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A BILL TO BE ENTITLED
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AN ACT
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relating to exemptions from ad valorem taxes, the sales and use tax, |
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and the franchise tax for certain businesses during an initial |
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period of operation in this state. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. This Act may be cited as the Texas Open for |
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Business Act. |
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SECTION 2. Subchapter B, Chapter 11, Tax Code, is amended by |
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adding Section 11.36 to read as follows: |
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Sec. 11.36. BUSINESSES DURING INITIAL PERIOD OF OPERATION. |
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(a) Subject to Subsection (b), a person is entitled to an exemption |
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from taxation by a taxing unit of the real and tangible personal |
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property owned by the person if: |
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(1) the person meets the requirements of a new |
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business under Section 151.3183; |
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(2) the property: |
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(A) is located in a county with a population of |
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250,000 or less; and |
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(B) is reasonably necessary for and used by the |
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person in the operation of the new business; and |
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(3) the exemption is adopted by the governing body of |
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the taxing unit in the manner provided by law for official action by |
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the governing body. |
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(b) A person is entitled to an exemption under this section |
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until the earliest of: |
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(1) the 10th anniversary of the date on which the |
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person first meets the requirements of a new business under Section |
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151.3183; |
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(2) the date on which the person ceases to meet the |
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requirements of a new business under Section 151.3183; or |
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(3) the date the comptroller revokes the person's |
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sales tax registration number under Section 151.3183(h). |
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(c) An exemption authorized by this section and adopted by |
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the governing body of a taxing unit applies to: |
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(1) the tax year: |
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(A) in which the exemption is adopted by the |
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governing body if officially adopted before April 15; or |
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(B) immediately following the tax year in which |
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the exemption is adopted by the governing body if officially |
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adopted on or after April 15; and |
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(2) each following tax year unless and until repealed |
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in the manner provided by Subsection (d). |
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(d) The governing body of a taxing unit may repeal an |
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exemption adopted under this section in the manner provided by law |
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for official action by the governing body. The repeal of an |
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exemption by a governing body does not affect the entitlement of a |
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person who is receiving the exemption on the date it is repealed to |
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continue to receive the exemption for the period described by |
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Subsection (b). |
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(e) The comptroller by rule shall establish requirements |
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and procedures for determining whether and as of what date a person |
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meets the requirements of a new business under Section 151.3183 for |
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the purpose of this section. |
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(f) In determining whether a person meets the requirements |
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of a new business under Section 151.3183 and the date that those |
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requirements are met, the chief appraiser shall apply the |
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requirements and procedures adopted by the comptroller under |
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Subsection (e). |
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(g) The chief appraiser shall promptly notify the |
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comptroller if the chief appraiser determines that a person |
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receiving an exemption under this section ceases to meet the |
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requirements of a new business under Section 151.3183. |
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SECTION 3. Section 11.42(e), Tax Code, is amended to read as |
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follows: |
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(e) A person who qualifies for an exemption under Section |
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11.131 or 11.36 after January 1 of a tax year may receive the |
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exemption for the applicable portion of that tax year immediately |
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on qualification for the exemption. |
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SECTION 4. Section 11.43(k), Tax Code, is amended to read as |
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follows: |
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(k) A person who qualifies for an exemption authorized by |
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Section 11.13(c) or (d), [or] 11.132, or 11.36 must apply for the |
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exemption no later than the first anniversary of the date the person |
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qualified for the exemption. |
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SECTION 5. Section 26.1125, Tax Code, is amended to read as |
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follows: |
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Sec. 26.1125. CALCULATION OF TAXES ON RESIDENCE HOMESTEAD |
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OF 100 PERCENT OR TOTALLY DISABLED VETERAN OR PROPERTY OF NEW |
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BUSINESS. (a) If a person qualifies for an exemption under Section |
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11.131 or 11.36 after the beginning of a tax year, the amount of the |
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taxes on the property subject to the exemption [residence homestead
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of the person] for the tax year is calculated by multiplying the |
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amount of the taxes that otherwise would be imposed on the property |
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[residence homestead] for the entire year had the person not |
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qualified for the exemption under Section 11.131 or 11.36 by a |
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fraction, the denominator of which is 365 and the numerator of which |
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is the number of days that elapsed before the date the person |
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qualified for the exemption under Section 11.131 or 11.36. |
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(b) If a person qualifies for an exemption under Section |
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11.131 or 11.36 with respect to the property after the amount of the |
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tax due on the property is calculated and the effect of the |
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qualification is to reduce the amount of the tax due on the |
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property, the assessor for each taxing unit shall recalculate the |
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amount of the tax due on the property and correct the tax roll. If |
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the tax bill has been mailed and the tax on the property has not been |
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paid, the assessor shall mail a corrected tax bill to the person in |
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whose name the property is listed on the tax roll or to the person's |
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authorized agent. If the tax on the property has been paid, the tax |
