85R3170 TJB-D
By: Guillen H.B. No. 102
A BILL TO BE ENTITLED
AN ACT
relating to exemptions from ad valorem taxes, the sales and use tax,
and the franchise tax for certain businesses during an initial
period of operation in this state.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. This Act may be cited as the Texas Open for
Business Act.
SECTION 2. Subchapter B, Chapter 11, Tax Code, is amended by
adding Section 11.36 to read as follows:
Sec. 11.36. BUSINESSES DURING INITIAL PERIOD OF OPERATION.
(a) Subject to Subsection (b), a person is entitled to an exemption
from taxation by a taxing unit of the real and tangible personal
property owned by the person if:
(1) the person meets the requirements of a new
business under Section 151.3183;
(2) the property:
(A) is located in a county with a population of
250,000 or less; and
(B) is reasonably necessary for and used by the
person in the operation of the new business; and
(3) the exemption is adopted by the governing body of
the taxing unit in the manner provided by law for official action by
the governing body.
(b) A person is entitled to an exemption under this section
until the earliest of:
(1) the 10th anniversary of the date on which the
person first meets the requirements of a new business under Section
151.3183;
(2) the date on which the person ceases to meet the
requirements of a new business under Section 151.3183; or
(3) the date the comptroller revokes the person's
sales tax registration number under Section 151.3183(h).
(c) An exemption authorized by this section and adopted by
the governing body of a taxing unit applies to:
(1) the tax year:
(A) in which the exemption is adopted by the
governing body if officially adopted before April 15; or
(B) immediately following the tax year in which
the exemption is adopted by the governing body if officially
adopted on or after April 15; and
(2) each following tax year unless and until repealed
in the manner provided by Subsection (d).
(d) The governing body of a taxing unit may repeal an
exemption adopted under this section in the manner provided by law
for official action by the governing body. The repeal of an
exemption by a governing body does not affect the entitlement of a
person who is receiving the exemption on the date it is repealed to
continue to receive the exemption for the period described by
Subsection (b).
(e) The comptroller by rule shall establish requirements
and procedures for determining whether and as of what date a person
meets the requirements of a new business under Section 151.3183 for
the purpose of this section.
(f) In determining whether a person meets the requirements
of a new business under Section 151.3183 and the date that those
requirements are met, the chief appraiser shall apply the
requirements and procedures adopted by the comptroller under
Subsection (e).
(g) The chief appraiser shall promptly notify the
comptroller if the chief appraiser determines that a person
receiving an exemption under this section ceases to meet the
requirements of a new business under Section 151.3183.
SECTION 3. Section 11.42(e), Tax Code, is amended to read as
follows:
(e) A person who qualifies for an exemption under Section
11.131 or 11.36 after January 1 of a tax year may receive the
exemption for the applicable portion of that tax year immediately
on qualification for the exemption.
SECTION 4. Section 11.43(k), Tax Code, is amended to read as
follows:
(k) A person who qualifies for an exemption authorized by
Section 11.13(c) or (d), [or] 11.132, or 11.36 must apply for the
exemption no later than the first anniversary of the date the person
qualified for the exemption.
SECTION 5. Section 26.1125, Tax Code, is amended to read as
follows:
Sec. 26.1125. CALCULATION OF TAXES ON RESIDENCE HOMESTEAD
OF 100 PERCENT OR TOTALLY DISABLED VETERAN OR PROPERTY OF NEW
BUSINESS. (a) If a person qualifies for an exemption under Section
11.131 or 11.36 after the beginning of a tax year, the amount of the
taxes on the property subject to the exemption [residence homestead
of the person] for the tax year is calculated by multiplying the
amount of the taxes that otherwise would be imposed on the property
[residence homestead] for the entire year had the person not
qualified for the exemption under Section 11.131 or 11.36 by a
fraction, the denominator of which is 365 and the numerator of which
is the number of days that elapsed before the date the person
qualified for the exemption under Section 11.131 or 11.36.
(b) If a person qualifies for an exemption under Section
11.131 or 11.36 with respect to the property after the amount of the
tax due on the property is calculated and the effect of the
qualification is to reduce the amount of the tax due on the
property, the assessor for each taxing unit shall recalculate the
amount of the tax due on the property and correct the tax roll. If
the tax bill has been mailed and the tax on the property has not been
paid, the assessor shall mail a corrected tax bill to the person in
whose name the property is listed on the tax roll or to the person's
authorized agent. If the tax on the property has been paid, the tax
collector for the taxing unit shall refund to the person who paid
the tax the amount by which the payment exceeded the tax due.
