Bill Text: TX HB2545 | 2019-2020 | 86th Legislature | Engrossed


Bill Title: Relating to franchise tax, oil production tax, and gas production tax incentives for certain desalination facility operations.

Spectrum: Bipartisan Bill

Status: (Engrossed - Dead) 2019-05-17 - Left pending in committee [HB2545 Detail]

Download: Texas-2019-HB2545-Engrossed.html
  86R25933 CBH-F
 
  By: Guillen H.B. No. 2545
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to franchise tax, oil production tax, and gas production
  tax incentives for certain desalination facility operations.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 171.1011, Tax Code, is amended by adding
  Subsection (g-9) to read as follows:
         (g-9)  A taxable entity that is a permit holder shall exclude
  from its total revenue, to the extent included under Subsection
  (c)(1)(A), (c)(2)(A), or (c)(3), any amount received by the entity
  from the sale of minerals or materials extracted from water by the
  desalination facility during the desalination process.  In this
  subsection, "desalination facility" and "permit holder" have the
  meanings assigned by Section 171.621.  This subsection expires
  December 31, 2024.
         SECTION 2.  Chapter 171, Tax Code, is amended by adding
  Subchapter L-1 to read as follows:
  SUBCHAPTER L-1. TAX CREDIT FOR OPERATION OF DESALINATION FACILITY
         Sec. 171.621.  DEFINITIONS. In this subchapter:
               (1)  "Commission" means the Texas Commission on
  Environmental Quality.
               (2)  "Desalination facility" means a facility that:
                     (A)  treats source water under the jurisdiction of
  the commission or the Railroad Commission of Texas that has a high
  total dissolved solids concentration, such as water produced in oil
  or gas drilling, completion, flowback, or production, to produce
  fresh water of usable quality for public, agricultural, industrial,
  environmental, and other beneficial uses; and
                     (B)  begins initial operations on or after January
  1, 2020.
               (3)  "Permit holder" means a person who operates a
  desalination facility and has all state and federal permits
  necessary to operate the facility.
         Sec. 171.622.  ELIGIBILITY FOR CREDIT. A permit holder that
  is a taxable entity and that produces fresh water of usable quality
  at a desalination facility is eligible for a credit in the amount
  and under the conditions and limitations provided by this
  subchapter against the tax imposed under this chapter.
         Sec. 171.623.  AMOUNT OF CREDIT; LIMITATIONS. (a) Except as
  provided by Subsection (d), the total amount of the credit under
  this subchapter for the period on which a report is based is equal
  to:
               (1)  50 cents for each 1,000 gallons of source water
  treated by the permit holder during the period on which the report
  is based if:
                     (A)  the source water has a total dissolved solids
  concentration of more than 5,000 milligrams per liter; and
                     (B)  the resulting fresh water is put to
  beneficial use in this state;
               (2)  $1 for each 1,000 gallons of source water treated
  by the permit holder during the period on which the report is based
  if:
                     (A)  at least 50 percent of the source water has a
  total dissolved solids concentration of more than 30,000 milligrams
  per liter; and
                     (B)  the resulting fresh water is put to
  beneficial use in this state;
               (3)  $5 for each 1,000 gallons of source water treated
  by the permit holder during the period on which the report is based
  if:
                     (A)  at least 50 percent of the source water has a
  total dissolved solids concentration of more than 50,000 milligrams
  per liter; and
                     (B)  the resulting fresh water is put to
  beneficial use in this state; and
               (4)  $17 for each 1,000 gallons of source water treated
  by the permit holder during the period on which the report is based
  if:
                     (A)  at least 50 percent of the source water has a
  total dissolved solids concentration of more than 90,000 milligrams
  per liter; and
                     (B)  the resulting fresh water is put to
  beneficial use in this state.
         (b)  The permit holder may treat source water with differing
  total dissolved solids concentrations during the period on which
  the report is based.  The permit holder is entitled to prorate the
  credit by the duration of processing time associated with each
  concentration during the period.
         (c)  Treated water may be counted only once in determining
  the amount of the credit.  Only one permit holder may claim a credit
  for the same treated water.
         (d)  The total credit claimed for a report, including the
  amount of any carryforward under Section 171.624, may not exceed
  the amount of franchise tax due for the report after all other
  applicable tax credits.
         Sec. 171.624.  CARRYFORWARD. (a) If a permit holder is
  eligible for a credit that exceeds the limitation under Section
  171.623(d), the permit holder may carry the unused credit forward
  for not more than five consecutive reports.
         (b)  A carryforward is considered the remaining portion of a
  credit that cannot be claimed in the current year because of the
  limitation under Section 171.623(d). A carryforward is added to
  the next year's installment of the credit in determining the
  limitation for that year. A credit carryforward from a previous
  report is considered to be used before the current year
  installment.
         Sec. 171.625.  APPLICATION. (a) A permit holder must apply
  for a credit under this subchapter on or with the report for the
  period for which the credit is claimed.
         (b)  A permit holder shall file with a report on which the
  credit is claimed a copy of each relevant certificate issued by the
  commission under Section 171.626 and any other information required
  by the comptroller to sufficiently demonstrate that the permit
  holder is eligible for the credit and the amount of the credit.
         (c)  The burden of establishing eligibility for and the
  amount of the credit is on the permit holder.
         Sec. 171.626.  MONTHLY STATEMENT; CERTIFICATION. (a)  To be
  eligible for a credit under this subchapter, a permit holder must
