By Solis H.B. No. 2686
77R6109 CBH-D
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 O, P, or
2-1 Q, 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 O, P, or
3-7 Q, 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 171.721, Tax Code, is amended by adding
7-20 Subdivisions (3)-(6) to read as follows:
7-21 (3) "Defense readjustment project" means a person
7-22 designated by the Texas Department of Economic Development as a
7-23 defense readjustment project under Chapter 2310, Government Code.
7-24 (4) "Enterprise project" means a person designated by
7-25 the Texas Department of Economic Development as an enterprise
7-26 project under Chapter 2303, Government Code.
7-27 (5) "Enterprise zone" has the meaning assigned that
8-1 term by Section 2303.003, Government Code.
8-2 (6) "Readjustment zone" has the meaning assigned that
8-3 term by Section 2310.001, Government Code.
8-4 SECTION 12. Section 171.722(b), Tax Code, is amended to read
8-5 as follows:
8-6 (b) A corporation may claim a credit under Section
8-7 171.723(d) or take a carryforward credit without regard to whether
8-8 the strategic investment area, enterprise zone, or readjustment
8-9 zone in which it made qualified research expenses and basic
8-10 research payments subsequently loses its designation as a strategic
8-11 investment area, enterprise zone, or readjustment area.
8-12 SECTION 13. Section 171.723(d), Tax Code, is amended to read
8-13 as follows:
8-14 (d) In computing the credit under this section, a
8-15 corporation may multiply by two the amount of any qualified
8-16 research expenses and basic research payments made in a strategic
8-17 investment area. A corporation that is an enterprise project or
8-18 defense readjustment project may multiply by two the amount of any
8-19 qualified research expenses and basic research payments made in an
8-20 enterprise zone or a readjustment zone. A corporation may not
8-21 multiply expenses and payments more than once under this
8-22 subsection.
8-23 SECTION 14. Sections 171.751(9) and (11), Tax Code, are
8-24 amended to read as follows:
8-25 (9) "Qualifying job" means a new permanent full-time
8-26 job that:
8-27 (A) is located in:
9-1 (i) a strategic investment area; [or]
9-2 (ii) a county within this state with a
9-3 population of less than 50,000, if the job is created by a business
9-4 primarily engaged in agricultural processing; or
9-5 (iii) an enterprise zone or a readjustment
9-6 zone, if the job is created by a qualified business that has been
9-7 designated as an enterprise project or defense readjustment
9-8 project, respectively;
9-9 (B) requires at least 1,600 hours of work a
9-10 year;
9-11 (C) pays at least 110 percent of the county
9-12 average weekly wage for the county where the job is located;
9-13 (D) is covered by a group health benefit plan
9-14 for which the business pays at least 80 percent of the premiums or
9-15 other charges assessed under the plan for the employee;
9-16 (E) is not transferred from one area in this
9-17 state to another area in this state; and
9-18 (F) is not created to replace a previous
9-19 employee.
9-20 (11) "Defense readjustment project," "enterprise
9-21 project," "enterprise zone," "readjustment zone," and "strategic
9-22 ["Strategic] investment area" have the meanings [has the meaning]
9-23 assigned those terms [that term] by Section 171.721.
9-24 SECTION 15. Section 171.752(b), Tax Code, is amended to read
9-25 as follows:
9-26 (b) A corporation may claim a credit or take a carryforward
9-27 credit without regard to whether the strategic investment area,
10-1 enterprise zone, or readjustment zone in which it created the
10-2 qualifying jobs subsequently loses its designation as a strategic
10-3 investment area, enterprise zone, or readjustment zone, if
10-4 applicable.
10-5 SECTION 16. Section 171.754, Tax Code, is amended to read as
10-6 follows:
10-7 Sec. 171.754. LENGTH OF CREDIT. (a) Except as provided by
10-8 Subsection (b), the [The] credit established shall be claimed in
10-9 five equal installments of one-fifth the credit amount over the
10-10 five consecutive reports beginning with the report based upon the
10-11 period during which the qualifying jobs were created.
10-12 (b) Subject to Section 171.755, a corporation that has been
10-13 designated as an enterprise project or as a defense readjustment
10-14 project may claim the entire credit earned during an accounting
10-15 period against the taxes imposed for the corresponding reporting
10-16 period.
10-17 SECTION 17. Sections 171.801(2) and (3), Tax Code, are
10-18 amended to read as follows:
10-19 (2) "Qualified capital investment" means tangible
10-20 personal property first placed in service in a strategic investment
10-21 area, [or] first placed in service in a county with a population of
10-22 less than 50,000 by a corporation primarily engaged in agricultural
10-23 processing, or first placed in service in an enterprise zone or
10-24 defense readjustment zone by a qualified business that has been
10-25 designated as an enterprise project or readjustment project,
10-26 respectively, and that is described in Section 1245(a), Internal
10-27 Revenue Code, such as engines, machinery, tools, and implements
11-1 used in a trade or business or held for investment and subject to
11-2 an allowance for depreciation, cost recovery under the accelerated
11-3 cost recovery system, or amortization. The term does not include
11-4 real property or buildings and their structural components.
11-5 Property that is leased under a capitalized lease is considered a
11-6 "qualified capital investment," but property that is leased under
11-7 an operating lease is not considered a "qualified capital
11-8 investment." Property expensed under Section 179, Internal Revenue
11-9 Code, is not considered a "qualified capital investment."
11-10 (3) "Defense readjustment project," "enterprise
11-11 project," "enterprise zone," "readjustment zone," and "strategic
11-12 ["Strategic] investment area" have the meanings [has the meaning]
11-13 assigned those terms [that term] by Section 171.721.
11-14 SECTION 18. Section 171.802(c), Tax Code, is amended to read
11-15 as follows:
11-16 (c) A corporation may claim a credit or take a carryforward
11-17 credit without regard to whether the strategic investment area,
11-18 enterprise zone, or readjustment zone in which it made the
11-19 qualified capital investment subsequently loses its designation as
11-20 a strategic investment area, enterprise zone, or readjustment zone,
11-21 if applicable.
11-22 SECTION 19. Section 171.804, Tax Code, is amended to read as
11-23 follows:
11-24 Sec. 171.804. LENGTH OF CREDIT. (a) Except as provided by
11-25 Subsection (b), the [The] credit established shall be claimed in
11-26 five equal installments of one-fifth the credit amount over the
11-27 five consecutive reports beginning with the report based upon the
12-1 period during which the qualified capital investment was made.
12-2 (b) Subject to Section 171.805, a corporation that has been
12-3 designated as an enterprise project or as a defense readjustment
12-4 project may claim the entire credit earned during an accounting
12-5 period against the taxes imposed for the corresponding reporting
12-6 period.
12-7 SECTION 20. Sections 171.1015, 171.1016, and 171.805(c), Tax
12-8 Code, are repealed.
12-9 SECTION 21. (a) Except as provided by Subsection (b) of this
12-10 section, this Act takes effect September 1, 2001. Sections 6, 7,
12-11 and 8 of this Act apply to wages paid on or after the effective
12-12 date of this Act. Wages paid before the effective date of this Act
12-13 are governed by the law in effect when the wages were paid and that
12-14 law is continued in effect for that purpose.
12-15 (b) Sections 11-20 of this Act take effect January 1, 2002,
12-16 and apply to a report originally due on or after that date.
12-17 (c) The change in law made by this Act does not affect taxes
12-18 imposed before the effective date of this Act, and the former law
12-19 is continued in effect for purposes of the liability for and
12-20 collection of those taxes.