BILL ANALYSIS Senate Research Center S.B. 1243 By: Huffman Finance 5/11/2023 Enrolled AUTHOR'S / SPONSOR'S STATEMENT OF INTENT As part of the Infrastructure Investment and Jobs Act, Congress provided over $65 billion for connectivity infrastructure, with $45 billion for broadband deployment across the United States. This builds off the $17 billion previously provided for broadband deployment under the American Rescue Plan. Without legislation, taxpayers receiving grants under these programs will owe franchise tax on the grants received and used to expand broadband access across Texas. There is currently no exception provided in Texas law to exclude this grant revenue from the franchise tax calculation. Taxpayers who receive broadband deployment grants must therefore include the grants in total revenue for franchise tax reporting purposes. To further encourage broadband deployment in Texas, S.B. 1243 excludes from total revenue the grants received for broadband deployment in Texas. The bill also specifically allows qualifying expenses paid with the grant proceeds to be included in the determination of cost of goods sold (COGS) or compensation for purposes of the franchise tax. S.B. 1243 amends current law relating to the franchise tax treatment of certain broadband grants made for the purposes of broadband deployment in this state. RULEMAKING AUTHORITY This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter C, Chapter 171, Tax Code, by adding Section 171.10132, as follows: Sec. 171.10132. PROVISIONS RELATED TO CERTAIN GRANTS RECEIVED FOR BROADBAND DEPLOYMENT IN TEXAS. (a) Defines "qualifying broadband grant." (b) Provides that a taxable entity, notwithstanding any other law: (1) is required to exclude from its total revenue, to the extent included under certain sections, qualifying broadband grant proceeds for the purposes of broadband deployment in this state; (2) is authorized to include as a cost of goods sold under Section 171.1012 (Determination of Cost of Goods Sold) any expense paid using qualifying broadband grant proceeds for the purposes of broadband deployment in this state if the expense is otherwise includable as a cost of goods sold under that section; and (3) is authorized to include as compensation under Section 171.1013 (Determination of Compensation) any expense paid using qualifying broadband grant proceeds for the purposes of broadband deployment in this state if the expense is otherwise includable as compensation under that section. SECTION 2. Provides that this Act applies only to a report originally due on or after January 1, 2023. SECTION 3. Effective date: upon passage or September 1, 2023.
BILL ANALYSIS
Senate Research Center S.B. 1243
By: Huffman
Finance
5/11/2023
Enrolled
Senate Research Center
S.B. 1243
By: Huffman
Finance
5/11/2023
Enrolled
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
As part of the Infrastructure Investment and Jobs Act, Congress provided over $65 billion for connectivity infrastructure, with $45 billion for broadband deployment across the United States. This builds off the $17 billion previously provided for broadband deployment under the American Rescue Plan. Without legislation, taxpayers receiving grants under these programs will owe franchise tax on the grants received and used to expand broadband access across Texas. There is currently no exception provided in Texas law to exclude this grant revenue from the franchise tax calculation. Taxpayers who receive broadband deployment grants must therefore include the grants in total revenue for franchise tax reporting purposes.
To further encourage broadband deployment in Texas, S.B. 1243 excludes from total revenue the grants received for broadband deployment in Texas. The bill also specifically allows qualifying expenses paid with the grant proceeds to be included in the determination of cost of goods sold (COGS) or compensation for purposes of the franchise tax.
S.B. 1243 amends current law relating to the franchise tax treatment of certain broadband grants made for the purposes of broadband deployment in this state.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Subchapter C, Chapter 171, Tax Code, by adding Section 171.10132, as follows:
Sec. 171.10132. PROVISIONS RELATED TO CERTAIN GRANTS RECEIVED FOR BROADBAND DEPLOYMENT IN TEXAS. (a) Defines "qualifying broadband grant."
(b) Provides that a taxable entity, notwithstanding any other law:
(1) is required to exclude from its total revenue, to the extent included under certain sections, qualifying broadband grant proceeds for the purposes of broadband deployment in this state;
(2) is authorized to include as a cost of goods sold under Section 171.1012 (Determination of Cost of Goods Sold) any expense paid using qualifying broadband grant proceeds for the purposes of broadband deployment in this state if the expense is otherwise includable as a cost of goods sold under that section; and
(3) is authorized to include as compensation under Section 171.1013 (Determination of Compensation) any expense paid using qualifying broadband grant proceeds for the purposes of broadband deployment in this state if the expense is otherwise includable as compensation under that section.
SECTION 2. Provides that this Act applies only to a report originally due on or after January 1, 2023.
SECTION 3. Effective date: upon passage or September 1, 2023.