86R25933 CBH-F
By: Guillen H.B. No. 2545
A BILL TO BE ENTITLED
AN ACT
relating to franchise tax, oil production tax, and gas production
tax incentives for certain desalination facility operations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 171.1011, Tax Code, is amended by adding
Subsection (g-9) to read as follows:
(g-9) A taxable entity that is a permit holder shall exclude
from its total revenue, to the extent included under Subsection
(c)(1)(A), (c)(2)(A), or (c)(3), any amount received by the entity
from the sale of minerals or materials extracted from water by the
desalination facility during the desalination process. In this
subsection, "desalination facility" and "permit holder" have the
meanings assigned by Section 171.621. This subsection expires
December 31, 2024.
SECTION 2. Chapter 171, Tax Code, is amended by adding
Subchapter L-1 to read as follows:
SUBCHAPTER L-1. TAX CREDIT FOR OPERATION OF DESALINATION FACILITY
Sec. 171.621. DEFINITIONS. In this subchapter:
(1) "Commission" means the Texas Commission on
Environmental Quality.
(2) "Desalination facility" means a facility that:
(A) treats source water under the jurisdiction of
the commission or the Railroad Commission of Texas that has a high
total dissolved solids concentration, such as water produced in oil
or gas drilling, completion, flowback, or production, to produce
fresh water of usable quality for public, agricultural, industrial,
environmental, and other beneficial uses; and
(B) begins initial operations on or after January
1, 2020.
(3) "Permit holder" means a person who operates a
desalination facility and has all state and federal permits
necessary to operate the facility.
Sec. 171.622. ELIGIBILITY FOR CREDIT. A permit holder that
is a taxable entity and that produces fresh water of usable quality
at a desalination facility is eligible for a credit in the amount
and under the conditions and limitations provided by this
subchapter against the tax imposed under this chapter.
Sec. 171.623. AMOUNT OF CREDIT; LIMITATIONS. (a) Except as
provided by Subsection (d), the total amount of the credit under
this subchapter for the period on which a report is based is equal
to:
(1) 50 cents for each 1,000 gallons of source water
treated by the permit holder during the period on which the report
is based if:
(A) the source water has a total dissolved solids
concentration of more than 5,000 milligrams per liter; and
(B) the resulting fresh water is put to
beneficial use in this state;
(2) $1 for each 1,000 gallons of source water treated
by the permit holder during the period on which the report is based
if:
(A) at least 50 percent of the source water has a
total dissolved solids concentration of more than 30,000 milligrams
per liter; and
(B) the resulting fresh water is put to
beneficial use in this state;
(3) $5 for each 1,000 gallons of source water treated
by the permit holder during the period on which the report is based
if:
(A) at least 50 percent of the source water has a
total dissolved solids concentration of more than 50,000 milligrams
per liter; and
(B) the resulting fresh water is put to
beneficial use in this state; and
(4) $17 for each 1,000 gallons of source water treated
by the permit holder during the period on which the report is based
if:
(A) at least 50 percent of the source water has a
total dissolved solids concentration of more than 90,000 milligrams
per liter; and
(B) the resulting fresh water is put to
beneficial use in this state.
(b) The permit holder may treat source water with differing
total dissolved solids concentrations during the period on which
the report is based. The permit holder is entitled to prorate the
credit by the duration of processing time associated with each
concentration during the period.
(c) Treated water may be counted only once in determining
the amount of the credit. Only one permit holder may claim a credit
for the same treated water.
(d) The total credit claimed for a report, including the
amount of any carryforward under Section 171.624, may not exceed
the amount of franchise tax due for the report after all other
applicable tax credits.
Sec. 171.624. CARRYFORWARD. (a) If a permit holder is
eligible for a credit that exceeds the limitation under Section
171.623(d), the permit holder 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 171.623(d). 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. 171.625. APPLICATION. (a) A permit holder must apply
for a credit under this subchapter on or with the report for the
period for which the credit is claimed.
