83R9590 KLA-D
By: Menendez H.B. No. 2390
A BILL TO BE ENTITLED
AN ACT
relating to a franchise tax credit for certain research and
development activities by taxable entities in the aerospace
industry.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 171, Tax Code, is amended by adding
Subchapter R to read as follows:
SUBCHAPTER R. TAX CREDIT FOR CERTAIN RESEARCH AND DEVELOPMENT
ACTIVITIES
Sec. 171.851. DEFINITIONS. In this subchapter:
(1) "Base amount," "basic research payment,"
"qualified research," and "qualified research expense" have the
meanings assigned those terms by Section 41, Internal Revenue Code,
except that the qualified research must be conducted within this
state, and all of the payments and expenses must be for research
conducted within this state.
(2) "Defense base development authority" means an
authority established under Chapter 379B, Local Government Code, or
Subtitle B, Title 4, Special District Local Laws Code.
Sec. 171.852. ELIGIBILITY. 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 if the entity:
(1) is primarily engaged in a business involved in the
aerospace industry; and
(2) performs qualified research in the territory of a
defense base development authority.
Sec. 171.853. CALCULATION OF CREDIT. (a) The credit for
any report equals five percent of the sum of:
(1) the excess of qualified research expenses incurred
in this state during the period on which the tax is based over 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 during
the period on which the tax is based.
(b) A taxable entity may elect to compute the credit for
qualified research expenses incurred in this state in a manner
consistent with the alternative incremental credit described in
Section 41(c)(4), Internal Revenue Code, only if for the
corresponding federal tax period:
(1) a federal election was made to compute the federal
credit under Section 41(c)(4), Internal Revenue Code;
(2) the taxable entity was a member of a consolidated
group for which a federal election was made under Section 41(c)(4),
Internal Revenue Code; or
(3) the taxable entity did not claim the federal
credit under Section 41(a)(1), Internal Revenue Code.
(c) For purposes of the alternate credit computation method
in Subsection (b), the credit percentages applicable to qualified
research expenses described in Sections 41(c)(4)(A)(i), (ii), and
(iii), Internal Revenue Code, are 0.41 percent, 0.55 percent, and
0.69 percent, respectively.
(d) The burden of establishing entitlement to and the value
of the credit is on the taxable entity.
(e) For the purposes of this section, "gross receipts" as
used in Section 41, Internal Revenue Code, means gross receipts as
determined under Section 171.103.
Sec. 171.854. LIMITATIONS. The sum of the total credit
claimed under this subchapter for a report, including the amount of
any carryforward credit under Section 171.855, and the amount of
unused credits accrued under Subchapter O before its repeal on
January 1, 2008, and claimed on the report as authorized by Section
18(d), Chapter 1 (H.B. 3), Acts of the 79th Legislature, 3rd Called
Session, 2006, may not exceed 50 percent of the amount of franchise
tax due for the report before any other applicable tax credits.
Sec. 171.855. CARRYFORWARD. If a taxable entity is
eligible for a credit that exceeds the limitation under Section
171.854, the taxable entity may carry the unused credit forward for
not more than 20 consecutive reports. Credits, including credit
carryforwards, are considered to be used in the following order:
(1) a credit carryforward of unused credits accrued
under Subchapter O before its repeal on January 1, 2008, and claimed
as authorized by Section 18(d), Chapter 1 (H.B. 3), Acts of the 79th
Legislature, 3rd Called Session, 2006;
(2) a credit carryforward under this subchapter; and
(3) a current year credit.
Sec. 171.856. BIENNIAL REPORT BY COMPTROLLER. (a) Before
the beginning of each regular session of the legislature, the
comptroller shall submit to the governor, the lieutenant governor,
and the speaker of the house of representatives a report that
states:
(1) the total amount of expenses and payments incurred
by taxable entities that claim a credit under this subchapter;
(2) the total amount of credits applied against the
tax under this chapter and the amount of unused credits including:
(A) the total amount of franchise tax due by
taxable entities claiming a credit under this subchapter before and
after the application of the credit;
(B) the average percentage reduction in
franchise tax due by taxable entities claiming a credit under this
subchapter;
(C) the percentage of tax credits that were
awarded to taxable entities with fewer than 100 employees; and
(D) the two-digit standard industrial
classification of taxable entities claiming a credit under this
subchapter;
(3) the geographical distribution of expenses and
payments giving rise to a credit authorized by this subchapter;
(4) the effect of the credit provided by this
subchapter on the amount of research and development performed in
this state and employment in research and development in this
state; and
(5) the effect of the credit provided under this
subchapter on employment, capital investment, and personal income
in this state and on state tax revenues.
(b) The final report issued prior to the expiration of this
subchapter shall include historical information on the credit
authorized under this subchapter.
(c) The comptroller may not include in the report
information that is confidential by law.
(d) For purposes of this section, the comptroller may
require a taxable entity that claims a credit under this subchapter
to submit information, on a form provided by the comptroller, on the
location of the taxable entity's research expenses and payments in
this state and any other information necessary to complete the
report required by this section.
Sec. 171.857. COMPTROLLER POWERS AND DUTIES. The
comptroller shall adopt rules and forms necessary to implement this
subchapter.
Sec. 171.858. 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. 171.859. EXPIRATION. (a) This subchapter expires
December 31, 2023.
(b) The expiration of this subchapter does not affect the
carryforward of a credit under Section 171.855 that was accrued
before the date this subchapter expires.
SECTION 2. (a) This Act applies only to a report originally
due on or after the effective date of this Act.
(b) The change in law made by this Act does not affect the
obligation for or the payment, computation, and collection of the
franchise tax for a report originally due before the effective date
of this Act. The obligation for and the payment, computation, and
collection of the franchise tax for a report originally due before
the effective date of this Act is governed by the law in effect on
the date the report was originally due, and that law is continued in
effect for those purposes.
SECTION 3. This Act takes effect January 1, 2014.