The Comptroller of Public Accounts adopts new §§9.1051 - 9.1058, concerning the limitation on appraised value and tax credits on certain qualified property created by Tax Code, Chapter 313, with changes to the proposed text as published in the November 9, 2007, issue of the Texas Register (32 TexReg 8102).

The new sections will be under new Subchapter F, Limitation on Appraised Value and Tax Credits on Certain Qualified Property. The new sections are being adopted to replace the current §9.107, which is being repealed. The new sections implement House Bill 2994, House Bill 1470, House Bill 3732, House Bill 3430, and House Bill 3693, 80th Legislature, 2007, to clarify issues related to application and qualification, and to adopt by reference application forms for the limitation on appraised value and the tax credits.

Section 9.1051 defines certain terms used in new Subchapter F, such as qualified property, application review period, and applicant. New §9.1052 adopts by reference forms entitled Application for Appraised Value Limitation on Qualified Property (Form 50-296) and Application for Tax Credit on Qualified Property (Form 50-300) by reference. Section 9.1053 concerns requirements and restrictions, governs extension of the application review period, provision of supplemental and amended information, and sets forth requirements for the primary activity of a project and the applicant's use of the property. Section 9.1054 governs the applicant and action on applications, including provisions setting forth the application date for certain qualifying time periods, the minimum standards for completion, the actions the governing body must take upon receiving an application, requiring specific information on the application, specifying the types of information that may be amended and types of information that may be supplemented, and addressing the time period in which the comptroller must issue a recommendation when an application is amended. Section 9.1055 sets forth requirements for the written agreement between the school district and the taxpayer to limit the appraised value of certain property, including provisions requiring the school district to send the comptroller and appraisal districts a copy of the agreement, setting out provisions that may be included in the agreement and provisions that must be contained in the agreement, requiring the reporting of additions of property to the agreement to the comptroller and appraisal districts, setting out the requirements for an agreement to add property, and prohibiting amendment of the agreement to extend the qualifying time period. Section 9.1056 concerns the tax credit to which an applicant may be entitled and states how the credit is to be calculated. Section 9.1057 concerns the comptroller's duties under Tax Code, Chapter 313, including provisions permitting the comptroller to require certain information from the school district, setting forth the time period in which the information must be provided, requiring applicants to promptly submit certain information required to complete a biennial report assessing the progress of each agreement; addresses the calculation of the 60-day time period for issuing the comptroller's recommendation; stating that the comptroller will promptly notify the applicant and school district if an application is incomplete; governing the submission of certain information requested by the comptroller, and providing that information not submitted in a timely manner may not be considered in the comptroller's recommendation or economic impact evaluation. Section 9.1058 includes miscellaneous provisions, including provisions requiring recipients of the limitation to notify certain parties of certain changes and the chief appraiser to maintain a list of property subject to the limitation stating that certain changes in district characteristics do not affect certain terms in the agreement, and that the comptroller may promulgate guidelines to further implement Tax Code, Chapter 313.

Comments submitted by Mr. James Wester recommended that §9.1053(d) include a reference to the comptroller. The agency agreed and made the change. The commenter suggested that §9.1054(b)(1)(F) require applicants intending to request a job waiver to submit, with the application, supporting documentation justifying the waiver of minimum job requirements. The agency agreed and the change was made. The commenter suggested that §9.1054(h) and (j) be revised to provide the school district with more time to act after receiving the comptroller's recommendation. The agency disagreed and did not make the change because the provision is intended to encourage applicants to file complete applications. The commenter suggested inclusion of a notice to the applicant and the school district that the application is complete. The agency disagreed and did not make the change. An applicant has filed a complete application if the applicant has not received a notice that the application is incomplete, however, the agency addressed the commenter's concern by adding a provision requiring prompt notification to an applicant that the application is not complete.

Mr. Michael Chrobak, Governor's Office of Economic Development and Tourism, commented that §9.1051 should define the terms "qualified investment" and "appraised value." The agency agreed and revised the rule accordingly. The commenter recommended that §9.1054(e) include the estimated appraised value of rendered property arising from the value of the proposed investment. The agency disagreed because the specific change was unnecessary, but clarified the information that is being requested on the form. The commenter suggested revising §9.1054(f) to replace the reference to September 3 with a generic term. The agency disagreed because the specific date provides the public with more information about the application process. The commenter recommended clarification of §9.1055(d). The agency agreed and made the change.

