34 TAC §9.105
The Comptroller of Public Accounts adopts new §9.105,
concerning tax refunds for economic development, with changes to the proposed
text as published in the August 29, 1997, issue of the
Texas Register
(22 TexReg 8602).
The new section sets forth how the Comptroller of Public Accounts shall
provide for refunds and management review of state taxes paid by a person
owning certain abated property as provided by the Tax Code, §§111.301-111.304,
in the manner required by law. This new section establishes the procedures
to be followed by a person seeking a refund under the Tax Code, §§111.301-111.304,
and provides for a management review process, including review by the comptroller,
for persons whose refund applications are determined to be ineligible. A
management review process is created rather than providing access to an
administrative hearings process because the statutorily created deadlines
imposed upon the comptroller for computing the total amount eligible for
refund, in combination with the limited amount of state funds available for
this refund program, would create a delay in distribution of all refunds
if a formal administrative hearings process is used for the small number
of persons whose refund application may be determined to be ineligible.
Comments were received from an accounting firm in Dallas requesting additional
explanation of subsection (b)(2)(A), which deals with the limitations on
the amount of the refund and states that a person may be required to return
a portion of the refund if the person filed an amended sales tax and/or
franchise tax return for the refund year. The comptroller agreed and changed
the language of the subsection to clarify this point.
Comments were received from the Texas Taxpayer and Research Association
(TTARA) suggesting a clarification in subsection (b)(3)(A), stating that
a taxpayer remains eligible for a refund if the taxpayer has an agreement
with a school district to pay the full amount of the taxes in two or more
payments, provided full payment is made before the application deadline.
The comptroller accepts that change and has added language to the subsection
to clarify this point.
TTARA also commented that in the example in Figure 1 of subsection (b)(3)(C),
Item 1, which refers to appraised value of land, needed to be clarified
to include appraised value of improvements and personal property. The language
suggested is the same as the language used in the application form (AP-186).
The comptroller made the suggested changes.
TTARA commented that subsection (b)(4)(A)(ii) should not require submission
of an original tax receipt with the application but should allow the taxpayer
to submit a copy of the tax receipt. The comptroller made the suggested
change.
The accounting firm also commented on subsection (b)(4)(A)(iii) which requires
the taxpayer to furnish the comptroller with a copy of the tax abatement
agreement. The firm felt this was unnecessary. The comptroller does not
have authority to waive this statutory requirement, therefore the change
was not made.
TTARA suggested that the requirement of a statement from city or county
officials verifying that the taxpayer is in compliance with each term of
the tax abatement agreement in proposed subsection (b)(4)(A)(vi) was not
needed and may be burdensome to taxpayers since the taxpayer was already
certifying compliance in the application. The comptroller agreed and has
deleted this subsection due to its ability to verify the taxpayer's compliance
through other resources.
Additionally, TTARA commented that the requirement in proposed subsection
(b)(4)(A)(vii) that the applicant submit Texas Workforce Commission returns
showing an increase in payroll be a requirement only if the person is applying
for the refund based on an increase in the person's payroll. The comptroller
agreed and has changed the subsection to require the statement only if the
basis for the refund is an increase in payroll. The subsection in the adopted
rule is (b)(4)(A)(vi).
TTARA and the accounting firm commented that the number of days to submit
additional information after receiving a request from the comptroller's
office was too short in proposed subsection (b)(4)(B) in view of the vagaries
of the postal service. Also, the accounting firm commented that these requests
should be faxed to the taxpayer. The comptroller has changed the subsection
to provide two different timelines, based on the application filing date
and to provide delivery of the request for additional information by fax.
The subsections in the adopted rule are (b)(4)(B) and (b)(4)(C).
TTARA also submitted comments requesting that the comptroller specify how
the proportional reduction will be made if the total amount of claims exceeds
$10 million in proposed subsection (b)(4)(G). The comptroller has changed
the subsection to specify that the reduction of a refund will be based on
the applicant's eligible refund as a percentage of all eligible refunds.
The subsection in the adopted rule is (b)(4)(H).
