By George H.B. No. 3216 Line and page numbers may not match official copy. Bill not drafted by TLC or Senate E&E. 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. BUSINESS LOSS CARRYOVERS AND REFUNDS FOR 1-8 CERTAIN 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 handheld 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) "Basic research payment" and "qualified research 1-21 expense" have the meanings assigned those terms by Section 41, 1-22 Internal Revenue Code. 1-23 (4) "Biotechnology" means the technology, including 2-1 products, services, and subtechnologies, involving the functioning 2-2 of biological systems from the macro level to the molecular and 2-3 subatomic levels. 2-4 (5) "Electronic device technology" means the 2-5 technology involving: 2-6 (A) microelectronics; 2-7 (B) semiconductors; 2-8 (C) electronic equipment and instrumentation; 2-9 (D) radio frequency, microwave, and millimeter 2-10 electronics; 2-11 (E) optical and optic-electrical devices; and 2-12 (F) data and digital communications an imaging 2-13 devices. 2-14 (6) "Environmental technology" means the technology 2-15 used: 2-16 (A) to assess and prevent threats or damage to 2-17 human health or the environment; 2-18 (B) for environmental cleanup; and 2-19 (C) to develop alternative energy sources. 2-20 (7) "Medical device technology" means the technology 2-21 involving any medical equipment or product that: 2-22 (A) is not a pharmaceutical product; 2-23 (B) has a therapeutic value, diagnostic value, 2-24 or both; and 2-25 (C) is regulated by the federal Food and Drug 2-26 Administration. 3-1 Sec. 171.852. BUSINESS LOSS CARRYOVER. Notwithstanding 3-2 Section 171.110(e), a corporation that has a business loss for a 3-3 privilege period may carry the loss forward for not more than 15 3-4 consecutive privilege periods if: 3-5 (1) during the privilege period the corporation 3-6 incurred or paid qualified research expenses; and 3-7 (2) the qualified research expenses were in the fields 3-8 of: 3-9 (A) advanced computing technology; 3-10 (B) advanced materials technology; 3-11 (C) biotechnology; 3-12 (D) electronic device technology; 3-13 (E) environmental technology; or 3-14 (F) medical device technology. 3-15 Sec. 171.853. REFUND OF BUSINESS LOSS OR CREDIT FOR CERTAIN 3-16 CORPORATIONS. (a) A corporation is entitled to receive a refund as 3-17 provided by this section if the corporation: 3-18 (1) has product revenues for the year preceding the 3-19 privilege period equal to or less than $5 million; and 3-20 (2) has: 3-21 (A) a business loss carryover described by 3-22 Section 171.852; or 3-23 (B) a research and development tax credit under 3-24 Subchapter O. 3-25 (b) The amount of the refund is 75 percent of the value of 3-26 the unused business loss or credit. 4-1 (c) A corporation may not receive an amount under this 4-2 section that would result in the corporation and its affiliated 4-3 taxpayers receiving, over the lifetime of the corporation or the 4-4 affiliated taxpayer, an amount greater than $30 million of 4-5 cumulative refunds under this section. A corporation is affiliated 4-6 with a taxpayer for the purposes of this subsection if: 4-7 (1) the taxpayer directly or indirectly owns or 4-8 controls 10 percent or more of the voting rights or 10 percent or 4-9 more of the value of all classes of stock of the corporation; or 4-10 (2) another organization directly or indirectly owns 4-11 or controls 10 percent or more of the voting rights or 10 percent 4-12 or more of the value of all classes of stock of both the taxpayer 4-13 and the corporation. 4-14 Sec. 171.854. RULES. The comptroller shall adopt rules 4-15 necessary to implement this subchapter. 4-16 SECTION 2. This Act takes effect January 1, 2002, and 4-17 applies only to a report originally due on or after that date.