By: Nichols, Hagenbuch S.B. No. 1405
A BILL TO BE ENTITLED
AN ACT
relating to increasing access to and reducing taxation of Internet
services.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 403.553(o), Government Code, is amended
to read as follows:
(o) Not later than November 1 of each year [the 60th day
after the date the pole replacement fund receives money for the pole
replacement program], the comptroller shall [maintain and] publish
on the comptroller's Internet website:
(1) statistics on the number of applications received,
processed, and rejected by the program in the preceding state
fiscal year;
(2) statistics on the size, number, and status of
reimbursements awarded by the program in the preceding state fiscal
year, including the retail broadband service providers and pole
owners receiving reimbursements; and
(3) the estimated amount of money available for grants
from the program as of the last day of the preceding state fiscal
year [remaining in the pole replacement fund].
SECTION 2. Section 490I.0101(a), Government Code, is
amended to read as follows:
(a) For purposes of this chapter, subject to Subsection (b),
"broadband service" means Internet service with the capability of
providing a:
(1) speed of not less than 100 [25] megabits per second
for a download;
(2) speed of not less than 20 [three] megabits per
second for an upload; and
(3) network round-trip latency of less than or equal
to 100 milliseconds based on the 95th percentile of speed
measurements.
SECTION 3. Sections 490I.0105(a), (c), (f), and (q),
Government Code, are amended to read as follows:
(a) The broadband development office shall create, update
annually, and publish on the comptroller's Internet website a map
classifying each broadband serviceable location in this state as:
(1) an unserved location if the location:
(A) does not have access to reliable broadband
service capable of providing [the] speeds matching standards
adopted by the Federal Communications Commission if required by the
comptroller under Section 490I.0101(b), or if the comptroller has
not exercised the comptroller's authority under that subsection,
speeds described by Section 490I.0101(a); or
(B) is a public school or community anchor
institution and does not have access to reliable broadband service
capable of providing symmetrical upload and download speeds of at
least one gigabit per second with a network round-trip latency of
less than or equal to 100 milliseconds based on the 95th percentile
of speed measurements;
(2) an underserved location if the location is not an
unserved location but does not have access to reliable broadband
service with the capability of providing:
(A) a speed of not less than 250 [100] megabits
per second for a download;
(B) a speed of not less than 25 [20] megabits per
second for an upload; and
(C) a network round-trip latency of less than or
equal to 100 milliseconds based on the 95th percentile of speed
measurements; or
(3) a served location if the location is neither an
unserved nor an underserved location.
(c) The [After creation of the initial map described in
Subsection (a), the] office may evaluate the usefulness of the
standards for unserved and underserved locations outlined in
Subsection (a) and, if appropriate, make a recommendation to the
legislature to revise the standards.
(f) The [Except as provided by Subsection (g), the] office
shall use the best available data, including information available
from the Federal Communications Commission, to create or update the
map.
(q) The office is not required to create, update, or publish
a map under this section if the office adopts a map produced by the
Federal Communications Commission [produces a map] that[:
[(1)] enables the office to identify unserved,
underserved, and served locations [eligible and ineligible areas,]
as described by Subsection (a)[; and
[(2) meets the requirements of Subsection (d)].
SECTION 4. Sections 490I.0106, Government Code, is amended
by amending Subsections (a), (a-1), (a-2), (a-3), (b), (d), (f),
and (h) and adding Subsection (h-1) to read as follows:
(a) The broadband development office shall establish a
program to award grants, low-interest loans, and other financial
incentives [to applicants] for the purpose of expanding access to
and adoption of broadband service.
(a-1) The office may award grants, low-interest loans, and
other financial incentives [to applicants] for eligible broadband
infrastructure projects designed to provide qualifying broadband
service to unserved and underserved locations. For the purposes of
this subsection, an eligible broadband infrastructure project
includes a project in which not less than 80 percent of the
broadband serviceable locations to be served by the project are
unserved and underserved locations.