  submit to the commission monthly statements that include, for the
  preceding month:
               (1)  the metered volume in gallons of source water
  treated by the permit holder;
               (2)  the total dissolved solids concentration of the
  source water, distinguished according to the concentrations
  described by Section 171.623(a);
               (3)  the duration of processing time associated with
  each concentration described by Section 171.623(a); and
               (4)  the total dissolved solids concentration of the
  resulting fresh water.
         (b)  To be eligible for the credit under this subchapter, the
  permit holder must apply to the commission for certification that:
               (1)  the permit holder has, during the reporting
  period, treated source water in an amount and with a total dissolved
  solids concentration that qualify for a credit under Section
  171.623; and
               (2)  the resulting fresh water was put to beneficial
  use in this state.
         (c)  The permit holder shall include with the certificate
  application any information the commission determines is necessary
  to certify eligibility for the credit and the amount of the credit,
  including information sufficient to demonstrate that:
               (1)  the permit holder has all state and federal
  permits necessary to operate the desalination facility; and
               (2)  the resulting fresh water was put to beneficial
  use in this state.
         (d)  If the permit holder provides sufficient information
  under this section, the commission shall issue a certificate of
  eligibility to the permit holder.
         (e)  The commission shall immediately notify the comptroller
  in writing if the commission:
               (1)  determines that a permit holder that previously
  received a certificate under this section was not eligible for the
  certified credit or is no longer eligible for the certified credit;
  or
               (2)  takes any action or discovers any information that
  affects the eligibility of the permit holder for a credit.
         Sec. 171.627.  SALE OR ASSIGNMENT OF CREDIT; USE OF SOLD OR
  ASSIGNED CREDIT. (a) A permit holder that earns a credit under
  this subchapter may sell or assign all or part of the credit, and
  any entity to which all or part of the credit is sold or assigned may
  sell or assign all or part of the credit to another entity. There is
  no limit on the total number of transactions for the sale or
  assignment of all or part of the total credit authorized under this
  subchapter; however, collectively all transferred and retained
  credits claimed for a period are subject to the maximum total
  limitations provided by Subsection (b) and Section 171.623(d).
         (b)  Notwithstanding any other provision of this subchapter,
  an entity to which a credit or part of a credit was sold or assigned
  may apply all or part of that credit against the tax imposed by this
  chapter or against the tax imposed by Chapter 201 or 202.  The total
  credit claimed against the tax imposed by Chapter 201 or 202 may not
  exceed the amount of tax due for a report after all other applicable
  tax credits, but the entity may carry any unused credit forward
  until the credit is used.
         (c)  An entity that sells or assigns a credit under this
  section and the entity to which the credit is sold or assigned shall
  jointly submit written notice of the sale or assignment to the
  comptroller on a form promulgated by the comptroller not later than
  the 30th day after the date of the sale or assignment. The notice
  must include:
               (1)  the date of the sale or assignment;
               (2)  the amount of the credit sold or assigned;
               (3)  the names and federal tax identification numbers
  of the entity that sold or assigned the credit or part of the credit
  and the entity to which the credit or part of the credit was sold or
  assigned;
               (4)  the amount of the credit owned by the selling or
  assigning entity before the sale or assignment, and the amount the
  selling or assigning entity retained, if any, after the sale or
  assignment; and
               (5)  for the entity to which the credit or part of the
  credit was sold or assigned, each type of tax liability against
  which the entity intends to apply all or part of the credit, and the
  amount or percentage that the entity intends to apply against each
  type.
         (d)  The sale or assignment of a credit in accordance with
  this section does not extend the period for which a credit may be
  carried forward and does not increase the total amount of the credit
  that may be claimed.
         (e)  Notwithstanding the requirements of this subchapter, a
  credit earned or purchased by, or assigned to, a partnership,
  limited liability company, S corporation, or other pass-through
  entity may be allocated to the partners, members, or shareholders
  of that entity and claimed under this subchapter or Chapter 201 or
  202 in accordance with the provisions of any agreement among the
  partners, members, or shareholders and without regard to the
  ownership interest of the partners, members, or shareholders in the
  desalination facility operated by the permit holder who earned the
  credit, provided that the entity that claims the credit must be
  subject to the tax imposed under this chapter or Chapter 201 or 202.
         Sec. 171.628.  RULES. The comptroller and commission shall
  adopt rules necessary to implement this subchapter.
         Sec. 171.629.  EXPIRATION. (a) This subchapter expires
  December 31, 2024.
         (b)  The expiration of this subchapter does not affect the
  carryforward of a credit under Section 171.624 or those credits for
  which a taxable entity is eligible after the date this subchapter
  expires based on source water treated before the date this
  subchapter expires.
         SECTION 3.  (a)  Subject to Subsection (b) of this section,
  this Act applies only to a report originally due on or after the
  effective date of this Act.
         (b)  A taxable entity may exclude amounts from its total
  revenue as provided by Section 171.1011(g-9), Tax Code, as added by
  this Act, only on a report originally due on or after January 1,
  2021, and before January 1, 2025.
         SECTION 4.  This Act takes effect January 1, 2021.
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