1-1 By: Solis, et al. (Senate Sponsor - Lucio) H.B. No. 2686
1-2 (In the Senate - Received from the House May 7, 2001;
1-3 May 7, 2001, read first time and referred to Committee on Finance;
1-4 May 11, 2001, reported favorably by the following vote: Yeas 7,
1-5 Nays 0; May 11, 2001, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to tax incentives for certain businesses located in
1-9 enterprise zones, defense readjustment zones, or strategic
1-10 investment areas.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Section 2303.407, Government Code, is amended to
1-13 read as follows:
1-14 Sec. 2303.407. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND.
1-15 When the department designates a business as an enterprise project,
1-16 the department shall allocate to the project the maximum number of
1-17 new permanent jobs or retained jobs eligible to be included in a
1-18 computation of a tax refund for the project. The number may not
1-19 exceed 250 [625] or a number equal to 110 percent of the number of
1-20 anticipated new permanent jobs or retained jobs specified in the
1-21 application for designation of the business as an enterprise
1-22 project under Section 2303.405, whichever is less.
1-23 SECTION 2. Section 2303.504, Government Code, is amended to
1-24 read as follows:
1-25 Sec. 2303.504. STATE TAX REFUNDS AND CREDITS [DEDUCTION];
1-26 REPORT. (a) Subject to Section 2303.516, an [An] enterprise
1-27 project is entitled to:
1-28 (1) a refund of state taxes under Section 151.429, Tax
1-29 Code; and
1-30 (2) a franchise tax credit under Subchapter P or Q,
1-31 Chapter 171 [deduction from taxable capital under Section
1-32 171.1015], Tax Code.
1-33 (b) Subject to Section 2303.516, a [A] qualified business is
1-34 entitled to a refund of state taxes under Sections 151.431 and
1-35 171.501, Tax Code.
1-36 (c) Not later than the 60th day after the last day of each
1-37 fiscal year, the comptroller shall report to the department the
1-38 statewide total of the tax refunds and credits made under this
1-39 section during that fiscal year.
1-40 SECTION 3. Subchapter G, Chapter 2303, Government Code, is
1-41 amended by adding Section 2303.516 to read as follows:
1-42 Sec. 2303.516. (a) The department may monitor a qualified
1-43 business or enterprise project to determine whether and to what
1-44 extent the business or project has followed through on any
1-45 commitments made by it or on its behalf under this chapter.
1-46 (b) The department may determine that the business or
1-47 project is not entitled to a refund or credit of state taxes under
1-48 Section 2303.504 if the department finds that:
1-49 (1) the business or project is not willing to
1-50 cooperate with the department in providing the department with the
1-51 information the department needs to make the determination under
1-52 Subsection (a); or
1-53 (2) the business or project has substantially failed
1-54 to follow through on any commitments made by it or on its behalf
1-55 under this chapter.
1-56 SECTION 4. Section 2310.404, Government Code, is amended to
1-57 read as follows:
1-58 Sec. 2310.404. STATE TAX REFUNDS AND CREDITS [DEDUCTION];
1-59 REPORT. (a) Subject to Section 2310.413, a [A] defense
1-60 readjustment project is eligible for:
1-61 (1) a refund of state taxes under Section 151.4291,
1-62 Tax Code;
1-63 (2) a franchise tax credit under Subchapter P or Q,
1-64 Chapter 171 [deduction from taxable capital under Section
2-1 171.1016], Tax Code; and
2-2 (3) the exclusion of receipts from service performed
2-3 in a readjustment zone in the determination of gross receipts from
2-4 business done in this state under Sections 171.103 and 171.1032,
2-5 Tax Code.
2-6 (b) 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 or credits made under this
2-9 section during that fiscal year.
2-10 SECTION 5. Subchapter F, Chapter 2303, Government Code, is
2-11 amended by adding Section 2310.413 to read as follows:
2-12 Sec. 2310.413. (a) The department may monitor a defense
2-13 readjustment project to determine whether and to what extent the
2-14 project has followed through on any commitments made by it or on
2-15 its behalf under this chapter.
