Bill Caption

Relating to the determination of eligible costs and expenses for purposes of the franchise tax credit for the rehabilitation of historic structures.

Fiscal Notes

A fiscal note dated April 13, 2015 anticipates a negative two-year net impact to General Revenue Related Funds of $408,088 through the biennium ending August 31, 2017.

Bill Analysis

House Bill 3230 would amend chapter 171 of the Tax Code related to the franchise tax to change the definition of "eligible costs and expenses." It would make an exception to qualified rehabilitation expenditures as defined by Section 47(c)(2), Internal Revenue to specify that the depreciation and tax-exempt use provisions of that section do not apply to costs and expenses incurred by an entity exempt from the tax imposed under this chapter by Section 171.063, and those costs and expenses are eligible costs and expenses if the other provisions of Section 47(c)(2), Internal Revenue Code, are satisfied.

Vote Recommendation Notes

5/23/15 Update:

No amendments have been introduced on the House floor and no changes have been made to the bill in Senate committee. We continue to support it.

The second chamber sponsor is Senator Donna Campbell.

First chamber analysis below:

According to the statement of intent of House Bill 3230, previous legislation created a credit against the franchise tax based on the qualified costs of a certified rehabilitation of certain historic structures. But the definition used for "eligible costs and expenses" had the result of excluding rehabilitation costs incurred by nonprofits.

House Bill 3230 would change the definition of "eligible costs and expenses" to allow that certain nonprofit entities that are exempt from the franchise tax because they are exempt from the federal income tax would be able to count as eligible costs and expenses for the purpose of the franchise tax credit those costs and expenses related to certified rehabilitation of certain historic structures incurred by these entities.

This bill is yet another example of how complicated the franchise tax is. The bill aims at preventing the exclusion from a franchise tax credit option of certain nonprofits while the intent of the original legislation wasn't to exclude them. As such, we can support this bill.

A better, long-term solution that could benefit everyone though would be to repeal or even phaseout the franchise tax.