BILL ANALYSIS

 

 

 

C.S.H.B. 3119

By: Alvarado

Ways & Means

Committee Report (Substituted)

 

 

 

 

BACKGROUND AND PURPOSE

 

Texas is home to the metropolitan area with the highest ozone levels in the United States, and more than half of Texas residents live in areas with ozone levels above federal standards.  Sole reliance on fining heavy emitters has not had the desired effect in reducing emissions of major-source air pollutants.  Rather than continue to penalize businesses with fines for emitting air contaminants, Texas should offer incentives to encourage businesses to monitor their own emissions if the state seeks to be more successful in reducing harmful pollution.  Certain airborne toxins have no federally enforced levels, rendering a legislative focus on compliance ineffective.  Policy should focus instead on information gathering.  However, because air quality monitoring is not mandated by state or federal law, policymakers must rely on self-reported industry estimates.  Facility-installed monitoring devices represent one of the most important tools that state and federal agencies can use to understand which chemicals most impact Texas' air quality and at what levels.  An alternate strategy should be enacted to reduce emissions and improve air quality by providing significant tax incentives to major sources of air contaminants.

 

C.S.H.B. 3119 offers a franchise tax credit for a percentage of the initial capital cost of purchasing and installing air quality monitoring devices.

RULEMAKING AUTHORITY

 

It is the committee's opinion that rulemaking authority is expressly granted to the comptroller of public accounts in SECTION 1 of this bill.

ANALYSIS

 

C.S.H.B. 3119 amends the Tax Code to require the comptroller of public accounts to develop and implement a pilot program to provide a qualified taxable entity with a franchise tax credit for the acquisition and installation of certain air quality monitoring devices to monitor the emission of air contaminants, and to evaluate the feasibility of extending the program and expanding it to apply statewide.  The bill entitles a taxable entity to a credit against the franchise tax if the taxable entity maintains monitoring of the emission of air contaminants from a major source that is located in the nonattainment area, maintains records that include the date, time, and findings of the measuring and monitoring of the emissions, and provides the Texas Commission on Environmental Quality (TCEQ) a copy of such records periodically as required by TCEQ.  The bill requires the taxable entity to maintain records of air quality monitoring data on-site for review by TCEQ, including data on each hazardous air pollutant listed under the federal Clean Air Act that is applicable to the major source, each air contaminant that the owner or operator has reason to believe may be emitted from the major source, and any other air contaminant that the executive director of TCEQ requests that the owner or operator monitor. 

 

C.S.H.B. 3119 provides that the amount of a franchise tax credit is equal to 35 percent of the total cost of acquiring and installing the air quality monitoring devices on the first two reports for which the taxable entity may claim the credit, and 10 percent of the total cost of acquiring and installing the air quality monitoring devices on the next three reports on which the taxable entity may claim the credit.  The bill requires a taxable entity to claim the credit on consecutive reports, and prohibits the total credit claimed from exceeding the amount of franchise tax due after any other applicable credits.  The bill prohibits a taxable entity from conveying, assigning, or transferring a tax credit to another entity unless all of the assets of the taxable entity are conveyed, assigned, or transferred in the same transaction. 

 

C.S.H.B. 3119 requires a taxable entity to apply for a credit on or with the tax report for the period for which the credit is claimed.  The bill requires the taxable entity to file with the report a certification from TCEQ confirming that the taxable entity provided TCEQ a copy of the records on the measuring and monitoring of the emissions as required. 

 

C.S.H.B. 3119 requires the comptroller of public accounts to adopt rules necessary to implement the franchise tax credit for monitoring devices.

 

C.S.H.B. 3119 requires the comptroller to evaluate the effectiveness of the pilot program and report the results of the evaluation to the legislature not later than February 1, 2013, including the number of taxable entities claiming the credit; the total amount of credits claimed; the comptroller's recommendations regarding the extension of the air quality monitoring device tax credit program and the expansion of the program statewide, and methods to enhance the effectiveness, simplicity, or any other aspect of the program; and any other information the comptroller considers meaningful and appropriate.

 

C.S.H.B. 3119 provides for the termination of the pilot program and the expiration of the bill's provisions on December 31, 2012.  The bill clarifies that expiration of its provisions does not affect a credit that was established before the date of expiration, that a taxable entity that has any unused credits established may continue to apply those credits on or with each consecutive report until the date the credit would have expired had the bill's provisions not expired, and that these provisions are continued in effect for the purposes of determining the amount of the credit the taxable entity may claim and the manner in which the taxable entity may claim the credit.

 

C.S.H.B. 3119 defines "air quality monitoring device" to mean a device, including a device that employs infrared technology, installed or placed on the perimeter or within the boundaries of a facility to monitor the emission of air contaminants.  The bill defines "major source" and "nonattainment area" by reference to the federal Clean Air Act and defines "commission" and "executive director."

EFFECTIVE DATE

 

January 1, 2010.

COMPARISON OF ORIGINAL AND SUBSTITUTE

C.S.H.B. 3119 differs from the original by specifying that an "air quality monitoring device" is installed to monitor, rather than evaluate, the emission of air contaminants.  The substitute adds a definition of "nonattainment area," which is not in the original.

 

C.S.H.B. 3119 adds provisions not in the original requiring the comptroller of public accounts to develop and implement the franchise tax credit pilot program for certain taxable entities.

 

C.S.H.B. 3119 differs from the original by providing that a taxable entity qualifies for a credit if it maintains monitoring of the emission of air contaminants from a major source that is located in the nonattainment area, rather than provides for daily monitoring of the emission of air contaminants from a major source.  The substitute differs from the original by requiring that the records on the measuring and monitoring include the date, time, and findings.

 

C.S.H.B. 3119 includes provisions not in the original requiring the comptroller to evaluate the pilot program and report the results to the legislature, setting forth the information the report is required to include, and specifying that the pilot program terminates and the bill's provisions expire December 31, 2012.