Mr. Dick Lavine, Center for Public Policy Priorities, requested the inclusion of information on health benefits when referencing wages and employment. The agency agreed and changed the application form and schedule "C" accordingly. The commenter suggested that §9.1055 require the agreement to include a requirement that the applicant's jobs meet the statutory definition of a "qualifying job," specifically coverage by a group health benefit plan and wages equal to at least 110% of the county average weekly wage for manufacturing jobs in the county, throughout the life of the agreement. The agency declined to make the change because the law regarding this issue is not clear and the parties may choose to include in the agreement a provision requiring continuing compliance with the definition of a qualifying job. The commenter recommended amending §9.1055(d) to require the applicant to seek a recommendation from the agency before adding property to an agreement. The agency declined to make the change because the law does not impose this requirement on property added to the agreement. The commenter suggested adding a provision requiring the applicant to submit information that is sufficiently detailed to enable evaluation of continuing compliance with Chapter 313. The agency declined to make the change because the agency is not proposing to adopt the report form that applicants must complete for the biennial report to the Legislature assessing the progress of Chapter 313 agreements. The commenter requested the deletion of language in §9.1058(d) concerning leaseholds and that the limitation application form be changed accordingly. Subsection (d) was deleted because the law regarding this matter is not clear, and therefore, the form need not be amended. The commenter recommended clarification of question six on the limitation application form by clearly stating that qualifying jobs are those that pay at least 110% of the county average weekly wage for manufacturing jobs in the county where the job is located. The agency agreed and made the requested change. The commenter suggested revising the limitation application form, question eight, to ask for information verifying that the applicant's qualifying jobs provide health benefits that meet the minimum statutory requirements. The agency agreed and added clarifying language to the application form. The commenter suggested that the limitation and tax credit application forms require applicants to update the schedules as necessary when reporting an amendment to the agreement. The agency agreed, but the change was not necessary because each of the schedules included with the application forms state that applicants are required to submit updated schedules in this circumstance. The agency, however, addressed the comment by improving the visibility of the language on the form that requires updated schedules. The commenter recommended adding the definition of a qualifying job and a request for the total number of permanent full-time new jobs created by the applicant to schedule "C" of the application form. The agency agreed and made the change. The commenter suggested that the same schedule be revised to reflect the statutory requirement that qualifying jobs pay wages that are 110% of the county average wage. The agency agreed and made the change. The commenter suggested adding to the same schedule a request for the number of jobs that provide the health benefits required by Tax Code, §313.021(3)(D). The agency agreed and addressed the comment by adding a citation to Tax Code, §313.021(3). The commenter suggested that the agency gather information from each school district concerning its taxable property value per weighted student in average daily attendance. The agency declined to make the change because this information is available from the Texas Education Agency. The commenter recommended that the agency gather information from each school district concerning financial arrangements between the district and the applicant that provide revenue or in-kind resources because, according to the commenter, the law requires school districts to approve only applications that improve the local public education system. The agency declined to make the change because the agency has not proposed rules or promulgated a form concerning the collection of information for the biennial report to the legislature assessing the progress of each Chapter 313 project.

Moak, Casey & Associates, Mr. Kevin O'Hanlon of O'Hanlon, McCollom & Demerath, and Ms. Debbie Cartwright of Bexar Appraisal District commented that the requirement in §9.1053(a) that an extension of the deadline be granted before the deadline has passed should be deleted. The agency declined to make the change because a deadline that has passed cannot be extended. Deleting the requirement would effectively render the statutory 120 day application review period meaningless. The commenters requested adding the school district to §9.1054(b). The agency agreed and made the change.

