78R8707 SMJ-D


By:  Delisi                                                       H.B. No. 695

Substitute the following for H.B. No. 695:                                    

By:  McCall                                                   C.S.H.B. No. 695


A BILL TO BE ENTITLED
AN ACT
relating to franchise tax deductions and exemptions for certain business activities involving desalination devices. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subchapter B, Chapter 171, Tax Code, is amended by adding Section 171.088 to read as follows: Sec. 171.088. EXEMPTION--CORPORATION ENGAGED IN BUSINESS INVOLVING DESALINATION DEVICES. (a) In this section, "desalination device" means a system or a series of mechanisms designed primarily to remove salt from water and produce desalted water. (b) A corporation engaged solely in the business of manufacturing, selling, and installing desalination devices is exempted from the franchise tax. (c) This section expires September 1, 2016. SECTION 2. Subchapter C, Chapter 171, Tax Code, is amended by adding Section 171.108 to read as follows: Sec. 171.108. DEDUCTION OF COST OF DESALINATION DEVICE. (a) In this section, "desalination device" has the meaning assigned by Section 171.088. (b) A corporation may deduct from its apportioned taxable capital the amortized cost of a desalination device or from its apportioned taxable earned surplus 10 percent of the amortized cost of a desalination device if: (1) the device is acquired by the corporation for removing salt from water; (2) the device is used in this state by the corporation; (3) the device reduces or eliminates the amount of fresh surface water or groundwater that the corporation uses; and (4) the cost of the device is amortized: (A) beginning in the month in which the device is placed in service in this state; (B) in equal monthly amounts for a period of at least 60 months; and (C) only for a period in which the device is used in this state. (c) A corporation that makes a deduction under this section shall file with the comptroller an amortization schedule showing the period in which a deduction will be made. On the request of the comptroller, the corporation shall file with the comptroller proof of the cost of the desalination device or of the device's operation in this state. (d) A corporation may elect to make the deduction under this section from either apportioned taxable capital or apportioned taxable earned surplus for each regular annual period. An election for an initial tax period applies to the second tax period and to the first regular annual period. (e) This section expires September 1, 2016. SECTION 3. (a) This Act takes effect January 1, 2006, and applies to a report originally due on or after that date. (b) A corporation may claim a deduction under Section 171.108, Tax Code, as added by this Act, only for an expenditure made on or after the effective date of this Act.