78R6549 SMJ-D

By:  Estes                                                        S.B. No. 696



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 
capable of producing at least 3,000 gallons of desalted water a day 
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.