79R2201 CBH-F

By:  Homer                                                        H.B. No. 394


A BILL TO BE ENTITLED
AN ACT
relating to franchise tax incentives for recycling. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subchapter C, Chapter 171, Tax Code, is amended by adding Section 171.1045 to read as follows: Sec. 171.1045. GROSS RECEIPTS: DEDUCTION FOR RECYCLED PRODUCTS. (a) In this section: (1) "Recycled product" has the meaning assigned by Section 361.421, Health and Safety Code. (2) "Solid waste" has the meaning assigned by Section 361.003, Health and Safety Code. (b) A corporation may exclude from its receipts includable under Sections 171.103(1), 171.1032(a)(1), 171.105(a)(1), and 171.1051(a)(1) the amount of the corporation's receipts from sales of recycled products manufactured by the corporation. A corporation that chooses to exclude receipts as provided by this section shall exclude those receipts from each computation of gross receipts required by this chapter. (c) A corporation is entitled to exclude receipts under this section only if: (1) the corporation is not primarily engaged in the business of manufacturing and selling recycled products; and (2) the corporation demonstrates to the comptroller that the recycled products were manufactured using waste that the corporation would otherwise have disposed of as solid waste. SECTION 2. Section 171.110, Tax Code, is amended by amending Subsection (a) and adding Subsection (m) to read as follows: (a) The net taxable earned surplus of a corporation is computed by: (1) determining the corporation's reportable federal taxable income, subtracting from that amount any amount excludable under Subsection (k), any amount included in reportable federal taxable income under Section 78 or Sections 951-964, Internal Revenue Code, any amount derived from the sale of recycled products manufactured by the corporation, and dividends received from a subsidiary, associate, or affiliated corporation that does not transact a substantial portion of its business or regularly maintain a substantial portion of its assets in the United States, and adding to that amount any compensation of officers or directors, or if a bank, any compensation of directors and executive officers, to the extent excluded in determining federal taxable income to determine the corporation's taxable earned surplus; (2) apportioning the corporation's taxable earned surplus to this state as provided by Section 171.106(b) or (c), as applicable, to determine the corporation's apportioned taxable earned surplus; (3) adding the corporation's taxable earned surplus allocated to this state as provided by Section 171.1061; and (4) subtracting from that amount any allowable deductions and any business loss that is carried forward to the tax reporting period and deductible under Subsection (e). (m) A corporation is entitled to subtract amounts derived from the sale of recycled products under this section only if: (1) the corporation is not primarily engaged in the business of manufacturing and selling recycled products; and (2) the corporation demonstrates to the comptroller that the recycled products were manufactured using waste that the corporation would otherwise have disposed of as solid waste. SECTION 3. Section 171.110(l), Tax Code, is amended by adding Subdivisions (6) and (7) to read as follows: (6) "Recycled product" has the meaning assigned by Section 361.421, Health and Safety Code. (7) "Solid waste" has the meaning assigned by Section 361.003, Health and Safety Code. SECTION 4. Chapter 171, Tax Code, is amended by adding Subchapter W to read as follows:
SUBCHAPTER W. TAX CREDIT FOR CAPITAL EXPENDITURES FOR CERTAIN RECYCLING EQUIPMENT
Sec. 171.951. DEFINITIONS. In this subchapter: (1) "Recycling equipment" means equipment necessary to assist a corporation in recycling waste and used predominantly for that purpose. (2) "Solid waste" has the meaning assigned by Section 361.003, Health and Safety Code. Sec. 171.952. ELIGIBILITY. A corporation is eligible for a credit against the tax imposed under this chapter in the amount and under the conditions and limitations provided by this subchapter. Sec. 171.953. CREDIT FOR CAPITAL EXPENDITURE FOR RECYCLING EQUIPMENT. (a) A corporation may claim a credit under this subchapter only for a capital expenditure made toward purchasing recycling equipment. (b) A corporation is entitled to a credit under this section only if: (1) the corporation is not primarily engaged in the business of manufacturing and selling recycled products; and (2) the corporation demonstrates to the comptroller that the recycling equipment was used to recycle waste that the corporation would otherwise have disposed of as solid waste. Sec. 171.954. AMOUNTS; LIMITATIONS. (a) The amount of the credit is equal to the lesser of: (1) the total amount of the capital expenditure made during the reporting period; or (2) $50,000. (b) The corporation may claim the credit only in five equal installments of one-fifth the credit amount over five consecutive reports beginning with the report based on the period during which the capital expenditure was made. Sec. 171.955. APPLICATION FOR CREDIT. (a) A corporation must apply for a credit under this subchapter on or with the tax report for the period for which the credit is claimed. (b) The comptroller shall adopt a form for the application for the credit. A corporation must use this form in applying for the credit. Sec. 171.956. ASSIGNMENT PROHIBITED. A corporation may not convey, assign, or transfer the credit allowed under this subchapter to another entity unless all of the assets of the corporation are conveyed, assigned, or transferred in the same transaction. SECTION 5. (a) This Act applies only to a report originally due on or after the effective date of this Act. (b) A corporation may claim a credit under Subchapter W, Chapter 171, Tax Code, as added by this Act, only for an expenditure made on or after the effective date of this Act. SECTION 6. This Act takes effect January 1, 2006.