(a-2) The office may award grants, low-interest loans, and
other financial incentives [to applicants] for middle-mile
broadband infrastructure projects.
(a-3) The office may award grants, low-interest loans, and
other financial incentives [to applicants] for projects not
involving the deployment of broadband infrastructure that expand
the accessibility, affordability, or adoption of broadband
service, including education, training, community outreach, remote
learning or telehealth facilities, equipment purchases, or any
other use permitted by the applicable funding source.
(b) The office shall establish eligibility and award
criteria for making awards under this chapter for each applicable
notice of funds availability. The comptroller by rule may
prescribe the manner in which the office shall provide notice [to
applicants] of the applicable criteria. In establishing
eligibility and award criteria, the office shall:
(1) take into consideration grants and other financial
incentives awarded by the federal government for the deployment of
broadband service;
(2) prioritize the applications [of applicants] that
will expand access to and adoption of broadband service in
designated areas in which the highest percentage of broadband
serviceable locations are unserved or underserved locations;
(3) prioritize the applications [of applicants] that
will expand access to broadband service in public and private
primary and secondary schools and institutions of higher education;
(4) give preference to an applicant that provided the
information requested by the office under Section [490I.0105 or]
490I.01061; [and]
(5) take into consideration whether an applicant has
forfeited federal funding for defaulting on a project to deploy
qualifying broadband service; and
(6) take into consideration whether an applicant has
repeatedly used private property in an unauthorized manner or
caused damage to private property, as demonstrated by affidavits
submitted to the office by property owners affected by that
conduct.
(d) The office may not:
(1) except as provided by Section 490I.01062, favor a
particular broadband technology in awarding grants, loans, or other
financial incentives;
(2) award a grant, loan, or other financial incentive
to a noncommercial provider of broadband service for a broadband
serviceable location if an eligible commercial provider of
broadband service has submitted an application for the same
location;
(3) take into consideration distributions from the
state universal service fund established under Section 56.021,
Utilities Code, when deciding to award grants, loans, or other
financial incentives; or
(4) except as provided by Section 490I.01061, award a
grant, loan, or other financial incentive for deployment of
last-mile broadband service for a location that is subject to an
existing [a] federal commitment to deploy qualifying broadband
service on the date the application is submitted or during the
application process.
(f) During the 30-day posting period described by
Subsection (e) for an application, the office shall accept from any
interested party, other than a broadband service provider that does
not report information requested by the office under Section
[490I.0105 or] 490I.01061, a written protest of an [the]
application submitted for a grant, loan, or other financial
incentive under Subsection (a-1) relating to whether the
broadband-serviceable locations contained in the application are
eligible to receive funding [applicant or project is eligible for
an award or should not receive an award based on the criteria
prescribed by the office].
(h) The office shall establish and publish criteria for
award recipients. The criteria must include requirements that
grants, loans, and other financial incentives awarded through the
program for the deployment of broadband infrastructure may be:
(1) used only for capital expenses, purchase or lease
of property, and other expenses, including backhaul and transport,
that will facilitate the provision or adoption of broadband
service; and
(2) subject to withdrawal if the award recipient is
found, in accordance with rules adopted by the office, to have
repeatedly used private property in an unauthorized manner or
caused damage to private property.
(h-1) The comptroller by rule shall establish a process for
determining whether a financial incentive is subject to withdrawal
under Subsection (h) that:
(1) provides for the submission of a notarized
affidavit by an affected property owner; and
(2) requires the office to notify an award recipient of
the potential withdrawal and provide the recipient an opportunity
to respond before taking action.
SECTION 5. Sections 151.00394(b) and (c), Tax Code, are
amended to read as follows:
(b) "Internet access service" does not include [and the
exemption under Section 151.325 does not apply to] any [other]
taxable service listed in Section 151.0101(a), unless the taxable
service is provided in conjunction with and is merely incidental to
the provision of Internet access service.
