C.S.H.B. 2423 78(R)    BILL ANALYSIS


C.S.H.B. 2423
By: McCall
Ways & Means
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

The sales and use tax exemption available for semiconductor cleanrooms is
currently not available for other cleanroom environments such as bio-tech.
Extending the exemption to pharmaceutical biotechnology manufacturers
would facilitate the establishment of bio-tech clusters in Texas. Industry
sources indicate that these companies could be expected to produce a job's
multiplier effect on a local or regional economy of 3.5 or greater.
C.S.H.B. 2423 extends the exemption to pharmaceutical biotechnology
cleanrooms and equipment. 

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

SECTION 1. Amends Section 151.318, Tax Code, by amending Subsections  (b)
and (s) and adding Subsection (q-1).  The bill adds pharmaceutical
biotechnology cleanrooms and equipment to the list of exemptions under the
section.  It also defines "pharmaceutical biotechnology cleanrooms and
equipment" to mean all tangible personal property used in manufacturing,
processing, or fabrication in a cleanroom environment of a pharmaceutical
biotechnology product.  The definition includes moveable cleanroom
partitions and lighting but not the building or a permanent, nonremovable
component of the building that houses the cleanroom environment.  

SECTION 2.  Amends Section 151.3181, Tax Code.  The bill adds that a
pharmaceutical biotechnology product that is not sold is not a divergent
use if the use occurs during the certification process by the U.S. Food
and Drug Administration.  

SECTION 3. Amends Section 313.021(2), Tax Code, to include Subsection
(q-1) as qualified property for purposes of a partial exemption from the
impact fee assessed under Chapter 313, Tax Code. 

EFFECTIVE DATE

SECTION 4. This Act takes effect July 1, 2003 if it receives a vote of
two-thirds of all members elected to each house.  If the Act does not
receive the vote necessary for effect on that date, the Act takes effect
September 1, 2003. 

COMPARISON OF ORIGINAL TO SUBSTITUTE

In an effort to reduce any fiscal implication, the committee substitute
changes "biotechnology cleanroom" to specifically "pharmaceutical
biotechnology cleanroom" as it relates to the sales and use tax.  This
change can be found throughout the committee substitute. 

C.S.H.B. 2423 adds a new SECTION 2 and renumbers the remaining sections
accordingly. SECTION 2 of C.S.H.B. 2423 now reads that Section 151.3181,
Tax Code, is amended by adding Subsection (h) to read as follows: The use
of pharmaceutical biotechnology cleanrooms and equipment that qualify for
the exemption is not a divergent use if the use occurs during the
certification process by the U.S. Food and Drug Administration.