By Williams H.B. No. 2790
77R4529 DAK-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to franchise tax incentives for corporations conducting
1-3 certain research and development activities.
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 S to read as follows:
1-7 SUBCHAPTER S. CREDITS AND BUSINESS LOSS CARRYOVERS FOR CERTAIN
1-8 RESEARCH AND DEVELOPMENT ACTIVITIES
1-9 Sec. 171.851. DEFINITIONS. In this subchapter:
1-10 (1) "Advanced computing technology" means the
1-11 technology used in designing and developing computing hardware and
1-12 software, including innovations in designing the full spectrum of
1-13 hardware from hand-held calculators to supercomputers, and
1-14 peripheral equipment associated with the hardware.
1-15 (2) "Advanced materials technology" means the
1-16 specialized processing and synthesis technology used to create
1-17 materials with engineered properties, including ceramics, high
1-18 value-added metals, electronic materials, composites, polymers, and
1-19 biomaterials.
1-20 (3) "Base amount," "basic research payment," and
1-21 "qualified research expense" have the meanings assigned those terms
1-22 by Section 41, Internal Revenue Code.
1-23 (4) "Biotechnology" means the technology, including
1-24 products, services, and subtechnologies, involving the functioning
2-1 of biological systems from the macro level to the molecular and
2-2 subatomic levels.
2-3 (5) "Electronic device technology" means the
2-4 technology involving:
2-5 (A) microelectronics;
2-6 (B) semiconductors;
2-7 (C) electronic equipment and instrumentation;
2-8 (D) radio frequency, microwave, and millimeter
2-9 electronics;
2-10 (E) optical and optic-electrical devices; and
2-11 (F) data and digital communications and imaging
2-12 devices.
2-13 (6) "Environmental technology" means the technology
2-14 used:
2-15 (A) to assess and prevent threats or damage to
2-16 human health or the environment;
2-17 (B) for environmental cleanup; and
2-18 (C) to develop alternative energy sources.
2-19 (7) "Medical device technology" means the technology
2-20 involving any medical equipment or product that:
2-21 (A) is not a pharmaceutical product;
2-22 (B) has a therapeutic value, diagnostic value,
2-23 or both; and
2-24 (C) is regulated by the federal Food and Drug
2-25 Administration.
2-26 Sec. 171.852. ENTITLEMENT. A corporation is entitled to a
2-27 credit in the amount and under the conditions and limitations
3-1 provided by this subchapter against the tax imposed under this
3-2 chapter.
3-3 Sec. 171.853. AMOUNT OF CREDIT. (a) Subject to Section
3-4 171.854, the credit for any privilege period equals 10 percent of
3-5 the sum of:
3-6 (1) the amount by which the qualified research
3-7 expenses in this state exceed the base amount for this state; and
3-8 (2) the basic research payments determined under
3-9 Section 41(e)(1)(A), Internal Revenue Code, for this state.
3-10 (b) If a corporation's accounting year does not correspond
3-11 to the privilege period, the base amount and any other amount used
3-12 to calculate the credit shall be multiplied by a ratio the
3-13 numerator of which is the number of days in the corporation's
3-14 accounting year that are also in the privilege period and the
3-15 denominator of which is the number of days in the privilege period.
3-16 Sec. 171.854. EXPENSES AND PAYMENTS IN CERTAIN FIELDS OF
3-17 TECHNOLOGY. For the purpose of determining the amount of the
3-18 credit under Section 171.853, a corporation may include only those
3-19 qualified research expenses and basic research payments in the
3-20 following fields:
3-21 (1) advanced computing technology;
3-22 (2) advanced materials technology;
3-23 (3) biotechnology;
3-24 (4) electronic device technology;
3-25 (5) environmental technology; and
3-26 (6) medical device technology.
3-27 Sec. 171.855. LIMITATION. The total credit claimed under
4-1 this subchapter for a privilege period may not reduce the tax for
4-2 the privilege period below zero.
4-3 Sec. 171.856. CARRYOVER OF CREDIT. A corporation may carry
4-4 a credit forward for not more than 15 consecutive privilege
4-5 periods.
4-6 Sec. 171.857. BUSINESS LOSS CARRYOVER. Notwithstanding
4-7 Section 171.110(e), a corporation that has a business loss for a
4-8 privilege period may carry the loss forward for not more than 15
4-9 consecutive privilege periods if:
4-10 (1) during the privilege period the corporation
4-11 incurred or paid qualified research expenses for research
4-12 conducted in this state; and
4-13 (2) the qualified research expenses were in the fields
4-14 specified in Section 171.854.
4-15 Sec. 171.858. SALE OF UNUSED CREDIT OR BUSINESS LOSS.
4-16 (a) A corporation that has an unused credit under this subchapter
4-17 or an unused business loss described by Section 171.857 may apply
4-18 to the comptroller to sell the credit or business loss to another
4-19 corporation. The acquiring corporation must apply to the
4-20 comptroller to purchase an unused credit or an unused business
4-21 loss.
4-22 (b) The comptroller shall review applications under this
4-23 section and may not approve the sale or purchase of an unused
4-24 credit under this subchapter or an unused business loss described
4-25 by Section 171.857 unless the comptroller determines that:
4-26 (1) the credit or loss is being purchased for money or
4-27 financial assistance in an amount equal to at least 75 percent of
5-1 its value;
5-2 (2) there is an agreement between the seller and
5-3 purchaser specifying the means and amount of payment or financial
5-4 assistance; and
5-5 (3) the payment or financial assistance will be used
5-6 to fund expenses incurred in connection with the operation of new
5-7 or expanding emerging technology in the fields specified in Section
5-8 171.854, including expenses relating to the acquisition and
5-9 development of real estate or other fixed assets, materials,
5-10 start-up, tenant fit-out, working capital, salaries, and research
5-11 and development.
5-12 Sec. 171.859. RULES. The comptroller shall adopt rules
5-13 necessary to implement this subchapter.
5-14 SECTION 2. This Act takes effect January 1, 2002, and
5-15 applies only to:
5-16 (1) a report originally due on or after that date; and
5-17 (2) an expense or business loss incurred on or after
5-18 that date.