85R3170 TJB-D     By: Guillen H.B. No. 102       A BILL TO BE ENTITLED   AN ACT   relating to exemptions from ad valorem taxes, the sales and use tax,   and the franchise tax for certain businesses during an initial   period of operation in this state.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  This Act may be cited as the Texas Open for   Business Act.          SECTION 2.  Subchapter B, Chapter 11, Tax Code, is amended by   adding Section 11.36 to read as follows:          Sec. 11.36.  BUSINESSES DURING INITIAL PERIOD OF OPERATION.   (a) Subject to Subsection (b), a person is entitled to an exemption   from taxation by a taxing unit of the real and tangible personal   property owned by the person if:                (1)  the person meets the requirements of a new   business under Section 151.3183;                (2)  the property:                      (A)  is located in a county with a population of   250,000 or less; and                      (B)  is reasonably necessary for and used by the   person in the operation of the new business; and                (3)  the exemption is adopted by the governing body of   the taxing unit in the manner provided by law for official action by   the governing body.          (b)  A person is entitled to an exemption under this section   until the earliest of:                (1)  the 10th anniversary of the date on which the   person first meets the requirements of a new business under Section   151.3183;                (2)  the date on which the person ceases to meet the   requirements of a new business under Section 151.3183; or                (3)  the date the comptroller revokes the person's   sales tax registration number under Section 151.3183(h).          (c)  An exemption authorized by this section and adopted by   the governing body of a taxing unit applies to:                (1)  the tax year:                      (A)  in which the exemption is adopted by the   governing body if officially adopted before April 15; or                      (B)  immediately following the tax year in which   the exemption is adopted by the governing body if officially   adopted on or after April 15; and                (2)  each following tax year unless and until repealed   in the manner provided by Subsection (d).          (d)  The governing body of a taxing unit may repeal an   exemption adopted under this section in the manner provided by law   for official action by the governing body. The repeal of an   exemption by a governing body does not affect the entitlement of a   person who is receiving the exemption on the date it is repealed to   continue to receive the exemption for the period described by   Subsection (b).          (e)  The comptroller by rule shall establish requirements   and procedures for determining whether and as of what date a person   meets the requirements of a new business under Section 151.3183 for   the purpose of this section.          (f)  In determining whether a person meets the requirements   of a new business under Section 151.3183 and the date that those   requirements are met, the chief appraiser shall apply the   requirements and procedures adopted by the comptroller under   Subsection (e).          (g)  The chief appraiser shall promptly notify the   comptroller if the chief appraiser determines that a person   receiving an exemption under this section ceases to meet the   requirements of a new business under Section 151.3183.          SECTION 3.  Section 11.42(e), Tax Code, is amended to read as   follows:          (e)  A person who qualifies for an exemption under Section   11.131 or 11.36 after January 1 of a tax year may receive the   exemption for the applicable portion of that tax year immediately   on qualification for the exemption.          SECTION 4.  Section 11.43(k), Tax Code, is amended to read as   follows:          (k)  A person who qualifies for an exemption authorized by   Section 11.13(c) or (d), [or] 11.132, or 11.36 must apply for the   exemption no later than the first anniversary of the date the person   qualified for the exemption.          SECTION 5.  Section 26.1125, Tax Code, is amended to read as   follows:          Sec. 26.1125.  CALCULATION OF TAXES ON RESIDENCE HOMESTEAD   OF 100 PERCENT OR TOTALLY DISABLED VETERAN OR PROPERTY OF NEW   BUSINESS. (a) If a person qualifies for an exemption under Section   11.131 or 11.36 after the beginning of a tax year, the amount of the   taxes on the property subject to the exemption [residence homestead   of the person] for the tax year is calculated by multiplying the   amount of the taxes that otherwise would be imposed on the property   [residence homestead] for the entire year had the person not   qualified for the exemption under Section 11.131 or 11.36 by a   fraction, the denominator of which is 365 and the numerator of which   is the number of days that elapsed before the date the person   qualified for the exemption under Section 11.131 or 11.36.          (b)  If a person qualifies for an exemption under Section   11.131 or 11.36 with respect to the property after the amount of the   tax due on the property is calculated and the effect of the   qualification is to reduce the amount of the tax due on the   property, the assessor for each taxing unit shall recalculate the   amount of the tax due on the property and correct the tax roll. If   the tax bill has been mailed and the tax on the property has not been   paid, the assessor shall mail a corrected tax bill to the person in   whose name the property is listed on the tax roll or to the person's   authorized agent. If the tax on the property has been paid, the tax   collector for the taxing unit shall refund to the person who paid   the tax the amount by which the payment exceeded the tax due.          