Texas 2013 - 83rd Regular

Texas House Bill HB800 Compare Versions

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1	1	By: Murphy, et al. (Senate Sponsor - Deuell) H.B. No. 800
2	2	(In the Senate - Received from the House May 3, 2013;
3	3	May 6, 2013, read first time and referred to Committee on Finance;
4	4	May 17, 2013, reported favorably by the following vote:
5	5	Yeas 11, Nays 3; May 17, 2013, sent to printer.)
6	6
7	7
8	8	A BILL TO BE ENTITLED
9	9	AN ACT
10	10	relating to a sales and use tax exemption and a franchise tax credit
11	11	related to certain research and development activities.
12	12	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
13	13	SECTION 1. LEGISLATIVE FINDINGS AND PURPOSES. (a) The
14	14	legislature finds that:
15	15	(1) Texas economic activity accounts for more than
16	16	eight percent of the economic activity in the United States, but
17	17	accounts for only five percent of research and development spending
18	18	in the United States;
19	19	(2) research and development activities create:
20	20	(A) high-paying jobs that provide substantial
21	21	benefits to the Texas economy; and
22	22	(B) new technologies and applications that
23	23	generate economic efficiency and growth; and
24	24	(3) private-sector research and development
25	25	activities create partnerships between private-sector entities and
26	26	institutions of higher education, and those partnerships expand
27	27	opportunities for innovation and learning.
28	28	(b) Based on the findings specified in Subsection (a) of
29	29	this section, the purposes of this Act are to:
30	30	(1) make Texas economically competitive in the field
31	31	of research and development;
32	32	(2) reduce the tax burden on research and development
33	33	activities in Texas and encourage new investments in this state;
34	34	(3) promote the creation of new, highly skilled,
35	35	high-paying jobs in Texas; and
36	36	(4) complement this state's manufacturing industries
37	37	by encouraging innovation and efficiency in applying new
38	38	technologies and producing new products.
39	39	SECTION 2. SALES AND USE TAX EXEMPTION. Subchapter H,
40	40	Chapter 151, Tax Code, is amended by adding Section 151.3182 to read
41	41	as follows:
42	42	Sec. 151.3182. CERTAIN PROPERTY USED IN RESEARCH AND
43	43	DEVELOPMENT ACTIVITIES; REPORTING OF ESTIMATES AND EVALUATION. (a)
44	44	In this section:
45	45	(1) "Depreciable tangible personal property" means
46	46	tangible personal property that:
47	47	(A) has a useful life that exceeds one year; and
48	48	(B) is subject to depreciation under:
49	49	(i) generally accepted accounting
50	50	principles; or
51	51	(ii) Section 167 or 168, Internal Revenue
52	52	Code.
53	53	(2) "Internal Revenue Code" has the meaning assigned
54	54	by Section 171.651.
55	55	(3) "Qualified research" has the meaning assigned by
56	56	Section 41, Internal Revenue Code.
57	57	(b) The sale, storage, or use of depreciable tangible
58	58	personal property directly used in qualified research is exempted
59	59	from the taxes imposed by this chapter if the property is sold,
60	60	leased, or rented to, or stored or used by, a person who:
61	61	(1) is engaged in qualified research; and
62	62	(2) will not, as a taxable entity as defined by Section
63	63	171.0002 or as a member of a combined group that is a taxable
64	64	entity, claim a credit under Subchapter M, Chapter 171, on a
65	65	franchise tax report for the period during which the sale, storage,
66	66	or use occurs.
67	67	(c) Before the beginning of each regular session of the
68	68	legislature, the comptroller shall submit to the legislature and
69	69	the governor:
70	70	(1) an estimate of the total number of persons who
71	71	received exemptions under this section and an estimate of the total
72	72	amount of those exemptions; and
73	73	(2) an evaluation of the effect of the exemption under
74	74	this section, in combination with the credit authorized by
75	75	Subchapter M, Chapter 171, that is conducted by an independent
76	76	researcher at a center for research authorized by Section 1.005,
77	77	Education Code, on:
78	78	(A) the amount of qualified research performed in
79	79	this state;
80	80	(B) employment in research and development in
81	81	this state;
82	82	(C) economic activity in this state; and
83	83	(D) state tax revenues.
84	84	(d) The comptroller shall require a person who receives an
85	85	exemption under this section to complete a form to provide the
86	86	information necessary for the comptroller to make the evaluation
87	87	required by Subsection (c)(2). The information provided on the
88	88	form is confidential and not subject to disclosure under Chapter
89	89	552, Government Code.
