By Sadler H.B. No. 3152
76R9248 T
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to tax incentives for investment in manufacturing and
1-3 research and development.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 171, Tax Code, is amended by adding
1-6 Subchapter N to read as follows:
1-7 SUBCHAPTER N. CREDIT FOR INVESTMENT IN MANUFACTURING,
1-8 RESEARCH AND DEVELOPMENT, AND EDUCATION
1-9 Sec. 171.701. DEFINITION. In this subchapter,
1-10 "manufacturing" has the meaning assigned by Section 151.3181.
1-11 Sec. 171.702. ENTITLEMENT. A corporation is entitled to a
1-12 credit in the amount and under the conditions and limitations
1-13 provided by this subchapter against the tax imposed under this
1-14 chapter.
1-15 Sec. 171.703. MANUFACTURING INVESTMENT CREDIT. (a) A
1-16 corporation is entitled to a credit for money spent on purchasing
1-17 or leasing buildings, fixtures, machinery, equipment, and any other
1-18 property eligible for depreciation under Section 167 or 168,
1-19 Internal Revenue Code, placed in service in this state for
1-20 manufacturing or research and development of products,
1-21 manufacturing processes, or technology.
1-22 (b) The credit may be taken only for property placed in
1-23 service on or after January 1, 2000.
1-24 (c) Subject to the limitations in subsections (d) and (e),
2-1 the amount of the credit is 2 percent of the amount spent under
2-2 Subsection (a). The 2 percent credit may be taken in the reporting
2-3 period in which the property is placed in service and in each of
2-4 the four succeeding reporting periods.
2-5 (d) The credit may be taken by a corporation only for
2-6 qualified property in projects that (1) exceed $100 million, or (2)
2-7 create 50 or more new permanent full-time or full-time equivalent
2-8 jobs in this state after January 1, 2000. A "project" means a
2-9 single transaction or a combination of related transactions to
2-10 acquire qualified investment property and may encompass multiple
2-11 locations, provided such locations are functionally related and are
2-12 not greater than 20 miles apart. In the first reporting period in
2-13 which (1) the qualified investments in a project exceed $100
2-14 million, or (2) the project results in 50 or more new permanent
2-15 full-time or full-time equivalent jobs in this state, the credit
2-16 may be taken for all qualified property placed in service on that
2-17 project between January 1, 2000 and the end of that reporting
2-18 period, and credit on that investment may also be claimed in each
2-19 of the four succeeding reporting periods.
2-20 (e) The credit shall be 25% of the amount calculated under
2-21 subsections (c) and (d) for reports due on or after January 1, 2001
2-22 and before January 1, 2002, 50% for reports due on or after January
2-23 1, 2002 and before January 1, 2003, 75% for reports due on or after
2-24 January 1, 2003 and before January 1, 2004, and 100% for reports
2-25 due on or after January 1, 2004.
2-26 Sec. 171.704. RESEARCH INVESTMENT CREDIT. (a) A
2-27 corporation is entitled to a credit for:
3-1 (1) qualified research expenses, as defined by Section
3-2 41, Internal Revenue Code, made in this state; and
3-3 (2) the basic research payments determined under
3-4 Section 41(e)(1)(A), Internal Revenue Code, made in this state.
3-5 (b) Subject to the limitations in subsection (c), the amount
3-6 of the credit is two percent of the amount spent under Subsection
3-7 (a). The credit may be taken in the reporting period in which the
3-8 expenses or payments are made and in each of the four succceeding
3-9 reporting periods.
3-10 (c) The credit shall be 25% of the amount calculated under
3-11 subsection (b) for reports due on or after October 1, 1999 and
3-12 before January 1, 2001, 50% for reports due on or after January 1,
3-13 2001 and before January 1, 2002, 75% for reports due on or after
3-14 January 1, 2002 and before January 1, 2003, and 100% for reports
3-15 due on or after January 1, 2003.
3-16 Sec. 171.706. CARRYOVER. A corporation may carry any unused
3-17 credit forward for not more than 5 consecutive privilege periods.
3-18 SECTION 2. Subchapter H, Chapter 151, Tax Code, is amended
3-19 by adding Section 151.3181 to read as follows:
3-20 Sec. 151.3181. PROPERTY USED IN RESEARCH AND DEVELOPMENT.
3-21 (a) Subject to the limitations in subsections (b) and (d), there
3-22 are exempted from the taxes imposed by this chapter machinery,
3-23 equipment, replacements parts, computers, and software that are
3-24 used:
3-25 (1) in the research or development of an invention,
3-26 product, process, or technology by a person that is primarily
3-27 engaged in the manufacturing, processing, or fabrication of
4-1 tangible personal property for ultimate sale; or
4-2 (2) in the performance of a scientific or technical
4-3 service for a person described by Subdivision (1).
4-4 (b) This section does not apply to equipment, replacement
4-5 parts, computers, or software used in:
4-6 (1) sales or distribution activities; or
4-7 (2) transportation activities.
4-8 (c) In this section, "manufacturing" includes:
4-9 (1) each operation beginning with the first stage in
4-10 the production of tangible personal property and ending with the
4-11 completion of tangible personal property having the physical
4-12 properties, including any packaging, that it has when transferred
4-13 by the manufacturer to another;
4-14 (2) preparatory activities to ready raw material or
4-15 inventory for manufacturing, including gathering, sorting, testing,
4-16 and warehousing; and
4-17 (3) activities of the manufacturer to maintain the
4-18 life of tangible personal property or prevent its deterioration,
4-19 including storage.
4-20 (d) The exemptions shall apply to 25% of the sales price of
4-21 property purchased for research and development on or after October
4-22 1, 1999 and before January 1, 2001, 50% of the sales price for
4-23 property purchased on or after January 1, 2001 and before January
4-24 1, 2002, 75% of the sales price for property purchased on or after
4-25 January 1, 2002 and before January 1, 2003, and 100% of the sales
4-26 price for property purchased on or after January 1, 2003.
4-27 SECTION 3. (a) Except as provided by Subsection (b) of this
5-1 section, Section 1 of this Act takes effect October 1, 1999, and
5-2 applies only to a report originally due on or after that date and
5-3 an investment made on or after that date.
5-4 (b) The manufacturing investment credit, as added by Section
5-5 171.703, Tax Code, as added by this Act, applies only to a report
5-6 originally due on or after January 1, 2001, without regard to
5-7 whether an investment was made before, on, or after that date.
5-8 (c) Section 2 of this Act takes effect October 1, 1999.
5-9 (d) The change in law made by Section 2 of this Act does not
5-10 affect taxes imposed before October 1, 1999, and the law in effect
5-11 before that date is continued in effect for purposes of the
5-12 liability and for collection of those taxes.
5-13 SECTION 4. The importance of this legislation and the
5-14 crowded condition of the calendars in both houses create an
5-15 emergency and an imperative public necessity that the
5-16 constitutional rule requiring bills to be read on three several
5-17 days in each house be suspended, and this rule is hereby suspended.