85R6857 TJB-F
By: Blanco H.B. No. 1230
A BILL TO BE ENTITLED
AN ACT
relating to franchise tax credits for businesses that employ
veterans.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 171, Tax Code, is amended by adding
Subchapters X and Y to read as follows:
SUBCHAPTER X. TAX CREDITS FOR EMPLOYMENT OF VETERANS
Sec. 171.9281. DEFINITIONS. In this subchapter:
(1) "Agricultural processing" means an establishment
primarily engaged in activities described in categories 0724,
2011-2099, or 3111-3199 of the 1987 Standard Industrial
Classification Manual published by the United States Department of
Labor.
(2) "Central administrative offices" means an
establishment primarily engaged in performing management or
support services for other establishments of the same enterprise.
An enterprise consists of all establishments having more than 50
percent common direct or indirect ownership.
(3) "Data processing" means an establishment
primarily engaged in activities described in categories 7371-7379
of the 1987 Standard Industrial Classification Manual published by
the United States Department of Labor.
(4) "Distribution" means an establishment primarily
engaged in activities described in categories 5012-5199 of the 1987
Standard Industrial Classification Manual published by the United
States Department of Labor.
(5) "Group health benefit plan" means:
(A) a health plan provided by a health
maintenance organization established under Chapter 843, Insurance
Code;
(B) a health benefit plan approved by the
commissioner of insurance; or
(C) a self-funded or self-insured employee
welfare benefit plan that provides health benefits and is
established in accordance with the Employee Retirement Income
Security Act of 1974 (29 U.S.C. Section 1001 et seq.).
(6) "Manufacturing" means an establishment primarily
engaged in activities described in categories 2011-3999 of the 1987
Standard Industrial Classification Manual published by the United
States Department of Labor.
(7) "Qualified business" means an establishment
primarily engaged in agricultural processing, central
administrative offices, data processing, distribution,
manufacturing, research and development, or warehousing.
(8) "Qualifying job" means a new permanent full-time
job that:
(A) is held by a veteran;
(B) pays an annual wage of at least $50,000,
subject to Section 171.9282;
(C) is covered by a group health benefit plan for
which the business pays at least 80 percent of the premiums or other
charges assessed under the plan for the employee; and
(D) is not created to replace a previous
employee.
(9) "Research and development" means an establishment
primarily engaged in activities described in category 8731 of the
1987 Standard Industrial Classification Manual published by the
United States Department of Labor.
(10) "Veteran" means a person who:
(A) has served in:
(i) the armed forces of the United States or
the United States Public Health Service under 42 U.S.C. Section 201
et seq.;
(ii) the Texas military forces, as defined
by Section 437.001, Government Code; or
(iii) an auxiliary service of a branch of
the armed forces described by Subparagraph (i) or (ii); and
(B) has been honorably discharged from the branch
of the service in which the person served.
(11) "Warehousing" means an establishment primarily
engaged in activities described in categories 4221-4226 of the 1987
Standard Industrial Classification Manual published by the United
States Department of Labor.
Sec. 171.9282. BIENNIAL ADJUSTMENT OF WAGE FOR QUALIFYING
JOB. (a) In this section, "consumer price index" means the average
over a state fiscal biennium of the Consumer Price Index for All
Urban Consumers (CPI-U), U.S. City Average, published monthly by
the United States Bureau of Labor Statistics, or its successor in
function.
(b) Beginning in 2020, on January 1 of each even-numbered
year, the wage amount prescribed by Section 171.9281(8) is
increased or decreased by an amount equal to the amount prescribed
by that section on December 31 of the preceding year multiplied by
the percentage increase or decrease during the preceding state
fiscal biennium in the consumer price index and rounded to the
nearest dollar.
(c) The amount determined under Subsection (b) applies to a
report originally due on or after the date the determination is
made.
(d) The comptroller shall make the determination required
by this section and may adopt rules related to making that
determination.
(e) A determination by the comptroller under this section is
final and may not be appealed.
Sec. 171.9283. ELIGIBILITY. A taxable entity is eligible
for a credit against the tax imposed under this chapter if the
taxable entity:
(1) is a qualified business; and
(2) creates a minimum of 10 qualifying jobs.
Sec. 171.9284. AMOUNT OF CREDIT. A taxable entity may
establish a credit equal to 25 percent of the total wages paid by
the taxable entity for each qualifying job during each of the first
12 months of employment of the person hired to perform the job that
occur during the period on which the report is based.
Sec. 171.9285. LENGTH OF CREDIT. A credit established
shall be claimed in five equal installments of one-fifth the credit
amount over consecutive reports beginning with the report based on
the period during which the qualifying jobs were created.
Sec. 171.9286. LIMITATIONS. (a) The total credit claimed
under this subchapter for a report, including the amount of any
carryforward credit under Section 171.9287, may not exceed 50
percent of the amount of franchise tax due for the report before any
other applicable tax credits.
(b) The total credit claimed under this subchapter and
Subchapter Y for a report, including the amount of any carryforward
credits, may not exceed the amount of franchise tax due for the
report after any other applicable credits.
