85R13311 CBH-F
By: Walle H.B. No. 4247
A BILL TO BE ENTITLED
AN ACT
relating to franchise tax credits for small businesses that create
quality jobs.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 171, Tax Code, is amended by adding
Subchapter P-1 to read as follows:
SUBCHAPTER P-1. TAX CREDITS FOR SMALL BUSINESSES FOR CREATION OF
QUALITY JOBS
Sec. 171.821. DEFINITIONS. In this subchapter:
(1) "Estimated direct state benefits" means the tax
revenues projected by the comptroller to accrue to this state as a
result of the creation of qualifying new direct jobs by a qualified
small business.
(2) "Estimated direct state cost" means the cost to
this state that the comptroller projects will result because of the
creation of qualifying new direct jobs by a qualified small
business, including:
(A) the cost of educating the children of new
state residents;
(B) the cost of public health, public safety, and
transportation services provided to new state residents;
(C) the cost of other state services provided to
new state residents; and
(D) the cost of providing additional state
services to existing state residents.
(3) "Estimated net direct state benefits" means the
estimated direct state benefits minus the estimated direct state
cost as determined by the comptroller.
(4) "Full-time employment" means employment of a
person residing in this state and working for at least 30 hours a
week in this state for more than six months during any 12-month
period.
(5) "Gross taxable payroll" means wages for new direct
jobs that are subject to federal income taxation.
(6) "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.).
(7) "Manufacturing" means being primarily engaged in
activities described in industry sectors 31, 32, and 33 of the 2017
North American Industry Classification System.
(8) "Net benefit rate" means the estimated net direct
state benefits computed as a percentage of gross taxable payroll as
determined by the comptroller.
(9) "New direct job" means full-time employment that
did not exist in this state preceding the first day of the period on
which margin is based. A job is considered to exist in this state
preceding the first day of the period on which margin is based if
the activities and functions for which the particular job exists
had been ongoing at any time during the six-month period preceding
that date.
(10) "Qualified small business" means a business
primarily engaged in manufacturing that:
(A) has not more than 90 full-time employees on
the date preceding the first day of the period on which margin is
based or had an average of not more than 90 full-time employees
during the year preceding the first day of the period on which
margin is based; and
(B) creates the applicable number of qualifying
new direct jobs required by Section 171.823 during the period on
which margin is based.
(11) "Qualifying new direct job" means a new direct
job:
(A) that pays an annual wage in an amount not less
than the wage prescribed by Section 171.822; and
(B) for which the qualified small business offers
a group health benefit plan.
Sec. 171.822. WAGE REQUIREMENTS FOR QUALIFYING NEW DIRECT
JOB. (a) A qualifying new direct job must pay an average
annualized wage that equals or exceeds:
(1) 110 percent of the county average wage paid to
employees of small businesses located in the county in which the
qualifying new direct job is located, as computed by the Texas
Workforce Commission, at the time the qualifying new direct job is
created if the cost to the qualified small business of providing a
health benefit plan for each person hired for a qualifying new
direct job is not included; or
(2) 125 percent of the county average wage paid to
employees of small businesses located in the county in which the
qualifying new direct job is located, as computed by the Texas
Workforce Commission, at the time the qualifying new direct job is
created if the cost to the qualified small business of providing a
health benefit plan for each person hired for a qualifying new
direct job is included.
(b) Notwithstanding Subsection (a), a qualifying new direct
job is required to pay only an amount that equals or exceeds 100
percent of the county average wage paid to employees of small
businesses located in the county in which the qualifying new direct
job is located, as computed by the Texas Workforce Commission, at
the time the qualifying new direct job is created if the qualifying
new direct job is located in a county that:
(1) has an unemployment rate that is more than 10
percent higher than the state unemployment rate; and
(2) has a county personal poverty rate of more than 15
percent according to the most recent data from the United States
Census Bureau.
Sec. 171.823. ELIGIBILITY. A taxable entity that is a
qualified small business is eligible for a credit against the tax
imposed under this chapter if the taxable entity, during the period
on which margin is based, creates at least:
(1) five qualifying new direct jobs if:
(A) the qualifying new direct jobs are located in
a municipality with a population of less than 3,500; or
(B) the qualifying new direct jobs are located in
an unincorporated area and the largest municipality within 20 miles
of that location is a municipality described by Paragraph (A);
(2) 10 qualifying new direct jobs if:
(A) the qualifying new direct jobs are located in
a municipality with a population of at least 3,500 but less than
7,000; or
(B) the qualifying new direct jobs are located in
an unincorporated area and the largest municipality within 20 miles
of that location is a municipality described by Paragraph (A); or
(3) 15 qualifying new direct jobs if:
(A) the qualifying new direct jobs are located in
a municipality with a population of at least 7,000; or
(B) the qualifying new direct jobs are located in
an unincorporated area and the largest municipality within 20 miles
of that location is a municipality described by Paragraph (A).
Sec. 171.824. AMOUNT OF CREDIT. (a) A taxable entity is
entitled to a credit equal to the taxable entity's annual gross
taxable payroll for qualifying new direct jobs created during the
reporting period multiplied by the lesser of five percent or the net
benefit rate.
(b) The comptroller shall compute a taxable entity's net
benefit rate and provide that rate to the taxable entity on request.
Sec. 171.825. LIMITATIONS. The total credit claimed under
this subchapter for a report, including the amount of any credit
carryforward under Section 171.826, may not exceed the amount of
franchise tax due for the report before any other applicable tax
credits.
Sec. 171.826. CARRYFORWARD. (a) If a taxable entity is
eligible for a credit that exceeds the limitations under Section
171.825, the taxable entity may carry the unused credit forward for
not more than seven consecutive reports.
(b) A credit carryforward is considered the remaining
portion of an installment that cannot be claimed in the current year
because of a limitation under Section 171.825. A credit
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. 171.827. CERTIFICATION OF ELIGIBILITY. (a) For each
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.
Sec. 171.828. 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. 171.829. 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; and
(2) a fiscal analysis of the costs and benefits of this
subchapter to this state.
(b) The comptroller may not include in the report
information that is confidential by law.
(c) The comptroller shall provide notice to the members of
the legislature that the report required under this section is
available on request.
Sec. 171.830. COMPTROLLER POWERS AND DUTIES. The
comptroller shall adopt rules and forms necessary to implement this
subchapter.
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.