90	90	(e) The comptroller shall provide the estimates and
91	91	evaluation required by Subsection (c) as part of the report
92	92	required by Section 403.014, Government Code.
93	93	(f) This section expires December 31, 2026.
94	94	SECTION 3. FRANCHISE TAX CREDIT. Chapter 171, Tax Code, is
95	95	amended by adding Subchapter M to read as follows:
96	96	SUBCHAPTER M. TAX CREDIT FOR CERTAIN RESEARCH AND DEVELOPMENT
97	97	ACTIVITIES
98	98	Sec. 171.651. DEFINITIONS. In this subchapter:
99	99	(1) "Internal Revenue Code" means the Internal Revenue
100	100	Code of 1986 in effect on December 31, 2011, excluding any changes
101	101	made by federal law after that date, but including any regulations
102	102	adopted under that code applicable to the tax year to which the
103	103	provisions of the code in effect on that date applied.
104	104	(2) "Public or private institution of higher
105	105	education" means:
106	106	(A) an institution of higher education, as
107	107	defined by Section 61.003, Education Code; or
108	108	(B) a private or independent institution of
109	109	higher education, as defined by Section 61.003, Education Code.
110	110	(3) "Qualified research" has the meaning assigned by
111	111	Section 41, Internal Revenue Code, except that the research must be
112	112	conducted in this state.
113	113	(4) "Qualified research expense" has the meaning
114	114	assigned by Section 41, Internal Revenue Code, except that the
115	115	expense must be for research conducted in this state.
116	116	Sec. 171.652. ELIGIBILITY FOR CREDIT. A taxable entity is
117	117	eligible for a credit against the tax imposed under this chapter in
118	118	the amount and under the conditions and limitations provided by
119	119	this subchapter.
120	120	Sec. 171.653. INELIGIBILITY FOR CREDIT FOR CERTAIN PERIODS.
121	121	(a) A taxable entity is not eligible for a credit on a report
122	122	against the tax imposed under this chapter for qualified research
123	123	expenses incurred during the period on which the report is based if
124	124	the taxable entity, or a member of the combined group if the taxable
125	125	entity is a combined group, received an exemption under Section
126	126	151.3182 during that period.
127	127	(b) A taxable entity's ineligibility under this section for
128	128	a credit on a report for the period on which the report is based does
129	129	not affect the taxable entity's eligibility to claim a carryforward
130	130	of unused credit under Section 171.659 on that report.
131	131	Sec. 171.654. AMOUNT OF CREDIT. (a) Except as provided by
132	132	Subsections (b), (c), and (d), the credit for any report equals five
133	133	percent of the difference between:
134	134	(1) the qualified research expenses incurred during
135	135	the period on which the report is based, subject to Section 171.655;
136	136	and
137	137	(2) 50 percent of the average amount of qualified
138	138	research expenses incurred during the three tax periods preceding
139	139	the period on which the report is based, subject to Section 171.655.
140	140	(b) If the taxable entity contracts with one or more public
141	141	or private institutions of higher education for the performance of
142	142	qualified research and the taxable entity has qualified research
143	143	expenses incurred in this state by the taxable entity under the
144	144	contract during the period on which the report is based, the credit
145	145	for the report equals 6.25 percent of the difference between:
146	146	(1) all qualified research expenses incurred during
147	147	the period on which the report is based, subject to Section 171.655;
148	148	and
149	149	(2) 50 percent of the average amount of all qualified
150	150	research expenses incurred during the three tax periods preceding
151	151	the period on which the report is based, subject to Section 171.655.
152	152	(c) Except as provided by Subsection (d), if the taxable
153	153	entity has no qualified research expenses in one or more of the
154	154	three tax periods preceding the period on which the report is based,
155	155	the credit for the period on which the report is based equals 2.5
156	156	percent of the qualified research expenses incurred during that
157	157	period.
158	158	(d) If the taxable entity contracts with one or more public
159	159	or private institutions of higher education for the performance of
160	160	qualified research and the taxable entity has qualified research
161	161	expenses incurred in this state by the taxable entity under the
162	162	contract during the period on which the report is based, but has no
163	163	qualified research expenses in one or more of the three tax periods
164	164	preceding the period on which the report is based, the credit for
165	165	the period on which the report is based equals 3.125 percent of all
166	166	qualified research expenses incurred during that period.