SECTION 6.  Subchapter H, Chapter 151, Tax Code, is amended   by adding Section 151.3183 to read as follows:          Sec. 151.3183.  TAXABLE ITEMS USED BY CERTAIN NEW BUSINESSES   DURING INITIAL PERIOD OF OPERATION. (a) In this section:                (1)  "Internal Revenue Code" means the Internal Revenue   Code of 1986 in effect on December 31, 2016, excluding any changes   made by federal law after that date, but including any regulations   adopted under that code applicable to the tax year to which the   provisions of the code in effect on that date applied.                (2)  "Qualifying job" means an employment position that   is:                      (A)  new to and located in this state;                      (B)  permanent and full-time; and                      (C)  held by an employee for at least 10 months   during each 12-month period.          (b)  The sale to or storage, use, or other consumption by a   new business of a taxable item that will be directly used or   consumed by the business is exempted from the taxes imposed by this   chapter.          (c)  A person is a new business for purposes of this section   if the person is a business that:                (1)  is primarily located in a county with a population   of 250,000 or less;                (2)  is first located and begins doing business in this   state on or after January 1, 2018, regardless of whether the   business is chartered or organized in this state or outside this   state;                (3)  is not substantially similar in operation and in   ownership to another business located in this state during any part   of the preceding five years;                (4)  is primarily engaged in:                      (A)  a manufacturing activity described in   categories 2011-3999 of the 1987 Standard Industrial   Classification Manual published by the United States Department of   Labor; or                      (B)  qualified research, as defined by Section 41,   Internal Revenue Code; and                (5)  creates, on or after January 1, 2018, and not later   than the 30th day after the date the business first locates in this   state, at least one qualifying job.          (d)  To claim an exemption under this section, a registration   number issued by the comptroller must be stated on the exemption   certificate provided by the purchaser of the item.          (e)  Subject to Subsection (f), a person may apply to the   comptroller for issuance of a registration number by the   comptroller.  The application must be made on a form prescribed by   the comptroller and include the information required by the   comptroller to establish that the person is a new business as   described by Subsection (c).          (f)  A person who meets the requirements of a new business as   described by Subsection (c) must apply for a registration number   not later than the first anniversary of the date the person begins   doing business in this state.  The comptroller shall deny an   application received after that date.          (g)  A registration number issued under this section expires   on the 10th anniversary of the date of issuance, unless revoked at   an earlier time by the comptroller as provided by Subsection (h).     The registration number may not be renewed.          (h)  The comptroller shall revoke and may not reinstate a   registration number issued to a person if the person ceases to meet   a requirement prescribed by Subsection (c). The comptroller shall   promptly notify the chief appraiser of each appraisal district in   which a person whose registration number is revoked owns property   that the registration number has been revoked. A person whose   registration number is revoked is liable for payment of the taxes   imposed under this chapter on the sales price of each taxable item   for which the person claimed an exemption under this section on or   after the date the registration number was revoked.          (i)  The comptroller shall adopt rules necessary to   implement this section, including rules relating to the:                (1)  qualification of a person for an exemption under   this section;                (2)  issuance and revocation of a registration number   issued under this section; and                (3)  reporting and other procedures necessary to ensure   that a person to whom a registration number is issued under this   section complies with this section and remains entitled to the   exemption authorized by this section.          SECTION 7.  Section 171.0001(4), Tax Code, as effective   until January 1, 2020, is amended to read as follows:                (4)  "Beginning date" means:                      (A)  except as provided by Paragraph (B) or (C):                            (i)  for a taxable entity chartered or   organized in this state, the date on which the taxable entity's   charter or organization takes effect; and                            (ii)  for any other taxable entity, the date   on which the taxable entity begins doing business in this state;   [or]                      (B)  for a taxable entity that qualifies as a new   veteran-owned business as defined by Section 171.0005, the earlier   of:                            (i)  the fifth anniversary of the date on   which the taxable entity begins doing business in this state; or                            (ii)  the date the taxable entity ceases to   qualify as a new veteran-owned business as defined by Section   171.0005; or                      (C)  for a taxable entity that meets the   requirements of a new business under Section 151.3183, the earlier   of:                            (i)  the 10th anniversary of the date on   which the taxable entity begins doing business in this state; or                            (ii)  the date the taxable entity ceases to   comply with the requirements of a new business under Section   151.3183.          