79R11863 ATP-D


By:  Jones of Dallas                                              H.B. No. 1380

Substitute the following for H.B. No. 1380:                                   

By:  Vo                                                       C.S.H.B. No. 1380


A BILL TO BE ENTITLED
AN ACT
relating to the creation of renaissance zones to promote the relocation of businesses to certain areas of this state. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subtitle G, Title 10, Government Code, is amended by adding Chapter 2312 to read as follows:
CHAPTER 2312. RENAISSANCE ZONES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2312.001. DEFINITIONS. In this chapter: (1) "Business" includes a part of the operations of a business entity. (2) "Eligible business" means a business designated as an eligible business under Section 2312.102. (3) "Office" means the Texas Economic Development and Tourism Office. (4) "Relocate" means to establish a physical presence at a new location, including: (A) the transfer of an existing business operation to a facility at a different location; (B) the expansion of an existing business operation to an additional location; or (C) the establishment of an office or plant at a different location. (5) "Taxing unit" has the meaning assigned by Section 1.04, Tax Code. (6) "Zone" means an area designated as a renaissance zone under this chapter. Sec. 2312.002. REINVESTMENT ZONE. A zone is a reinvestment zone within the meaning of Section 1-g(a), Article VIII, Texas Constitution.
[Sections 2312.003-2312.050 reserved for expansion]
SUBCHAPTER B. CREATION OF ZONE
Sec. 2312.051. NOMINATION OF AREA. (a) The governing body of a taxing unit, singly or jointly with another taxing unit, may by order or ordinance nominate an area located within the boundaries of the taxing unit for designation as a zone by submitting an application to the office. (b) An application for designation as a zone shall contain: (1) a copy of the order or ordinance nominating the area as a zone; (2) a map of the area showing existing streets and highways and the boundaries of the area; (3) an analysis and appropriate supporting documents and statistics demonstrating that the area qualifies for designation as a zone; (4) information demonstrating that an eligible business is likely to relocate to the area if the area is designated as a zone; and (5) any other information required by the office. Sec. 2312.052. DESIGNATION BY OFFICE. (a) The office shall review each application submitted by a taxing unit seeking designation as a zone. (b) The office must decide whether to designate an area as a zone before the 90th day after the date on which the application is submitted. (c) The office shall decide whether to designate an area as a zone based on: (1) whether the criteria for designation as a zone prescribed by Section 2312.053 are met; and (2) the likelihood that an eligible business will relocate to the area. Sec. 2312.053. CRITERIA FOR DESIGNATION. (a) To be designated as a zone an area must: (1) have a continuous boundary; (2) be at least one square mile but not larger than the greater of: (A) 10 square miles, excluding lakes, waterways, and transportation arteries; or (B) an area, not to exceed 20 square miles, that is equal to five percent of the area, excluding lakes, waterways, and transportation arteries, of the county in which the area is located; and (3) be an area classified as an area of pervasive poverty, unemployment, and economic distress under Subsection (b). (b) An area is an area of pervasive poverty, unemployment, and economic distress if: (1) the average rate of unemployment in the area during the most recent 12-month period for which data is available was at least 1-1/2 times the state average for that period; or (2) the area had a population loss of at least 12 percent during the most recent six-year period or at least four percent during the most recent three-year period, and: (A) the area is a low-income poverty area; (B) the area is in a jurisdiction or pocket of poverty eligible for urban development action grants under federal law, according to the most recent certification available from the United States Department of Housing and Urban Development; (C) at least 70 percent of the residents or households of the area have an income that is less than 80 percent of the median income of the residents or households of the locality or state, whichever is less; or (D) the governing body of the taxing unit nominating the area establishes to the satisfaction of the office that: (i) chronic abandonment or demolition of commercial or residential structures exists in the area; (ii) substantial tax arrearages for commercial or residential structures exist in the area; (iii) substantial losses of businesses or jobs have occurred in the area; (iv) the area is part of a disaster area declared by the state or federal government during the preceding 18 months; or (v) the area has had a substantial increase in the number of individuals younger than 18 years of age arrested due to criminal activity. (c) Labor force and population data under Subsection (b) are considered current if: (1) they are the most recently published estimates; or (2) the renaissance zone application containing the data is received by the office before the 61st day after the date revised estimates of that data are published. (d) For purposes of determining the average rate of unemployment in the area under Subsection (b)(1), individuals who are employed by a business and whose principal place of employment is on property for which the business has received a certificate of completion under Section 361.609, Health and Safety Code, are not considered.
