85R4256 TJB/CLG-F
By: Elkins H.B. No. 906
A BILL TO BE ENTITLED
AN ACT
relating to the creation of research technology corporations for
the development and commercialization of technologies owned by
institutions of higher education or by certain medical centers with
members that are institutions of higher education; providing for
tax exemptions; providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle H, Title 3, Education Code, is amended
by adding Chapter 157 to read as follows:
CHAPTER 157. UNIVERSITY RESEARCH TECHNOLOGY CORPORATIONS
Sec. 157.0001. PURPOSE AND FINDINGS. The legislature finds
that the development and commercialization of technology owned by
public and private institutions of higher education and by medical
centers associated with those institutions are critical components
of the educational and research missions of those institutions and
key contributors to the economic development and well-being of this
state. The activities authorized by this chapter directly support
those important public purposes.
Sec. 157.0002. DEFINITIONS. In this chapter:
(1) "Contribution" has the meaning assigned by Section
1.002, Business Organizations Code.
(2) "Institution of higher education" means an
institution of higher education or a private or independent
institution of higher education as those terms are defined by
Section 61.003.
(3) "Medical center development corporation" means a
nonprofit corporation that is eligible to claim an ad valorem tax
exemption under Section 11.23(j-1), Tax Code, for all or any part of
the corporation's properties.
(4) "Qualified medical center," with respect to an
institution of higher education, means a medical center development
corporation that includes among its member institutions, as
described in the corporation's books and records, one or more
institutions of higher education, regardless of whether those
institutions of higher education have membership status in the
qualified medical center for purposes of the Business Organizations
Code.
(5) "Technology" means the application of scientific
knowledge for practical purposes and includes inventions,
discoveries, patents, trade secrets, copyrighted materials, tools,
machines, materials, processes to do work, processes to produce
goods, processes to perform services, processes to carry out other
useful activities, trademarks, and computer software.
Sec. 157.0003. CREATION OF SPECIAL-PURPOSE CORPORATION.
(a) Any person having the capacity to be an organizer of a
corporation as provided by Section 3.004, Business Organizations
Code, may create a special-purpose corporation for the exclusive
purpose of developing and commercializing one or more technologies
owned wholly or partly by an institution of higher education. To
create the special-purpose corporation, an organizer of the
corporation must present to the secretary of state written evidence
that the organizer has a license to develop and commercialize a
specific technology owned wholly or partly by an institution of
higher education. The license may be conditioned on the creation of
the special-purpose corporation.
(b) A person described by Subsection (a) may create a
special-purpose corporation for the exclusive purpose of
developing and commercializing technology owned wholly or partly by
a qualified medical center.
(c) A special-purpose corporation created under Subsection
(b) may be created in the same form and manner as a special-purpose
corporation created under Subsection (a). To that extent, a
qualified medical center that owns wholly or partly the technology
for which a special-purpose corporation is created under Subsection
(b) is governed by the same provisions of this chapter that are
applicable to an institution of higher education.
(d) A corporation created under this chapter that engages in
other purposes that are not incidental to the purposes authorized
by this section is not entitled to the benefits of this chapter,
including any tax exemption authorized by Section 157.0008.
(e) The certificate of formation of a corporation created
under this chapter must state that the corporation is governed by
this chapter and state the name and purposes of the corporation and
other information required by law. Except as otherwise provided by
this chapter, a corporation created under this chapter is governed
by Chapters 20 and 21, Business Organizations Code, and Title 1 of
that code.
(f) The organizers of a corporation created under this
chapter shall register the corporation with the comptroller.
Sec. 157.0004. MANAGEMENT OF CORPORATION; RIGHTS OF
CREATING INSTITUTION. (a) The organizers of a corporation created
under this chapter shall name the persons constituting the initial
board of directors of the corporation. Directors other than the
initial directors shall be determined as provided by Chapter 21,
Business Organizations Code.
(b) An institution of higher education that owns wholly or
partly the technology for which a corporation is created under this
chapter must at all times be a shareholder in the corporation. The
institution of higher education shall be issued shares in the
corporation when the corporation is created as agreed on by the
organizers of the corporation according to any contribution of the
institution.
(c) The institution of higher education described by
Subsection (b) may be issued shares in the corporation in exchange
for the contribution of rights in the technology of the institution
of higher education or of other contractual obligations, as agreed
on by the corporation's board of directors.
Sec. 157.0005. TECHNOLOGY LICENSING. The institution of
higher education that owns wholly or partly the technology for
which a corporation is created under this chapter may license to the
corporation any technology owned by the institution of higher
education.
Sec. 157.0006. REQUIRED OPERATIONS IN TEXAS. The principal
offices of the corporation must be located in this state, and more
than 50 percent of any goods produced or services performed by the
corporation must be produced or performed in this state.
