86R491 CJC-D
By: Sanford H.B. No. 3866
A BILL TO BE ENTITLED
AN ACT
relating to a franchise tax credit based on the ad valorem taxes
paid by a taxable entity on certain inventory.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 171, Tax Code, is amended by adding
Subchapter N to read as follows:
SUBCHAPTER N. TAX CREDIT FOR BUSINESS AD VALOREM TAX PAYMENTS ON
INVENTORY
Sec. 171.701. DEFINITIONS. In this subchapter:
(1) "Qualified entity" means a taxable entity that:
(A) is a retailer; and
(B) pays ad valorem taxes on retail inventory
owned by the entity and located in this state.
(2) "Retail inventory" means all tangible personal
property that a retailer holds for sale in this state during a
12-month period and for which the retailer is not otherwise
entitled to an exemption from taxation. For purposes of this
section, the term does not include:
(A) real property; or
(B) inventory that qualifies for appraisal under
Section 23.121, 23.124, 23.1241, or 23.127.
(3) "Retailer" means a person who is engaged in the
business in this state of selling retail inventory. For purposes of
this section, the term does not include:
(A) a bank, savings bank, savings and loan
association, credit union, or other finance company; or
(B) a person who was not engaged in the business
in this state of selling retail inventory on January 1 of the
preceding tax year.
(4) "Sales price" means the total amount of money paid
or to be paid to a retailer for the purchase of an item of retail
inventory.
(5) "Total annual sales" means the total of the sales
price from every sale from a retailer's retail inventory for a
12-month period, other than a sale at wholesale or a sale to another
retailer.
Sec. 171.702. ELIGIBILITY FOR CREDIT. A qualified entity
is eligible to apply for a credit in the amount and under the
conditions and limitations provided by this subchapter against the
tax imposed under this chapter.
Sec. 171.703. AMOUNT OF CREDIT; LIMITATIONS. (a) Subject
to Subsection (c), the total amount of the credit under this
subchapter is equal to the difference between the following
amounts:
(1) the amount of the ad valorem taxes paid by the
qualified entity during the period on which a report is based that
are derived from the taxable value of the entity's retail
inventory; and
(2) the amount of the ad valorem taxes the entity would
have paid during the period described by Subdivision (1) on the
taxable value of the entity's retail inventory if the taxable value
of that inventory were an amount determined by dividing the
entity's total annual sales, as reported to the comptroller under
Section 171.705, by 12.
(b) The comptroller may request assistance from the chief
appraiser of the appraisal district in which a qualified entity's
retail inventory is located to determine the amount described by
Subsection (a)(2). The chief appraiser shall provide the requested
assistance.
(c) A qualified entity is not eligible for a credit under
this subchapter for a year in which the amount described by
Subsection (a)(2) is greater than the amount described by
Subsection (a)(1).
(d) The total credit claimed for a report, including the
amount of any carryforward under Section 171.704, may not exceed
the amount of franchise tax due for the report after all other
applicable tax credits.
Sec. 171.704. CARRYFORWARD. (a) If a qualified entity is
eligible for a credit that exceeds the limitation under Section
171.703(d), the entity may carry the unused credit forward for not
more than three 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 171.703(d). A carryforward is added to
the next year's credit in determining the limitation for that year.
A credit carryforward from a previous report is considered to be
used before the current year credit.
Sec. 171.705. APPLICATION FOR CREDIT. (a) A qualified
entity must apply for a credit under this subchapter on or with the
report for the period for which the credit is claimed.
(b) The comptroller shall promulgate a form for the
application for the credit. A qualified entity must use the form in
applying for the credit. The application must require the entity to
state the entity's total annual sales for the 12-month period for
which the credit is claimed. The comptroller may require the entity
to include any other information the comptroller determines is
necessary to 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 qualified entity.
(d) The comptroller may request permission to examine the
books and records of a qualified entity in the manner provided by
this subsection. A request made under this subsection must be made
in writing, be delivered personally to the custodian of the records
at a location at which the entity conducts business, provide a
period of not less than 15 days for the person to respond to the
request, and state that the person to whom the request is addressed
has the right to seek judicial relief from compliance with the
request. In a request made under this subsection, the comptroller
may examine:
(1) documentation appropriate to allow the
comptroller to determine if the entity is eligible for the credit;
and
(2) sales records to substantiate information
included in the entity's application for the credit.
Sec. 171.706. SALE OR ASSIGNMENT OF CREDIT. (a) A
qualified entity 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 limitation under Section 171.703(d).
(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.
Sec. 171.707. RULES. The comptroller shall adopt rules
necessary to implement and administer this subchapter.
SECTION 2. Subchapter N, 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 3. This Act takes effect January 1, 2020.