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collector for the taxing unit shall refund to the person who paid |
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the tax the amount by which the payment exceeded the tax due. |
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SECTION 6. Subchapter H, Chapter 151, Tax Code, is amended |
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by adding Section 151.3183 to read as follows: |
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Sec. 151.3183. TAXABLE ITEMS USED BY CERTAIN NEW BUSINESSES |
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DURING INITIAL PERIOD OF OPERATION. (a) In this section: |
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(1) "Internal Revenue Code" means the Internal Revenue |
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Code of 1986 in effect on December 31, 2016, excluding any changes |
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made by federal law after that date, but including any regulations |
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adopted under that code applicable to the tax year to which the |
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provisions of the code in effect on that date applied. |
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(2) "Qualifying job" means an employment position that |
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is: |
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(A) new to and located in this state; |
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(B) permanent and full-time; and |
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(C) held by an employee for at least 10 months |
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during each 12-month period. |
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(b) The sale to or storage, use, or other consumption by a |
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new business of a taxable item that will be directly used or |
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consumed by the business is exempted from the taxes imposed by this |
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chapter. |
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(c) A person is a new business for purposes of this section |
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if the person is a business that: |
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(1) is primarily located in a county with a population |
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of 250,000 or less; |
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(2) is first located and begins doing business in this |
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state on or after January 1, 2018, regardless of whether the |
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business is chartered or organized in this state or outside this |
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state; |
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(3) is not substantially similar in operation and in |
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ownership to another business located in this state during any part |
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of the preceding five years; |
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(4) is primarily engaged in: |
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(A) a manufacturing activity described in |
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categories 2011-3999 of the 1987 Standard Industrial |
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Classification Manual published by the United States Department of |
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Labor; or |
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(B) qualified research, as defined by Section 41, |
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Internal Revenue Code; and |
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(5) creates, on or after January 1, 2018, and not later |
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than the 30th day after the date the business first locates in this |
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state, at least one qualifying job. |
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(d) To claim an exemption under this section, a registration |
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number issued by the comptroller must be stated on the exemption |
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certificate provided by the purchaser of the item. |
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(e) Subject to Subsection (f), a person may apply to the |
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comptroller for issuance of a registration number by the |
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comptroller. The application must be made on a form prescribed by |
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the comptroller and include the information required by the |
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comptroller to establish that the person is a new business as |
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described by Subsection (c). |
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(f) A person who meets the requirements of a new business as |
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described by Subsection (c) must apply for a registration number |
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not later than the first anniversary of the date the person begins |
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doing business in this state. The comptroller shall deny an |
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application received after that date. |
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(g) A registration number issued under this section expires |
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on the 10th anniversary of the date of issuance, unless revoked at |
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an earlier time by the comptroller as provided by Subsection (h). |
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The registration number may not be renewed. |
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(h) The comptroller shall revoke and may not reinstate a |
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registration number issued to a person if the person ceases to meet |
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a requirement prescribed by Subsection (c). The comptroller shall |
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promptly notify the chief appraiser of each appraisal district in |
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which a person whose registration number is revoked owns property |
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that the registration number has been revoked. A person whose |
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registration number is revoked is liable for payment of the taxes |
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imposed under this chapter on the sales price of each taxable item |
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for which the person claimed an exemption under this section on or |
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after the date the registration number was revoked. |
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(i) The comptroller shall adopt rules necessary to |
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implement this section, including rules relating to the: |
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(1) qualification of a person for an exemption under |
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this section; |
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(2) issuance and revocation of a registration number |
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issued under this section; and |
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(3) reporting and other procedures necessary to ensure |
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that a person to whom a registration number is issued under this |
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section complies with this section and remains entitled to the |
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exemption authorized by this section. |
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SECTION 7. Section 171.0001(4), Tax Code, as effective |
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until January 1, 2020, is amended to read as follows: |
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(4) "Beginning date" means: |
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(A) except as provided by Paragraph (B) or (C): |
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(i) for a taxable entity chartered or |
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organized in this state, the date on which the taxable entity's |
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charter or organization takes effect; and |
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(ii) for any other taxable entity, the date |
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on which the taxable entity begins doing business in this state; |
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[or] |
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(B) for a taxable entity that qualifies as a new |
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veteran-owned business as defined by Section 171.0005, the earlier |
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of: |
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(i) the fifth anniversary of the date on |
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which the taxable entity begins doing business in this state; or |
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(ii) the date the taxable entity ceases to |
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qualify as a new veteran-owned business as defined by Section |
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171.0005; or |
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(C) for a taxable entity that meets the |