The accounting firm commented that the 10 days to request a management
review be changed to 10 working days and that the denial notice be by fax
in proposed subsection (b)(4)(H). The comptroller has changed the subsection
to provide 10 working days to request a management review and to provide
delivery of the denial notice and management review responses by fax. The
subsection in the adopted rule is (b)(4)(I).
The accounting firm also commented that if this process is not governed
by the Administrative Procedures Act, it will eliminate the claimant's access
to a hearing and due process. Because the management review in proposed
subsection (b)(4)(H) provides due process, the comptroller has made no change.
The subsection in the adopted rule is (b)(4)(I).
TTARA had questions about the expiration of the program and its effect
on the refunds for tax year 2001. After reviewing the enabling legislation,
the comptroller deleted proposed subsection (b)(4)(I), because the Sunset
reference is to Tax Code, Chapter 312, not subchapter F of Tax Code, Chapter
111.
This new section is adopted under the Tax Code, §111.303,
which requires the comptroller to adopt forms and rules for the administration
of the provisions of the Tax Code, §111.301 and §111.302.
The new section implements the Tax Code, §§111.301-111.304.
§9.105. Tax Refund for Economic Development.
(a)
Definitions. The following words and terms, when used
in this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
Appraised value - The chief appraiser's opinion as to
the market value on a specific appraisal date.
(2)
Compliance - Conforming to all the terms of an abatement
agreement.
(3)
Management review - Review by comptroller management
staff of the denial of a refund based on the facts present.
(4)
Taxes paid - The franchise tax and state sales and
use tax paid directly to the state, and state sales and use tax that is
paid to a seller or collected from customers and remitted to the state, minus
any applicable tax credits.
(b)
Tax refund for economic development.
(1)
Eligible property and taxes. An eligible person is entitled
to a refund of taxes paid and postmarked in a calendar year, not to exceed
the amount for which the person paid ad valorem taxes to a school district
in that calendar year on property that:
(A)
is located in a reinvestment zone established under the
Tax Code, Chapter 312;
(B)
is exempt in whole or in part from the ad valorem taxes
imposed by a municipality or a county under a tax abatement agreement entered
into after January 1, 1996, with the municipality or county under the Tax
Code, Chapter 312; and
(C)
is not subject to a tax abatement agreement entered into
by the school district.
(2)
Limitations on refunds.
(A)
The amount of the refund that can be paid by the comptroller
in a calendar year is limited to the amount of taxes paid and postmarked,
as the term is defined in subsection (a)(4) of this section, by the person
after any applicable tax credit. A person who receives a tax abatement refund
under this section, and who later receives a refund, credit, or other adjustment
of the amount of "taxes paid and postmarked" on which the tax abatement
refund was based, may be required to return a portion of that tax abatement
refund.
(B)
The refund period is limited to the lesser of:
(i)
five years; or
(ii)
the duration of the tax abatement agreement entered into
with a municipality or county.
(3)
Eligibility for the refund.
(A)
To be eligible for the refund, a person must have paid
in full, by single or multiple payments, ad valorem taxes to the school
district and:
(i)
established a new business in the reinvestment zone;
(ii)
expanded an existing business in the reinvestment zone;
or
(iii)
modernized an existing business located in the reinvestment
zone to retain jobs for employees of the business.
(B)
The business must have had:
(i)
since the date of the tax abatement agreement with a municipality
or county, an increase of $3 million in the business' payroll, specific
to property located in this state according to records filed by the business
with the Texas Workforce Commission; or
(ii)
an increase of at least $4 million in appraised value
of the business' property subject to the tax abatement agreement from an
initial base comparison year beginning on or after January 1, 1996.
(C)
The following is an example of how the refund available
under this subsection will be administered.
Figure: 34 TAC 9.105(b)(3)(C)
(4)
Application for refund.
