By: Nelson S.B. No. 96
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 use of earned, unused franchise tax benefits for
1-3 development stage companies conducting certain research and
1-4 development activities.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Chapter 171, Tax Code, is amended by adding
1-7 Subchapter Q to read as follows:
1-8 SUBCHAPTER Q. SALE OF BUSINESS LOSS CARRYOVERS AND CREDITS FOR
1-9 CERTAIN RESEARCH AND DEVELOPMENT ACTIVITIES
1-10 Sec. 171.781. DEFINITIONS. In this subchapter:
1-11 (1) "Advanced computing technology" means the
1-12 technology used in designing and developing computing hardware and
1-13 software, including innovations in designing the full spectrum of
1-14 hardware from handheld calculators to supercomputers, and
1-15 peripheral equipment associated with the hardware.
1-16 (2) "Advanced materials technology" means the
1-17 specialized processing and synthesis technology used to create
1-18 materials with engineered properties, including ceramics, high
1-19 value added metals, electronic materials, composites, polymers, and
1-20 biomaterials.
1-21 (3) "Basic research payment" and "qualified research
1-22 expense" have the meanings assigned those terms by Section 41,
1-23 Internal Revenue Code.
2-1 (4) "Biotechnology" means the technology, including
2-2 products, services, and subtechnologies, involving the functioning
2-3 of biological systems from the macro level to the molecular and
2-4 subatomic levels.
2-5 (5) "Development stage company" is a company with
2-6 product revenues for the preceding year of no greater than ten
2-7 million dollars ($10,000,000).
2-8 (6) "Electronic device technology" means the
2-9 technology involving:
2-10 (A) microelectronics;
2-11 (B) semiconductors;
2-12 (C) electronic equipment and instrumentation;
2-13 (D) radio frequency, microwave, and millimeter
2-14 electronics;
2-15 (E) optical and optic electrical devices; and
2-16 (F) data and digital communications and imaging
2-17 devices.
2-18 (7) "Environmental technology" means the technology
2-19 used:
2-20 (A) to assess and prevent threats or damage to
2-21 human health or the environment;
2-22 (B) for environmental cleanup; and
2-23 (C) to develop alternative energy sources.
2-24 (8) "Medical device technology" means the technology
2-25 involving any medical equipment or product that:
2-26 (A) is not a pharmaceutical product;
3-1 (B) has a therapeutic value, diagnostic value,
3-2 or both; and
3-3 (C) is regulated by the federal Food and Drug
3-4 Administration.
3-5 Sec. 171.782. BUSINESS LOSS CARRYOVER. Notwithstanding
3-6 Section 171.110(e), a corporation that has a business loss for a
3-7 privilege period may carry the loss forward for not more than 15
3-8 consecutive privilege periods if:
3-9 (1) during the privilege period the corporation
3-10 incurred or paid qualified research expenses; and
3-11 (2) the qualified research expenses were in the fields
3-12 of:
3-13 (A) advanced computing technology;
3-14 (B) advanced materials technology;
3-15 (C) biotechnology;
3-16 (D) electronic device technology;
3-17 (E) environmental technology; or
3-18 (F) medical device technology.
3-19 Sec. 171.783. SALE OF BUSINESS LOSS OR CREDIT. (a) A
3-20 development stage company that has a business loss carryover
3-21 described by Section 171.782 or a research and development tax
3-22 credit described by Subchapter O may apply to the comptroller to
3-23 sell the business loss or credit to another corporation. The
3-24 acquiring corporation must apply to the comptroller to purchase a
3-25 business loss or a credit. The maximum lifetime financial
3-26 assistance that may be received by a development stage enterprise
4-1 and its affiliated corporation business taxpayers pursuant to this
4-2 section is thirty million dollars ($30,000,000).
4-3 (b.) For the purposes of this section, a corporation is affiliated
4-4 with the taxpayer if either the taxpayer directly or indirectly
4-5 owns or controls 10 percent or more of the voting rights or 10
4-6 percent of the value of all classes of stock of that corporation or
4-7 another organization directly or indirectly owns or controls 10
4-8 percent or more of the voting rights or 10 percent of the value of
4-9 all classes of stock of both taxpayer and that corporation.
4-10 (c.) The comptroller shall review applications under this
4-11 section and may not approve the sale or purchase of a business loss
4-12 or credit unless the comptroller determines that:
4-13 (1) the loss or credit is being purchased for money or
4-14 financial assistance in an amount equal to at least 75 percent of
4-15 its value;
4-16 (2) there is an agreement between the seller and
4-17 purchaser specifying the means and amount of payment or financial
4-18 assistance; and
4-19 (3) the payment or financial assistance will be used
4-20 to fund expenses incurred in connection with the operation of new
4-21 or expanding emerging technology in the fields specified in Section
4-22 171.782(2), including expenses relating to the acquisition and
4-23 development of real estate or other fixed assets, materials, start
4-24 up, tenant fit out, working capital, salaries, and research and
4-25 development.
4-26 Sec. 171.785. RULES. The comptroller shall adopt rules
5-1 necessary to implement this subchapter.
5-2 SECTION 2. This Act takes effect January 1, 2000, and
5-3 applies only to a report originally due on or after that date.
5-4 SECTION 3. The importance of this legislation and the
5-5 crowded condition of the calendars in both houses create an
5-6 emergency and an imperative public necessity that the
5-7 constitutional rule requiring bills to be read on three several
5-8 days in each house be suspended, and this rule is hereby suspended.