89R10421 RDS-F

By: Ordaz H.B. No. 3605

A BILL TO BE ENTITLED

AN ACT

relating to a franchise tax credit for taxable entities that employ certain apprentices in broadband utility engineering or construction jobs.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 171, Tax Code, is amended by adding Subchapter N-1 to read as follows:

SUBCHAPTER N-1. TAX CREDIT FOR EMPLOYMENT OF APPRENTICES FOR

BROADBAND UTILITY CONSTRUCTION

Sec. 171.721. GENERAL DEFINITIONS. In this subchapter:

(1) "Broadband utility engineering or construction job" means a job described in category 237130 of the 2022 North American Industry Classification System.

(2) "Commission" means the Texas Workforce Commission.

Sec. 171.722. DEFINITION: QUALIFYING APPRENTICE. (a) For purposes of this subchapter, "qualifying apprentice" means an apprentice employed by a taxable entity:

(1) in a broadband utility engineering or construction job; and

(2) as part of an apprenticeship program that is:

(A) certified as an industry-recognized apprenticeship program by an entity determined to meet United States Department of Labor criteria; or

(B) registered with the United States Department of Labor and qualified to receive funding provided through the commission under Chapter 133, Education Code.

(b) An individual who otherwise meets the definition of qualifying apprentice under Subsection (a) may not be considered a qualifying apprentice of a taxable entity for purposes of this subchapter:

(1) beyond the earlier of:

(A) the fourth anniversary of the date the individual was employed by the entity as a qualifying apprentice; or

(B) the conclusion of the initial term of the apprenticeship program in which the individual is participating; or

(2) if the individual was employed by the entity in another capacity immediately before being employed by the entity as a qualifying apprentice.

Sec. 171.723. ENTITLEMENT TO CREDIT. A taxable entity is entitled to a credit in the amount and under the conditions provided by this subchapter against the tax imposed under this chapter.

Sec. 171.724. QUALIFICATION. A taxable entity qualifies for a credit under this subchapter if, during the period for which the credit is claimed, the entity employs at least one qualifying apprentice for at least three months and, in accordance with criteria adopted by the commission by rule, provides the apprentice with training and skills development in pole climbing, rigging, fiber and coax splicing, or other tasks required of an aerial lineman.

Sec. 171.725. CERTIFICATE OF ELIGIBILITY. (a) Before claiming a credit under this subchapter, a taxable entity must request a certificate of eligibility from the commission stating that the entity qualifies for a credit under this subchapter by satisfying the requirements of Section 171.724. The entity must request the certificate of eligibility in the manner prescribed by the commission.

(b) On receipt of a request under Subsection (a), the commission shall:

(1) determine whether the taxable entity is eligible for a credit under this subchapter; and

(2) if the commission determines that the taxable entity is eligible for a credit, issue the requested certificate of eligibility.

Sec. 171.726. AMOUNT OF CREDIT; LIMITATION. (a) Subject to Subsections (b) and (c), the amount of the credit a taxable entity may claim on a report is an amount equal to $5,000 multiplied by the number of qualifying apprentices employed by the entity during the period covered by the report.

(b) The total credit claimed on a report may not exceed the amount of franchise tax due for the report after the application of any other applicable credits.

(c) The total amount of credits that may be awarded under Subsection (a) in a state fiscal biennium may not exceed $10 million.

Sec. 171.727. CARRYFORWARD. (a) If a taxable entity is eligible for a credit that exceeds the limitation under Section 171.726(b), the entity may carry the unused credit forward for not more than five consecutive reports.

(b) A carryforward is considered the remaining portion of a credit that cannot be claimed on a report because of the limitation under Section 171.726(b).

(c) Credits, including a carryforward, are considered to be used in the following order:

(1) a carryforward under this section; and

(2) a credit for the period on which the report is based.

Sec. 171.728. APPLICATION FOR CREDIT. (a) A taxable entity must apply for a credit under this subchapter on or with the report for the period for which the credit is claimed.

(b) A taxable entity must apply for the credit in the manner prescribed by the comptroller and include with the application:

(1) the certificate of eligibility issued under Section 171.725; and

(2) any information requested by the comptroller to determine the amount of the credit.

(c) The comptroller shall award a credit to a taxable entity that submits an application that complies with the provisions of this section if the entity is eligible for the credit and the credit is available under Section 171.726(c).

Sec. 171.729. SALE OR ASSIGNMENT OF CREDIT. (a) A taxable entity that employs a qualifying apprentice may sell or assign all or part of the credit that may be claimed in relation to that qualifying apprentice to one or more taxable entities, and any taxable 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 taxable 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.

(b) A taxable entity that sells or assigns a credit under this section and the taxable entity to which the credit is sold or assigned shall jointly submit written notice of the sale or assignment to the comptroller not later than the 30th day after the date of the sale or assignment. The notice must include:

(1) the date on which the credit was originally established;

(2) the date of the sale or assignment;

(3) the amount of the credit sold or assigned and the remaining period during which it may be used;

(4) the names, addresses, and federal tax identification numbers of the taxable entity that sold or assigned the credit or part of the credit and the taxable entity to which the credit or part of the credit was sold or assigned; and

(5) the amount of the credit owned by the selling or assigning taxable entity before the sale or assignment, and the amount the selling or assigning taxable 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.

Sec. 171.730. RULES. The comptroller may adopt rules necessary to implement and administer this subchapter.

Sec. 171.731. REPORT. (a) Not later than November 1 of each even-numbered year, the commission shall prepare and deliver to the governor, the lieutenant governor, the speaker of the house of representatives, and the presiding officer of each legislative standing committee with primary jurisdiction over taxation a report that evaluates the effect of the tax credits issued under this subchapter on the employment outcomes and earnings of qualifying apprentices with respect to whom credits are issued under this subchapter. The report must include a recommendation regarding whether the tax credit should be expanded or terminated.

(b) A taxable entity that requests a certificate of eligibility under Section 171.725 shall provide, on request of the commission, information the commission determines is necessary to prepare the report under this section.

SECTION 2. Subchapter N-1, Chapter 171, Tax Code, as added by this Act, applies only to a report originally due on or after January 1, 2026.

SECTION 3. An entity may apply for a franchise tax credit under Subchapter N-1, Chapter 171, Tax Code, as added by this Act, only in connection with an apprentice first employed on or after the effective date of this Act.

SECTION 4. This Act takes effect January 1, 2026.