C.S.H.B. 695 78(R)    BILL ANALYSIS


C.S.H.B. 695
By: Delisi
Ways & Means
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Available and affordable potable water is a driving concern for Texas
leaders in the new millennium. Desalination, the process of removing salt
from seawater or other salty water to produce freshwater, has become
significantly more cost-effective in recent years. 

While currently not a major industry in this state, with the proper tax
policy, desalination could become a major economic contributor. In
addition, the growth of a Texas desalination industry could alleviate
growing pressures on the state's landlocked water supply. 

House Bill 695 exempts from the franchise tax a corporation engaged solely
in the business of manufacturing, selling, or installing desalination
devices. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

House Bill 695 amends the Tax Code to provide a deduction for the cost of
desalination devices from a corporation's taxable capital or taxable
earned surplus apportioned to this state.  The bill limits the deductions
to only those businesses that reduce or eliminate their use of surface
water or groundwater. 

EFFECTIVE DATE

January 1, 2006.

COMPARISON OF ORIGINAL TO SUBSTITUTE

Section 1.Removes (a)(1) definition of "brine".
(a)(2) Expands definition of desalination device from a system that
removes salt from "seawater" to "water". 
Adds (c) to Section 1, setting an expiration date on the section of
September 1, 2016. 

Section 2.Adds (b)(3) that the device must reduce or eliminate the amount
of fresh surface water or groundwater that the corporation uses. 
Adds (e) to Section 2, setting an expiration date on the section of
September 1, 2016. 

Section 3.(a) Changes effective date of the act to January 1, 2006
  Removes (c), redundant transition language in subsection.