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A BILL TO BE ENTITLED
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AN ACT
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relating to franchise tax credits for small businesses that create |
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quality jobs. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 171, Tax Code, is amended by adding |
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Subchapter P-1 to read as follows: |
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SUBCHAPTER P-1. TAX CREDITS FOR SMALL BUSINESSES FOR CREATION OF |
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QUALITY JOBS |
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Sec. 171.821. DEFINITIONS. In this subchapter: |
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(1) "Estimated direct state benefits" means the tax |
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revenues projected by the comptroller to accrue to this state as a |
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result of the creation of qualifying new direct jobs by a qualified |
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small business. |
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(2) "Estimated direct state cost" means the cost to |
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this state that the comptroller projects will result because of the |
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creation of qualifying new direct jobs by a qualified small |
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business, including: |
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(A) the cost of educating the children of new |
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state residents; |
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(B) the cost of public health, public safety, and |
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transportation services provided to new state residents; |
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(C) the cost of other state services provided to |
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new state residents; and |
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(D) the cost of providing additional state |
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services to existing state residents. |
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(3) "Estimated net direct state benefits" means the |
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estimated direct state benefits minus the estimated direct state |
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cost as determined by the comptroller. |
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(4) "Full-time employment" means employment of a |
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person residing in this state and working for at least 30 hours a |
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week in this state for more than six months during any 12-month |
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period. |
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(5) "Gross taxable payroll" means wages for new direct |
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jobs that are subject to federal income taxation. |
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(6) "Group health benefit plan" means: |
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(A) a health plan provided by a health |
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maintenance organization established under Chapter 843, Insurance |
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Code; |
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(B) a health benefit plan approved by the |
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commissioner of insurance; or |
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(C) a self-funded or self-insured employee |
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welfare benefit plan that provides health benefits and is |
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established in accordance with the Employee Retirement Income |
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Security Act of 1974 (29 U.S.C. Section 1001 et seq.). |
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(7) "Manufacturing" means being primarily engaged in |
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activities described in industry sectors 31, 32, and 33 of the 2017 |
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North American Industry Classification System. |
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(8) "Net benefit rate" means the estimated net direct |
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state benefits computed as a percentage of gross taxable payroll as |
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determined by the comptroller. |
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(9) "New direct job" means full-time employment that |
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did not exist in this state preceding the first day of the period on |
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which margin is based. A job is considered to exist in this state |
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preceding the first day of the period on which margin is based if |
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the activities and functions for which the particular job exists |
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had been ongoing at any time during the six-month period preceding |
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that date. |
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(10) "Qualified small business" means a business |
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primarily engaged in manufacturing that: |
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(A) has not more than 90 full-time employees on |
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the date preceding the first day of the period on which margin is |
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based or had an average of not more than 90 full-time employees |
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during the year preceding the first day of the period on which |
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margin is based; and |
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(B) creates the applicable number of qualifying |
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new direct jobs required by Section 171.823 during the period on |
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which margin is based. |
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(11) "Qualifying new direct job" means a new direct |
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job: |
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(A) that pays an annual wage in an amount not less |
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than the wage prescribed by Section 171.822; and |
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(B) for which the qualified small business offers |
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a group health benefit plan. |
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Sec. 171.822. WAGE REQUIREMENTS FOR QUALIFYING NEW DIRECT |
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JOB. (a) A qualifying new direct job must pay an average |
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annualized wage that equals or exceeds: |
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(1) 110 percent of the county average wage paid to |
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employees of small businesses located in the county in which the |
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qualifying new direct job is located, as computed by the Texas |
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Workforce Commission, at the time the qualifying new direct job is |
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created if the cost to the qualified small business of providing a |
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health benefit plan for each person hired for a qualifying new |
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direct job is not included; or |
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(2) 125 percent of the county average wage paid to |
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employees of small businesses located in the county in which the |
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qualifying new direct job is located, as computed by the Texas |
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Workforce Commission, at the time the qualifying new direct job is |
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created if the cost to the qualified small business of providing a |
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health benefit plan for each person hired for a qualifying new |
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direct job is included. |
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(b) Notwithstanding Subsection (a), a qualifying new direct |
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job is required to pay only an amount that equals or exceeds 100 |
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percent of the county average wage paid to employees of small |