Sec. 157.0007. DURATION. (a) A corporation created under
this chapter is limited in duration to 15 years. At the expiration
of that period, the corporation may file a restated and amended
certificate of formation under which the corporation continues in
existence as a for-profit corporation governed by Chapters 20 and
21, Business Organizations Code, and Title 1 of that code. A
corporation that files a restated and amended certificate of
formation as authorized by this subsection is not governed by the
other provisions of this chapter and is not entitled to an exemption
authorized by Section 157.0008.
(b) Subsection (a) does not limit the time or manner in
which the corporation may be terminated as otherwise provided by
law.
Sec. 157.0008. TAX-EXEMPT STATUS OF CORPORATION. (a) This
section applies only to a corporation created under this chapter,
other than a corporation that files a restated and amended
certificate of formation as authorized by Section 157.0007, that:
(1) is engaged exclusively in developing and
commercializing one or more technologies owned wholly or partly by
an institution of higher education or by a qualified medical
center, including activities that are incidental to developing and
commercializing those technologies; and
(2) complies with Section 157.0006.
(b) The corporation is entitled to an exemption from ad
valorem taxation of real and tangible personal property as provided
by Section 11.232, Tax Code.
(c) The corporation is exempted from the sales and use tax
imposed by Chapter 151, Tax Code, as provided by Section 151.3184 of
that code.
(d) The corporation is exempted from the franchise tax
imposed by Chapter 171, Tax Code, as provided by Section 171.089 of
that code.
(e) This section does not limit the eligibility of the
corporation for any other available tax benefit, including a tax
benefit under Chapter 312 or 313, Tax Code.
(f) The corporation must maintain a complete record of all
taxes for which the corporation would have been liable if the
corporation had not been entitled to the exemptions authorized by
this section. The corporation shall report that information
annually to the comptroller in the form and manner required by the
comptroller.
(g) The comptroller shall adopt rules necessary to
implement this section and administer the exemptions under
Subsections (c) and (d).
Sec. 157.0009. PENALTY FOR NONCOMPLIANCE WITH CORPORATE
OPERATIONS REQUIREMENTS. (a) A corporation created under this
chapter that ceases to comply with Section 157.0006 is liable to the
state for a penalty in an amount equal to any taxes, including ad
valorem taxes, for which the corporation received an exemption
under Section 157.0008 for the four calendar years preceding the
year in which the noncompliance began. The comptroller shall
determine the corporation's liability for the penalty and assess
the amount owed.
(b) A penalty assessed under this section is due on the date
designated by the comptroller, not later than the 90th day after the
date assessed, and shall be collected in the same manner as a state
tax. A lien exists on any property of the corporation to secure the
payment of any amount assessed under this section. The comptroller
is entitled to collect interest and penalties on the unpaid amount
of a delinquent penalty in the same manner as the manner prescribed
for the collection of a delinquent state tax. The comptroller by
rule shall establish the methods of payment and shall adopt other
rules necessary to administer and enforce this section.
(c) Amounts received under this section shall be deposited
to the credit of the general revenue fund.
Sec. 157.0010. CONFLICT WITH BUSINESS ORGANIZATIONS CODE.
To the extent of any conflict between a provision of this chapter
and a provision of the Business Organizations Code, the provision
of this chapter controls.
SECTION 2. Subchapter B, Chapter 11, Tax Code, is amended by
adding Section 11.232 to read as follows:
Sec. 11.232. PROPERTY OWNED BY OR LEASED TO UNIVERSITY
RESEARCH TECHNOLOGY CORPORATION. (a) In this section,
"institution of higher education," "medical center development
corporation," "qualified medical center," and "technology" have
the meanings assigned by Section 157.0002, Education Code.
(b) Except as provided by Subsection (c), a corporation that
qualifies as a university research technology corporation as
provided by Subsection (g) is entitled to an exemption from ad
valorem taxation of:
(1) the real and tangible personal property owned by
the corporation that is used for a purpose described by Subsection
(g)(2); and
(2) the real property owned by the corporation that
consists of:
(A) an incomplete improvement that is under
active construction or other physical preparation to make the
property suitable to be used for a purpose described by Subsection
(g)(2); and
(B) the land on which the incomplete improvement
is located that will be reasonably necessary for the corporation's
use of the improvement.
(c) A qualified university research technology corporation
is not entitled to an exemption from taxation of real or tangible
personal property:
(1) owned by an organizer or director of the
corporation before the creation of the corporation; and
(2) subject to taxation in this state before being
devoted exclusively to a purpose described by Subsection (g)(2).
(d) Notwithstanding Subsection (c), a qualified university
research technology corporation is entitled to an exemption from
taxation of the value of that portion of an improvement that
consists of an expansion of an improvement described by that
subsection if the improvement is devoted exclusively to a purpose
described by Subsection (g)(2).
