89R10421 RDS-F
By: Ordaz H.B. No. 3605
A BILL TO BE ENTITLED
AN ACT
relating to a franchise tax credit for taxable entities that employ
certain apprentices in broadband utility engineering or
construction jobs.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 171, Tax Code, is amended by adding
Subchapter N-1 to read as follows:
SUBCHAPTER N-1. TAX CREDIT FOR EMPLOYMENT OF APPRENTICES FOR
BROADBAND UTILITY CONSTRUCTION
Sec. 171.721. GENERAL DEFINITIONS. In this subchapter:
(1) "Broadband utility engineering or construction
job" means a job described in category 237130 of the 2022 North
American Industry Classification System.
(2) "Commission" means the Texas Workforce
Commission.
Sec. 171.722. DEFINITION: QUALIFYING APPRENTICE. (a) For
purposes of this subchapter, "qualifying apprentice" means an
apprentice employed by a taxable entity:
(1) in a broadband utility engineering or construction
job; and
(2) as part of an apprenticeship program that is:
(A) certified as an industry-recognized
apprenticeship program by an entity determined to meet United
States Department of Labor criteria; or
(B) registered with the United States Department
of Labor and qualified to receive funding provided through the
commission under Chapter 133, Education Code.
(b) An individual who otherwise meets the definition of
qualifying apprentice under Subsection (a) may not be considered a
qualifying apprentice of a taxable entity for purposes of this
subchapter:
(1) beyond the earlier of:
(A) the fourth anniversary of the date the
individual was employed by the entity as a qualifying apprentice;
or
(B) the conclusion of the initial term of the
apprenticeship program in which the individual is participating; or
(2) if the individual was employed by the entity in
another capacity immediately before being employed by the entity as
a qualifying apprentice.
Sec. 171.723. ENTITLEMENT TO CREDIT. A taxable entity is
entitled to a credit in the amount and under the conditions provided
by this subchapter against the tax imposed under this chapter.
Sec. 171.724. QUALIFICATION. A taxable entity qualifies
for a credit under this subchapter if, during the period for which
the credit is claimed, the entity employs at least one qualifying
apprentice for at least three months and, in accordance with
criteria adopted by the commission by rule, provides the apprentice
with training and skills development in pole climbing, rigging,
fiber and coax splicing, or other tasks required of an aerial
lineman.
Sec. 171.725. CERTIFICATE OF ELIGIBILITY. (a) Before
claiming a credit under this subchapter, a taxable entity must
request a certificate of eligibility from the commission stating
that the entity qualifies for a credit under this subchapter by
satisfying the requirements of Section 171.724. The entity must
request the certificate of eligibility in the manner prescribed by
the commission.
(b) On receipt of a request under Subsection (a), the
commission shall:
(1) determine whether the taxable entity is eligible
for a credit under this subchapter; and
(2) if the commission determines that the taxable
entity is eligible for a credit, issue the requested certificate of
eligibility.
Sec. 171.726. AMOUNT OF CREDIT; LIMITATION. (a) Subject to
Subsections (b) and (c), the amount of the credit a taxable entity
may claim on a report is an amount equal to $5,000 multiplied by the
number of qualifying apprentices employed by the entity during the
period covered by the report.
(b) The total credit claimed on a report may not exceed the
amount of franchise tax due for the report after the application of
any other applicable credits.
(c) The total amount of credits that may be awarded under
Subsection (a) in a state fiscal biennium may not exceed $10
million.
Sec. 171.727. CARRYFORWARD. (a) If a taxable entity is
eligible for a credit that exceeds the limitation under Section
171.726(b), 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 on a report because of the limitation
under Section 171.726(b).
(c) Credits, including a carryforward, are considered to be
used in the following order:
(1) a carryforward under this section; and
(2) a credit for the period on which the report is
based.
Sec. 171.728. APPLICATION FOR CREDIT. (a) A taxable entity
must apply for a credit under this subchapter on or with the report
for the period for which the credit is claimed.
(b) A taxable entity must apply for the credit in the manner
prescribed by the comptroller and include with the application:
(1) the certificate of eligibility issued under
Section 171.725; and
(2) any information requested by the comptroller to
determine the amount of the credit.
(c) The comptroller shall award a credit to a taxable entity
that submits an application that complies with the provisions of
this section if the entity is eligible for the credit and the credit
is available under Section 171.726(c).
Sec. 171.729. SALE OR ASSIGNMENT OF CREDIT. (a) A taxable
entity that employs a qualifying apprentice may sell or assign all
or part of the credit that may be claimed in relation to that
qualifying apprentice to one or more taxable entities, and any
taxable 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
taxable 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.
(b) A taxable entity that sells or assigns a credit under
this section and the taxable entity to which the credit is sold or
assigned shall jointly submit written notice of the sale or
assignment to the comptroller not later than the 30th day after the
date of the sale or assignment. The notice must include:
(1) the date on which the credit was originally
established;
(2) the date of the sale or assignment;
(3) the amount of the credit sold or assigned and the
remaining period during which it may be used;
(4) the names, addresses, and federal tax
identification numbers of the taxable entity that sold or assigned
the credit or part of the credit and the taxable entity to which the
credit or part of the credit was sold or assigned; and
(5) the amount of the credit owned by the selling or
assigning taxable entity before the sale or assignment, and the
amount the selling or assigning taxable 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.
Sec. 171.730. RULES. The comptroller may adopt rules
necessary to implement and administer this subchapter.
Sec. 171.731. REPORT. (a) Not later than November 1 of
each even-numbered year, the commission shall prepare and deliver
to the governor, the lieutenant governor, the speaker of the house
of representatives, and the presiding officer of each legislative
standing committee with primary jurisdiction over taxation a report
that evaluates the effect of the tax credits issued under this
subchapter on the employment outcomes and earnings of qualifying
apprentices with respect to whom credits are issued under this
subchapter. The report must include a recommendation regarding
whether the tax credit should be expanded or terminated.
(b) A taxable entity that requests a certificate of
eligibility under Section 171.725 shall provide, on request of the
commission, information the commission determines is necessary to
prepare the report under this section.
SECTION 2. Subchapter N-1, Chapter 171, Tax Code, as added
by this Act, applies only to a report originally due on or after
January 1, 2026.
SECTION 3. An entity may apply for a franchise tax credit
under Subchapter N-1, Chapter 171, Tax Code, as added by this Act,
only in connection with an apprentice first employed on or after the
effective date of this Act.
SECTION 4. This Act takes effect January 1, 2026.