Moak, Casey & Associates and Mr. Kevin O'Hanlon of O'Hanlon, McCollom & Demerath commented that §9.1054(f) should be changed to state that the application must be filed, "on or before" September 3, rather than "before" that date, as the subsection currently states. The agency declined to make the change because the deadline would be incorrectly stated. The commenters recommended deleting or, alternatively, replacing the requirement in §9.1053(e) that the applicant use eligible property in the applicant's primary activity with definitions of "placed in the stream of commerce" and "used in connection with," contending that the subsection too narrowly interprets the phrase "used in connection with." The agency disagreed and did not make the change because the agency interprets "in connection with" to mean the property of the person who is engaged in the primary activity but that is not used in the conduct of the primary activity, such as property used for administrative purposes and other support functions that are "connected with" the primary activities listed under Tax Code, §313.024. The commenters suggested that §9.1054(b)(1)(C) be amended to insert the term, "projected" before the word, "employment." The agency agreed and made the change. The commenters suggested that references to the application fee in §9.1054(b)(3) and (d)(1) be deleted because payment of the application fee is purely a local matter. The agency declined to make the change because the application fee is specifically required by Tax Code, §313.025(a)(1). The commenters recommended that §9.1054(g), (h), and (k) be amended to delete "governing body" and require that the school district take the indicated action. The agency agreed with a portion of the comment. In subsections (g) and (k), "governing body" was replaced by "school district." The phrase "by official action" was deleted from subsection (h), however, "governing body" was not deleted because Tax Code, §313.025(b) requires the "governing body of the school district" to extend the application review period. The commenters requested the deletion of §9.1055 in its entirety. The commenters contend that the agreement is subject only to the discretion of the parties, so the comptroller does not have authority to prescribe any conditions not currently required by state law. The agency disagreed and did not make the change. The agreement is within the scope of the agency's rulemaking authority. Tax Code, §313.031(a)(1), requires the comptroller to, "adopt rules and forms necessary for the implementation and administration" of Tax Code, Chapter 313. Tax Code, §313.027 is entitled Limitation on Appraised Value, Agreement, and all of the provisions in that section, except one, pertain to the agreement. The commenters suggested, alternatively, that §9.1055(c) be changed to read that the "agreement must contain, but is not limited to, the following provisions," instead of "the agreement shall contain the following." The agency agreed and made the change. The commenters stated that §9.1055(d)(1) and (2) should be deleted because the subdivisions are outside the agency's rulemaking authority. The agency disagreed that it does not have authority to adopt rules concerning the agreement because Tax Code, §313.031(a)(1), requires the comptroller to, "adopt rules and forms necessary for the implementation and administration" of Tax Code, Chapter 313. Tax Code, §313.027 concerns the agreement, so the provisions are within the agency's rulemaking authority. The language has, however, been narrowed to require that property added to the agreement meet only the eligibility requirements of Tax Code, Chapter 313. Tax Code, §313.004(3)(A) expresses the legislature's intent that school districts strictly interpret "the criteria and selection guidelines" of Chapter 313. If ineligible property may be added to the agreement after the original limitation has been granted, applicants could be permitted to add types of property to the agreement that are outside the scope of Tax Code, Chapter 313. Commenter's interpretation is impermissibly broad. The agency disagreed that it does not have authority to require information concerning property added to the agreement and did not make the requested change. House Bill 3430, House Bill 3693, and House Bill 2994, 80th Legislature, 2007, read together, require the comptroller to assess the progress of each Chapter 313 project. The progress of the project cannot be assessed without information concerning property added to the agreement; therefore, the provision is within the agency's rulemaking authority, which is provided by Tax Code, §313.031(a)(1). The commenters suggested that §9.1057(b) be changed to provide for a primary time period of 20 working days and an extension of 10 working days. The agency agreed and made the change. The commenters requested a provision stating that the school district may submit additional information about the impact of the limitation on school facilities or school finance and would require the agency to transmit the economic analysis in written and electronic form as soon as practicable. The agency agreed and made the suggested change, however, a provision was added stating that comptroller may consider the information in the development of the recommendation and economic analysis. The commenters stated that reports by the appraisal district should be incorporated into (the) self-report process. The agency declined to make the change because the provision does not prevent the agency from integrating the appraisal district report into the self-report process. The commenters suggested that schedule "C" should not require applicants to project wage increases necessary to keep up with the 110% requirement for 10 years. The agency did not make the change because the schedule does not require this projection.

Ms. Debbie Cartwright of Bexar County Appraisal District agreed with the portions of the rules that require school districts to send the appraisal district copies of the applications, schedules, and other supporting information, that copies of the limitation agreement be submitted to the appraisal districts, and agreed that the comptroller should receive information concerning the type, value, and identification of property subject to value limitations. The commenter requested that §9.1054(b) be changed to state that school districts are not required to consider an incomplete application. The agency agreed and made the change. The commenter stated that a provision should be added to §9.1057 requiring that the information submitted to the comptroller for the biennial report to the legislature assessing the progress of Chapter 313 projects be sent to the school districts and appraisal districts. The agency declined to make the change because an appraisal district that needs the information may request this information through a public information request. The commenter suggested that §9.1057(b) be revised by replacing the 14-day extension for providing additional information with a provision stating that amount of time is determined on a case-by-case basis. The agency agreed that the time period should be extended and made the change, but determined that it is administratively impracticable to determine the time period on a case-by-case basis. The commenter recommended permitting school districts and appraisal districts to provide input regarding applications and the economic impact evaluation. The agency agreed and revised the rule to provide that information may be submitted and that the agency may, but is not required to, consider it. The commenter requested that school districts and appraisal districts be permitted to provide input to the agency on the application. The agency agreed and made the change. The commenter requested deletion of the requirement on the limitation application form for attachment of a surveyor's certification. The agency revised the application to permit submission of alternate types of evidence of the reinvestment zone boundaries.

Gary Fusfield from Jack County, Texas commented that a multi-million-dollar "retroactive" Tax Abatement agreement that he alleges was adopted may conflict with these proposed rules. The comment did not request a change; therefore a change was not made.

The new sections are adopted under Tax Code, §313.031, which requires the comptroller to adopt forms and rules for the implementation and administration of Tax Code, Chapter 313.

The new sections implement Tax Code, Chapter 313.