| 1 | 1 | | 87R8743 BEF-D |
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| 2 | 2 | | By: Leman H.B. No. 3380 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to the franchise tax credit for certain research and |
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| 8 | 8 | | development activities. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. Section 171.651, Tax Code, is amended by adding |
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| 11 | 11 | | Subdivision (1-a) and amending Subdivision (4) to read as follows: |
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| 12 | 12 | | (1-a) "Production costs" include the cost of: |
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| 13 | 13 | | (A) materials; |
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| 14 | 14 | | (B) labor; |
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| 15 | 15 | | (C) supplies; |
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| 16 | 16 | | (D) pilot models; and |
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| 17 | 17 | | (E) products manufactured or produced. |
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| 18 | 18 | | (4) "Qualified research expense" has the meaning |
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| 19 | 19 | | assigned by Section 41, Internal Revenue Code, except that the |
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| 20 | 20 | | expense must be for research conducted in this state. The term |
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| 21 | 21 | | includes an expense described by Section 171.6515. |
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| 22 | 22 | | SECTION 2. Subchapter M, Chapter 171, Tax Code, is amended |
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| 23 | 23 | | by adding Section 171.6515 to read as follows: |
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| 24 | 24 | | Sec. 171.6515. QUALIFIED RESEARCH EXPENSES RELATING TO |
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| 25 | 25 | | RESEARCH INVOLVING PRODUCTION PROCESS. A taxable entity that |
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| 26 | 26 | | conducts qualified research for which the business component is a |
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| 27 | 27 | | production process may treat as a qualified research expense |
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| 28 | 28 | | production costs incurred while conducting that research, |
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| 29 | 29 | | regardless of whether the costs: |
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| 30 | 30 | | (1) include a taxable item exempted from sales and use |
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| 31 | 31 | | taxes under Section 151.318; or |
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| 32 | 32 | | (2) would have been incurred in the process if the |
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| 33 | 33 | | qualified research were not conducted. |
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| 34 | 34 | | SECTION 3. This Act applies only to a report originally due |
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| 35 | 35 | | on or after the effective date of this Act. |
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| 36 | 36 | | SECTION 4. This Act takes effect January 1, 2022. |
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