Section 3.329 - Enterprise Projects, Enterprise Zones, and Defense Readjustment Zones(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Enterprise project--A qualified business designated by the Texas Department of Economic Development as an enterprise project under Government Code, Chapter 2303.406, for a five-year period.(2) Enterprise zone--An area of the state designated by the Department of Economic Development as an enterprise zone.(3) Equipment and machinery--Any machinery and equipment, including office furniture and equipment, used exclusively in an enterprise zone by a qualified business. These terms do not include building materials or motor vehicles.(4) Local governing body--A governing body of a city or county with an enterprise zone within its boundaries.(5) New permanent job--A job that meets the criteria of a new permanent job as defined by the Texas Department of Economic Development for enterprise projects.(6) One-time refund--The maximum amount that may be refunded from all claims during the life of a qualified business regardless of the amount of tax paid or jobs retained in an enterprise zone.(7) Period--The five-year period that the qualified business has been designated as a project unless the designation is revoked.(8) Qualified business--A person, including a corporation or other entity, that the Texas Department of Economic Development certifies has met the criteria required under the Texas Enterprise Zone Act.(9) Qualified employee--An employee who works for a qualified business and who performs at least 50% of his service for the business within the enterprise zone.(10) Retained job--An existing employment position of a qualified business that has provided employment to a qualified employee of at least 1,820 hours annually.(b) Refund for job retention. (1) Eligibility for a one-time refund of state sales and use tax. A business is eligible for the refund if: (A) the business is certified as a qualified business by a local governing body;(B) has operated in an enterprise zone's jurisdiction for at least three consecutive years before filing a claim;(C) has retained 10 or more jobs held by qualified employees during the year; and(D) has been certified as eligible for a refund to the Comptroller's Department by the Texas Department of Economic Development.(2) When to apply for a one-time refund. On or after September 1, 1991, a qualified business may apply for a refund of state sales and use tax immediately upon receipt of certification from the Texas Department of Economic Development.(3) Accumulated purchases. A qualified business may apply for and receive a refund of tax paid on equipment and machinery upon which the qualified business paid sales or use tax within four years of the date of application. The allowed refund is up to $500 per qualified employee retained, for a total of not more than $5,000. See § 3.325 of this title (relating to Refunds, Interest, and Payments Under Protest) for information on the statute of limitations on refunds.(4) How to apply for a one-time state sales or use tax refund. After a qualified business has been certified as eligible for a refund by the local governing body sponsoring the enterprise zone and by the Texas Department of Economic Development, the qualified business may obtain a refund by applying directly to the Comptroller of Public Accounts. A refund request submitted to the comptroller must: (A) be in writing on forms provided by the comptroller;(B) be accompanied by copies of the certification by the Department of Economic Development; and(C) list each item purchased, the name of each seller, invoice or contract number, dollar amount of each purchase, and amount of state tax paid on each purchase.(5) The refund applies to state tax only. No city, county, transit, special purpose district tax, or any other local sales and use tax may be obtained from the state. Information regarding city tax refunds may be obtained from the city having an enterprise zone within its boundaries.(6) Manufacturers. A qualified business engaged in manufacturing that claims a sales tax refund under both § 3.300 of this title (relating to Manufacturing; Custom Manufacturing; Fabricating; Processing) and this section on the same machinery and equipment, may not claim more than the total amount of state sales or use tax paid on the machinery and equipment.(7) Records. A qualified business must maintain records supporting the refund request which can be verified by audit. See § 3.281 of this title (relating to Records Required; Information Required) and § 3.282 of this title (relating to Auditing Taxpayer Records).(c) Enterprise projects. (1) An enterprise project qualifies for a refund of state sales and use tax of $2,000 for each job that has been retained or each new permanent job the enterprise project creates for a qualified employee during its designation as an enterprise project. A qualified business receiving its designation as an enterprise project after August 31, 1995, may not apply for a refund of taxes until after August 31, 1997. Not more than $8 million in state sales and use taxes may be refunded to enterprise projects designated during the biennium beginning September 1, 1995.(2) Only items of the type described in paragraph (3) of this subsection which are purchased by the enterprise project during the designated period or 90 days prior to its designation may be considered in determining the amount of refund available to the project.(3) Subject to the limitations of paragraphs (1), (2), (4), (5), and (6) of this subsection, a refund will be made based on state tax paid purchases of: (A) machinery or equipment for use in the enterprise zone in which the enterprise project is located;(B) building materials for use in constructing, rehabilitating, or remodeling a structure in the enterprise zone in which the enterprise project is located;(C) labor for remodeling, rehabilitating, or constructing a structure in an enterprise zone; and(D) electricity and natural gas purchased and consumed in the normal course of business in the enterprise zone.(4) An enterprise project is not entitled to a refund of any taxes paid by a contractor under a lump-sum contract unless the contractor has received designation as the enterprise project.(5) Sales and use taxes paid on taxable services are not eligible for refund. Taxes paid on materials purchased in conjunction with services will qualify for refund only when the charge for materials is separated from the charge for services and the amount of tax paid on materials is separated.