By Greenberg                                            H.B. No. 63
         76R1303 DAK-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to a franchise tax exemption for certain research and
 1-3     development activities.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  Subchapter C, Chapter 171, Tax Code, is amended
 1-6     by adding Section 171.114 to read as follows:
 1-7           Sec. 171.114.  CREDIT ON NET TAXABLE EARNED SURPLUS FOR
 1-8     RESEARCH AND DEVELOPMENT ACTIVITIES.  (a)  A corporation is
 1-9     entitled to a credit against the tax due under this chapter on net
1-10     taxable earned surplus as provided by this section.
1-11           (b)  Subject to Subsections (c) and (d), the credit for any
1-12     privilege period equals the sum of:
1-13                 (1)  10 percent of the qualified research expenses for
1-14     this state for that period; and
1-15                 (2)  15 percent of the basic research payments
1-16     determined for this state for that period.
1-17           (c)  The credit may not exceed:
1-18                 (1)  for the first privilege period in which the
1-19     taxpayer claims the credit, $100,000;
1-20                 (2)  for the second privilege period, $250,000;
1-21                 (3)  for the third privilege period, $400,000; and
1-22                 (4)  for the fourth and subsequent privilege periods,
1-23     $500,000.
1-24           (d)  The amount of the credit may not reduce the tax below
 2-1     zero.
 2-2           (e)  If a taxpayer is entitled to a credit that exceeds the
 2-3     limitation under Subsection (c) for a privilege period, the
 2-4     taxpayer may carry the credit forward for not more than 15
 2-5     consecutive privilege periods.
 2-6           (f)  If a corporation's accounting year does not correspond
 2-7     to the privilege period, any amount used to calculate the credit
 2-8     shall be multiplied by a ratio the numerator of which is the number
 2-9     of days in the corporation's accounting year that are also in the
2-10     privilege period and the denominator of which is the number of days
2-11     in the privilege period.
2-12           (g)  The comptroller shall adopt rules necessary to implement
2-13     this section.
2-14           (h)  This section applies only to an expenditure by a
2-15     corporation made on or before December 31, 2017.
2-16           (i)  In this section, "basic research payment" and "qualified
2-17     research expense" have the meanings assigned those terms by Section
2-18     41, Internal Revenue Code of 1986.
2-19           SECTION 2.  This Act takes effect January 1, 2002, and
2-20     applies only to a report originally due on or after that date.
2-21           SECTION 3.  The importance of this legislation and the
2-22     crowded condition of the calendars in both houses create an
2-23     emergency and an imperative public necessity that the
2-24     constitutional rule requiring bills to be read on three several
2-25     days in each house be suspended, and this rule is hereby suspended.