(b) A permit holder shall file with a report on which the
credit is claimed a copy of each relevant certificate issued by the
commission under Section 171.626 and any other information required
by the comptroller to sufficiently demonstrate that the permit
holder is eligible for the credit and the amount of the credit.
(c) The burden of establishing eligibility for and the
amount of the credit is on the permit holder.
Sec. 171.626. MONTHLY STATEMENT; CERTIFICATION. (a) To be
eligible for a credit under this subchapter, a permit holder must
submit to the commission monthly statements that include, for the
preceding month:
(1) the metered volume in gallons of source water
treated by the permit holder;
(2) the total dissolved solids concentration of the
source water, distinguished according to the concentrations
described by Section 171.623(a);
(3) the duration of processing time associated with
each concentration described by Section 171.623(a); and
(4) the total dissolved solids concentration of the
resulting fresh water.
(b) To be eligible for the credit under this subchapter, the
permit holder must apply to the commission for certification that:
(1) the permit holder has, during the reporting
period, treated source water in an amount and with a total dissolved
solids concentration that qualify for a credit under Section
171.623; and
(2) the resulting fresh water was put to beneficial
use in this state.
(c) The permit holder shall include with the certificate
application any information the commission determines is necessary
to certify eligibility for the credit and the amount of the credit,
including information sufficient to demonstrate that:
(1) the permit holder has all state and federal
permits necessary to operate the desalination facility; and
(2) the resulting fresh water was put to beneficial
use in this state.
(d) If the permit holder provides sufficient information
under this section, the commission shall issue a certificate of
eligibility to the permit holder.
(e) The commission shall immediately notify the comptroller
in writing if the commission:
(1) determines that a permit holder that previously
received a certificate under this section was not eligible for the
certified credit or is no longer eligible for the certified credit;
or
(2) takes any action or discovers any information that
affects the eligibility of the permit holder for a credit.
Sec. 171.627. SALE OR ASSIGNMENT OF CREDIT; USE OF SOLD OR
ASSIGNED CREDIT. (a) A permit holder that earns a credit under
this subchapter may sell or assign all or part of the credit, 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 transferred and retained
credits claimed for a period are subject to the maximum total
limitations provided by Subsection (b) and Section 171.623(d).
(b) Notwithstanding any other provision of this subchapter,
an entity to which a credit or part of a credit was sold or assigned
may apply all or part of that credit against the tax imposed by this
chapter or against the tax imposed by Chapter 201 or 202. The total
credit claimed against the tax imposed by Chapter 201 or 202 may not
exceed the amount of tax due for a report after all other applicable
tax credits, but the entity may carry any unused credit forward
until the credit is used.
(c) 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;
(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; and
(5) for the entity to which the credit or part of the
credit was sold or assigned, each type of tax liability against
which the entity intends to apply all or part of the credit, and the
amount or percentage that the entity intends to apply against each
type.
(d) 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.
(e) 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 or Chapter 201 or
202 in accordance with the provisions of any agreement among the
partners, members, or shareholders and without regard to the
ownership interest of the partners, members, or shareholders in the
desalination facility operated by the permit holder who earned the
credit, provided that the entity that claims the credit must be
subject to the tax imposed under this chapter or Chapter 201 or 202.
Sec. 171.628. RULES. The comptroller and commission shall
adopt rules necessary to implement this subchapter.
Sec. 171.629. EXPIRATION. (a) This subchapter expires
December 31, 2024.
(b) The expiration of this subchapter does not affect the
carryforward of a credit under Section 171.624 or those credits for
which a taxable entity is eligible after the date this subchapter
expires based on source water treated before the date this
subchapter expires.
SECTION 3. (a) Subject to Subsection (b) of this section,
this Act applies only to a report originally due on or after the
effective date of this Act.
(b) A taxable entity may exclude amounts from its total
revenue as provided by Section 171.1011(g-9), Tax Code, as added by
this Act, only on a report originally due on or after January 1,
2021, and before January 1, 2025.
SECTION 4. This Act takes effect January 1, 2021.