79S20650 KEG-F
By: Keffer of Eastland H.B. No. 73
A BILL TO BE ENTITLED
AN ACT
relating to franchise tax benefits for certain entities designated
as enterprise projects.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2303.401, Government Code, is amended to
read as follows:
Sec. 2303.401. DEFINITIONS. In this subchapter:
(1) "Certified job" means a new or retained job that:
(A) has provided at least 1,820 hours of
employment a year to a qualified employee of a qualified business as
described by Section 2303.402;
(B) is intended to exist for at least three years
after the date on which the comptroller makes the initial
certification of hiring commitments for the qualified business
under Section 2303.516(d); and
(C) has been certified by the comptroller as
eligible for receipt of a state benefit under this chapter.
(2) "New permanent job" means a new employment
position created by a qualified business as described by Section
2303.402 that:
(A) has provided at least 1,820 hours of
employment a year to a qualified employee; and
(B) is intended to exist at the qualified
business site for at least three years after the date on which a
state benefit is received as authorized by this chapter.
(3) [(2)] "Retained job" means a job that existed with
a qualified business before designation of the business's project
or activity as an enterprise project that:
(A) has provided employment to a qualified
employee of at least 1,820 hours annually; and
(B) is intended to be an employment position for
at least three years after the date on which a state benefit is
received as authorized by this chapter.
SECTION 2. Section 2303.4072, Government Code, is amended
to read as follows:
Sec. 2303.4072. ENTERPRISE PROJECT CLAIM FOR STATE BENEFIT.
A person must make a claim to the comptroller for a state benefit as
prescribed under this chapter and Chapters 151 and 171, Tax Code,
not later than six [18] months after the date on which the term of
the enterprise project designation expires as provided by Section
2303.404.
SECTION 3. Section 2303.504, Government Code, as amended by
Section 2.02, Chapter 1134, Acts of the 77th Legislature, Regular
Session, 2001, is amended to read as follows:
Sec. 2303.504. STATE TAX REFUNDS AND CREDITS; REPORT. (a)
In this section, "triple jumbo enterprise project" has the meaning
assigned by Section 2303.407.
(a-1) Subject to Section 2303.516, an enterprise project is
entitled to:
(1) a refund of state taxes under Section 151.429, Tax
Code; and
(2) a franchise tax credit under Subchapter P or Q,
Chapter 171, Tax Code, but only if the enterprise project was
designated and approved as a triple jumbo enterprise project on or
after September 1, 2004, and on or before November 30, 2004.
(b) At the time of receipt of any tax benefit available as a
result of participating in the enterprise zone program, including a
state sales and use tax refund or franchise tax credit, three
percent of the amount of the tax benefit shall be transferred to the
Texas economic development bank fund under Subchapter B, Chapter
489, to defray the cost of administering this chapter.
(c) Not later than the 60th day after the last day of each
fiscal year, the comptroller shall report to the bank the statewide
total of actual jobs created, actual jobs retained, and the tax
refunds and credits made under this section during that fiscal
year.
SECTION 4. Sections 2303.516(b) and (d), Government Code,
are amended to read as follows:
(b) The comptroller [bank] may determine that the business
or project is not entitled to a refund or credit of state taxes
under Section 2303.504(a-1) if the comptroller [bank] finds that:
(1) the business or project is not willing to
cooperate with the comptroller [bank] in providing the comptroller
[bank] with the information the comptroller [bank] needs to
determine state benefits [make the determination under Subsection
(a)]; or
(2) the business or project has substantially failed
to follow through on any commitments made by it or on its behalf
under this chapter.
(d) A qualified business may obtain a state benefit, earned
through a specific enterprise project designation, on completion
of:
(1) a certification of the project or activity for
completeness that is conducted [an audit performed] by the
comptroller to verify [that will certify] hiring commitments of a
qualified business under this chapter;
(2) a certification conducted by the comptroller to
verify [and eligible] purchases of taxable items made by or on
behalf of the [a] qualified business under this chapter; and
(3) a verification of the capital investment for the
project or activity, conducted by the comptroller, to determine the
level of benefit achieved by the qualified business.
