Food Desert Grocers Get A 5% Franchise Tax Credit

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89R1990 CJD-D

By: Miles
S.B. No. 2294

A BILL TO BE ENTITLED

AN ACT

relating to a franchise tax credit for entities that establish a

grocery store or healthy corner store in a food desert.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 171, Tax Code, is amended by adding

Subchapter N to read as follows:

SUBCHAPTER N. TAX CREDIT FOR ESTABLISHMENT OF FOOD STORE IN FOOD

DESERT

Sec. 171.701. DEFINITIONS. In this subchapter:

(1) "Corner store" means a store that has fewer than

2,000 square feet of retail space.

(2) "Department" means the Texas Department of Housing

and Community Affairs.

(3) "Food desert" means a geographic area in this

state determined by the department to be an area that:

(A) has limited access to healthy food retailers

and is located in a low-income or high-poverty area; or

(B) otherwise has serious healthy food access

limitations.

(4) "Grocery store" means a store that has at least:

(A) 66 percent of the store's retail space

reserved for the sale of food products;

(B) 50 percent of the store's food retail space

reserved for the sale of non-prepared foods or foods intended for

home preparation and consumption; and

(C) 30 percent of the store's food retail space

reserved for the sale of perishable foods, including dairy

products, fresh produce, fresh meats, poultry, and fish, and frozen

foods.

(5) "Healthy corner store" means a corner store that:

(A) offers a wide variety of fresh produce for

sale; and

(B) allocates at least 20 percent of the store's

retail space to fresh produce and other perishable foods, including

dairy products.

(6) "Supplemental nutrition assistance program" means

the nutritional assistance program operated under Chapter 33, Human

Resources Code, and formerly referred to as the food stamp program.

(7) "WIC program" means the federal special

supplemental nutrition program for women, infants, and children

authorized by 42 U.S.C. Section 1786.

Sec. 171.702. ENTITLEMENT TO CREDIT. A taxable entity is

entitled to a credit in the amount and under the conditions provided

by this subchapter against the tax imposed under this chapter.

Sec. 171.703. QUALIFICATION. A taxable entity qualifies

for a credit under this subchapter if, on or after January 1, 2026,

the taxable entity opens a grocery store or healthy corner store:

(1) located in a food desert;

(2) located in a low or moderate income area, as

determined by the United States Department of Housing and Urban

Development, or that serves a customer base living in a low or

moderate income area;

(3) that begins accepting benefits under the WIC

program and the supplemental nutrition assistance program not later

than the 90th day after the date the store opens; and

(4) that is open year-round.

Sec. 171.704. CERTIFICATION OF ELIGIBILITY. (a) Before

claiming a credit under this subchapter, a taxable entity must

request from the department a certificate of eligibility on which

the department certifies that the taxable entity qualifies for a

credit under Section 171.703. The taxable entity must include with

the taxable entity's request information required by the department

to determine whether the taxable entity meets the requirements of

Section 171.703.

(b) The department shall issue a certificate of eligibility

to a taxable entity that qualifies for a credit under Section

171.703.

(c) The taxable entity must forward the certificate of

eligibility and the following documentation to the comptroller to

claim the credit:

(1) an audited cost report issued by a certified

public accountant, as defined by Section 901.002, Occupations Code,

that itemizes the taxable entity's expenditures to which Section

171.705 applies;

(2) the date the grocery store or healthy corner store

first opened for business and evidence of that opening; and

(3) an attestation of the total amount of the taxable

entity's expenditures to which Section 171.705 applies.

(d) For purposes of approving a credit under this

subchapter, the comptroller may rely on the audited cost report

provided by the taxable entity applying for the credit.

Sec. 171.705. AMOUNT OF CREDIT. (a) A taxable entity may

claim a credit for each store described by Section 171.703 equal to

five percent of the amount the taxable entity spends to establish

the store during the earliest 12-month period:

(1) in which the taxable entity makes an expenditure

to which this section applies; and

(2) that includes the date the store opens for

business.

(b) Subsection (a) applies to amounts spent to:

(1) purchase or lease the land or building for the

store;

(2) construct or remodel the store; and

(3) furnish and equip the store.

(c) Subsection (a) does not apply to amounts spent to

acquire inventory for the store.

Sec. 171.706. LIMITATIONS. (a) The total credit a taxable

entity may claim under this subchapter on a report, including the

amount of any credit carryforward under Section 171.708, may not

exceed 50 percent of the amount of franchise tax due after applying

all other applicable credits.

(b) A taxable entity may not convey, assign, or transfer a

credit under this subchapter to another entity unless substantially

all of the assets of the taxable entity are conveyed, assigned, or

transferred in the same transaction.

Sec. 171.707. PERIOD FOR WHICH CREDIT MAY BE CLAIMED.

Subject to Section 171.708, a taxable entity may claim a credit

under this subchapter on a report only for an expenditure made

during the period on which the report is based.

Sec. 171.708. CARRYFORWARD. (a) If a taxable entity is

eligible for a credit that exceeds the limitation under Section

171.706(a), the taxable entity may carry the unused credit forward

for not more than five consecutive reports.

(b) Credits, including credit carryforwards, are considered

to be used in the following order:

(1) a credit carryforward under this section; and

(2) a credit for the period on which the report is

based.

Sec. 171.709. APPLICATION FOR CREDIT. A taxable entity

must apply for a credit under this subchapter on or with the report

for the period for which the credit is claimed. The comptroller may

prescribe an application form for the credit under this subchapter.

Sec. 171.710. RULES. (a) The department may adopt rules

governing the requirements to qualify for a credit under Section

171.703, including rules governing the stores that qualify as

grocery stores or healthy corner stores and the areas that qualify

as food deserts.

(b) The comptroller may adopt any rules necessary to

administer this subchapter other than rules described by Subsection

(a).

SECTION 2. This Act applies only to a report originally due

on or after the effective date of this Act.

SECTION 3. This Act takes effect January 1, 2026.