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A BILL TO BE ENTITLED
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AN ACT
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relating to a franchise tax credit for certain research and |
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development activities. |
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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 O-1 to read as follows: |
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SUBCHAPTER O-1. TAX CREDIT FOR CERTAIN RESEARCH AND DEVELOPMENT |
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ACTIVITIES |
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Sec. 171.741. DEFINITIONS. In this subchapter: |
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(1) "Base amount," "basic research payment," and |
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"qualified research expense" have the meanings assigned those terms |
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by Section 41, Internal Revenue Code, except that all of those |
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payments and expenses must be for research conducted within this |
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state. |
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(2) "Strategic investment area" means an area that is |
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determined by the comptroller under Section 171.746 that is: |
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(A) a county within this state with above state |
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average unemployment and below state average per capita income; |
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(B) an area within this state that is a federally |
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designated urban enterprise community or an urban enhanced |
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enterprise community; or |
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(C) a defense economic readjustment zone |
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designated under Chapter 2310, Government Code. |
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Sec. 171.742. ELIGIBILITY. (a) A taxable entity is |
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eligible for a credit against the tax imposed under this chapter in |
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the amount and under the conditions and limitations provided by |
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this subchapter. |
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(b) A taxable entity may claim a credit under Section |
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171.743(d) or take a carryforward credit without regard to whether |
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the strategic investment area in which the entity incurred |
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qualified research expenses or made basic research payments |
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subsequently loses its designation as a strategic investment area. |
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Sec. 171.743. CALCULATION OF CREDIT. (a) The credit for |
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any report equals five percent of the sum of: |
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(1) the excess of qualified research expenses incurred |
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in this state during the period on which the tax is based over the |
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base amount for this state; and |
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(2) the basic research payments determined under |
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Section 41(e)(1)(A), Internal Revenue Code, for this state during |
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the period on which the tax is based. |
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(b) A taxable entity may elect to compute the credit for |
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qualified research expenses incurred in this state in a manner |
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consistent with the alternative incremental credit described in |
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Section 41(c)(4), Internal Revenue Code, only if for the |
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corresponding federal tax period: |
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(1) a federal election was made to compute the federal |
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credit under Section 41(c)(4), Internal Revenue Code; |
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(2) the taxable entity was a member of a consolidated |
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group for which a federal election was made under Section 41(c)(4), |
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Internal Revenue Code; or |
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(3) the taxable entity did not claim the federal |
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credit under Section 41(a)(1), Internal Revenue Code. |
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(c) For purposes of the alternate credit computation method |
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in Subsection (b), the credit percentages applicable to qualified |
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research expenses described in Sections 41(c)(4)(A)(i), (ii), and |
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(iii), Internal Revenue Code, are 0.41 percent, 0.55 percent, and |
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0.69 percent, respectively. |
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(d) In computing the credit under this section, a taxable |
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entity may multiply by two the amount of any qualified research |
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expenses and basic research payments made in a strategic investment |
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area. |
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(e) 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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(f) For the purposes of this section, "gross receipts" as |
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used in Section 41, Internal Revenue Code, means gross receipts as |
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determined under Section 171.103. |
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Sec. 171.744. LIMITATIONS. The sum of the total credit |
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claimed under this subchapter for a report, including the amount of |
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any carryforward credit under Section 171.745, and the amount of |
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unused credits accrued under Subchapter O before its repeal on |
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January 1, 2008, and claimed on the report as authorized by Section |
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18(d), Chapter 1 (H.B. 3), Acts of the 79th Legislature, 3rd Called |
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Session, 2006, may not exceed 50 percent of the amount of franchise |
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tax due for the report before any other applicable tax credits. |
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Sec. 171.745. CARRYFORWARD. If a taxable entity is |
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eligible for a credit that exceeds the limitation under Section |
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171.744, the taxable entity may carry the unused credit forward for |
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not more than 20 consecutive reports. Credits, including credit |
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carryforwards, are considered to be used in the following order: |
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(1) a credit carryforward of unused credits accrued |
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under Subchapter O before its repeal on January 1, 2008, and claimed |
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as authorized by Section 18(d), Chapter 1 (H.B. 3), Acts of the 79th |
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Legislature, 3rd Called Session, 2006; |
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(2) a credit carryforward under this subchapter; and |
