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A BILL TO BE ENTITLED
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AN ACT
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relating to a franchise tax credit for research and development |
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activities performed in conjunction with institutions of higher |
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education; authorizing a tax credit. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 171, Tax Code, is amended by adding |
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Subchapter N to read as follows: |
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SUBCHAPTER N. TAX CREDIT FOR RESEARCH AND DEVELOPMENT ACTIVITIES |
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PERFORMED IN CONJUNCTION WITH INSTITUTIONS OF HIGHER EDUCATION |
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Sec. 171.701. DEFINITIONS. In this subchapter: |
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(1) "Public or private institution of higher |
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education" means: |
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(A) an institution of higher education, as |
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defined by Section 61.003, Education Code; or |
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(B) a private or independent institution of |
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higher education, as defined by Section 61.003, Education Code. |
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(2) "Qualified research" has the meaning assigned by |
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Section 41, Internal Revenue Code, except that the research must be |
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conducted in this state. |
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(3) "Qualified research expense" has the meaning |
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assigned by Section 41, Internal Revenue Code. |
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Sec. 171.702. ELIGIBILITY FOR CREDIT. A taxable entity is |
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eligible for a credit against the tax imposed under this chapter in |
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the amount and under the conditions and limitations provided by |
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this subchapter if the taxable entity contracts with one or more |
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public or private institutions of higher education for the |
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performance of qualified research. |
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Sec. 171.703. AMOUNT OF CREDIT. (a) Subject to Section |
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171.704, the credit for any report equals 20 percent of the |
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difference between: |
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(1) the total amount of qualified research expenses |
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incurred in this state by the taxable entity under contracts |
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described by Section 171.702 during the period on which the report |
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is based; and |
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(2) 50 percent of the average amount of qualified |
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research expenses incurred in this state by the taxable entity |
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under contracts described by Section 171.702 during the three tax |
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years preceding the period on which the report is based. |
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(b) The burden of establishing entitlement to and the value |
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of the credit is on the taxable entity. |
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Sec. 171.704. LIMITATIONS. (a) Subject to Subsection (b), |
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the total credit claimed under this subchapter for a report, |
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including the amount of any carryforward credit under Section |
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171.705, may not exceed 50 percent of the amount of franchise tax |
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due for the report before any other applicable tax credits. |
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(b) For each state fiscal year, the total amount of tax |
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credits, including credit carryforwards, that may be claimed by all |
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taxable entities under this subchapter may not exceed $15 million. |
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The comptroller by rule shall prescribe procedures by which the |
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comptroller will allocate credits under this subchapter on a pro |
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rata basis. |
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(c) The comptroller may require a taxable entity to notify |
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the comptroller of the amount the taxable entity intends or expects |
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to claim under this subchapter before the beginning of a state |
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fiscal year or at any other time required by the comptroller. |
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Sec. 171.705. CARRYFORWARD. If a taxable entity is |
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eligible for a credit that exceeds the limitation under Section |
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171.704, the taxable entity may carry the unused credit forward for |
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not more than 20 consecutive reports. A credit carryforward from a |
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previous report is considered to be used before the current year |
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credit. |
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Sec. 171.706. ASSIGNMENT PROHIBITED. A taxable entity may |
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not convey, assign, or transfer the credit allowed under this |
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subchapter to another entity unless all of the assets of the taxable |
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entity are conveyed, assigned, or transferred in the same |
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transaction. |
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Sec. 171.707. APPLICATION FOR CREDIT. A taxable entity |
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must apply for a credit under this subchapter on or with the tax |
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report for the period for which the credit is claimed. |
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Sec. 171.708. RULES. The comptroller shall adopt rules |
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necessary to implement this subchapter. |
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Sec. 171.709. REPORT. Not later than December 1, 2016, and |
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each fourth year thereafter, the comptroller shall conduct a study |
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of the credit under this subchapter and submit a report on the |
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results of the study to the governor and the legislature. The |
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purpose of the study is to determine: |
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(1) if the credit accomplishes the credit's intended |
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purpose; |
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(2) if the credit complies with the intent of the |
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legislature in enacting this subchapter; |
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(3) if the economic benefit of the credit to the state |
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exceeds the amount of tax revenue lost as a result of the credit; |
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and |
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(4) if legislative action is needed to increase the |
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efficiency or effectiveness of any part of the subchapter. |
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SECTION 2. This Act applies only to a report originally due |
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on or after the effective date of this Act. |
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SECTION 3. This Act takes effect January 1, 2014. |