[Sections 2312.054-2312.100 reserved for expansion]
SUBCHAPTER C. BOARD OF DIRECTORS; POWERS AND DUTIES OF BOARD
Sec. 2312.101. BOARD OF DIRECTORS. (a) A zone is governed by a board of directors. (b) The executive director of the office shall by rule determine the number of directors, the qualifications of directors, and the method of apportioning the appointment of directors among the taxing units that nominated the area for designation as a zone. The executive director of the office shall provide that each taxing unit may appoint at least one director. (c) A taxing unit must make its appointments to the board of directors before the 30th day after the date on which the office designates an area as a zone. Sec. 2312.102. DESIGNATION OF ELIGIBLE BUSINESSES. (a) The board of directors shall determine whether a business is an eligible business. (b) If the board of directors determines that a business meets the requirements prescribed by Section 2312.151(b), the board by order shall designate the business as an eligible business. Sec. 2312.103. ADVERTISEMENT OF ZONE. The board of directors shall advertise the existence of a zone and the benefits of relocating to a zone to attract businesses to the zone and encourage new business growth in the zone. Sec. 2312.104. APPLICATION FOR AUTHORITY TO EXEMPT ELIGIBLE BUSINESSES FROM FRANCHISE TAX. (a) The board of directors may apply to the comptroller for authorization to grant a franchise tax exemption to eligible businesses within the zone. (b) If the comptroller determines that there is sufficient money in the renaissance zone franchise tax exemption account established under Subchapter E to offset an exemption from the franchise tax for eligible businesses within the zone, the comptroller shall approve the exemption. (c) The comptroller may restrict the number of businesses in a single zone or in all zones that may be granted franchise tax exemptions if the comptroller determines that the money in the account will support franchise tax exemptions for only that number of businesses. (d) The comptroller may adopt rules to implement this section.
[Sections 2312.105-2312.150 reserved for expansion]
SUBCHAPTER D. INCENTIVES FOR BUSINESS RECRUITMENT
Sec. 2312.151. ELIGIBLE BUSINESS. (a) In this section, "new job" means a new employment position that is intended to provide at least 1,820 hours of employment a year. (b) A business is an eligible business if: (1) the business relocates from another state to or is a new business created in a zone after the date on which the zone is designated; and (2) the business delivers a written statement to the board of directors that guarantees that: (A) the relocation of the business to or creation of the business in the zone will create 50 or more new jobs in the zone; and (B) the business will invest a minimum of $1 million in real property improvements in the zone. (c) An eligible business that has not created 50 or more new jobs in the zone before the first anniversary of the date on which the business is designated as an eligible business or that has not invested $1 million or more in real property improvements before the fifth anniversary of the date on which the business is designated as an eligible business may not receive further tax abatements or exemptions under this chapter. (d) Only the property and operations of an eligible business that are physically located in the zone are eligible for an incentive under this chapter. Sec. 2312.152. EXPIRATION. The designation of a business as an eligible business expires on the 10th anniversary of the date on which a business is designated as an eligible business. Sec. 2312.153. SALES AND USE TAX EXEMPTIONS. An eligible business is exempt from sales and use taxes as provided by Section 151.356, Tax Code. Sec. 2312.154. FRANCHISE TAX EXEMPTION. An eligible business is exempt from franchise taxes as provided by Section 171.088, Tax Code, only if: (1) the eligible business is located in a zone for which the comptroller has approved franchise tax exemptions under Section 2312.104; (2) the number of businesses previously granted exemptions does not equal or exceed the maximum number of businesses that may be granted exemptions in the zone or in all zones, as determined by the comptroller under Section 2312.104(c); and (3) the board of directors grants the business an exemption from the franchise tax. Sec. 2312.155. LOCAL AD VALOREM TAX ABATEMENT. The governing body of a taxing unit located wholly or partly in a zone may enter into a tax abatement agreement as provided by Chapter 314, Tax Code, with an eligible business operating in the zone if the taxing unit may issue bonds payable from ad valorem taxes under Section 1-g(b), Article VIII, Texas Constitution, or other law, for the purpose of offsetting tax proceeds that would not be collected as a result of a tax abatement agreement.