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(3) a current year credit. |
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Sec. 171.746. DETERMINATION OF STRATEGIC INVESTMENT AREAS. |
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(a) Not later than September 1 each year, the comptroller shall |
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determine areas that qualify as strategic investment areas using |
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the most recently completed full calendar year data available on |
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that date and, not later than October 1, shall publish a list and |
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map of the designated areas. |
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(b) The designation is effective for the following calendar |
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year for purposes of credits available under this subchapter. |
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Sec. 171.747. 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 amount of expenses and payments incurred |
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by taxable entities that claim a credit under this subchapter; |
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(2) the total amount of credits applied against the |
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tax under this chapter and the amount of unused credits including: |
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(A) the total amount of franchise tax due by |
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taxable entities claiming a credit under this subchapter before and |
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after the application of the credit; |
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(B) the average percentage reduction in |
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franchise tax due by taxable entities claiming a credit under this |
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subchapter; |
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(C) the percentage of tax credits that were |
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awarded to taxable entities with fewer than 100 employees; and |
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(D) the two-digit standard industrial |
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classification of taxable entities claiming a credit under this |
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subchapter; |
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(3) the geographical distribution of expenses and |
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payments giving rise to a credit authorized by this subchapter; |
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(4) the effect of the credit provided by this |
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subchapter on the amount of research and development performed in |
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this state and employment in research and development in this |
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state; and |
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(5) the effect of the credit provided under this |
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subchapter on employment, capital investment, and personal income |
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in this state and on state tax revenues. |
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(b) The final report issued prior to the expiration of this |
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subchapter shall include historical information on the credit |
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authorized under this subchapter. |
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(c) The comptroller may not include in the report |
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information that is confidential by law. |
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(d) For purposes of this section, the comptroller may |
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require a taxable entity that claims a credit under this subchapter |
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to submit information, on a form provided by the comptroller, on the |
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location of the taxable entity's research expenses and payments in |
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this state and any other information necessary to complete the |
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report required by this section. |
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Sec. 171.748. 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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Sec. 171.749. 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. 171.750. EXPIRATION. (a) This subchapter expires |
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December 31, 2022. |
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(b) The expiration of this subchapter does not affect the |
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carryforward of a credit under Section 171.745 that was accrued |
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before the date this subchapter expires. |
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SECTION 2. Section 228.153(a)(1), Insurance Code, is |
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amended to read as follows: |
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(1) "Strategic investment area" means an area of this |
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state that qualifies as a strategic investment area under |
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Subchapter O-1 [O], Chapter 171, Tax Code, or, after the date that |
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subchapter expires, an area that qualified as a strategic |
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investment area under that subchapter immediately before that date. |
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SECTION 3. Section 313.051(a), Tax Code, is amended to read |
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as follows: |
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(a) This subchapter applies only to a school district that |
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has territory in: |
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(1) an area that qualifies [qualified] as a strategic |
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investment area under Subchapter O-1 [O], Chapter 171[, immediately
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before that subchapter expired]; or |
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(2) a county: |
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(A) that has a population of less than 50,000; |
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and |
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(B) in which, from 1990 to 2000, according to the |
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federal decennial census, the population: |
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(i) remained the same; |
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(ii) decreased; or |
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(iii) increased, but at a rate of not more |
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than three percent per annum. |
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SECTION 4. (a) This Act applies only to a report originally |
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due on or after the effective date of this Act. |
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(b) The change in law made by this Act does not affect the |
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obligation for or the payment, computation, and collection of the |
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franchise tax for a report originally due before the effective date |
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of this Act. The obligation for and the payment, computation, and |
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collection of the franchise tax for a report originally due before |
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the effective date of this Act is governed by the law in effect on |
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the date the report was originally due and that law is continued in |
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effect for those purposes. |
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SECTION 5. This Act takes effect January 1, 2014. |