SECTION 6. Subchapter H, Chapter 151, Tax Code, is amended
by adding Section 151.3183 to read as follows:
Sec. 151.3183. TAXABLE ITEMS USED BY CERTAIN NEW BUSINESSES
DURING INITIAL PERIOD OF OPERATION. (a) In this section:
(1) "Internal Revenue Code" means the Internal Revenue
Code of 1986 in effect on December 31, 2016, excluding any changes
made by federal law after that date, but including any regulations
adopted under that code applicable to the tax year to which the
provisions of the code in effect on that date applied.
(2) "Qualifying job" means an employment position that
is:
(A) new to and located in this state;
(B) permanent and full-time; and
(C) held by an employee for at least 10 months
during each 12-month period.
(b) The sale to or storage, use, or other consumption by a
new business of a taxable item that will be directly used or
consumed by the business is exempted from the taxes imposed by this
chapter.
(c) A person is a new business for purposes of this section
if the person is a business that:
(1) is primarily located in a county with a population
of 250,000 or less;
(2) is first located and begins doing business in this
state on or after January 1, 2018, regardless of whether the
business is chartered or organized in this state or outside this
state;
(3) is not substantially similar in operation and in
ownership to another business located in this state during any part
of the preceding five years;
(4) is primarily engaged in:
(A) a manufacturing activity described in
categories 2011-3999 of the 1987 Standard Industrial
Classification Manual published by the United States Department of
Labor; or
(B) qualified research, as defined by Section 41,
Internal Revenue Code; and
(5) creates, on or after January 1, 2018, and not later
than the 30th day after the date the business first locates in this
state, at least one qualifying job.
(d) To claim an exemption under this section, a registration
number issued by the comptroller must be stated on the exemption
certificate provided by the purchaser of the item.
(e) Subject to Subsection (f), a person may apply to the
comptroller for issuance of a registration number by the
comptroller. The application must be made on a form prescribed by
the comptroller and include the information required by the
comptroller to establish that the person is a new business as
described by Subsection (c).
(f) A person who meets the requirements of a new business as
described by Subsection (c) must apply for a registration number
not later than the first anniversary of the date the person begins
doing business in this state. The comptroller shall deny an
application received after that date.
(g) A registration number issued under this section expires
on the 10th anniversary of the date of issuance, unless revoked at
an earlier time by the comptroller as provided by Subsection (h).
The registration number may not be renewed.
(h) The comptroller shall revoke and may not reinstate a
registration number issued to a person if the person ceases to meet
a requirement prescribed by Subsection (c). The comptroller shall
promptly notify the chief appraiser of each appraisal district in
which a person whose registration number is revoked owns property
that the registration number has been revoked. A person whose
registration number is revoked is liable for payment of the taxes
imposed under this chapter on the sales price of each taxable item
for which the person claimed an exemption under this section on or
after the date the registration number was revoked.
(i) The comptroller shall adopt rules necessary to
implement this section, including rules relating to the:
(1) qualification of a person for an exemption under
this section;
(2) issuance and revocation of a registration number
issued under this section; and
(3) reporting and other procedures necessary to ensure
that a person to whom a registration number is issued under this
section complies with this section and remains entitled to the
exemption authorized by this section.
SECTION 7. Section 171.0001(4), Tax Code, as effective
until January 1, 2020, is amended to read as follows:
(4) "Beginning date" means:
(A) except as provided by Paragraph (B) or (C):
(i) for a taxable entity chartered or
organized in this state, the date on which the taxable entity's
charter or organization takes effect; and
(ii) for any other taxable entity, the date
on which the taxable entity begins doing business in this state;
[or]
(B) for a taxable entity that qualifies as a new
veteran-owned business as defined by Section 171.0005, the earlier
of:
(i) the fifth anniversary of the date on
which the taxable entity begins doing business in this state; or
(ii) the date the taxable entity ceases to
qualify as a new veteran-owned business as defined by Section
171.0005; or
(C) for a taxable entity that meets the
requirements of a new business under Section 151.3183, the earlier
of:
(i) the 10th anniversary of the date on
which the taxable entity begins doing business in this state; or
(ii) the date the taxable entity ceases to
comply with the requirements of a new business under Section
151.3183.