[Sections 2312.156-2312.200 reserved for expansion]
SUBCHAPTER E. RENAISSANCE ZONE FRANCHISE TAX EXEMPTION ACCOUNT
Sec. 2312.201. RENAISSANCE ZONE FRANCHISE TAX EXEMPTION ACCOUNT. (a) The renaissance zone franchise tax exemption account is a separate account in the general revenue fund. (b) The account is composed of: (1) money from the Texas Enterprise Fund awarded to the account; (2) gifts, grants, and donations; and (3) legislative appropriations. (c) Money in the account may be used only to offset the exemptions from the franchise tax granted to eligible businesses within renaissance zones. SECTION 2. Subchapter H, Chapter 151, Tax Code, is amended by adding Section 151.356 to read as follows: Sec. 151.356. ITEMS SOLD TO OR USED BY CERTAIN BUSINESSES LOCATED IN RENAISSANCE ZONES. (a) A taxable item sold, leased, or rented to or stored, used, or consumed by a business designated as an eligible business under Section 2312.102, Government Code, is exempted from the taxes imposed by this chapter if the item is for the exclusive use and benefit of the eligible business's operations within the renaissance zone. (b) The exemption provided by this section does not apply to an item that is to be leased, sold, or lent by the eligible business. SECTION 3. Subchapter B, Chapter 171, Tax Code, is amended by adding Section 171.088 to read as follows: Sec. 171.088. EXEMPTION--CERTAIN CORPORATIONS LOCATED IN RENAISSANCE ZONES. (a) To the extent that the corporation's taxable activities occur within a renaissance zone, a corporation designated as an eligible business under Section 2312.102, Government Code, is exempted from the franchise tax before the fifth anniversary of the date on which the corporation is designated as an eligible business. (b) To the extent that the corporation's taxable activities occur within a renaissance zone, a corporation designated as an eligible business under Section 2312.102, Government Code, is exempted from: (1) 80 percent of the amount of franchise tax due for the period beginning on the fifth anniversary and ending on the day before the sixth anniversary of the date on which the corporation is designated as an eligible business; (2) 60 percent of the amount of franchise tax due for the period beginning on the sixth anniversary and ending on the day before the seventh anniversary of the date on which the corporation is designated as an eligible business; (3) 40 percent of the amount of franchise tax due for the period beginning on the seventh anniversary and ending on the day before the eighth anniversary of the date on which the corporation is designated as an eligible business; (4) 20 percent of the amount of franchise tax due for the period beginning on the eighth anniversary and ending on the day before the ninth anniversary of the date on which the corporation is designated as an eligible business; and (5) 10 percent of the amount of franchise tax due for the period beginning on the ninth anniversary and ending on the day before the 10th anniversary of the date on which the corporation is designated as an eligible business. SECTION 4. Subtitle B, Title 3, Tax Code, is amended by adding Chapter 314 to read as follows:
CHAPTER 314. TAX ABATEMENT IN RENAISSANCE ZONES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 314.001. DEFINITIONS. In this chapter: (1) "Eligible business" means a business designated as an eligible business under Section 2312.102, Government Code. (2) "Taxing unit" has the meaning assigned by Section 1.04. Sec. 314.002. TAXING UNIT WITH TAX RATE SET BY COMMISSIONERS COURT. (a) The commissioners court of a county that enters into a tax abatement agreement for the county may enter into a tax abatement agreement applicable to the same property on behalf of a taxing unit other than the county if by statute the ad valorem tax rate of the other taxing unit is approved by the commissioners court or the commissioners court is expressly required by statute to impose the ad valorem taxes of the other taxing unit. The tax abatement agreement entered into on behalf of the other taxing unit is not required to contain the same terms as the tax abatement agreement entered into on behalf of the county. (b) This section does not apply to a taxing unit because the county tax assessor-collector is required by law to assess or collect the taxing unit's ad valorem taxes. Sec. 314.003. STATE ADMINISTRATION. (a) The comptroller shall maintain a central registry of ad valorem tax abatement agreements executed under this chapter. The chief appraiser of each appraisal district that appraises property for a taxing unit that is located wholly or partly in a reinvestment zone and has executed a tax abatement agreement under this chapter shall deliver to the comptroller before July 1 of the year following