2-16 (b) The department may determine that the defense
2-17 readjustment project is not eligible for state tax refunds and
2-18 credits under Section 2310.404 if the department finds that:
2-19 (1) the project is not willing to cooperate with the
2-20 department in providing the department with the information the
2-21 department needs to make the determination under Subsection (a); or
2-22 (2) the project has substantially failed to follow
2-23 through on its commitments made by it or on its behalf under this
2-24 chapter.
2-25 SECTION 6. Sections 151.429(a) and (b), Tax Code, are amended
2-26 to read as follows:
2-27 (a) An enterprise project is eligible for a refund in the
2-28 amount provided by this section of the taxes imposed by this
2-29 chapter on purchases of:
2-30 (1) equipment or machinery sold to an enterprise
2-31 project for use in an enterprise zone;
2-32 (2) building materials sold to an enterprise project
2-33 for use in remodeling, rehabilitating, or constructing a structure
2-34 in an enterprise zone;
2-35 (3) labor for remodeling, rehabilitating, or
2-36 constructing a structure by an enterprise project in an enterprise
2-37 zone; [and]
2-38 (4) electricity and natural gas purchased and consumed
2-39 in the normal course of business in the enterprise zone;
2-40 (5) tangible personal property purchased and consumed
2-41 in the normal course of business in the enterprise zone; and
2-42 (6) taxable services.
2-43 (b) Subject to the limitations provided by Subsection (c) of
2-44 this section, an enterprise project qualifies for a refund of taxes
2-45 under this section of $5,000 [$2,000] for each new permanent job or
2-46 job that has been retained by the enterprise project for a
2-47 qualified employee.
2-48 SECTION 7. Section 151.4291(a), Tax Code, is amended to read
2-49 as follows:
2-50 (a) A defense readjustment project is eligible for a refund
2-51 in the amount provided by this section of the taxes imposed by this
2-52 chapter on purchases of:
2-53 (1) equipment or machinery sold to a defense
2-54 readjustment project for use in a readjustment zone;
2-55 (2) building materials sold to a defense readjustment
2-56 project for use in remodeling, rehabilitating, or constructing a
2-57 structure in a readjustment zone;
2-58 (3) labor for remodeling, rehabilitating, or
2-59 constructing a structure by a defense readjustment project in a
2-60 readjustment zone; [and]
2-61 (4) electricity and natural gas purchased and consumed
2-62 in the normal course of business in the readjustment zone;
2-63 (5) tangible personal property purchased and consumed
2-64 in the normal course of business in the readjustment zone; and
2-65 (6) taxable services.
2-66 SECTION 8. Section 171.751, Tax Code, is amended by amending
2-67 Subdivision (9) and adding Subdivisions (13)-(16) to read as
2-68 follows:
2-69 (9) "Qualifying job" means a new permanent full-time
3-1 job that:
3-2 (A) is located in:
3-3 (i) a strategic investment area; [or]
3-4 (ii) a county within this state with a
3-5 population of less than 50,000, if the job is created by a business
3-6 primarily engaged in agricultural processing; or
3-7 (iii) an enterprise zone or a readjustment
3-8 zone, regardless of whether the job meets the qualifications
3-9 prescribed by Paragraphs (B)-(F), if the job is created by a
3-10 qualified business that has been designated as an enterprise
3-11 project or defense readjustment project, respectively;
3-12 (B) requires at least 1,600 hours of work a
3-13 year;
3-14 (C) pays at least 110 percent of the county
3-15 average weekly wage for the county where the job is located;
3-16 (D) is covered by a group health benefit plan
3-17 for which the business pays at least 80 percent of the premiums or
3-18 other charges assessed under the plan for the employee;
3-19 (E) is not transferred from one area in this
3-20 state to another area in this state; and
3-21 (F) is not created to replace a previous
3-22 employee.
