| (a) Except as otherwise provided in this section, the provisions
of this section apply to franchise tax reports originally due on or after
September 1, 1991.
(b) Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1) Enterprise project--A person, including a corporation or
other entity, designated by the Texas Department of Economic Development as
an enterprise project under the Government Code, Chapter 2303.
(2) Enterprise zone--An area of the state designated by
the Texas Department of Economic Development as an enterprise zone under the
Government Code, Chapter 2303.
(3) New permanent job--A new employment position that
is:
(A) created by a qualified business as described by the Government
Code, §2303.402, that has provided employment to a qualified employee
of at least 1,820 hours annually (applicable to reports originally due on
or after September 1, 1995); and
(B) intended to exist under the Government Code, Chapter 2303,
during the period the business is designated as an enterprise project.
(4) Qualified business--A person, including a corporation
or other entity, that is certified as a qualified business under the Government
Code, §2303.402.
(5) Qualified employee--A person who works for a qualified
business and who performs at least 50% of the person's service for the business
within the enterprise zone. See the Government Code, §2303.003.
(6) Qualified investment--Capital equipment or other investment
that qualifies for depreciation for federal income tax purposes and that is
placed in service in the enterprise zone or readjustment zone not earlier
than the 90th working day before the date of designation as an enterprise
project or readjustment project. The investment must be used in the normal
course of business in the enterprise zone or readjustment zone and must not
be removed from the zone, except for repair and maintenance.
(7) Readjustment project--A corporation designated by
the Texas Department of Economic Development as a defense readjustment project
under the Government Code, Chapter 2310.
(8) Readjustment zone--An area of the state that the Texas
Department of Economic Development has designated as a defense economic readjustment
zone under the Government Code, Chapter 2310.
(c) A corporation may apply for a refund under the Tax Code, §171.501,
each year that it is certified as eligible for refund by the Texas Department
of Economic Development.
(d) The comptroller shall issue a refund under the Tax Code, §171.501,
after receiving certification from the Texas Department of Economic Development
that a qualified business has created ten or more new permanent jobs for qualified
employees in its enterprise zone. The ten or more new permanent jobs must
have been created during the calendar year containing the accounting year
end on which the franchise tax report is based. For example, a corporation
with a June 30, 1997, accounting year end would be eligible for a refund of
franchise tax paid on its 1998 annual report if ten or more new permanent
jobs are created during the 1997 calendar year.
(e) If a corporation is eligible for a refund under the Tax
Code, §171.501, on its initial report and that report includes a regular
annual period, the corporation will be entitled to two refunds:
(1) a refund for the initial and second periods; and
(2) a refund for the regular annual period.
(f) Claims for refund under this rule must be on the form provided
by the comptroller for that purpose. The claim must indicate the report year
in which franchise tax was paid. The claim must include certification from
the Texas Department of Economic Development that ten or more new permanent
jobs have been created during the applicable calendar year.
(g) A corporation that the Texas Department of Economic Development
has certified to be an enterprise project eligible for a tax deduction may
elect to reduce either its apportioned taxable capital or apportioned taxable
earned surplus in accordance with the Tax Code, §171.1015, on each report
based on a fiscal year during all or part of which the corporation is designated
an enterprise project. An election for an initial period applies to the second
tax period and to the first regular annual period. This requirement is applicable
to the first regular annual period whether it is included in the corporation's
initial report or first annual report. Otherwise, the election will not be
binding on the corporation for future reports. A corporation that establishes
its eligibility for a capital investment credit under the Tax Code, §171.802,
cannot take the enterprise zone deduction authorized by the Tax Code, §171.1015.
(1) The deduction from apportioned taxable capital is limited
to 50% of the depreciated value of qualified investments. For example, a corporation
with a December 31 year end is designated as an enterprise project on July
15, 1997. The corporation's 1998 annual report (based on its December 31,
1997, accounting year end) would be the first report in which it would be
eligible for a taxable capital deduction under the Tax Code, §171.1015.
The deduction would apply to qualified investments placed in service in the
enterprise zone on or after March 5, 1997 (the 90th working day before the
July 15, 1997, designation date).