(A)
An application for the refund must:
(i)
be made on a form prescribed by the comptroller and properly
completed;
(ii)
include an attached copy of the tax receipt from the
assessor and collector of taxes for the school district showing full payment
of school district ad valorem taxes on the property for the tax year for
which the refund is sought;
(iii)
include an attached copy of the tax abatement agreement
entered into with the municipality or county;
(iv)
include an attached signed statement from the county
appraisal district's chief appraiser verifying that an exemption from property
tax was granted and showing the current appraised value and the beginning
or base year's appraised value of the property subject to the abatement
agreement;
(v)
include an attached statement from each applicable city
or county official verifying that the abatement agreement has been filed
with the entity responsible for maintaining a registry of tax abatements;
(vi)
include attached copies of Texas Workforce Commission
returns for the calendar year subject to the claim, showing an increase
in payroll since entering the abatement agreement, if the person is applying
for the refund based on an increase in payroll; and
(vii)
include any other information requested by the comptroller
to support the refund request.
(B)
If a comptroller employee has requested in writing additional
information, the person requesting the refund must submit the requested
materials:
(i)
within 30 calendar days after the request is issued by
fax, if the application was filed on or before April 30 of the year following
the tax year , or
(ii)
within 10 calendar days after the request is issued by
fax, if the application was filed on or after May 1 of the year following
the tax year.
(C)
If additional information is not submitted as required
by paragraph (B) of this subsection, the refund may be denied in full due
to missing information.
(D)
A refund payable under this subsection does not earn interest.
(E)
A person applying for a refund must certify to the comptroller
that the person is in compliance with each term of the tax abatement agreement
entered into with the municipality or county.
(F)
A complete application for refund must be filed before
August 1 of the year following the ad valorem tax year for which the applicant
has paid ad valorem taxes described by the Tax Code, §111.301(a).
(G)
If the total amount of eligible refunds claimed by all
persons is less than $10 million, the amount of a tax refund is equal to
the ad valorem taxes paid to a school district by the person for the applicable
tax year on the property that the person would not have been required to
pay if the school district had entered into a tax abatement agreement covering
the property that included the same terms, including terms governing the
portion of the property that is to be exempt from taxation under the agreement,
as the applicable municipal or county tax abatement agreement.
(H)
If the total amount of eligible refunds claimed by all
persons is greater than $10 million, the comptroller shall proportionally
reduce the amount of each refund of persons whose claims are determined
to be eligible as necessary to reduce the total refund amount to the $10
million available based on the applicant's eligible refund as a percentage
of all eligible refunds. The amount by which a refund is reduced under this
subsection may not be included in a claim for a refund in a subsequent year.
(I)
The decision of the comptroller regarding a claim for
refund becomes final 10 working days after the date the comptroller issues
by fax notice of denial unless the claimant delivers a written request stating
specific grounds for reconsideration of that comptroller decision, which
request must be accompanied by appropriate supporting documentation. Management
of the Property Tax Division will conduct a management review and fax a
response to the taxpayer within 10 calendar days after the taxpayer's request
for reconsideration was received by the comptroller. The decision of the
Property Tax Division's management review becomes final 10 calendar days
after the date the comptroller issues by fax notice of such review unless
the claimant delivers a second written request for reconsideration to the
manager of Property Tax Division stating grounds and providing documentation
for a Comptroller of Public Accounts review within that time. A comptroller
review will be conducted with the benefit of the Property Tax Division's
recommendation and a response will be faxed within 20 calendar days after
the request is filed. This process is not governed by the Administrative
Procedures Act; it is provided solely to ensure an appropriate administrative
review of a refund claimed under this section.
(J)
Application for refund. An application for refund must
be substantially in the form of an Application for Refund of State Taxes
Paid by Person Owning Certain Abated Property (Form AP- 186). The comptroller
adopts this form by reference. Copies of the form are available for inspection
at the office of the
Texas Register
or may
be obtained from the Comptroller of Public Accounts, P.O. Box 13528, Austin,
Texas 78711. Copies may also be requested by calling our toll-free number,
1-800-252-9121. In Austin, call (512) 365-9999. From a Telecommunications
Device for the Deaf (TDD), call 1-800-248-4099, toll free. In Austin, the
local TDD number is (512) 463-4621.
This agency hereby certifies that the adoption
has been reviewed by legal counsel and found to be a valid exercise of the
agency's legal authority.
Issued in Austin, Texas, on December 19, 1997.
TRD-9717006
Martin Cherry
Chief, General Law
Comptroller of Public Accounts
Effective date: January 8, 1998
Proposal publication date: August 29, 1997
For further information, please call: (512) 463-3699