86R491 CJC-D
 
  By: Hughes S.B. No. 412
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to a franchise tax credit based on the ad valorem taxes
  paid by a taxable entity on certain inventory.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 171, Tax Code, is amended by adding
  Subchapter N to read as follows:
  SUBCHAPTER N. TAX CREDIT FOR BUSINESS AD VALOREM TAX PAYMENTS ON
  INVENTORY
         Sec. 171.701.  DEFINITIONS. In this subchapter:
               (1)  "Qualified entity" means a taxable entity that:
                     (A)  is a retailer; and
                     (B)  pays ad valorem taxes on retail inventory
  owned by the entity and located in this state.
               (2)  "Retail inventory" means all tangible personal
  property that a retailer holds for sale in this state during a
  12-month period and for which the retailer is not otherwise
  entitled to an exemption from taxation. For purposes of this
  section, the term does not include:
                     (A)  real property; or
                     (B)  inventory that qualifies for appraisal under
  Section 23.121, 23.124, 23.1241, or 23.127.
               (3)  "Retailer" means a person who is engaged in the
  business in this state of selling retail inventory. For purposes of
  this section, the term does not include:
                     (A)  a bank, savings bank, savings and loan
  association, credit union, or other finance company; or
                     (B)  a person who was not engaged in the business
  in this state of selling retail inventory on January 1 of the
  preceding tax year.
               (4)  "Sales price" means the total amount of money paid
  or to be paid to a retailer for the purchase of an item of retail
  inventory.
               (5)  "Total annual sales" means the total of the sales
  price from every sale from a retailer's retail inventory for a
  12-month period, other than a sale at wholesale or a sale to another
  retailer.
         Sec. 171.702.  ELIGIBILITY FOR CREDIT. A qualified entity
  is eligible to apply for a credit in the amount and under the
  conditions and limitations provided by this subchapter against the
  tax imposed under this chapter.
         Sec. 171.703.  AMOUNT OF CREDIT; LIMITATIONS. (a) Subject
  to Subsection (c), the total amount of the credit under this
  subchapter is equal to the difference between the following
  amounts:
               (1)  the amount of the ad valorem taxes paid by the
  qualified entity during the period on which a report is based that
  are derived from the taxable value of the entity's retail
  inventory; and 
               (2)  the amount of the ad valorem taxes the entity would
  have paid during the period described by Subdivision (1) on the
  taxable value of the entity's retail inventory if the taxable value
  of that inventory were an amount determined by dividing the
  entity's total annual sales, as reported to the comptroller under
  Section 171.705, by 12.
         (b)  The comptroller may request assistance from the chief
  appraiser of the appraisal district in which a qualified entity's
  retail inventory is located to determine the amount described by
  Subsection (a)(2). The chief appraiser shall provide the requested
  assistance.
         (c)  A qualified entity is not eligible for a credit under
  this subchapter for a year in which the amount described by
  Subsection (a)(2) is greater than the amount described by
  Subsection (a)(1).
         (d)  The total credit claimed for a report, including the
  amount of any carryforward under Section 171.704, may not exceed
  the amount of franchise tax due for the report after all other
  applicable tax credits.
         Sec. 171.704.  CARRYFORWARD. (a) If a qualified entity is
  eligible for a credit that exceeds the limitation under Section
  171.703(d), the entity may carry the unused credit forward for not
  more than three consecutive reports.
         (b)  A carryforward is considered the remaining portion of a
  credit that cannot be claimed in the current year because of the
  limitation under Section 171.703(d). A carryforward is added to
  the next year's credit in determining the limitation for that year.
  A credit carryforward from a previous report is considered to be
  used before the current year credit.
         Sec. 171.705.  APPLICATION FOR CREDIT. (a) A qualified
  entity must apply for a credit under this subchapter on or with the
  report for the period for which the credit is claimed.
         (b)  The comptroller shall promulgate a form for the
  application for the credit. A qualified entity must use the form in
  applying for the credit. The application must require the entity to
  state the entity's total annual sales for the 12-month period for
  which the credit is claimed. The comptroller may require the entity
  to include any other information the comptroller determines is
  necessary to demonstrate that the entity is eligible for the
  credit.
         (c)  The burden of establishing eligibility for and the value
  of the credit is on the qualified entity.
         (d)  The comptroller may request permission to examine the
  books and records of a qualified entity in the manner provided by
  this subsection. A request made under this subsection must be made
  in writing, be delivered personally to the custodian of the records
  at a location at which the entity conducts business, provide a
  period of not less than 15 days for the person to respond to the
  request, and state that the person to whom the request is addressed
  has the right to seek judicial relief from compliance with the
  request. In a request made under this subsection, the comptroller
  may examine:
               (1)  documentation appropriate to allow the
  comptroller to determine if the entity is eligible for the credit;
  and
               (2)  sales records to substantiate information
  included in the entity's application for the credit.
         Sec. 171.706.  SALE OR ASSIGNMENT OF CREDIT. (a) A
  qualified entity that earns a credit under this subchapter may sell
  or assign all or part of the credit, and any entity to which all or
  part of the credit is sold or assigned may sell or assign all or part
  of the credit to another entity.  There is no limit on the total
  number of transactions for the sale or assignment of all or part of
  the total credit authorized under this subchapter, however,
  collectively all transferred and retained credits claimed for a
  period are subject to the limitation under Section 171.703(d).
         (b)  An entity that sells or assigns a credit under this
  section and the entity to which the credit is sold or assigned shall
  jointly submit written notice of the sale or assignment to the
  comptroller on a form promulgated by the comptroller not later than
  the 30th day after the date of the sale or assignment. The notice
  must include:
               (1)  the date of the sale or assignment;
               (2)  the amount of the credit sold or assigned;
               (3)  the names and federal tax identification numbers
  of the entity that sold or assigned the credit or part of the credit
  and the entity to which the credit or part of the credit was sold or
  assigned; and
               (4)  the amount of the credit owned by the selling or
  assigning entity before the sale or assignment, and the amount the
  selling or assigning entity retained, if any, after the sale or
  assignment.
         (c)  The sale or assignment of a credit in accordance with
  this section does not extend the period for which a credit may be
  carried forward and does not increase the total amount of the credit
  that may be claimed.
         Sec. 171.707.  RULES. The comptroller shall adopt rules
  necessary to implement and administer this subchapter.
         SECTION 2.  Subchapter N, Chapter 171, Tax Code, as added by
  this Act, applies only to a report originally due on or after the
  effective date of this Act.
         SECTION 3.  This Act takes effect January 1, 2020.