the year in which the zone is designated or the agreement is executed a report providing the following information: (1) a general description of the reinvestment zone, including its boundaries and the taxing units that are located wholly or partly in the zone; (2) a copy of each tax abatement agreement to which a taxing unit that participates in the appraisal district is a party; and (3) any other information required by the comptroller to administer this section. (b) The comptroller may provide assistance to a taxing unit on request of its governing body or the presiding officer of its governing body relating to the administration of this chapter. The Texas Economic Development and Tourism Office and the comptroller may provide technical assistance to a local governing body regarding the execution of tax abatement agreements. (c) Only the property of an eligible business that is physically located in a renaissance zone is eligible for an abatement under this chapter.
[Sections 314.004-314.050 reserved for expansion]
SUBCHAPTER B. TAX ABATEMENT
Sec. 314.051. REINVESTMENT ZONE. Designation of an area as a renaissance zone under Chapter 2312, Government Code, constitutes designation of the area as a reinvestment zone under this chapter without procedural requirements other than those provided by Chapter 2312, Government Code. Sec. 314.052. TAX ABATEMENT AGREEMENT. (a) The governing body of a taxing unit authorized to enter into tax abatement agreements under Section 2312.155, Government Code, may agree in writing with an eligible business to exempt from taxation a portion of the value of the property owned by the eligible business as provided by this section. (b) A tax abatement agreement shall provide that: (1) 100 percent of the value of the taxable property is exempt from taxation before the seventh anniversary of the date on which the business is designated as an eligible business; (2) 75 percent of the value of the taxable property is exempt from taxation for the period beginning on the seventh anniversary and ending on the day before the eighth anniversary of the date on which the business is designated as an eligible business; (3) 50 percent of the value of the taxable property is exempt from taxation for the period beginning on the eighth anniversary and ending on the day before the ninth anniversary of the date on which the business is designated as an eligible business; and (4) 25 percent of the value of the taxable property is exempt from taxation for the period beginning on the ninth anniversary and ending on the day before the 10th anniversary of the date on which the business is designated as an eligible business. (c) A tax abatement agreement expires on the 10th anniversary of the date on which the business is designated as an eligible business. Sec. 314.053. SPECIFIC TERMS OF TAX ABATEMENT AGREEMENT. (a) An agreement made under this chapter must: (1) provide for recapturing property tax revenue lost as a result of the agreement if the property ceases to be owned by an eligible business; and (2) require the owner of the property to certify annually to the governing body of the taxing unit that the owner is an eligible business and is in compliance with each applicable term of the agreement. (b) An agreement made under this chapter may include any term agreed on by the taxing unit and the eligible business that does not alter the terms prescribed by this subchapter. Sec. 314.054. APPROVAL BY GOVERNING BODY. (a) To be effective, an agreement made under this chapter must be approved by the affirmative vote of a majority of the members of the governing body of the taxing unit at a regularly scheduled meeting of the governing body. (b) On approval by the governing body, an agreement may be executed in the same manner as other contracts made by the taxing unit. Sec. 314.055. MODIFICATION OR TERMINATION OF AGREEMENT. (a) At any time before the expiration of an agreement made under this chapter, the agreement may be modified by the parties to the agreement to include other provisions that could have been included in the original agreement or to delete provisions that were not necessary to the original agreement. The agreement may not be modified to alter the terms expressly imposed by this subchapter. (b) The modification must be made by the same procedure by which the original agreement was approved and executed. (c) The original agreement may not be modified to extend beyond the 10th anniversary of the date on which the business is designated as an eligible business. Sec. 314.056. USE OF BOND PROCEEDS BY TAXING UNIT. A taxing unit authorized to issue bonds payable from ad valorem taxes under Section 1-g(b), Article VIII, Texas Constitution, or other law, may use the proceeds of the bonds to offset the tax proceeds