HBA-RBT H.B. 2737 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 2737
By: Turner, Bob
Ways & Means
4/8/1999
Introduced



BACKGROUND AND PURPOSE 

Currently, a large percentage of Texas agricultural products are shipped
out of Texas for processing as there are few incentives for agricultural
processing business to locate in this state.  Texas ranks ninth in the
relative amount of value-added agricultural production compared to the
amount of raw agricultural goods produced in this state.  Seven of the
eight states which rank higher in relative value-added production have a
smaller population and overall agricultural production than Texas. H.B.
2737 provides incentives, through franchise and sales tax credits, for
businesses locating in this state to process agricultural products from
Texas. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the comptroller of public accounts in
SECTION 2 (Section 171.708, Tax Code) of this bill. 
 
SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter H, Chapter 151, Tax Code, by adding Section
151.3185, as follows: 

Sec.  151.3185.  TAXABLE ITEMS SOLD OR USED BY CERTAIN AGRICULTURAL
PROCESSORS.  Defines "agricultural processor," "agricultural product,"
"economically distressed county," "qualified agricultural processor," and
"rural county."  Provides that a taxable item purchased, leased, rented,
stored, or used by the agricultural processing business of a qualified
agricultural processor is exempted from the taxes imposed by this chapter.
Sets forth when an agricultural processor qualifies for the exemption.
Authorizes a qualified agricultural processor that is not a corporation
subject to taxation under Chapter 171 (Franchise Tax) to claim the
exemption only until the third anniversary of the date on which the
processor begins constructing or expanding a facility that is necessary or
essential to the agricultural processing business or enters into a lease
for such a facility.  Authorizes a qualified agricultural processor that is
a corporation subject to taxation under Chapter 171 (Franchise Tax) to
claim the exemption only until the first anniversary of the date on which
the processor begins constructing or expanding a facility that is necessary
or essential to the agricultural processing business or enters into a lease
for such a facility.  Provides that a corporation must apply to the
comptroller for the exemption provided by this section. Provides that the
burden of establishing entitlement to the exemption is on the agricultural
processor. 

SECTION 2.  Amens Chapter 171, Tax Code, by adding Subchapter N, as follows:

SUBCHAPTER N.  CREDIT FOR CERTAIN AGRICULTURAL PROCESSORS

Sec.  171.701.  DEFINITIONS.  Defines "agricultural processor,"
"agricultural product," "economically distressed county," "new permanent
employee," and "rural county."   

Sec.  171.702.  ENTITLEMENT TO CREDIT.  Provides that a corporation is
entitled to a credit in the amount and under the conditions and limitations
provided by this subchapter against the tax imposed under this chapter. 
 
Sec.  171.703.  TYPES OF CORPORATIONS THAT QUALIFY FOR CREDIT.  Sets forth
the conditions under which an agricultural processor corporation qualifies
for a credit under this subchapter.  Sets forth the method of computation
of the value of a corporation's overall investment in establishing or
expanding an agricultural processing business in a rural county or
economically distressed county.  Sets forth the method of calculating the
value of a new permanent job created by a corporation. 

Sec.  171.704.  AMOUNT OF CREDIT.  Sets forth the method of calculating the
total amount of credit for which a corporation may qualify for during a
privilege period. Establishes when a credit related to a particular new
permanent employee expires.  Provides that a corporation that qualifies for
a credit under this subchapter must take the credit in five equal
installments. 

Sec.  171.705.  LIMITATIONS.  Prohibits the total credit claimed from
exceeding 50 percent of the amount of net franchise tax due for the
privilege period after any other applicable tax credits.  Prohibits the
amount of the credit from reducing the tax below zero. 

Sec.  171.706.  CARRYOVER.  Authorizes a corporation to carryover a credit
that the corporation is entitled to take that exceeds the limitation
prescribed by Section 171.705. 

Sec.  171.707.  CONVEYANCE, ASSIGNMENT, OR TRANSFER.  Prohibits a
corporation from conveying, assigning, or transferring a credit to another
person.   

Sec.  171.708.  RULES.  Requires the comptroller to adopt rules necessary
to implement this subchapter. 

SECTION 3.  Amends Subchapter B, Chapter 403, Government Code, by adding
Section 403.0255, as follows: 

Sec.  403.0255.  INCENTIVES FOR AGRICULTURAL PROCESSORS.  Requires the
comptroller to promote awareness of incentives available to companies that
want to establish or expand an agricultural processing business in the
state. 

SECTION 4.  Amends Chapter 12, Agriculture Code, by adding Section 12.0021,
as follows: 

Sec.  12.0021.  INCENTIVES FOR AGRICULTURAL PROCESSORS.  Requires the
Department of Agriculture to recruit the governor's office and other state
agencies to participate in a coordinated campaign to increase awareness of
the incentives available to companies that want to establish or expand an
agricultural processing business in this state. 

SECTION 5.  Effective date: January 1, 2000.
            Authorizes a corporation to claim an exemption or credit under
this Act only for a 
            capital investment made or new permanent employee hired on or
after the  
            effective  date of this Act.

SECTION 6.  Emergency clause.