SECTION 5. Section 2303.517, Government Code, is amended to
read as follows:
Sec. 2303.517. REPORT. Before obtaining a state benefit,
the qualified business must submit to the comptroller [bank] a
certified report of the actual number of jobs created or retained
and the capital investment made at or committed to the qualified
business site.
SECTION 6. Section 171.721(2), Tax Code, is amended to read
as follows:
(2) "Strategic investment area" means an area that is
determined by the comptroller under Section 171.726 that is:
(A) a county within this state with above state
average unemployment and below state average per capita income;
(B) an area within this state that is:
(i) an area consisting of a federally
designated empowerment zone and associated developable areas; or
(ii) a federally designated renewal
community [urban enterprise community or an urban enhanced
enterprise community]; or
(C) a defense economic readjustment zone
designated under Chapter 2310, Government Code.
SECTION 7. Section 171.751, Tax Code, is amended by adding
Subdivision (5-a) and amending Subdivisions (8) and (9) to read as
follows:
(5-a) "Enterprise project" means a person designated
as an enterprise project under Chapter 2303, Government Code.
(8) "Qualified business" means an establishment:
(A) primarily engaged in agricultural
processing, central administrative offices, distribution, data
processing, manufacturing, research and development, or
warehousing; or
(B) that has been designated as an enterprise
project under Chapter 2303, Government Code, and approved as a
triple jumbo enterprise project, as defined by Section 2303.407,
Government Code, on or after September 1, 2004, and on or before
November 30, 2004.
(9) "Qualifying job" means:
(A) a new permanent full-time job that:
(i) [(A)] is located in:
(a) [(i)] a strategic investment
area; or
(b) [(ii)] a county within this state
with a population of less than 50,000, if the job is created by a
business primarily engaged in agricultural processing;
(ii) [(B)] requires at least 1,600 hours of
work a year;
(iii) [(C)] pays at least 110 percent of
the county average weekly wage for the county where the job is
located;
(iv) [(D)] is covered by a group health
benefit plan for which the business pays at least 80 percent of the
premiums or other charges assessed under the plan for the employee;
(v) [(E)] is not transferred from one area
in this state to another area in this state; and
(vi) [(F)] is not created to replace a
previous employee; or
(B) a new permanent full-time job created by an
enterprise project at a qualified business site, regardless of
whether the job meets the qualifications prescribed by Paragraph
(A).
SECTION 8. Subchapter P, Chapter 171, Tax Code, is amended
by adding Section 171.7542 to read as follows:
Sec. 171.7542. LENGTH OF CREDIT. (a) This section applies
only to a corporation that was designated as an enterprise project
and approved as a triple jumbo enterprise project, as defined by
Section 2303.407, Government Code, on or after September 1, 2004,
and on or before November 30, 2004.
(b) Notwithstanding Section 171.753 and subject to Section
171.755, a corporation to which this section applies may establish
a credit equal to 25 percent of the total wages and salaries paid or
to be paid by the corporation for qualifying jobs created during the
period beginning on the date the project is designated as an
enterprise project through the ending date used to determine net
taxable earned surplus for the report on which the credit is
claimed.
(c) Notwithstanding Subsection (b), the corporation may
claim:
(1) on the first report originally due on or after
September 1, 2005, a credit for the total amount of wages and
salaries paid by the corporation for qualifying jobs created
during the period on which earned surplus is based for the report;
and
(2) on each subsequent report originally due before
January 1, 2009, a credit equal to 25 percent of the total wages and
salaries paid by the corporation for qualifying jobs created during
the period on which earned surplus is based for the report.
(d) This section expires January 1, 2009.