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requirements of a new business under Section 151.3183, the earlier |
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of: |
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(i) the 10th anniversary of the date on |
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which the taxable entity begins doing business in this state; or |
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(ii) the date the taxable entity ceases to |
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comply with the requirements of a new business under Section |
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151.3183. |
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SECTION 8. Section 171.0001(4), Tax Code, as effective |
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January 1, 2020, is amended to read as follows: |
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(4) "Beginning date" means: |
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(A) except as provided by Paragraph (B): |
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(i) for a taxable entity chartered or |
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organized in this state, the date on which the taxable entity's |
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charter or organization takes effect; and |
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(ii) [(B)] for any other taxable entity, |
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the date on which the taxable entity begins doing business in this |
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state; or |
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(B) for a taxable entity that meets the |
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requirements of a new business under Section 151.3183, the earlier |
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of: |
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(i) the 10th anniversary of the date on |
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which the taxable entity begins doing business in this state; or |
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(ii) the date the taxable entity ceases to |
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comply with the requirements of a new business under Section |
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151.3183. |
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SECTION 9. Section 171.001, Tax Code, is amended by adding |
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Subsection (e) to read as follows: |
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(e) Notwithstanding Subsection (a), the tax imposed under |
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this chapter is not imposed on a taxable entity that meets the |
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requirements of a new business under Section 151.3183 until the |
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earlier of: |
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(1) the 10th anniversary of the date on which the |
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taxable entity begins doing business in this state; or |
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(2) the date the taxable entity ceases to comply with |
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the requirements of a new business under Section 151.3183. |
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SECTION 10. Section 171.063(g), Tax Code, as effective |
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until January 1, 2020, is amended to read as follows: |
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(g) If a corporation's federal tax exemption is withdrawn by |
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the Internal Revenue Service for failure of the corporation to |
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qualify or maintain its qualification for the exemption, the |
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corporation's exemption under this section ends on the effective |
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date of that withdrawal by the Internal Revenue Service. The |
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effective date of the withdrawal is considered the corporation's |
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beginning date for purposes of determining the corporation's |
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privilege periods and for all other purposes of this chapter, |
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except that if the corporation would have been subject to Section |
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171.001(d) or (e) in the absence of the federal tax exemption, and |
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the effective date of the withdrawal is a date earlier than the date |
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the corporation would have become subject to the franchise tax as |
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provided by Section 171.001(d) or (e), as applicable, the date the |
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corporation would have become subject to the franchise tax under |
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Section 171.001(d) or (e) [that section] is considered the |
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corporation's beginning date for those purposes. |
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SECTION 11. Section 171.063(g), Tax Code, as effective |
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January 1, 2020, is amended to read as follows: |
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(g) If a corporation's federal tax exemption is withdrawn by |
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the Internal Revenue Service for failure of the corporation to |
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qualify or maintain its qualification for the exemption, the |
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corporation's exemption under this section ends on the effective |
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date of that withdrawal by the Internal Revenue Service. The |
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effective date of the withdrawal is considered the corporation's |
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beginning date for purposes of determining the corporation's |
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privilege periods and for all other purposes of this chapter, |
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except that if the corporation would have been subject to Section |
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171.001(e) in the absence of the federal tax exemption, and the |
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effective date of the withdrawal is a date earlier than the date the |
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corporation would have become subject to the franchise tax as |
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provided by Section 171.001(e), the date the corporation would have |
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become subject to the franchise tax under that section is |
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considered the corporation's beginning date for those purposes. |
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SECTION 12. Section 171.204, Tax Code, is amended by adding |
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Subsection (e) to read as follows: |
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(e) The comptroller may require a taxable entity on which |
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the tax imposed under this chapter is not imposed solely because of |
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the application of Section 171.001(e) to file an information report |
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stating the taxable entity's beginning date as determined under |
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Section 171.0001 and any other information the comptroller |
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determines necessary. The comptroller may not require the taxable |
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entity to report or compute its margin. |
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SECTION 13. Not later than December 1, 2017, the |
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comptroller of public accounts shall adopt rules as required by |
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Section 151.3183(i), Tax Code, as added by this Act. |
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SECTION 14. Section 11.36, Tax Code, as added by this Act, |
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and Sections 11.42, 11.43, and 26.1125, Tax Code, as amended by this |
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Act, apply only to ad valorem taxes imposed for a tax year that |
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begins on or after January 1, 2018. |
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SECTION 15. (a) Except as provided by Subsection (b) of |
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this section or as otherwise provided by this Act, this Act takes |
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effect September 1, 2017. |
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(b) Sections 2, 3, 4, and 5 of this Act take effect January |
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1, 2018, but only if the constitutional amendment authorizing the |
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governing bodies of certain political subdivisions to exempt from |
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ad valorem taxation the real and tangible personal property of |
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businesses during an initial period of operation in this state is |
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approved by the voters. If that amendment is not approved by the |
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voters, Sections 2, 3, 4, and 5 of this Act have no effect. |