Signed by Governor Rick Perry

Vote Smart's Synopsis:

Vote to pass a bill that expands the franchise tax to include certain businesses.

Highlights:

• Authorizes a business to be eligible for a franchise tax credit if it is a “qualified business” and creates a minimum of 10 “qualifying jobs”, effective January 1, 2016 (Sec. 18).

• Defines “qualified business” as an establishment primarily engaged in agricultural processing, central administration offices, distribution, data processing, manufacturing, research and development, or warehousing (Sec. 18). 

• Defines “qualifying job” as a full-time position that meets the following requirements (Sec. 18):
• The job is paid an annual wage of at least $50,000; 
• The job is covered by a group health benefit plan for which the business pays at least 80 percent of the premiums for the employee; and 
• The job is not created to replace a previous employee.

• Specifies that the taxable margin of a business is to be determined by computing the amount equal to the business’s total revenue, minus $1 million (Sec. 6).

• Restructures the rate of the franchise tax to be 0.95 percent of the taxable margin if a business elects to subtract salaries for the purposes of computing its taxable margin (Sec. 3).

• Exempts certain businesses from including certain subcontracting payments made to non-employee agents in its total revenue (Sec. 7).

• Exempts a non-admitted insurance organization from the franchise tax if the organization is subject to a separate tax for conducting business in another state or foreign jurisdiction (Sec. 5).

• Authorizes a qualified business to establish a credit equivalent to 25 percent of the total wages paid by the business for each qualifying job during each of the first 12 months of employment of the individual hired to perform the job (Sec. 18). 

• Prohibits the total credit from exceeding 50 percent of the amount of the franchise tax due for the tax report before any other applicable tax credits (Sec. 18).

• Authorizes a business to be eligible for a tax credit for a “qualified capital investment” if a qualified business meets the following requirements (Sec. 18):
• The business pays an annual wage of at least $50,000 for a qualifying job;
• The business offers a group  health benefit plan coverage to all full-time employees for which the business pays at least 80 percent of the premiums for the employee; and
• The business makes a minimum “qualified capital investment” of $500,000.

• Defines “qualified capital investment” as tangible personal property first placed in service in this state by a taxable entity primarily engaged in agricultural processing including, but not limited to, engines, machinery, tools, and property leased under a capitalized lease (Sec. 18).

• Authorizes a taxable entity to establish a tax credit equal to 7.5 percent of the qualified capital investment during the period on which the tax report is based (Sec. 18).

• Authorizes a taxable entity to carry forward any unused credit of an installment that cannot be claimed in the current year to be then added to the following year’s installment of the credit in determining the limitation for that year (Sec. 18).

• Requires the comptroller to submit to the governor, the lieutenant governor, and the speaker of the House of Representatives a report with certain information including, but not limited to, the following information (Sec. 18):
• The total amount of tax credits claimed under this bill;
• The total number of jobs created by taxable entities that claim a credit; and
• The effect of the credit provided on employment, personal income, and capital investment in the state and on state tax revenues.

• Prohibits the comptroller from including information that is confidential by law in the report (Sec. 18).

• Authorizes a business to be eligible for a tax credit for costs and expenses incurred in the certified rehabilitation of certain historical structures if the following requirements are met (Sec. 19):
• The rehabilitated historic structure is placed in service on or after September 1, 2013;
• The business has an ownership interest in the certified historic structure in the year during which the structure is placed in service after the rehabilitation; and
• The total amount of the eligible costs and expenses incurred exceeds $5,000.

• Prohibits the amount of the franchise credit received by a business from exceeding 25 percent of the total eligible costs and expenses incurred in the rehabilitation of a single certified historic structure (Sec. 19).

• Authorizes a business that has unused, unexpired tax credits to transfer the credits to another taxpayer of the state if the business meets the following requirements (Sec. 22):
• It obtains a certificate of transfer of credit from the comptroller of public accounts for the amount of credits to be transferred; 
• It submits a notice of transfer to the comptroller; and
• Its credit was first reported on a tax report originally due before January 1, 2008.

• Rep. Eddie Lucio III is not on our vote breakdown because his vote did not accurately reflect his intentions; he initially voted “Yea” but changed his vote to “Nay” after roll call.

Full Bill Text