(c) [On and after October 1, 1999,] "Internet access
service" is not included in the definitions of "data processing
service" and "information service."
SECTION 6. Section 151.0101(a), Tax Code, is amended to
read as follows:
(a) "Taxable services" means:
(1) amusement services;
(2) cable television services;
(3) personal services;
(4) motor vehicle parking and storage services;
(5) the repair, remodeling, maintenance, and
restoration of tangible personal property, except:
(A) aircraft;
(B) a ship, boat, or other vessel, other than:
(i) a taxable boat or motor as defined by
Section 160.001;
(ii) a sports fishing boat; or
(iii) any other vessel used for pleasure;
(C) the repair, maintenance, and restoration of a
motor vehicle; and
(D) the repair, maintenance, creation, and
restoration of a computer program, including its development and
modification, not sold by the person performing the repair,
maintenance, creation, or restoration service;
(6) telecommunications services;
(7) credit reporting services;
(8) debt collection services;
(9) insurance services;
(10) information services;
(11) real property services;
(12) data processing services;
(13) real property repair and remodeling;
(14) security services;
(15) telephone answering services; and
(16) [Internet access service; and
[(17)] a sale by a transmission and distribution
utility, as defined in Section 31.002, Utilities Code, of
transmission or delivery of service directly to an electricity
end-use customer whose consumption of electricity is subject to
taxation under this chapter.
SECTION 7. Section 171.10132, Tax Code, is amended by
amending Subsection (a) and adding Subsection (a-1) to read as
follows:
(a) In this section, "qualifying broadband grant" means a
grant for broadband deployment in this state received by a taxable
entity:
(1) under the Broadband Equity, Access, and Deployment
Program established under 47 U.S.C. Section 1702;
(2) under the State Digital Equity Capacity Grant
Program established under 47 U.S.C. Section 1723;
(3) under the Digital Equity Competitive Grant Program
established under 47 U.S.C. Section 1724;
(4) under the provisions of 47 U.S.C. Section 1741
providing for middle mile grants;
(5) under the broadband loan and grant pilot program
authorized under Section 779, Title VII, Div. A, Consolidated
Appropriations Act, 2018 (Pub. L. No. 115-141, 132 Stat. 399), from
funds made available for that program under the heading "Distance
Learning, Telemedicine, and Broadband Program," "Rural Utilities
Service," "Rural Development Programs" in Title I, Infrastructure
Investments and Jobs Appropriations Act (Title I, Div. J, Pub. L.
No. 117-58, 135 Stat. 1351);
(6) under Section 905, Division N, Consolidated
Appropriations Act, 2021 (Pub. L. No. 116-260, 134 Stat. 2136);
[or]
(7) from a state, territory, tribal government, or
unit of local government to the extent the grant was:
(A) funded by amounts provided under 42 U.S.C.
Section 802, 803, or 804; and
(B) provided for the stated purposes of making
investments in broadband infrastructure; or
(8) from the comptroller under Subchapter S, Chapter
403, Government Code, or Chapter 490I of that code.
(a-1) For purposes of Subsection (a)(8), a reimbursement
award received by a taxable entity under Subchapter S, Chapter 403,
Government Code, is considered a grant for broadband development in
this state.
SECTION 8. The following provisions are repealed:
(1) Chapter 490H, Government Code;
(2) Sections 490I.0105(g), (h), (i), (j), (k), (l),
(n), (o), and (p), Government Code; and
(3) Section 151.325, Tax Code.
SECTION 9. The changes in law made by this Act do not affect
tax liability accruing before the effective date of this Act. That
liability continues in effect as if this Act had not been enacted,
and the former law is continued in effect for the collection of
taxes due and for civil and criminal enforcement of the liability
for those taxes.
SECTION 10. Section 171.10132, Tax Code, as amended by this
Act, applies only to a report originally due on or after January 1,
2026.
SECTION 11. This Act takes effect July 1, 2025, if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for effect on that
date, this Act takes effect September 1, 2025.