By Brown of Kaufman                                   H.B. No. 1746
         77R4606 CBH-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to a franchise credit for funding certain scholarships.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1. Chapter 171, Tax Code, is amended by adding
 1-5     Subchapter S to read as follows:
 1-6         SUBCHAPTER S.  TAX CREDIT FOR FUNDING CERTAIN SCHOLARSHIPS
 1-7           Sec. 171.851.  DEFINITION. In this subchapter, "institution
 1-8     of higher education" means an institution of higher education or a
 1-9     private or independent institution of higher education as those
1-10     terms are defined by Section 61.003, Education Code.
1-11           Sec. 171.852.  ELIGIBILITY. (a)  A corporation may claim a
1-12     credit under this subchapter only if the corporation has fewer than
1-13     50 employees.
1-14           (b)  A corporation described by Subsection (a) is eligible
1-15     for a credit against the tax imposed under this chapter in the
1-16     amount and under the conditions and limitations provided by this
1-17     subchapter.
1-18           Sec. 171.853.  CREDIT FOR FUNDING CERTAIN SCHOLARSHIPS. (a)
1-19     A corporation may claim a credit under this subchapter only for an
1-20     expenditure made toward funding a scholarship as provided by this
1-21     section payable toward the payment of at least 50 percent of the
1-22     tuition costs of a corporation employee who:
1-23                 (1)  attends an institution of higher education;
1-24                 (2)  enrolls for at least six semester credit hours at
 2-1     the institution; and
 2-2                 (3)  uses the scholarship to attend the institution.
 2-3           (b)  A corporation may fund more than one scholarship.
 2-4           Sec. 171.854.  AMOUNTS; LIMITATIONS. (a)  Except as provided
 2-5     by Subsection (b), the amount of the credit is equal to the total
 2-6     amount of the expenditures made under Section 171.853.
 2-7           (b)  The total credit under this subchapter for a report may
 2-8     not exceed the total amount of franchise tax due for the report
 2-9     after any other applicable tax credits.
2-10           (c)  A corporation may claim a credit under this subchapter
2-11     for an expenditure made during an accounting period only against
2-12     the tax owed for the corresponding reporting period.
2-13           Sec. 171.855.  APPLICATION FOR CREDIT. (a)  A corporation
2-14     must apply for a credit under this subchapter on or with the tax
2-15     report for the period for which the credit is claimed.
2-16           (b)  The comptroller shall adopt a form for the application
2-17     for the credit.  A corporation must use the form in applying for
2-18     the credit.
2-19           Sec. 171.856.  ASSIGNMENT PROHIBITED. A corporation may not
2-20     convey, assign, or transfer the credit allowed under this
2-21     subchapter to another entity unless all of the assets of the
2-22     corporation are conveyed, assigned, or transferred in the same
2-23     transaction.
2-24           SECTION 2. (a)  This Act takes effect January 1, 2002, and
2-25     applies only to a report due on or after that date.
2-26           (b)  A corporation may claim a credit under Subchapter S,
2-27     Chapter 171, Tax Code, as added by this Act, only for an
 3-1     expenditure made on or after January 1, 2002.