By Madla                                               S.B. No. 985
         76R5991 DAK-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to a franchise tax refund or credit for certain research
 1-3     and development activities by a defense readjustment project.
 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 O to read as follows:
 1-7        SUBCHAPTER O.  TAX REFUND OR CREDIT FOR CERTAIN RESEARCH AND
 1-8           DEVELOPMENT ACTIVITIES BY DEFENSE READJUSTMENT PROJECT
 1-9           Sec. 171.721.  DEFINITIONS.  In this subchapter:
1-10                 (1)  "Basic research payment" and "qualified research
1-11     expense" have the meanings assigned by Section 41, Internal Revenue
1-12     Code.
1-13                 (2)  "Defense readjustment project" means a person
1-14     designated by the Texas Department of Economic Development as a
1-15     defense readjustment project under Chapter 2310, Government Code.
1-16                 (3)  "Readjustment zone" has the meaning assigned by
1-17     Section 2310.001, Government Code.
1-18           Sec. 171.722.  ENTITLEMENT.  A corporation that is a defense
1-19     readjustment project is entitled to a refund in the amount and
1-20     under the conditions and limitations provided by this subchapter
1-21     against the tax imposed under this chapter.
1-22           Sec. 171.723.  AMOUNT.  (a)  Except as provided by Subsection
1-23     (b), and subject to adjustment under Section 171.726, the refund
1-24     for any privilege period equals five percent of the sum of:
 2-1                 (1)  the qualified research expenses made in a
 2-2     readjustment zone; and
 2-3                 (2)  the basic research payments determined under
 2-4     Section 41(e)(1)(A), Internal Revenue Code, made in a readjustment
 2-5     zone.
 2-6           (b)  The total refund claimed under this section for a
 2-7     privilege period may not exceed 25 percent of the amount of net
 2-8     franchise tax due for the privilege period after any other
 2-9     applicable tax credits or refunds.
2-10           (c)  If a corporation's accounting year does not correspond
2-11     to the privilege period, the base amount and any other amount used
2-12     to calculate the refund shall be multiplied by a ratio the
2-13     numerator of which is the number of days in the corporation's
2-14     accounting year that are also in the privilege period and the
2-15     denominator of which is the number of days in the privilege period.
2-16           Sec. 171.724.  APPLICATION.  (a)  A corporation must apply
2-17     for a refund under this subchapter on or with the tax report for
2-18     the period for which the refund is claimed.
2-19           (b)  The comptroller shall promulgate a form for the
2-20     application for the refund.  A corporation must use this form in
2-21     applying for the refund.
2-22           Sec. 171.725.  DETERMINATION OF TOTAL AMOUNT OF REFUNDS.  The
2-23     comptroller shall determine the total amount of refunds claimed for
2-24     a tax year on all reports that are filed on or before November 15.
2-25           Sec. 171.726.  ADJUSTMENT AND PAYMENT OF REFUND.  (a)  On or
2-26     before December 31 of a tax year, the comptroller shall send to a
2-27     corporation entitled to a refund under this subchapter:
 3-1                 (1)  the full amount of the refund determined under
 3-2     Section 171.723 if the amount under Section 171.725 is less than or
 3-3     equal to $125 million; or
 3-4                 (2)  a portion of the refund determined under Section
 3-5     171.723 in accordance with Subsection (b) if the amount under
 3-6     Section 171.725 is greater than $125 million.
 3-7           (b)  If the amount under Section 171.725 is greater than $125
 3-8     million, the comptroller shall determine the amount of a
 3-9     corporation's refund by multiplying the amount of the corporation's
3-10     refund determined under Section 171.723 by a fraction:
3-11                 (1)  the numerator of which is $125 million; and
3-12                 (2)  the denominator of which is the amount under
3-13     Section 171.725.
3-14           Sec. 171.727.  CREDIT.  (a)  The comptroller may, for a tax
3-15     year, allow corporations to take a credit directly against the tax
3-16     owed under this chapter instead of issuing a refund after the tax
3-17     is paid if the comptroller determines that the amount under Section
3-18     171.725 for the tax year is reasonably certain to be less than or
3-19     equal to $125 million.
3-20           (b)  If the comptroller makes the determination under
3-21     Subsection (a), the provisions of this subchapter that relate to
3-22     the entitlement to and amount of limitations of a refund apply in
3-23     the same manner to a credit.
3-24           Sec. 171.728.  RULES.  The comptroller shall adopt rules
3-25     necessary to implement this subchapter.
3-26           SECTION 2.  (a)  This Act takes effect January 1, 2000.
3-27           (b)  This Act applies only to:
 4-1                 (1)  a report originally due on or after the effective
 4-2     date of this Act; and
 4-3                 (2)  an expense or payment made on or after January 1,
 4-4     1999.
 4-5           SECTION 3.  The importance of this legislation and the
 4-6     crowded condition of the calendars in both houses create an
 4-7     emergency and an imperative public necessity that the
 4-8     constitutional rule requiring bills to be read on three several
 4-9     days in each house be suspended, and this rule is hereby suspended.