86R8818 CJC-D
By: Clardy H.B. No. 2397
A BILL TO BE ENTITLED
AN ACT
relating to a sales and use tax refund and franchise tax credit for
certain businesses that make investments in qualified opportunity
zones.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter I, Chapter 151, Tax Code, is amended
by adding Section 151.4292 to read as follows:
Sec. 151.4292. TAX REFUNDS FOR BUSINESS IN ECONOMIC
OPPORTUNITY ZONE. (a) In this section:
(1) "Economic opportunity zone" has the meaning
assigned by Section 171.9261.
(2) "Qualifying business entity" means an entity that
is eligible to receive a tax credit under Subchapter W, Chapter 171.
(b) After the qualifying business entity becomes eligible
to receive a tax credit under Subchapter W, Chapter 171, and subject
to Subsection (c), the entity is eligible for a one-time refund of
the sales and use taxes paid by the entity for the purchase of:
(1) building materials to remodel, rehabilitate, or
construct a structure owned or leased by the entity that is located
in the economic opportunity zone and that is the basis for the
entity's eligibility for the tax credit under Subchapter W, Chapter
171;
(2) labor to remodel, rehabilitate, or construct a
structure owned or leased by the entity that is located in the
economic opportunity zone and that is the basis for the entity's
eligibility for the tax credit under Subchapter W, Chapter 171; and
(3) equipment or machinery to be located in, or used in
the operation of, a structure owned or leased by the entity that is
located in the economic opportunity zone and that is the basis for
the entity's eligibility for the tax credit under Subchapter W,
Chapter 171.
(c) The amount of the one-time refund paid to a qualifying
business entity under this section may not exceed the lesser of:
(1) 25 percent of the total amount of sales and use
taxes paid by the business entity on purchases described by
Subsection (b); or
(2) $50,000.
(d) A qualifying business entity must apply to the
comptroller to receive a refund authorized under this section on a
form prescribed by the comptroller.
(e) The comptroller may adopt rules to implement and
administer this section.
SECTION 2. Chapter 171, Tax Code, is amended by adding
Subchapter W to read as follows:
SUBCHAPTER W. TAX CREDIT FOR INVESTMENT IN ECONOMIC OPPORTUNITY
ZONE
Sec. 171.9261. DEFINITIONS. In this subchapter:
(1) "Economic opportunity zone" means a population
census tract that, as of September 1, 2019, was designated as a
qualified opportunity zone under Public Law No. 115-97.
(2) "Qualifying investment" means an investment to:
(A) remodel, rehabilitate, or construct a
structure owned or leased by the entity that is located in an
economic opportunity zone; or
(B) purchase equipment or machinery to be located
in, or used in the operation of, a structure owned or leased by the
entity that is located in an economic opportunity zone.
Sec. 171.9262. ELIGIBILITY FOR CREDIT. An entity is
eligible to apply for a credit in the amount and under the
conditions provided by this subchapter against the tax imposed
under this chapter.
Sec. 171.9263. QUALIFICATION. An entity qualifies for a
credit under this subchapter if the entity makes a qualifying
investment:
(1) on or after September 1, 2019; and
(2) in an amount that is at least $100,000.
Sec. 171.9264. CERTIFICATION OF ELIGIBILITY. (a) Before
claiming, selling, or assigning a credit under this subchapter, the
entity that made the qualifying investment must request from the
comptroller a certificate of eligibility on a form prescribed by
the comptroller. The entity must include with the entity's request
information sufficient to allow the comptroller to determine
whether the entity has made a qualifying investment under this
subchapter. At a minimum, the entity must provide documentation
certified by the chief financial officer of the entity
demonstrating:
(1) the total amount of the qualifying investment made
by the entity; and
(2) the date on which the qualifying investment was
made.
(b) The comptroller shall issue a certificate of
eligibility to an entity that has made a qualifying investment
under this subchapter.
(c) An entity that sells or assigns a credit under this
subchapter to another entity shall provide a copy of the
certificate of eligibility to the purchaser or assignee.
Sec. 171.9265. AMOUNT OF CREDIT; LIMITATIONS. (a) Subject
to Subsections (b) and (c), the amount of the credit under this
subchapter is equal to 25 percent of the total amount of the
qualifying investment.
(b) An entity may not claim more than one credit under this
subchapter.
(c) The total credit claimed for a report, including the
amount of any carryforward under Section 171.9266, may not exceed
the amount of franchise tax due for the report after any other
applicable tax credits.
(d) A qualifying investment may be counted only once in
determining the amount of the tax credit available, and more than
one entity may not claim a credit for the same qualifying
investment.
Sec. 171.9266. CARRYFORWARD. (a) If an entity is eligible
for a credit that exceeds the limitation under Section 171.9265(c),
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 in the current year because of the
limitation under Section 171.9265(c).
Sec. 171.9267. APPLICATION FOR CREDIT. (a) An entity must
apply for a credit under this subchapter on or with the report for
the period for which the credit is claimed.
(b) An entity shall file with any report on which the credit
is claimed a copy of the certificate of eligibility issued by the
comptroller under Section 171.9264 and any other information
required by the comptroller to sufficiently 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 entity.
Sec. 171.9268. SALE OR ASSIGNMENT OF CREDIT. (a) An entity
that makes a qualifying investment may sell or assign all or part of
the credit that may be claimed for that investment to one or more
entities, 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 transfers are
subject to the limitations provided by Section 171.9265.
(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.
(d) Notwithstanding the requirements of this subchapter, a
credit earned or purchased by, or assigned to, a partnership,
limited liability company, S corporation, or other pass-through
entity may be allocated to the partners, members, or shareholders
of that entity and claimed under this subchapter in accordance with
the provisions of any agreement among the partners, members, or
shareholders, provided that the entity that claims the credit must
be subject to the tax imposed under this chapter.
Sec. 171.9269. RULES. The comptroller shall adopt rules
necessary to implement and administer this subchapter.
SECTION 3. Subchapter W, 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 4. This Act takes effect January 1, 2020.