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A BILL TO BE ENTITLED
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AN ACT
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relating to the computation of the cost of goods sold for franchise |
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tax purposes by certain taxable entities. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter C, Chapter 171, Tax Code, is amended |
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by adding Section 171.10125 to read as follows: |
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Sec. 171.10125. COMPUTATION OF COST OF GOODS SOLD BY |
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TAXABLE ENTITY DOING BUSINESS NEAR BORDER. (a) In this section: |
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(1) "Border" means the border between this state and |
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the United Mexican States. |
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(2) "Strategic investment area" means an area |
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determined by the comptroller under Subsection (h) that is: |
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(A) a county in this state with above state |
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average unemployment and below state average per capita income; or |
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(B) an area within this state that is a federally |
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designated urban enterprise community or an urban enhanced |
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enterprise community. |
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(b) This section applies only to a taxable entity that: |
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(1) has a business or facility located within a |
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strategic investment area; and |
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(2) conducts at least 90 percent of the taxable |
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entity's total business in the strategic investment area. |
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(c) In addition to Subsection (b), at least two of the |
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following conditions must apply for this section to apply to a |
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taxable entity: |
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(1) the taxable entity is licensed by the appropriate |
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local, state, and federal agencies on both sides of the border to |
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conduct border trade; |
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(2) the taxable entity is enrolled in the |
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Customs-Trade Partnership Against Terrorism (C-TPAT) and Fast and |
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Secure Trade (FAST) programs or is participating with companies |
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that are enrolled; |
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(3) the taxable entity invests in and implements |
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security, tracking, communication, and surveillance technology |
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systems used on commercial vehicles that operate in the strategic |
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investment area or in manufacturing and distribution plants located |
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on this state's side of the border or makes investment expenditures |
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specifically related to and incurs direct costs related to the |
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implementation of advanced technologies that protect elements of |
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the supply chain, including: |
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(A) secure trailers with intelligent locking |
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devices and seals; |
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(B) systems that detect tampering or |
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compromising of cargo; |
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(C) systems and protocols that provide instant |
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alarms and response to cargo deviation; |
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(D) efforts required to collaborate with |
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appropriate federal and state agencies on both sides of the border; |
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and |
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(E) systems and software that allow for the |
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tracking and monitoring of vehicles and manufacturing and logistics |
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facilities engaged in border trade; |
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(4) the taxable entity makes direct expenditures |
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related to a business that implements or operates security systems |
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that conduct or share information with appropriate federal and |
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state agencies relating to the assessment of drivers' dock |
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personnel and other individuals who are fundamentally important to |
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the border trade process; |
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(5) the taxable entity incurs direct costs of |
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creating, and training personnel for, new jobs in specialized, |
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highly skilled positions related to biotechnology, defense, |
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medical, software, and other value-added manufacturing fields in |
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the border region; or |
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(6) the taxable entity makes other direct investments |
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in integrated supply chain transportation systems that incorporate |
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sophisticated, embedded broadband communications technology that |
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integrates with public sector disaster, hazardous materials |
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transfer, congestion relief, vehicle tracking, or emergency |
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management systems. |
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(d) Subject to Subsection (f), a taxable entity to which |
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this section applies may subtract as a cost of goods sold under |
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Section 171.1012 any expenditure made or cost incurred relating to |
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an item or event listed in Subsection (c) that is not otherwise |
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included as a cost of goods sold under Section 171.1012. |
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(e) An expenditure made or cost incurred relating to an item |
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or event listed in Subsection (c) that is for not more than $150,000 |
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must be subtracted or depreciated on the report for the period in |
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which the expenditure is made or the cost incurred. An expenditure |
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made or cost incurred that is for more than $150,000 may be |
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subtracted or depreciated equally in three consecutive reports. |
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(f) The total amount that may be subtracted under this |
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section by all taxable entities during a reporting period may not |
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exceed $3 million. If the total amount subtracted as a cost of |
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goods sold under this section will exceed $3 million during a |
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reporting period, the comptroller shall allocate the $3 million |
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that may be subtracted on a pro rata basis. The comptroller may |
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require a taxable entity to notify the comptroller of the amount the |
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taxable entity intends to subtract under this section before the |
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due date of the report on which the taxable entity will subtract the |
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amount. |
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(g) If the comptroller decreases the amount that a taxable |
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entity may subtract under Subsection (f), the taxable entity may, |
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subject to the limitation provided by Subsection (f), carry the |
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difference in the amounts backward for not more than three |
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consecutive reports or forward for not more than seven consecutive |
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reports. |
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(h) Not later than September 1 each year, the comptroller |
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shall determine areas that qualify as strategic investment areas |
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using the most recently completed full calendar year data available |
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on that date and, not later than October 1, shall publish a list and |
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map of the designated areas. The designation is effective for the |
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following calendar year for purposes of this section. |
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(i) A taxable entity may not establish a credit under this |
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section on or after January 1, 2015. |
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SECTION 2. This Act applies only to a report originally due |
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on or after the effective date of this Act. |
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SECTION 3. This Act takes effect January 1, 2008. |