3-23 (13) "Defense readjustment project" means a person
3-24 designated by the Texas Department of Economic Development as a
3-25 defense readjustment project under Chapter 2310, Government Code,
3-26 on or after September 1, 2001.
3-27 (14) "Enterprise project" means a person designated by
3-28 the Texas Department of Economic Development as an enterprise
3-29 project under Chapter 2303, Government Code, on or after September
3-30 1, 2001.
3-31 (15) "Enterprise zone" has the meaning assigned that
3-32 term by Section 2303.003, Government Code.
3-33 (16) "Readjustment zone" has the meaning assigned that
3-34 term by Section 2310.001, Government Code.
3-35 SECTION 9. Section 171.752(b), Tax Code, is amended to read
3-36 as follows:
3-37 (b) A corporation may claim a credit or take a carryforward
3-38 credit without regard to whether the strategic investment area,
3-39 enterprise zone, or readjustment zone in which it created the
3-40 qualifying jobs subsequently loses its designation as a strategic
3-41 investment area, enterprise zone, or readjustment zone, if
3-42 applicable.
3-43 SECTION 10. Section 171.754, Tax Code, is amended to read as
3-44 follows:
3-45 Sec. 171.754. LENGTH OF CREDIT. (a) Except as provided by
3-46 Subsection (b), the [The] credit established shall be claimed in
3-47 five equal installments of one-fifth the credit amount over the
3-48 five consecutive reports beginning with the report based upon the
3-49 period during which the qualifying jobs were created.
3-50 (b) Subject to Section 171.755, a corporation that has been
3-51 designated as an enterprise project or as a defense readjustment
3-52 project may claim the entire credit earned during an accounting
3-53 period against the taxes imposed for the corresponding reporting
3-54 period.
3-55 SECTION 11. Section 171.801, Tax Code, is amended by amending
3-56 Subdivision (2) and adding Subdivision (4) to read as follows:
3-57 (2) "Qualified capital investment" means tangible
3-58 personal property first placed in service in a strategic investment
3-59 area, [or] first placed in service in a county with a population of
3-60 less than 50,000 by a corporation primarily engaged in agricultural
3-61 processing, or first placed in service in an enterprise zone or
3-62 defense readjustment zone by a qualified business that has been
3-63 designated as an enterprise project or readjustment project,
3-64 respectively, and that is described in Section 1245(a), Internal
3-65 Revenue Code, such as engines, machinery, tools, and implements
3-66 used in a trade or business or held for investment and subject to
3-67 an allowance for depreciation, cost recovery under the accelerated
3-68 cost recovery system, or amortization. The term does not include
3-69 real property or buildings and their structural components.
4-1 Property that is leased under a capitalized lease is considered a
4-2 "qualified capital investment," but property that is leased under
4-3 an operating lease is not considered a "qualified capital
4-4 investment." Property expensed under Section 179, Internal Revenue
4-5 Code, is not considered a "qualified capital investment."
4-6 (4) "Defense readjustment project," "enterprise
4-7 project," "enterprise zone," and "readjustment zone" have the
4-8 meanings assigned by Section 171.751.
4-9 SECTION 12. Section 171.802(c), Tax Code, is amended to read
4-10 as follows:
4-11 (c) A corporation may claim a credit or take a carryforward
4-12 credit without regard to whether the strategic investment area,
4-13 enterprise zone, or readjustment zone in which it made the
4-14 qualified capital investment subsequently loses its designation as
4-15 a strategic investment area, enterprise zone, or readjustment zone,
4-16 if applicable.
4-17 SECTION 13. Section 171.804, Tax Code, is amended to read as
4-18 follows:
4-19 Sec. 171.804. LENGTH OF CREDIT. (a) Except as provided by
4-20 Subsection (b), the [The] credit established shall be claimed in
4-21 five equal installments of one-fifth the credit amount over the
4-22 five consecutive reports beginning with the report based upon the
4-23 period during which the qualified capital investment was made.