SECTION 9. Section 171.801(2), Tax Code, is amended to read
as follows:
(2) "Qualified capital investment" means tangible
personal property, as defined by 26 C.F.R. Section 1.1245-3(b)(1),
that is first placed in service in a strategic investment area, [or]
first placed in service in a county with a population of less than
50,000 by a corporation primarily engaged in agricultural
processing, or first placed in service by an enterprise project,
regardless of whether the project is located in an enterprise zone,
as defined by Section 2303.003, Government Code, and that is
described in Section 1245(a), Internal Revenue Code, such as
engines, machinery, tools, and implements used in a trade or
business or held for investment and subject to an allowance for
depreciation, cost recovery under the accelerated cost recovery
system, or amortization. The term does not include land [real
property] or buildings and their structural components. Property
that is leased under a capitalized lease is considered a "qualified
capital investment," but property that is leased under an operating
lease is not considered a "qualified capital investment." Property
expensed under Section 179, Internal Revenue Code, is not
considered a "qualified capital investment."
SECTION 10. Section 171.8015, Tax Code, is amended to read
as follows:
Sec. 171.8015. TANGIBLE PERSONAL PROPERTY FIRST PLACED IN
SERVICE BY [IN] AN ENTERPRISE PROJECT [ZONE]. For purposes of
determining whether an investment is a "qualified capital
investment" under Section 171.801, "tangible personal property
first placed in service by [in] an enterprise project [zone]"
includes tangible personal property:
(1) purchased by an enterprise project that was
designated as a triple jumbo enterprise project, as defined by
Section 2303.407, Government Code, on or after September 1, 2004,
and on or before November 30, 2004, [by a qualified business] for
placement in an incomplete improvement that is under active
construction or other physical preparation;
(2) identified by a purchase order, invoice, billing,
sales slip, or contract; and
(3) physically present at the enterprise project's
qualified business site, as defined by Section 2303.003, Government
Code, [zone] and in use by the enterprise project on the original
due date of the report on which the credit is established [qualified
business not later than September 30, 2005].
SECTION 11. Section 171.802, Tax Code, is amended by adding
Subsection (d-1) to read as follows:
(d-1) A corporation that was designated as an enterprise
project on or after September 1, 2004, and approved as a triple
jumbo enterprise project, as defined by Section 2303.407,
Government Code, on or after September 1, 2004, and on or before
November 30, 2004, may qualify for the credit provided by this
subchapter, regardless of whether the corporation meets the
qualifications prescribed by Subsection (b).
SECTION 12. Section 171.804, Tax Code, is amended to read as
follows:
Sec. 171.804. LENGTH OF CREDIT. (a) Except as provided by
Subsection (b), the [The] credit established shall be claimed in
five equal installments of one-fifth the credit amount over the
five consecutive reports beginning with the report based upon the
period during which the qualified capital investment was made.
(b) This subsection applies only to a corporation that was
designated as an enterprise project on or after September 1, 2004,
and approved as a triple jumbo enterprise project, as defined by
Section 2303.407, Government Code, on or after September 1, 2004,
and on or before November 30, 2004. Subject to Section 171.805 and
notwithstanding Section 171.803, a corporation may establish a
credit equal to 7.5 percent of the qualified capital investment
made during the period beginning on the date the project is
designated as an enterprise project through the ending date used to
determine net taxable earned surplus for the report.
(c) Notwithstanding Subsection (b), the corporation may
claim:
(1) on the first report originally due on or after
September 1, 2005, a credit for the entire amount of qualified
capital investment made during the period on which earned surplus
is based for the report; and
(2) on each subsequent report originally due before
January 1, 2009, a credit equal to 7.5 percent of the qualified
capital investment made during the period on which earned surplus
is based for the report.
(d) This subsection and Subsections (b) and (c) expire
January 1, 2009.
SECTION 13. Section 2303.516(c), Government Code, is
repealed.
SECTION 14. The changes in law made by this Act by amending
or adding Sections 171.721, 171.751, 171.7542, 171.801, 171.8015,
171.802, and 171.804, Tax Code, take effect January 1, 2006, and
apply only to a report originally due on or after that date.
SECTION 15. Except as provided by Section 14, this Act takes
effect immediately if it receives a vote of two-thirds of all the
members elected to each house, as provided by Section 39, Article
III, Texas Constitution. If this Act does not receive the vote
necessary for immediate effect, this Act takes effect December 1,
2005.