(2) The deduction from apportioned taxable earned surplus
is limited to 5.0% of the depreciated value of qualified investments. For
example, a corporation with a December 31 year end is designated as an enterprise
project on July 15, 1997. The corporation would be eligible for the earned
surplus deduction on its 1998 annual report (based on its December 31, 1997,
accounting year end) under the Tax Code, §171.1015. The deduction would
apply to qualified investments placed in service in the enterprise zone on
or after March 5, 1997 (the 90th working day before the July 15, 1997, designation
date).
(h) A corporation must retain records substantiating its apportioned
taxable capital or apportioned taxable earned surplus deduction. The records
must be verifiable by audit and include copies of invoices showing the items
purchased, the date of purchase, and the cost of the purchase. The records
must also reflect the depreciated value of the items purchased and show that
these items were placed in service in the zone after the corporation's designation
as an enterprise project.
(i) Amended reports may be filed in accordance with the following
enterprise project designations.
(1) A corporation receiving its enterprise project designation
after August 31, 1991, cannot claim a tax base deduction under the Tax Code, §171.1015,
until after August 31, 1993. For example, a corporation with a November 30,
1991, fiscal year end is designated an enterprise project on September 30,
1991. The corporation could not claim the tax base deduction on its 1992 report
until after August 31, 1993. An amended report would have to be filed at that
time.
(2) A corporation receiving its enterprise project designation
after August 31, 1993, cannot claim a tax base deduction under the Tax Code, §171.1015,
until after August 31, 1995. For example, a corporation with a November 30,
1993, fiscal year end is designated an enterprise project on September 30,
1993. The corporation could not claim the tax base deduction on its 1994 report
until after August 31, 1995. An amended report would have to be filed at that
time.
(3) A corporation receiving its enterprise project designation
after August 31, 1995, cannot claim a tax base deduction under the Tax Code, §171.1015,
until after August 31, 1997. For example, a corporation with a November 30,
1995, fiscal year end is designated an enterprise project on September 30,
1995. The corporation could not claim the tax base deduction on its 1996 report
until after August 31, 1997. An amended report would have to be filed at that
time.
(j) A corporation that the Texas Department of Economic Development
has designated as a readjustment project may elect to reduce either its apportioned
taxable capital or apportioned taxable earned surplus in accordance with the
Tax Code, §171.1016, on each report based on a fiscal year during all
or part of which the corporation is designated a readjustment project. An
election for an initial period applies to the second tax period and to the
first regular annual period. This requirement is applicable to the first regular
annual period whether it is included in the corporation's initial report or
first annual report. Otherwise, the election will not be binding on the corporation
for future reports.
(1) The deduction from apportioned taxable capital is 50% of
the depreciated value of qualified investments. For example, a corporation
with a December 31 year end is designated as a readjustment project on July
15, 1997. The corporation's 1998 annual report (based on its December 31,
1997, accounting year end) would be the first report in which it would be
eligible for a taxable capital deduction under the Tax Code, §171.1016.
The deduction would apply to qualified investments placed in service in the
readjustment zone on or after March 5, 1997 (the 90th working day before the
July 15, 1997, designation date).
(2) The deduction from apportioned taxable earned surplus
is limited to 5.0% of the depreciated value of qualified investments. For
example, a corporation with a December 31 year end is designated as a readjustment
project on July 15, 1997. The corporation would be eligible for the earned
surplus deduction on its 1998 annual report (based on its December 31, 1997,
accounting year end) under the Tax Code, §171.1016. The deduction would
apply to qualified investments placed in service in the readjustment zone
on or after March 5, 1997 (the 90th working day before the November 15, 1997,
designation date).
(k) A corporation must retain records substantiating its apportioned
taxable capital or apportioned taxable earned surplus deduction. The records
must be verifiable by audit and include copies of invoices showing the items
purchased, the date of purchase, and the cost of the purchase. The records
must also reflect the depreciated value of the items purchased and show that
these items were placed in service in the zone after the corporation's designation
as a readjustment project.
(l) Gross receipts from services performed by a readjustment
project in a readjustment zone are not Texas gross receipts for either taxable
capital or earned surplus.
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