167	167	(e) Notwithstanding whether the time for claiming a credit
168	168	under this subchapter has expired for any tax period used in
169	169	determining the average amount of qualified research expenses under
170	170	Subsection (a)(2) or (b)(2), the determination of which research
171	171	expenses are qualified research expenses for purposes of computing
172	172	that average must be made in the same manner as that determination
173	173	is made for purposes of Subsection (a)(1) or (b)(1). This
174	174	subsection does not apply to a credit to which a taxable entity was
175	175	entitled under Subchapter O, as that subchapter existed before
176	176	January 1, 2008.
177	177	(f) The comptroller may adopt rules for determining which
178	178	research expenses are qualified research expenses for purposes of
179	179	Subsection (a) or (b) to prevent disparities in those
180	180	determinations that may result from the taxable entity using
181	181	different accounting methods for the period on which the report is
182	182	based, as compared to any preceding tax periods used in determining
183	183	the average amount of qualified research expenses under Subsection
184	184	(a)(2) or (b)(2).
185	185	Sec. 171.655. ATTRIBUTION OF EXPENSES FOLLOWING TRANSFER OF
186	186	CONTROLLING INTEREST. (a) If a taxable entity acquires a
187	187	controlling interest in another taxable entity or in a separate
188	188	unit of another taxable entity during a tax period with respect to
189	189	which the acquiring taxable entity claims a credit under this
190	190	subchapter, the amount of the acquiring taxable entity's qualified
191	191	research expenses equals the sum of:
192	192	(1) the amount of qualified research expenses incurred
193	193	by the acquiring taxable entity during the period on which the
194	194	report is based; and
195	195	(2) subject to Subsection (d), the amount of qualified
196	196	research expenses incurred by the acquired taxable entity or unit
197	197	during the portion of the period on which the report is based that
198	198	precedes the date of the acquisition.
199	199	(b) A taxable entity that sells or otherwise transfers to
200	200	another taxable entity a controlling interest in another taxable
201	201	entity or in a separate unit of a taxable entity during a period on
202	202	which a report is based may not claim a credit under this subchapter
203	203	for qualified research expenses incurred by the transferred taxable
204	204	entity or unit during the period if the taxable entity is ineligible
205	205	for the credit under Section 171.653 or if the acquiring taxable
206	206	entity claims a credit under this subchapter for the corresponding
207	207	period.
208	208	(c) If during any of the three tax periods following the tax
209	209	period in which a sale or other transfer described by Subsection (b)
210	210	occurs, the taxable entity that sold or otherwise transferred the
211	211	controlling interest reimburses the acquiring taxable entity for
212	212	research activities conducted on behalf of the taxable entity that
213	213	made the sale or other transfer, the amount of the reimbursement is:
214	214	(1) subject to Subsection (e), included as qualified
215	215	research expenses incurred by the taxable entity that made the sale
216	216	or other transfer for the tax period during which the reimbursement
217	217	was paid; and
218	218	(2) excluded from the qualified research expenses
219	219	incurred by the acquiring taxable entity for the tax period during
220	220	which the reimbursement was paid.
221	221	(d) An acquiring taxable entity may not include on a report
222	222	the amount of qualified research expenses otherwise authorized by
223	223	Subsection (a)(2) to be included if the taxable entity that made the
224	224	sale or other transfer described by Subsection (b) received an
225	225	exemption under Section 151.3182 during the portion of the period
226	226	on which the acquiring taxable entity's report is based that
227	227	precedes the date of the acquisition.
228	228	(e) A taxable entity that makes a sale or other transfer
229	229	described by Subsection (b) may not include on a report the amount
230	230	of reimbursement otherwise authorized by Subsection (c)(1) to be
231	231	included if the reimbursement is for research activities that
232	232	occurred during a tax period under this chapter during which that
233	233	taxable entity received an exemption under Section 151.3182.
234	234	Sec. 171.656. COMBINED REPORTING. (a) A credit under this
235	235	subchapter for qualified research expenses incurred by a member of
236	236	a combined group must be claimed on the combined report required by
237	237	Section 171.1014 for the group, and the combined group is the
238	238	taxable entity for purposes of this subchapter.
239	239	(b) An upper tier entity that includes the total revenue of
240	240	a lower tier entity for purposes of computing its taxable margin as
241	241	authorized by Section 171.1015 may claim the credit under this
242	242	subchapter for qualified research expenses incurred by the lower
243	243	tier entity to the extent of the upper tier entity's ownership
244	244	interest in the lower tier entity.
245	245	Sec. 171.657. BURDEN OF ESTABLISHING CREDIT. The burden of
246	246	establishing entitlement to and the value of the credit is on the
247	247	taxable entity.
