BILL ANALYSIS

S.B. 1243

By: Huffman

Ways & Means

Committee Report (Unamended)

BACKGROUND AND PURPOSE

As part of the federal Infrastructure Investment and Jobs Act enacted in 2021, the U.S. Congress provided over $65 billion for connectivity infrastructure, with $45 billion for broadband deployment across the United States. This builds off the $17 billion previously provided for broadband deployment under the federal American Rescue Plan. There is currently no exception provided in state law to exclude this grant revenue from the franchise tax calculation. Taxpayers who receive broadband deployment grants must therefore include the grants in total revenue for franchise tax reporting purposes. To further encourage broadband deployment in Texas, S.B. 1243 seeks to exclude the grants received for broadband deployment in Texas from the calculation of total revenue used to determine franchise tax liability. Additionally, the bill seeks to specifically allow qualifying expenses paid with the grant proceeds to be included in the determination of cost of goods sold or compensation for franchise tax purposes.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

S.B. 1243 amends the Tax Code to require a taxable entity to exclude from its total revenue as calculated in determining franchise tax liability qualifying broadband grant proceeds for the purposes of broadband deployment in Texas. The bill authorizes a taxable entity to include as a cost of goods sold or as compensation when determining that tax liability any expense paid using those grant proceeds for the purposes of broadband deployment in Texas if the expense is otherwise includable as a cost of goods sold or as compensation, as applicable.

S.B. 1243 defines "qualifying broadband grant" for these purposes as a grant for broadband deployment in Texas received by a taxable entity under any of the following:

·         the federal Broadband Equity, Access, and Deployment Program;

·         the federal State Digital Equity Capacity Grant Program;

·         the federal Digital Equity Competitive Grant Program;

·         the provisions of federal law providing for middle mile grants;

·         the broadband loan and grant pilot program authorized under the federal Consolidated Appropriations Act, 2018, from funds made available for that program under specified provisions of the federal Infrastructure Investments and Jobs Appropriations Act;

·         a broadband infrastructure grant program established by the federal Consolidated Appropriations Act, 2021; or

·         from a state, territory, tribal government, or unit of local government to the extent the grant was funded with certain federal coronavirus recovery funds and provided for the stated purposes of making investments in broadband infrastructure.

S.B. 1243 applies only to a franchise tax report originally due on or after January 1, 2023.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2023.