use in remodeling, rehabilitating, or constructing a
7-10 structure in a readjustment zone;
7-11 (3) labor for remodeling, rehabilitating, or
7-12 constructing a structure by a defense readjustment project in a
7-13 readjustment zone; [and]
7-14 (4) electricity and natural gas purchased and consumed
7-15 in the normal course of business in the readjustment zone;
7-16 (5) tangible personal property purchased and consumed
7-17 in the normal course of business in the readjustment zone; and
7-18 (6) taxable services.
7-19 SECTION 11. Section 171.751, Tax Code, is amended by amending
7-20 Subdivision (9) and adding Subdivisions (13)-(16) to read as
7-21 follows:
7-22 (9) "Qualifying job" means a new permanent full-time
7-23 job that:
7-24 (A) is located in:
7-25 (i) a strategic investment area; [or]
7-26 (ii) a county within this state with a
7-27 population of less than 50,000, if the job is created by a business
8-1 primarily engaged in agricultural processing; or
8-2 (iii) an enterprise zone or a readjustment
8-3 zone, regardless of whether the job meets the qualifications
8-4 prescribed by Paragraphs (B)-(F), if the job is created by a
8-5 qualified business that has been designated as an enterprise
8-6 project or defense readjustment project, respectively;
8-7 (B) requires at least 1,600 hours of work a
8-8 year;
8-9 (C) pays at least 110 percent of the county
8-10 average weekly wage for the county where the job is located;
8-11 (D) is covered by a group health benefit plan
8-12 for which the business pays at least 80 percent of the premiums or
8-13 other charges assessed under the plan for the employee;
8-14 (E) is not transferred from one area in this
8-15 state to another area in this state; and
8-16 (F) is not created to replace a previous
8-17 employee.
8-18 (13) "Defense readjustment project" means a person
8-19 designated by the Texas Department of Economic Development as a
8-20 defense readjustment project under Chapter 2310, Government Code,
8-21 on or after September 1, 2001.
8-22 (14) "Enterprise project" means a person designated by
8-23 the Texas Department of Economic Development as an enterprise
8-24 project under Chapter 2303, Government Code, on or after September
8-25 1, 2001.
8-26 (15) "Enterprise zone" has the meaning assigned that
8-27 term by Section 2303.003, Government Code.
9-1 (16) "Readjustment zone" has the meaning assigned that
9-2 term by Section 2310.001, Government Code.
9-3 SECTION 12. Section 171.752(b), Tax Code, is amended to read
9-4 as follows:
9-5 (b) A corporation may claim a credit or take a carryforward
9-6 credit without regard to whether the strategic investment area,
9-7 enterprise zone, or readjustment zone in which it created the
9-8 qualifying jobs subsequently loses its designation as a strategic
9-9 investment area, enterprise zone, or readjustment zone, if
9-10 applicable.
9-11 SECTION 13. Section 171.754, Tax Code, is amended to read as
9-12 follows:
9-13 Sec. 171.754. LENGTH OF CREDIT. (a) Except as provided by
9-14 Subsection (b), the [The] credit established shall be claimed in
9-15 five equal installments of one-fifth the credit amount over the
9-16 five consecutive reports beginning with the report based upon the
9-17 period during which the qualifying jobs were created.
9-18 (b) Subject to Section 171.755, a corporation that has been
9-19 designated as an enterprise project or as a defense readjustment
9-20 project may claim the entire credit earned during an accounting
9-21 period against the taxes imposed for the corresponding reporting
9-22 period.
9-23 SECTION 14. Section 171.801, Tax Code, is amended by amending
9-24 Subdivision (2) and adding Subdivision (4) to read as follows:
9-25 (2) "Qualified capital investment" means tangible
9-26 personal property first placed in service in a strategic investment
9-27 area, [or] first placed in service in a county with a population of
10-1 less than 50,000 by a corporation primarily engaged in agricultural
10-2 processing, or first placed in service in an enterprise zone or
10-3 defense readjustment zone by a qualified business that has been
10-4 designated as an enterprise project or readjustment project,
10-5 respectively, and that is described in Section 1245(a), Internal
10-6 Revenue Code, such as engines, machinery, tools, and implements
10-7 used in a trade or business or held for investment and subject to
10-8 an allowance for depreciation, cost recovery under the accelerated
10-9 cost recovery system, or amortization. The term does not include
10-10 real property or buildings and their structural components.
10-11 Property that is leased under a capitalized lease is considered a
10-12 "qualified capital investment," but property that is leased under
10-13 an operating lease is not considered a "qualified capital
10-14 investment." Property expensed under Section 179, Internal Revenue
10-15 Code, is not considered a "qualified capital investment."
10-16 (4) "Defense readjustment project," "enterprise
10-17 project," "enterprise zone," and "readjustment zone" have the
10-18 meanings assigned by Section 171.751.
10-19 SECTION 15. Section 171.802(c), Tax Code, is amended to read
10-20 as follows:
10-21 (c) A corporation may claim a credit or take a carryforward
10-22 credit without regard to whether the strategic investment area,
10-23 enterprise zone, or readjustment zone in which it made the
10-24 qualified capital investment subsequently loses its designation as
10-25 a strategic investment area, enterprise zone, or readjustment zone,
10-26 if applicable.
10-27 SECTION 16. Section 171.804, Tax Code, is amended to read as
11-1 follows:
11-2 Sec. 171.804. LENGTH OF CREDIT. (a) Except as provided by
11-3 Subsection (b), the [The] credit established shall be claimed in
11-4 five equal installments of one-fifth the credit amount over the
11-5 five consecutive reports beginning with the report based upon the
11-6 period during which the qualified capital investment was made.
11-7 (b) Subject to Section 171.805, a corporation that has been
11-8 designated as an enterprise project or as a defense readjustment
11-9 project may claim the entire credit earned during an accounting
11-10 period against the taxes imposed for the corresponding reporting
11-11 period.
11-12 SECTION 17. Sections 171.1015, 171.1016, and 171.805(c), Tax
11-13 Code, are repealed.
11-14 SECTION 18. (a) Except as provided by Subsection (c) of this
11-15 section, this Act takes effect September 1, 2001. The changes in
11-16 law made by this Act apply only to an enterprise project or defense
11-17 readjustment project designated by the Texas Department of Economic
11-18 Development as such a project on or after September 1, 2001. An
11-19 enterprise project or defense readjustment project designated
11-20 before that date is governed by the law in effect on the date it
11-21 was designated, and that law is continued in effect for that
11-22 purpose.
11-23 (b) Sections 6, 7, and 8 of this Act apply to wages paid on
11-24 or after the effective date of this Act. Wages paid before the
11-25 effective date of this Act are governed by the law in effect when
11-26 the wages were paid and that law is continued in effect for that
11-27 purpose.
12-1 (c) Sections 11-17 of this Act take effect January 1, 2002,
12-2 and apply to a report originally due on or after that date.
12-3 (d) The change in law made by this Act does not affect taxes
12-4 imposed before the effective date of this Act, and the former law
12-5 is continued in effect for purposes of the liability for and
12-6 collection of those taxes.