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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.