(6) Subject to the limitations prescribed in this subparagraph, refunds will be paid directly to the project. (A) An enterprise project is eligible for a maximum refund of $250,000 in each state fiscal year. (i) The total amount refunded to an enterprise project may not exceed the total amount of state tax paid on qualifying purchases, or the amount determined by multiplying $250,000 by the number of state fiscal years during the designated period of the enterprise project, whichever is less. The refund may not exceed $2,000 for each job retained or each new job created for a qualified employee.(ii) An enterprise project that qualifies for a refund that exceeds $250,000 during a state fiscal year may carry the excess to a subsequent year subject to the $250,000 limitation in each year.(iii) Any carry-over or other eligible refunds must be applied for no later than the end of the next state fiscal year that follows the fiscal year in which the designation as an enterprise project expires or is removed by the Texas Department of Economic Development.(B) Claims for refund must be in writing and must indicate the period for which the refund is claimed and must reflect the written approval of the Texas Department of Economic Development with respect to the number of jobs retained or new permanent jobs created during the period. A claim for refund may be made annually or semiannually. Annual claims cover the period from September-August of each fiscal year. Semiannual claims cover the period from September-February and from March-August of each fiscal year.(7) For refunds applied for after August 31, 1991, the following conditions apply: (A) the qualified business must maintain the same level of employment of qualified employees for three years as existed at the time it qualified for a refund;(B) annually, the Texas Department of Economic Development shall certify that the correct level of employment has been maintained; and(C) the comptroller shall assess the qualified business that portion of the refund attributable to any decrease in employment, plus penalty and interest from the date of the refund.(8) An enterprise project must retain records substantiating each claim for refund. The records must be verifiable by audit and include copies of invoices showing the item purchased, the date of purchase, amount of purchase, the amount of tax paid, and the identity of the seller. The records must also show that the machinery and equipment and building materials purchased are for use within the zone. Employment records must also be kept verifying the number of new jobs created.(d) Defense economic readjustment zones. (1) Definitions applicable to subsection (d) only: (A) Defense readjustment project--A person designated by the Texas Department of Economic Development as a defense readjustment project under the Government Code, Title 10, Subtitle G, Chapter 2310.(B) Qualified business--A person certified as a qualified business under Government Code, § 2310.302.(C) Qualified employee--A person who: (i) works for a qualified business; and(ii) performs at least 50% of the person's service for the business in the readjustment zone.(D) Readjustment zone--An area designated as a defense economic readjustment zone under the Government Code, Chapter 2310.(2) Tax refunds for defense readjustment projects. (A) A defense readjustment project is eligible for a refund in the amount provided by this section of the state sales and use taxes imposed by this chapter on purchases of: (i) equipment or machinery sold to a defense readjustment project for use in a readjustment zone;(ii) building materials sold to a defense readjustment project for use in remodeling, rehabilitating, or constructing a structure in a readjustment zone;(iii) labor for remodeling, rehabilitating, or constructing a structure, not qualifying as a new construction, by a defense readjustment project in a readjustment zone; and(iv) electricity and natural gas purchased and consumed in the normal course of business in the readjustment zone.(B) Subject to the limitations provided by subparagraph (C) of this paragraph, a defense readjustment project qualifies for a refund of taxes under this section of $2,500 for each new permanent job or job that has been retained by the defense readjustment project for a qualified employee.(C) The total amount of tax refund that a defense readjustment project may apply for in a state fiscal year may not exceed $250,000. If a defense readjustment project qualifies in a state fiscal year for a refund of taxes in an amount in excess of the limitation provided by this subsection, it may apply for a refund of those taxes in a subsequent year, subject to the $250,000 limitation for each year. However, a defense readjustment project may not apply for a refund under this section after the end of the state fiscal year immediately following the state fiscal year in which the defense readjustment project's designation as a defense readjustment project expires or is removed. The total amount that may be refunded to a defense readjustment project under this section may not exceed the amount determined by multiplying $250,000 by the number of state fiscal years during which the defense readjustment project created one or more jobs for qualified employees.(D) Only qualified businesses that have been certified as eligible for a tax refund under this section by the Texas Department of Economic Development to the comptroller and the Legislative Budget Board are entitled to the tax refund.(E) To receive a state tax refund under this section, a defense readjustment project must apply to the comptroller for the refund. A refund request submitted to the comptroller must: (i) be in writing in a format prescribed by the comptroller;(ii) be accompanied by copies of the certification by the Texas Department of Economic Development;(iii) list each qualifying item purchased, the name of each seller, invoice or contract number, dollar amount of each purchase, and amount of state tax paid on each purchase.(F) A defense readjustment project applying for a refund of state taxes under this subsection must retain records substantiating each claim for refund. The records must be verifiable by audit and include copies of invoices showing the item purchased, the date of purchase, amount of purchase, the amount of tax paid, and the identity of the seller. The records must also show that the qualifying taxable items purchased were for use within the zone. Employment records must also be kept verifying the number of new jobs created or retained.(G) For possible local tax abatements, see the Government Code, § 2310.405.34 Tex. Admin. Code § 3.329
The provisions of this §3.329 adopted to be effective December 6, 1996, 21 TexReg 11505; amended to be effective May 10, 1998, 23 TexReg 4311.