By Carona S.B. No. 1286 77R8657 DAK-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to a phased-in and limited exemption for certain purchases 1-3 of machinery and equipment used for research and development from 1-4 sales and use taxes. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 SECTION 1. Subchapter H, Chapter 151, Tax Code, is amended by 1-7 adding Section 151.3181 to read as follows: 1-8 Sec. 151.3181. EQUIPMENT USED IN RESEARCH OR DEVELOPMENT. 1-9 (a) Subject to the limitations in Subsection (b), there are 1-10 exempted from the taxes imposed by this chapter machinery, 1-11 equipment, or replacement parts that are used directly in the 1-12 research or development of inventions, products, processes, or 1-13 technology by a person that is primarily engaged in: 1-14 (1) the manufacturing, processing, or fabrication of 1-15 tangible personal property for ultimate sale; or 1-16 (2) the performance of scientific or technical 1-17 services for a person described by Subdivision (1). 1-18 (b) The exemption from the taxes imposed by this chapter 1-19 under Subsection (a) is limited to the following amounts: 1-20 (1) the first $100,000 of tax on qualifying purchases 1-21 is exempt for each taxpayer in 2002; 1-22 (2) the first $200,000 of tax on qualifying purchases 1-23 is exempt for each taxpayer in 2003; 1-24 (3) the first $300,000 of tax on qualifying purchases 2-1 is exempt for each taxpayer in 2004; 2-2 (4) the first $400,000 of tax on qualifying purchases 2-3 is exempt for each taxpayer in 2005; and 2-4 (5) the first $500,000 of tax on qualifying purchases 2-5 is exempt for each taxpayer in 2006 and each following year. 2-6 (c) The exemption does not include: 2-7 (1) office equipment or supplies; or 2-8 (2) equipment or supplies used in sales or 2-9 distribution activities or in transportation activities. 2-10 (d) In this section: 2-11 (1) "Manufacturing" has the meaning assigned by 2-12 Section 151.318. 2-13 (2) "Research or development" has the meaning assigned 2-14 to "qualified research" by Section 41(d)(1), Internal Revenue Code. 2-15 SECTION 2. (a) This Act takes effect January 1, 2002. 2-16 (b) The change in law made by this Act does not affect taxes 2-17 imposed before the effective date of this Act, and the law in 2-18 effect before the effective date of this Act is continued in effect 2-19 for purposes of the liability for and collection of those taxes.