83R2240 KLA-D
 
  By: Button H.B. No. 414
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to a franchise tax credit for 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 M to read as follows:
  SUBCHAPTER M.  TAX CREDIT FOR CERTAIN RESEARCH AND DEVELOPMENT
  ACTIVITIES
         Sec. 171.651.  DEFINITIONS. In this subchapter:
               (1)  "Qualified research" has the meaning assigned by
  Section 41, Internal Revenue Code, except that the research must be
  conducted in this state.
               (2)  "Qualified research expense" has the meaning
  assigned by Section 41, Internal Revenue Code, except that the
  payments and expenses must be for research conducted in this state.
         Sec. 171.652.  ENTITLEMENT TO CREDIT. A taxable entity is
  eligible for a credit against the tax imposed under this chapter in
  the amount and under the conditions and limitations provided by
  this subchapter.
         Sec. 171.653.  AMOUNT OF CREDIT. (a) The credit for any
  report equals:
               (1)  10 percent of the difference between:
                     (A)  the qualified research expenses incurred in
  this state during the period on which the report is based; and
                     (B)  50 percent of the average amount of qualified
  research expenses incurred in this state during the three tax years
  preceding the period on which the report is based; or
               (2)  the amount of taxes imposed by Chapter 151 and paid
  during the period on which the report is based on the sale, lease,
  or rental to or use by the taxable entity of a taxable item that is
  used in performing qualified research.
         (b)  For each report, a taxable entity may elect to compute
  the amount of the credit in accordance with Subsection (a)(1) or
  (2), regardless of whether the taxable entity has made a different
  election on a previous report.
         (c)  The burden of establishing entitlement to and the value
  of the credit is on the taxable entity.
         Sec. 171.654.  LIMITATIONS. The total credit claimed under
  this subchapter for a report, including the amount of any
  carryforward credit under Section 171.655, may not exceed 50
  percent of the amount of franchise tax due for the report before any
  other applicable tax credits.
         Sec. 171.655.  CARRYFORWARD. If a taxable entity is
  eligible for a credit that exceeds the limitation under Section
  171.654, the taxable entity may carry the unused credit forward for
  not more than 20 consecutive reports.  A credit carryforward from a
  previous report is considered to be used before the current year
  credit.
         Sec. 171.656.  ASSIGNMENT PROHIBITED. A taxable entity may
  not convey, assign, or transfer the credit allowed under this
  subchapter to another entity unless all of the assets of the taxable
  entity are conveyed, assigned, or transferred in the same
  transaction.
         Sec. 171.657.  APPLICATION FOR CREDIT. A taxable entity
  must apply for a credit under this subchapter on or with the tax
  report for the period for which the credit is claimed.
         Sec. 171.658.  RULES. The comptroller shall adopt rules
  necessary to implement this subchapter, including rules regarding
  the documentation necessary to establish the amount of the credit
  computed under Section 171.653(a)(2).
         SECTION 2.  This Act applies only to a report originally due
  on or after the effective date of this Act.
         SECTION 3.  This Act takes effect January 1, 2014.