SECTION 8. Section 171.0001(4), Tax Code, as effective
January 1, 2020, is amended to read as follows:
(4) "Beginning date" means:
(A) except as provided by Paragraph (B):
(i) for a taxable entity chartered or
organized in this state, the date on which the taxable entity's
charter or organization takes effect; and
(ii) [(B)] for any other taxable entity,
the date on which the taxable entity begins doing business in this
state; or
(B) for a taxable entity that meets the
requirements of a new business under Section 151.3183, the earlier
of:
(i) the 10th anniversary of the date on
which the taxable entity begins doing business in this state; or
(ii) the date the taxable entity ceases to
comply with the requirements of a new business under Section
151.3183.
SECTION 9. Section 171.001, Tax Code, is amended by adding
Subsection (e) to read as follows:
(e) Notwithstanding Subsection (a), the tax imposed under
this chapter is not imposed on a taxable entity that meets the
requirements of a new business under Section 151.3183 until the
earlier of:
(1) the 10th anniversary of the date on which the
taxable entity begins doing business in this state; or
(2) the date the taxable entity ceases to comply with
the requirements of a new business under Section 151.3183.
SECTION 10. Section 171.063(g), Tax Code, as effective
until January 1, 2020, is amended to read as follows:
(g) If a corporation's federal tax exemption is withdrawn by
the Internal Revenue Service for failure of the corporation to
qualify or maintain its qualification for the exemption, the
corporation's exemption under this section ends on the effective
date of that withdrawal by the Internal Revenue Service. The
effective date of the withdrawal is considered the corporation's
beginning date for purposes of determining the corporation's
privilege periods and for all other purposes of this chapter,
except that if the corporation would have been subject to Section
171.001(d) or (e) in the absence of the federal tax exemption, and
the effective date of the withdrawal is a date earlier than the date
the corporation would have become subject to the franchise tax as
provided by Section 171.001(d) or (e), as applicable, the date the
corporation would have become subject to the franchise tax under
Section 171.001(d) or (e) [that section] is considered the
corporation's beginning date for those purposes.
SECTION 11. Section 171.063(g), Tax Code, as effective
January 1, 2020, is amended to read as follows:
(g) If a corporation's federal tax exemption is withdrawn by
the Internal Revenue Service for failure of the corporation to
qualify or maintain its qualification for the exemption, the
corporation's exemption under this section ends on the effective
date of that withdrawal by the Internal Revenue Service. The
effective date of the withdrawal is considered the corporation's
beginning date for purposes of determining the corporation's
privilege periods and for all other purposes of this chapter,
except that if the corporation would have been subject to Section
171.001(e) in the absence of the federal tax exemption, and the
effective date of the withdrawal is a date earlier than the date the
corporation would have become subject to the franchise tax as
provided by Section 171.001(e), the date the corporation would have
become subject to the franchise tax under that section is
considered the corporation's beginning date for those purposes.
SECTION 12. Section 171.204, Tax Code, is amended by adding
Subsection (e) to read as follows:
(e) The comptroller may require a taxable entity on which
the tax imposed under this chapter is not imposed solely because of
the application of Section 171.001(e) to file an information report
stating the taxable entity's beginning date as determined under
Section 171.0001 and any other information the comptroller
determines necessary. The comptroller may not require the taxable
entity to report or compute its margin.
SECTION 13. Not later than December 1, 2017, the
comptroller of public accounts shall adopt rules as required by
Section 151.3183(i), Tax Code, as added by this Act.
SECTION 14. Section 11.36, Tax Code, as added by this Act,
and Sections 11.42, 11.43, and 26.1125, Tax Code, as amended by this
Act, apply only to ad valorem taxes imposed for a tax year that
begins on or after January 1, 2018.
SECTION 15. (a) Except as provided by Subsection (b) of
this section or as otherwise provided by this Act, this Act takes
effect September 1, 2017.
(b) Sections 2, 3, 4, and 5 of this Act take effect January
1, 2018, but only if the constitutional amendment authorizing the
governing bodies of certain political subdivisions to exempt from
ad valorem taxation the real and tangible personal property of
businesses during an initial period of operation in this state is
approved by the voters. If that amendment is not approved by the
voters, Sections 2, 3, 4, and 5 of this Act have no effect.