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A BILL TO BE ENTITLED
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AN ACT
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relating to a franchise tax credit based on the ad valorem taxes |
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paid by a taxable entity on certain inventory. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 171, Tax Code, is amended by adding |
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Subchapter N to read as follows: |
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SUBCHAPTER N. TAX CREDIT FOR BUSINESS AD VALOREM TAX PAYMENTS ON |
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INVENTORY |
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Sec. 171.701. DEFINITIONS. In this subchapter: |
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(1) "Qualified entity" means a taxable entity that: |
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(A) is a retailer; and |
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(B) pays ad valorem taxes on retail inventory |
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owned by the entity and located in this state. |
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(2) "Retail inventory" means all tangible personal |
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property that a retailer holds for sale in this state during a |
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12-month period and for which the retailer is not otherwise |
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entitled to an exemption from taxation. For purposes of this |
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section, the term does not include: |
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(A) real property; or |
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(B) inventory that qualifies for appraisal under |
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Section 23.121, 23.124, 23.1241, or 23.127. |
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(3) "Retailer" means a person who is engaged in the |
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business in this state of selling retail inventory. For purposes of |
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this section, the term does not include: |
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(A) a bank, savings bank, savings and loan |
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association, credit union, or other finance company; or |
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(B) a person who was not engaged in the business |
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in this state of selling retail inventory on January 1 of the |
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preceding tax year. |
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(4) "Sales price" means the total amount of money paid |
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or to be paid to a retailer for the purchase of an item of retail |
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inventory. |
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(5) "Total annual sales" means the total of the sales |
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price from every sale from a retailer's retail inventory for a |
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12-month period, other than a sale at wholesale or a sale to another |
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retailer. |
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Sec. 171.702. ELIGIBILITY FOR CREDIT. A qualified entity |
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is eligible to apply for a credit in the amount and under the |
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conditions and limitations provided by this subchapter against the |
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tax imposed under this chapter. |
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Sec. 171.703. AMOUNT OF CREDIT; LIMITATIONS. (a) Subject |
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to Subsection (c), the total amount of the credit under this |
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subchapter is equal to the difference between the following |
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amounts: |
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(1) the amount of the ad valorem taxes paid by the |
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qualified entity during the period on which a report is based that |
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are derived from the taxable value of the entity's retail |
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inventory; and |
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(2) the amount of the ad valorem taxes the entity would |
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have paid during the period described by Subdivision (1) on the |
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taxable value of the entity's retail inventory if the taxable value |
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of that inventory were an amount determined by dividing the |
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entity's total annual sales, as reported to the comptroller under |
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Section 171.705, by 12. |
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(b) The comptroller may request assistance from the chief |
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appraiser of the appraisal district in which a qualified entity's |
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retail inventory is located to determine the amount described by |
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Subsection (a)(2). The chief appraiser shall provide the requested |
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assistance. |
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(c) A qualified entity is not eligible for a credit under |
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this subchapter for a year in which the amount described by |
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Subsection (a)(2) is greater than the amount described by |
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Subsection (a)(1). |
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(d) The total credit claimed for a report, including the |
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amount of any carryforward under Section 171.704, may not exceed |
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the amount of franchise tax due for the report after all other |
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applicable tax credits. |
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Sec. 171.704. CARRYFORWARD. (a) If a qualified entity is |
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eligible for a credit that exceeds the limitation under Section |
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171.703(d), the entity may carry the unused credit forward for not |
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more than three consecutive reports. |
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(b) A carryforward is considered the remaining portion of a |
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credit that cannot be claimed in the current year because of the |
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limitation under Section 171.703(d). A carryforward is added to |
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the next year's credit in determining the limitation for that year. |
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A credit carryforward from a previous report is considered to be |
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used before the current year credit. |
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Sec. 171.705. APPLICATION FOR CREDIT. (a) A qualified |
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entity must apply for a credit under this subchapter on or with the |
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report for the period for which the credit is claimed. |
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(b) The comptroller shall promulgate a form for the |
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application for the credit. A qualified entity must use the form in |
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applying for the credit. The application must require the entity to |
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state the entity's total annual sales for the 12-month period for |
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which the credit is claimed. The comptroller may require the entity |
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to include any other information the comptroller determines is |
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necessary to demonstrate that the entity is eligible for the |
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credit. |
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(c) The burden of establishing eligibility for and the value |
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of the credit is on the qualified entity. |
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(d) The comptroller may request permission to examine the |
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books and records of a qualified entity in the manner provided by |
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this subsection. A request made under this subsection must be made |
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in writing, be delivered personally to the custodian of the records |
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at a location at which the entity conducts business, provide a |
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period of not less than 15 days for the person to respond to the |
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request, and state that the person to whom the request is addressed |
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has the right to seek judicial relief from compliance with the |
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request. In a request made under this subsection, the comptroller |
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may examine: |
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(1) documentation appropriate to allow the |
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comptroller to determine if the entity is eligible for the credit; |
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and |
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(2) sales records to substantiate information |
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included in the entity's application for the credit. |
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Sec. 171.706. SALE OR ASSIGNMENT OF CREDIT. (a) A |
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qualified entity that earns a credit under this subchapter may sell |
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or assign all or part of the credit, and any entity to which all or |
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part of the credit is sold or assigned may sell or assign all or part |
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of the credit to another entity. There is no limit on the total |
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number of transactions for the sale or assignment of all or part of |
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the total credit authorized under this subchapter, however, |
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collectively all transferred and retained credits claimed for a |
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period are subject to the limitation under Section 171.703(d). |
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(b) An entity that sells or assigns a credit under this |
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section and the entity to which the credit is sold or assigned shall |
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jointly submit written notice of the sale or assignment to the |
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comptroller on a form promulgated by the comptroller not later than |
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the 30th day after the date of the sale or assignment. The notice |
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must include: |
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(1) the date of the sale or assignment; |
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(2) the amount of the credit sold or assigned; |
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(3) the names and federal tax identification numbers |
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of the entity that sold or assigned the credit or part of the credit |
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and the entity to which the credit or part of the credit was sold or |
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assigned; and |
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(4) the amount of the credit owned by the selling or |
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assigning entity before the sale or assignment, and the amount the |
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selling or assigning entity retained, if any, after the sale or |
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assignment. |
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(c) The sale or assignment of a credit in accordance with |
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this section does not extend the period for which a credit may be |
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carried forward and does not increase the total amount of the credit |
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that may be claimed. |
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Sec. 171.707. RULES. The comptroller shall adopt rules |
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necessary to implement and administer this subchapter. |
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SECTION 2. Subchapter N, Chapter 171, Tax Code, as added by |
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this Act, applies only to a report originally due on or after the |
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effective date of this Act. |
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SECTION 3. This Act takes effect January 1, 2020. |