4-24 (b) Subject to Section 171.805, a corporation that has been
4-25 designated as an enterprise project or as a defense readjustment
4-26 project may claim the entire credit earned during an accounting
4-27 period against the taxes imposed for the corresponding reporting
4-28 period.
4-29 SECTION 14. Section 171.721, Tax Code, is amended to read as
4-30 follows:
4-31 Sec. 171.721. DEFINITIONS. In this subchapter:
4-32 (1) "Base amount," "basic research payment," and
4-33 "qualified research expense" have the meanings assigned those terms
4-34 by Section 41, Internal Revenue Code, except that all such payments
4-35 and expenses must be for research conducted within this state.
4-36 (2) "Strategic investment area" means an area that is
4-37 determined by the comptroller under Section 171.726 that is:
4-38 (A) a county within this state with above state
4-39 average unemployment and below state average per capita income;
4-40 [or]
4-41 (B) an area within this state that is a
4-42 federally designated urban enterprise community or an urban
4-43 enhanced enterprise community; or
4-44 (C) a county within this state that has a
4-45 spaceport, as defined by Section 4D, Development Corporation Act of
4-46 1979 (Article 5190.6, Vernon's Texas Civil Statutes), as added by
4-47 Chapter 1537, Acts of the 76th Legislature, Regular Session, 1999,
4-48 within its boundaries.
4-49 SECTION 15. Sections 171.1015, 171.1016, and 171.805(c), Tax
4-50 Code, are repealed.
4-51 SECTION 16. (a) Except as provided by Subsection (b) of this
4-52 section, this Act takes effect September 1, 2001. The changes in
4-53 law made by this Act apply only to an enterprise project or defense
4-54 readjustment project designated by the Texas Department of Economic
4-55 Development as such a project on or after September 1, 2001. An
4-56 enterprise project or defense readjustment project designated
4-57 before that date is governed by the law in effect on the date it
4-58 was designated, and that law is continued in effect for that
4-59 purpose.
4-60 (b) Sections 8-13 of this Act take effect January 1, 2003,
4-61 and apply to a report originally due on or after that date.
4-62 Notwithstanding any other law, an enterprise project or defense
4-63 readjustment project designated on or after January 1, 2001, may,
4-64 beginning on the date the project is designated, establish credits
4-65 as provided by the changes in law made by Sections 8-13 of this Act
4-66 but may only claim the credits on reports due on or after January
4-67 1, 2003.
4-68 (c) Subject to Section 151.429(f), Tax Code, an enterprise
4-69 project or defense readjustment project designated on or after
5-1 September 1, 2001, may apply for a refund for which the project is
5-2 entitled under Sections 151.429(a)(1)-(4), Tax Code, as provided by
5-3 Section 151.429, Tax Code. The comptroller may pay the refund as
5-4 provided by Section 151.429, Tax Code, and other law.
5-5 (d) Subject to Section 151.429(f), Tax Code, an enterprise
5-6 project or defense readjustment project designated on or after
5-7 September 1, 2001, may accrue the right to a refund for which the
5-8 project is entitled under Sections 151.429(a)(5) and (6), Tax Code,
5-9 as added by this Act, and may apply for that refund as provided by
5-10 Section 151.429, Tax Code. However, the comptroller may not pay a
5-11 refund described by this subsection before September 1, 2003.
5-12 Notwithstanding any other law, for purposes of determining whether
5-13 interest accrues on a refund application submitted before September
5-14 1, 2003, the comptroller is considered to have made a final
5-15 decision on the application for the refund on September 1, 2003.
5-16 (e) The change in law made by this Act does not affect taxes
5-17 imposed before the effective date of this Act, and the former law
5-18 is continued in effect for purposes of the liability for and
5-19 collection of those taxes.
5-20 * * * * *