Title
Consider/Discuss/Act on a Chapter 380 Economic Development Agreement between the City of McKinney and Pulte Homes of Texas, LP
Summary
MEETING DATE: September 16, 2014
DEPARTMENT: City Manager
CONTACT: Barry Shelton, Interim Assistant City Manager
RECOMMENDED CITY COUNCIL ACTION: Approval of the agreement.
ITEM SUMMARY:
* Pulte Homes of Texas has requested a Chapter 380 Economic Development Agreement to source the local use taxes on materials incorporated into homes in McKinney (based on tax rates at the job site) in exchange for sharing a portion of the new incremental local use taxes generated.
BACKGROUND INFORMATION:
* Staff was recently contacted by Doug Duffie, CPA, who proposed a Chapter 380 Agreement for sharing the use taxes his client (Pulte Homes of Texas, LP) will pay for directly purchased building materials used in McKinney.
* The company must apply to the Comptroller's Office in Austin for a special Use Tax Permit (Texas Direct Payment Permit). If approved for the permit, the company will self-assess and pay use taxes on the building materials they incorporate into realty rather than pay sales taxes on these materials to key suppliers (where the suppliers receive orders).
* None of Pulte's direct material suppliers have sales outlets in McKinney, so no local sales taxes on these materials are currently sourced to the City.
* Pulte proposed receiving 80% of the 1% general city use tax and for the City to retain 20% of this tax as well as 100% of the incremental McKinney use taxes above the 1% general city use tax (EDC / CDC).
* In total, McKinney will receive 1.2% of the 2% local use taxes while Pulte will receive .8% of the 2% local use taxes generated.
* Pulte Homes is not currently required to have a Texas sales/use tax permit since the company sells real property (ie: not taxable). A Texas Direct Payment Permit allows the company to source local use taxes on its direct materials to the city wher...
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