248	248	Sec. 171.658. LIMITATIONS. The total credit claimed under
249	249	this subchapter for a report, including the amount of any
250	250	carryforward credit under Section 171.659, may not exceed 50
251	251	percent of the amount of franchise tax due for the report before any
252	252	other applicable tax credits.
253	253	Sec. 171.659. CARRYFORWARD. If a taxable entity is
254	254	eligible for a credit that exceeds the limitation under Section
255	255	171.658, the taxable entity may carry the unused credit forward for
256	256	not more than 20 consecutive reports. Credits, including credit
257	257	carryforwards, are considered to be used in the following order:
258	258	(1) a credit carryforward of unused credits accrued
259	259	under Subchapter O before its repeal on January 1, 2008, and claimed
260	260	as authorized by Section 18(d), Chapter 1 (H.B. 3), Acts of the 79th
261	261	Legislature, 3rd Called Session, 2006;
262	262	(2) a credit carryforward under this subchapter; and
263	263	(3) a current year credit.
264	264	Sec. 171.660. ASSIGNMENT PROHIBITED. A taxable entity may
265	265	not convey, assign, or transfer the credit allowed under this
266	266	subchapter to another entity unless all of the assets of the taxable
267	267	entity are conveyed, assigned, or transferred in the same
268	268	transaction.
269	269	Sec. 171.661. APPLICATION FOR CREDIT. A taxable entity
270	270	must apply for a credit under this subchapter on or with the tax
271	271	report for the period for which the credit is claimed.
272	272	Sec. 171.662. RULES. The comptroller shall adopt rules and
273	273	forms necessary to implement this subchapter.
274	274	Sec. 171.663. REPORTING OF ESTIMATES AND COLLECTION OF
275	275	INFORMATION. (a) Before the beginning of each regular session of
276	276	the legislature, the comptroller shall submit to the legislature
277	277	and the governor estimates of:
278	278	(1) the total number of taxable entities that applied
279	279	credits under this subchapter against the tax imposed under this
280	280	chapter;
281	281	(2) the total amount of those credits; and
282	282	(3) the total amount of unused credits carried
283	283	forward.
284	284	(b) The comptroller may require a taxable entity that claims
285	285	a credit under this subchapter to complete a form to provide the
286	286	information necessary for the comptroller to make the evaluations
287	287	required by Section 151.3182. The information provided on the form
288	288	is confidential and not subject to disclosure under Chapter 552,
289	289	Government Code.
290	290	(c) The comptroller shall provide the estimates required by
291	291	this section as part of the report required by Section 403.014,
292	292	Government Code.
293	293	Sec. 171.664. DEPOSIT OF CERTAIN REVENUE. Notwithstanding
294	294	any other law, for each fiscal year, the comptroller must deposit to
295	295	the credit of the property tax relief fund an amount of revenue
296	296	received from the tax imposed under this chapter sufficient to
297	297	offset any decrease in deposits to that fund that results from the
298	298	implementation of this subchapter.
299	299	Sec. 171.665. EXPIRATION. (a) This subchapter expires
300	300	December 31, 2026.
301	301	(b) The expiration of this subchapter does not affect the
302	302	carryforward of a credit under Section 171.659 or a credit
303	303	authorized under this subchapter established before the date this
304	304	subchapter expires.
305	305	SECTION 4. INITIAL REPORTING OF INFORMATION. The
306	306	comptroller of public accounts shall submit the initial estimates
307	307	required by Sections 151.3182(c)(1) and 171.663, Tax Code, as added
308	308	by this Act, before the 84th Regular Legislative Session commences
309	309	in January 2015. Notwithstanding Section 151.3182(c)(2), Tax Code,
310	310	as added by this Act, the comptroller is not required to submit the
311	311	initial evaluation required by that section until January 2017, but
312	312	shall submit that evaluation before the 85th Regular Legislative
313	313	Session commences.
314	314	SECTION 5. TRANSITION PROVISION. Section 151.3182, Tax
315	315	Code, as added by this Act, does not affect tax liability accruing
316	316	before the effective date of this Act. That liability continues in
317	317	effect as if this Act had not been enacted, and the former law is
318	318	continued in effect for the collection of taxes due and for civil
319	319	and criminal enforcement of the liability for those taxes.
320	320	SECTION 6. APPLICABILITY. Subchapter M, Chapter 171, Tax
321	321	Code, as added by this Act, applies only to a report originally due
322	322	on or after the effective date of this Act.
323	323	SECTION 7. EFFECTIVE DATE. This Act takes effect January 1,
324	324	2014.
325	325	* * * * *