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businesses located in the county in which the qualifying new direct |
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job is located, as computed by the Texas Workforce Commission, at |
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the time the qualifying new direct job is created if the qualifying |
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new direct job is located in a county that: |
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(1) has an unemployment rate that is more than 10 |
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percent higher than the state unemployment rate; and |
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(2) has a county personal poverty rate of more than 15 |
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percent according to the most recent data from the United States |
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Census Bureau. |
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Sec. 171.823. ELIGIBILITY. A taxable entity that is a |
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qualified small business is eligible for a credit against the tax |
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imposed under this chapter if the taxable entity, during the period |
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on which margin is based, creates at least: |
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(1) five qualifying new direct jobs if: |
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(A) the qualifying new direct jobs are located in |
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a municipality with a population of less than 3,500; or |
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(B) the qualifying new direct jobs are located in |
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an unincorporated area and the largest municipality within 20 miles |
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of that location is a municipality described by Paragraph (A); |
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(2) 10 qualifying new direct jobs if: |
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(A) the qualifying new direct jobs are located in |
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a municipality with a population of at least 3,500 but less than |
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7,000; or |
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(B) the qualifying new direct jobs are located in |
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an unincorporated area and the largest municipality within 20 miles |
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of that location is a municipality described by Paragraph (A); or |
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(3) 15 qualifying new direct jobs if: |
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(A) the qualifying new direct jobs are located in |
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a municipality with a population of at least 7,000; or |
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(B) the qualifying new direct jobs are located in |
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an unincorporated area and the largest municipality within 20 miles |
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of that location is a municipality described by Paragraph (A). |
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Sec. 171.824. AMOUNT OF CREDIT. (a) A taxable entity is |
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entitled to a credit equal to the taxable entity's annual gross |
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taxable payroll for qualifying new direct jobs created during the |
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reporting period multiplied by the lesser of five percent or the net |
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benefit rate. |
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(b) The comptroller shall compute a taxable entity's net |
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benefit rate and provide that rate to the taxable entity on request. |
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Sec. 171.825. LIMITATIONS. The total credit claimed under |
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this subchapter for a report, including the amount of any credit |
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carryforward under Section 171.826, may not exceed the amount of |
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franchise tax due for the report before any other applicable tax |
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credits. |
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Sec. 171.826. CARRYFORWARD. (a) If a taxable entity is |
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eligible for a credit that exceeds the limitations under Section |
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171.825, the taxable entity may carry the unused credit forward for |
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not more than seven consecutive reports. |
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(b) A credit carryforward is considered the remaining |
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portion of an installment that cannot be claimed in the current year |
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because of a limitation under Section 171.825. A credit |
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carryforward is added to the next year's installment of the credit |
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in determining the limitation for that year. A credit carryforward |
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from a previous report is considered to be used before the current |
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year installment. |
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Sec. 171.827. CERTIFICATION OF ELIGIBILITY. (a) For each |
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report on which a credit is claimed under this subchapter, the |
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taxable entity shall file with its report, on a form provided by the |
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comptroller, information that sufficiently demonstrates that the |
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taxable entity is eligible for the credit. |
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(b) The burden of establishing entitlement to and the value |
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of the credit is on the taxable entity. |
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Sec. 171.828. ASSIGNMENT PROHIBITED. A taxable entity may |
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not convey, assign, or transfer the credit allowed under this |
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subchapter to another entity unless all of the assets of the taxable |
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entity are conveyed, assigned, or transferred in the same |
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transaction. |
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Sec. 171.829. BIENNIAL REPORT BY COMPTROLLER. (a) Before |
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the beginning of each regular session of the legislature, the |
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comptroller shall submit to the governor, the lieutenant governor, |
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and the speaker of the house of representatives a report that |
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states: |
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(1) the total number of jobs created by taxable |
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entities that claim a credit under this subchapter and the average |
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and median annual wage of those jobs; and |
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(2) a fiscal analysis of the costs and benefits of this |
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subchapter to this state. |
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(b) The comptroller may not include in the report |
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information that is confidential by law. |
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(c) The comptroller shall provide notice to the members of |
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the legislature that the report required under this section is |
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available on request. |
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Sec. 171.830. COMPTROLLER POWERS AND DUTIES. The |
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comptroller shall adopt rules and forms necessary to implement this |
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subchapter. |
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SECTION 2. This Act applies only to a report originally due |
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on or after the effective date of this Act. |
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SECTION 3. This Act takes effect January 1, 2018. |