that would not be collected by the taxing unit as a result of tax abatement agreements entered into with eligible businesses under this chapter if the use of proceeds in that manner is consistent with the purpose for which the bonds were issued. Sec. 314.057. ISSUANCE OF BONDS. (a) A municipality may issue bonds, the proceeds of which may be used to pay the cost to the municipality under tax abatement agreements entered into with eligible businesses in the renaissance zone on behalf of which the bonds were issued or to satisfy claims of holders of the bonds or notes. The municipality may issue refunding bonds for the payment or retirement of bonds previously issued by the municipality under this section. (b) Bonds issued under this section are payable, as to both principal and interest, from ad valorem taxes. (c) Bonds are issued under this section by ordinance of the municipality without any additional approval other than that of the attorney general. (d) Bonds issued under this section, together with the interest on and income from those bonds, are exempt from all taxes. (e) The bonds may be issued in one or more series. The ordinance approving a bond, or the trust indenture or mortgage issued in connection with the bond, shall provide: (1) the date that the bond bears; (2) that the bond is payable on demand or at a specified time; (3) the interest rate that the bond bears; (4) the denomination of the bond; (5) whether the bond is in coupon or registered form; (6) the conversion or registration privileges of the bond; (7) the rank or priority of the bond; (8) the manner of execution of the bond; (9) the medium of payment in which and the place or places at which the bond is payable; (10) the terms of redemption, with or without premium, to which the bond is subject; (11) the manner in which the bond is secured; and (12) any other characteristic of the bond. (f) A bond issued under this section is fully negotiable. In a suit, action, or other proceeding involving the validity or enforceability of a bond issued under this section or the security of a bond issued under this section, if the bond recites in substance that it was issued by the municipality for a renaissance zone, the bond or note is conclusively considered to have been issued for that purpose, and the development or redevelopment of the zone is conclusively considered to have been planned, located, and carried out as provided by this chapter. (g) A bank, trust company, savings bank or institution, savings and loan association, investment company or other person carrying on a banking or investment business, an insurance company, insurance association, or other person carrying on an insurance business, or an executor, administrator, curator, trustee, or other fiduciary may invest any sinking funds, money, or other funds belonging to it or in its control in bonds issued under this section. The bonds are authorized security for all public deposits. A person, political subdivision, or public or private officer may use funds owned or controlled by the person, political subdivision, or officer to purchase bonds issued under this section. This subsection does not relieve any person of the duty to exercise reasonable care in selecting securities. (h) A bond issued under this section is not a general obligation of the issuing municipality. A bond issued under this section does not give rise to a charge against the general credit or taxing powers of the municipality and is not payable except as provided by this section. A bond issued under this section must state the restrictions of this subsection on its face. (i) A bond issued under this section may not be included in any computation of the debt of the issuing municipality. (j) A municipality may not issue bonds in an amount that exceeds the total cost to the municipality under tax abatement agreements entered into with eligible businesses in the renaissance zone for which the bonds are issued. (k) A bond issued under this section must mature within 20 years of the date of issue. SECTION 5. Subchapter C, Chapter 321, Tax Code, is amended by adding Section 321.2081 to read as follows: Sec. 321.2081. REALLOCATION OF PROCEEDS FOR CERTAIN EXEMPTIONS. Notwithstanding any other law, a municipality may reallocate sales and use tax proceeds to offset revenue not received as a result of the operation of Sections 151.356 and 321.208. SECTION 6. Subchapter C, Chapter 323, Tax Code, is amended by adding Section 323.2071 to read as follows: Sec. 323.2071. REALLOCATION OF PROCEEDS FOR CERTAIN EXEMPTIONS. Notwithstanding any other law, a county may reallocate sales and use tax proceeds to offset revenue not received as a result of the operation of Sections 151.356 and 323.207. SECTION 7. This Act takes effect September 1, 2005.