78R5582 DAK-D
By: Williams S.B. No. 538
A BILL TO BE ENTITLED
AN ACT
relating to franchise tax incentives for corporations conducting
certain research and development activities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 171, Tax Code, is amended by adding
Subchapter V to read as follows:
SUBCHAPTER V. CREDITS AND BUSINESS LOSS CARRYOVERS FOR CERTAIN
RESEARCH AND DEVELOPMENT ACTIVITIES
Sec. 171.921. DEFINITIONS. In this subchapter:
(1) "Advanced computing technology" means the
technology used in designing and developing computing hardware and
software, including innovations in designing the full spectrum of
hardware from hand-held calculators to supercomputers, and
peripheral equipment associated with the hardware.
(2) "Advanced materials technology" means the
specialized processing and synthesis technology used to create
materials with engineered properties, including ceramics, high
value-added metals, electronic materials, composites, polymers,
and biomaterials.
(3) "Base amount," "basic research payment," and
"qualified research expense" have the meanings assigned those terms
by Section 41, Internal Revenue Code.
(4) "Biotechnology" means the technology, including
products, services, and subtechnologies, involving the functioning
of biological systems from the macro level to the molecular and
subatomic levels.
(5) "Electronic device technology" means the
technology involving:
(A) microelectronics;
(B) semiconductors;
(C) electronic equipment and instrumentation;
(D) radio frequency, microwave, and millimeter
electronics;
(E) optical and optic-electrical devices; and
(F) data and digital communications and imaging
devices.
(6) "Environmental technology" means the technology
used:
(A) to assess and prevent threats or damage to
human health or the environment;
(B) for environmental cleanup; and
(C) to develop alternative energy sources.
(7) "Medical device technology" means the technology
involving any medical equipment or product that:
(A) is not a pharmaceutical product;
(B) has a therapeutic value, diagnostic value, or
both; and
(C) is regulated by the federal Food and Drug
Administration.
Sec. 171.922. ENTITLEMENT. A corporation is entitled to a
credit in the amount and under the conditions and limitations
provided by this subchapter against the tax imposed under this
chapter.
Sec. 171.923. AMOUNT OF CREDIT. (a) Subject to Section
171.924, the credit for any privilege period equals 10 percent of
the sum of:
(1) the amount by which the qualified research
expenses in this state exceed the base amount for this state; and
(2) the basic research payments determined under
Section 41(e)(1)(A), Internal Revenue Code, for this state.
(b) If a corporation's accounting year does not correspond
to the privilege period, the base amount and any other amount used
to calculate the credit shall be multiplied by a ratio the numerator
of which is the number of days in the corporation's accounting year
that are also in the privilege period and the denominator of which
is the number of days in the privilege period.
Sec. 171.924. EXPENSES AND PAYMENTS IN CERTAIN FIELDS OF
TECHNOLOGY. For the purpose of determining the amount of the credit
under Section 171.923, a corporation may include only those
qualified research expenses and basic research payments in the
following fields:
(1) advanced computing technology;
(2) advanced materials technology;
(3) biotechnology;
(4) electronic device technology;
(5) environmental technology; and
(6) medical device technology.
Sec. 171.925. CARRYOVER OF CREDIT. A corporation may carry
a credit forward for not more than 15 consecutive privilege
periods.
Sec. 171.926. BUSINESS LOSS CARRYOVER. Notwithstanding
Section 171.110(e), a corporation that has a business loss for a
privilege period may carry the loss forward for not more than 15
consecutive privilege periods if:
(1) during the privilege period the corporation
incurred or paid qualified research expenses for research conducted
in this state; and
(2) the qualified research expenses were in the fields
specified in Section 171.924.
Sec. 171.927. SALE OF UNUSED CREDIT OR BUSINESS LOSS.
(a) A corporation that has an unused credit under this subchapter
or an unused business loss described by Section 171.926 may apply to
the comptroller to sell the credit or business loss to another
corporation. The acquiring corporation must apply to the
comptroller to purchase an unused credit or an unused business
loss.
(b) The comptroller shall review applications under this
section and may not approve the sale or purchase of an unused credit
under this subchapter or an unused business loss described by
Section 171.926 unless the comptroller determines that:
(1) the credit or loss is being purchased for money or
financial assistance in an amount equal to at least 75 percent of
its value;
(2) there is an agreement between the seller and
purchaser specifying the means and amount of payment or financial
assistance; and
(3) the payment or financial assistance will be used
to fund expenses incurred in connection with the operation of new or
expanding emerging technology in the fields specified in Section
171.924, including expenses relating to the acquisition and
development of real estate or other fixed assets, materials,
start-up, tenant fit-out, working capital, salaries, and research
and development.
Sec. 171.928. RULES. The comptroller shall adopt rules
necessary to implement this subchapter.
SECTION 2. This Act takes effect January 1, 2004, and
applies only to:
(1) a report originally due on or after that date; and
(2) an expense or business loss incurred on or after
that date.