(e) A medical center development corporation is entitled to
an exemption from taxation of the corporation's real and tangible
personal property that is leased to or used or occupied primarily by
a qualified university research technology corporation and used
exclusively for a purpose described by Subsection (g)(2).
(f) Notwithstanding Section 25.07, a qualified university
research technology corporation is entitled to an exemption from
taxation of a possessory interest in property described by
Subsection (e).
(g) To qualify as a university research technology
corporation for purposes of this section, a corporation must:
(1) be a corporation created under Chapter 157,
Education Code, other than a corporation created under that chapter
that files a restated and amended certificate of formation as
authorized by Section 157.0007 of that code;
(2) be engaged exclusively in developing and
commercializing one or more technologies owned wholly or partly by
an institution of higher education or by a qualified medical
center, including activities that are incidental to developing and
commercializing those technologies; and
(3) be in compliance with Section 157.0006, Education
Code.
SECTION 3. Section 11.42(d), Tax Code, is amended to read as
follows:
(d) A person who acquires property after January 1 of a tax
year may receive an exemption authorized by Section 11.17, 11.18,
11.19, 11.20, 11.21, 11.23, 11.231, 11.232, or 11.30 for the
applicable portion of that tax year immediately on qualification
for the exemption.
SECTION 4. The heading to Section 26.113, Tax Code, is
amended to read as follows:
Sec. 26.113. PRORATING TAXES--ACQUISITION BY NONPROFIT
ORGANIZATION OR UNIVERSITY RESEARCH TECHNOLOGY CORPORATION.
SECTION 5. Subchapter H, Chapter 151, Tax Code, is amended
by adding Section 151.3184 to read as follows:
Sec. 151.3184. UNIVERSITY RESEARCH TECHNOLOGY CORPORATION.
(a) In this section, "university research technology corporation"
means a corporation to which Section 157.0008, Education Code,
applies.
(b) A taxable item sold, leased, or rented to, or stored,
used, or consumed by, a university research technology corporation
is exempted from the taxes imposed by this chapter if the item is
classified by the corporation as a capital asset. An item is
considered to be classified by the corporation as a capital asset if
the item is considered to be a capital asset according to generally
accepted accounting principles adopted by the Financial Accounting
Standards Board and is recognized by the corporation as a capital
asset on the corporation's federal income tax returns.
(c) The comptroller shall adopt rules necessary to
implement this section, including rules to ensure that a taxable
item with respect to which an exemption from the taxes imposed by
this chapter is granted under this section meets the requirements
of Subsection (b).
SECTION 6. Subchapter B, Chapter 171, Tax Code, is amended
by adding Section 171.089 to read as follows:
Sec. 171.089. EXEMPTION--UNIVERSITY RESEARCH TECHNOLOGY
CORPORATION. (a) In this section, "university research technology
corporation" means a corporation to which Section 157.0008,
Education Code, applies.
(b) A university research technology corporation is
exempted from the franchise tax.
(c) A corporation created as a university research
technology corporation that files at the expiration of the period
described by Section 157.0007(a), Education Code, a restated and
amended certificate of formation as authorized by that section is
no longer exempted from the franchise tax by Subsection (b) on the
expiration of that period. Unless the corporation is otherwise
exempted from the franchise tax, the date of the expiration of that
period is considered the corporation's beginning date for purposes
of determining the corporation's privilege periods and for all
other purposes of this chapter.
SECTION 7. Section 11.232, Tax Code, as added by this Act,
applies only to an ad valorem tax year that begins on or after the
effective date of this Act.
SECTION 8. Section 151.3184, Tax Code, as added by this Act,
does not affect tax liability accruing before the effective date of
this Act. That liability continues in effect as if this Act had not
been enacted, and the former law is continued in effect for the
collection of taxes due and for civil and criminal enforcement of
the liability for those taxes.
SECTION 9. The change in law made by this Act to Chapter
171, Tax Code, applies only to a report originally due on or after
the effective date of this Act.
SECTION 10. (a) Except as provided by Subsection (b) of
this section, this Act takes effect January 1, 2018.
(b) Section 157.0008(b), Education Code, and Section
11.232, Tax Code, as added by this Act, and Sections 11.42(d) and
26.113, Tax Code, as amended by this Act, take effect January 1,
2018, but only if the constitutional amendment proposed by the 85th
Legislature, Regular Session, 2017, authorizing the legislature to
provide for an exemption from ad valorem taxation of certain
property owned by or leased to or by a university research
technology corporation is approved by the voters. If that
amendment is not approved by the voters, Section 157.0008(b),
Education Code, and Section 11.232, Tax Code, as added by this Act,
and Sections 11.42(d) and 26.113, Tax Code, as amended by this Act,
have no effect.