Sec. 171.9287. CARRYFORWARD. (a) If a taxable entity is
eligible for a credit that exceeds the limitations under Section
171.9286, the taxable entity may carry the unused credit forward
for not more than five consecutive reports.
(b) A carryforward is considered the remaining portion of an
installment that cannot be claimed in the current year because of a
limitation under Section 171.9286. A carryforward is added to the
next year's installment of the credit in determining the limitation
for that year. A credit carryforward from a previous report is
considered to be used before the current year installment.
Sec. 171.9288. CERTIFICATION OF ELIGIBILITY. (a) For the
initial and each succeeding report on which a credit is claimed
under this subchapter, the taxable entity shall file with its
report, on a form provided by the comptroller, information that
sufficiently demonstrates that the taxable entity is eligible for
the credit.
(b) The burden of establishing entitlement to and the value
of the credit is on the taxable entity.
(c) A credit expires under this subchapter and the taxable
entity may not take any remaining installment of the credit if in
one of the five years in which the installment of a credit accrues,
the taxable entity fails to maintain the minimum number of
qualifying jobs required to be created by Section 171.9283.
(d) Notwithstanding Subsection (c), the taxable entity may
take the portion of an installment that accrued in a previous year
and was carried forward to the extent permitted under Section
171.9287.
Sec. 171.9289. ASSIGNMENT PROHIBITED. A taxable entity may
not convey, assign, or transfer the credit allowed under this
subchapter to another entity unless all of the assets of the taxable
entity are conveyed, assigned, or transferred in the same
transaction.
Sec. 171.9290. BIENNIAL REPORT BY COMPTROLLER. (a) Before
the beginning of each regular session of the legislature, the
comptroller shall submit to the governor, the lieutenant governor,
and the speaker of the house of representatives a report that
states:
(1) the total number of jobs created by taxable
entities that claim a credit under this subchapter and the average
and median annual wage of those jobs;
(2) the total amount of credits applied against the
tax under this chapter and the amount of unused credits including:
(A) the total amount of franchise tax due by
taxable entities claiming a credit under this subchapter before and
after the application of the credit;
(B) the average percentage reduction in
franchise tax due by taxable entities claiming a credit under this
subchapter; and
(C) the percentage of tax credits that were
awarded to taxable entities with fewer than 100 employees;
(3) the two-digit standard industrial classification
of taxable entities claiming a credit under this subchapter;
(4) the geographical distribution of the credits
claimed under this subchapter; and
(5) the effect of the credit provided under this
subchapter on employment, personal income, and capital investment
in this state and on state tax revenues.
(b) The final report issued before the expiration of this
subchapter must include historical information on the credit
authorized under this subchapter.
(c) The comptroller may not include in the report
information that is confidential by law.
(d) For purposes of this section, the comptroller may
require a taxable entity that claims a credit under this subchapter
to submit information, on a form provided by the comptroller, on the
location of the taxable entity's job creation in this state and any
other information necessary to complete the report required under
this section.
(e) The comptroller shall provide notice to the members of
the legislature that the report required under this section is
available on request.
Sec. 171.9291. COMPTROLLER POWERS AND DUTIES. The
comptroller shall adopt rules and forms necessary to implement this
subchapter.
Sec. 171.9292. EXPIRATION. (a) This subchapter expires
December 31, 2027.
(b) The expiration of this subchapter does not affect the
carryforward of a credit under Section 171.9287 or those credits
for which a taxable entity is eligible before the date this
subchapter expires. The provisions of this subchapter in effect
immediately before this subchapter expires remain in effect for
purposes of claiming a credit or carryforward after the date this
subchapter expires.
SUBCHAPTER Y. TAX CREDITS FOR CERTAIN CAPITAL INVESTMENTS MADE BY
BUSINESSES THAT EMPLOY VETERANS
Sec. 171.9301. DEFINITIONS. In this subchapter:
(1) "Agricultural processing," "group health benefit
plan," "qualified business," "qualifying job," and "veteran" have
the meanings assigned by Section 171.9281.
(2) "Qualified capital investment" means tangible
personal property first placed in service in this state by a taxable
entity primarily engaged in agricultural processing and that is
described in Section 1245(a), Internal Revenue Code, such as
engines, machinery, tools, and implements used in a trade or
business or held for investment and subject to an allowance for
depreciation, cost recovery under the accelerated cost recovery
system, or amortization. The term does not include real property or
buildings and their structural components. Property that is leased
under a capitalized lease is considered a "qualified capital
investment," but property that is leased under an operating lease
is not considered a "qualified capital investment." Property
expensed under Section 179, Internal Revenue Code, is not
considered a "qualified capital investment."
Sec. 171.9302. ELIGIBILITY. (a) A qualified business is
eligible for a credit against the tax imposed under this chapter in
the amount and under the conditions and limitations provided by
this subchapter.