SECTION 8.  Section 171.0001(4), Tax Code, as effective   January 1, 2020, is amended to read as follows:                (4)  "Beginning date" means:                      (A)  except as provided by Paragraph (B):                            (i)  for a taxable entity chartered or   organized in this state, the date on which the taxable entity's   charter or organization takes effect; and                            (ii) [(B)]  for any other taxable entity,   the date on which the taxable entity begins doing business in this   state; or                      (B)  for a taxable entity that meets the   requirements of a new business under Section 151.3183, the earlier   of:                            (i)  the 10th anniversary of the date on   which the taxable entity begins doing business in this state; or                            (ii)  the date the taxable entity ceases to   comply with the requirements of a new business under Section   151.3183.          SECTION 9.  Section 171.001, Tax Code, is amended by adding   Subsection (e) to read as follows:          (e)  Notwithstanding Subsection (a), the tax imposed under   this chapter is not imposed on a taxable entity that meets the   requirements of a new business under Section 151.3183 until the   earlier of:                (1)  the 10th anniversary of the date on which the   taxable entity begins doing business in this state; or                (2)  the date the taxable entity ceases to comply with   the requirements of a new business under Section 151.3183.          SECTION 10.  Section 171.063(g), Tax Code, as effective   until January 1, 2020, is amended to read as follows:          (g)  If a corporation's federal tax exemption is withdrawn by   the Internal Revenue Service for failure of the corporation to   qualify or maintain its qualification for the exemption, the   corporation's exemption under this section ends on the effective   date of that withdrawal by the Internal Revenue Service.  The   effective date of the withdrawal is considered the corporation's   beginning date for purposes of determining the corporation's   privilege periods and for all other purposes of this chapter,   except that if the corporation would have been subject to Section   171.001(d) or (e) in the absence of the federal tax exemption, and   the effective date of the withdrawal is a date earlier than the date   the corporation would have become subject to the franchise tax as   provided by Section 171.001(d) or (e), as applicable, the date the   corporation would have become subject to the franchise tax under   Section 171.001(d) or (e) [that section] is considered the   corporation's beginning date for those purposes.          SECTION 11.  Section 171.063(g), Tax Code, as effective   January 1, 2020, is amended to read as follows:          (g)  If a corporation's federal tax exemption is withdrawn by   the Internal Revenue Service for failure of the corporation to   qualify or maintain its qualification for the exemption, the   corporation's exemption under this section ends on the effective   date of that withdrawal by the Internal Revenue Service. The   effective date of the withdrawal is considered the corporation's   beginning date for purposes of determining the corporation's   privilege periods and for all other purposes of this chapter,   except that if the corporation would have been subject to Section   171.001(e) in the absence of the federal tax exemption, and the   effective date of the withdrawal is a date earlier than the date the   corporation would have become subject to the franchise tax as   provided by Section 171.001(e), the date the corporation would have   become subject to the franchise tax under that section is   considered the corporation's beginning date for those purposes.          SECTION 12.  Section 171.204, Tax Code, is amended by adding   Subsection (e) to read as follows:          (e)  The comptroller may require a taxable entity on which   the tax imposed under this chapter is not imposed solely because of   the application of Section 171.001(e) to file an information report   stating the taxable entity's beginning date as determined under   Section 171.0001 and any other information the comptroller   determines necessary. The comptroller may not require the taxable   entity to report or compute its margin.          SECTION 13.  Not later than December 1, 2017, the   comptroller of public accounts shall adopt rules as required by   Section 151.3183(i), Tax Code, as added by this Act.          SECTION 14.  Section 11.36, Tax Code, as added by this Act,   and Sections 11.42, 11.43, and 26.1125, Tax Code, as amended by this   Act, apply only to ad valorem taxes imposed for a tax year that   begins on or after January 1, 2018.          SECTION 15.  (a) Except as provided by Subsection (b) of   this section or as otherwise provided by this Act, this Act takes   effect September 1, 2017.          (b)  Sections 2, 3, 4, and 5 of this Act take effect January   1, 2018, but only if the constitutional amendment authorizing the   governing bodies of certain political subdivisions to exempt from   ad valorem taxation the real and tangible personal property of   businesses during an initial period of operation in this state is   approved by the voters. If that amendment is not approved by the   voters, Sections 2, 3, 4, and 5 of this Act have no effect.