(b) To qualify for the credit authorized under this
subchapter, a qualified business must:
(1) pay an annual wage to each veteran employed by the
qualified business of at least the amount required for a qualifying
job for the period on which the report is based;
(2) offer health benefits coverage to all full-time
employees at the location with respect to which the credit is
claimed through a group health benefit plan for which the business
pays at least 80 percent of the premiums or other charges assessed
under the plan for the employees; and
(3) make a minimum $500,000 qualified capital
investment.
Sec. 171.9303. AMOUNT OF CREDIT. A taxable entity may
establish a credit equal to 7.5 percent of the qualified capital
investment during the period on which the report is based.
Sec. 171.9304. LENGTH OF CREDIT. The credit established
shall be claimed in five equal installments of one-fifth the credit
amount over the five consecutive reports beginning with the report
based on the period during which the qualified capital investment
was made.
Sec. 171.9305. LIMITATIONS. (a) The total credit claimed
under this subchapter for a report, including the amount of any
carryforward credit under Section 171.9306, may not exceed 50
percent of the amount of franchise tax due for the report before any
other applicable tax credits.
(b) The total credit claimed under this subchapter and
Subchapter X for a report, including the amount of any carryforward
credits, may not exceed the amount of franchise tax due for the
report after any other applicable tax credits.
Sec. 171.9306. CARRYFORWARD. (a) If a taxable entity is
eligible for a credit from an installment that exceeds the
limitation under Section 171.9305, the taxable entity may carry the
unused credit forward for not more than five consecutive reports.
(b) A carryforward is considered the remaining portion of an
installment that cannot be claimed in the current year because of a
limitation under Section 171.9305. A carryforward is added to the
next year's installment of the credit in determining the limitation
for that year. A credit carryforward from a previous report is
considered to be used before the current year installment.
Sec. 171.9307. CERTIFICATION OF ELIGIBILITY. (a) For the
initial and each succeeding report on which a credit is claimed
under this subchapter, the taxable entity shall file with its
report, on a form provided by the comptroller, information that
sufficiently demonstrates that the taxable entity is eligible for
the credit.
(b) The burden of establishing entitlement to and the value
of the credit is on the taxable entity.
(c) A credit expires under this subchapter and the taxable
entity may not take any remaining installment of the credit if in
one of the five years in which the installment of a credit accrues,
the taxable entity:
(1) disposes of the qualified capital investment;
(2) takes the qualified capital investment out of
service;
(3) moves the qualified capital investment out of this
state; or
(4) fails to pay in accordance with Section
171.9302(b)(1) the annual wage required for a qualifying job for
the period covered by the report on which the taxable entity would
otherwise claim the credit.
(d) Notwithstanding Subsection (c), the taxable entity may
take the portion of an installment that accrued in a previous year
and was carried forward to the extent permitted under Section
171.9306.
Sec. 171.9308. ASSIGNMENT PROHIBITED. A taxable entity may
not convey, assign, or transfer the credit allowed under this
subchapter to another entity unless all of the assets of the taxable
entity are conveyed, assigned, or transferred in the same
transaction.
Sec. 171.9309. BIENNIAL REPORT BY COMPTROLLER. (a) Before
the beginning of each regular session of the legislature, the
comptroller shall submit to the governor, the lieutenant governor,
and the speaker of the house of representatives a report that
states:
(1) the total amount of qualified capital investments
made by taxable entities that claim a credit under this subchapter
and the average and median wages paid by those taxable entities;
(2) the total amount of credits applied against the
tax under this chapter and the amount of unused credits, including:
(A) the total amount of franchise tax due by
taxable entities claiming a credit under this subchapter before and
after the application of the credit;
(B) the average percentage reduction in
franchise tax due by taxable entities claiming a credit under this
subchapter; and
(C) the percentage of tax credits that were
awarded to taxable entities with fewer than 100 employees;
(3) the two-digit standard industrial classification
of taxable entities claiming a credit under this subchapter;
(4) the geographical distribution of the qualified
capital investments on which tax credit claims are made under this
subchapter; and
(5) the effect of the credit provided under this
subchapter on employment, personal income, and capital investment
in this state and on state tax revenues.
(b) The final report issued before the expiration of this
subchapter must include historical information on the credit
authorized under this subchapter.
(c) The comptroller may not include in the report
information that is confidential by law.
(d) For purposes of this section, the comptroller may
require a taxable entity that claims a credit under this subchapter
to submit information, on a form provided by the comptroller, on the
location of the taxable entity's capital investment in this state
and any other information necessary to complete the report required
under this section.
(e) The comptroller shall provide notice to the members of
the legislature that the report required under this section is
available on request.
Sec. 171.9310. COMPTROLLER POWERS AND DUTIES. The
comptroller shall adopt rules and forms necessary to implement this
subchapter.
Sec. 171.9311. EXPIRATION. (a) This subchapter expires
December 31, 2027.
(b) The expiration of this subchapter does not affect the
carryforward of a credit under Section 171.9306 or those credits
for which a taxable entity is eligible before the date this
subchapter expires. The provisions of this subchapter in effect
immediately before this subchapter expires remain in effect for
purposes of claiming a credit or carryforward after the date this
subchapter expires.
SECTION 2. 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, 2018.