Texas 2025 - 89th Regular

Texas House Bill HB4393 Compare Versions

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1	1	89R5699 CJC-F
2	2	By: Geren H.B. No. 4393
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7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to a franchise tax credit for, and the application of sales
10	10	and use taxes to, certain research and development expenses.
11	11	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
12	12	SECTION 1. Chapter 171, Tax Code, is amended by adding
13	13	Subchapter T to read as follows:
14	14	SUBCHAPTER T. TAX CREDIT FOR CERTAIN RESEARCH AND DEVELOPMENT
15	15	ACTIVITIES
16	16	Sec. 171.9201. DEFINITION. In this subchapter, "public or
17	17	private institution of higher education" means:
18	18	(1) an institution of higher education, as defined by
19	19	Section 61.003, Education Code; or
20	20	(2) a private or independent institution of higher
21	21	education, as defined by Section 61.003, Education Code.
22	22	Sec. 171.9202. QUALIFIED RESEARCH EXPENSE. (a) In this
23	23	subchapter, "qualified research expense" means, subject to this
24	24	section, the portion of the amount reported by a taxable entity as
25	25	the entity's total qualified research expenses on line 9 or 28, as
26	26	applicable, of Form 6765, that is attributable to research
27	27	conducted in this state. The term does not include any amount that
28	28	is not paid or incurred by the taxable entity, a member of the
29	29	entity's combined group, or a lower tier entity as provided by
30	30	Section 171.9206.
31	31	(b) For purposes of this section:
32	32	(1) a reference to Form 6765 is a reference to Internal
33	33	Revenue Service Form 6765 and includes a revised version of that
34	34	form or a subsequent form with a different number or designation
35	35	that substantially provides the same information as Form 6765; and
36	36	(2) a reference to a line number on Form 6765 includes
37	37	a different line number on a revised or subsequent form described by
38	38	Subdivision (1) that substantially provides the same information as
39	39	the line number originally referenced.
40	40	(c) Notwithstanding Section 171.0001(9), for purposes of
41	41	this section, a reference to an amount reported on a line number on
42	42	Form 6765 is:
43	43	(1) a reference to the amount entered on that line
44	44	number to the extent the amount entered complies with federal law in
45	45	effect for the federal tax year for which the form is filed with the
46	46	Internal Revenue Service;
47	47	(2) if an amended Form 6765 is filed by the taxable
48	48	entity with the Internal Revenue Service before the expiration of
49	49	the period for claiming a refund of federal income tax for the
50	50	federal tax year for which the amended form is filed, a reference to
51	51	the amount entered on that line number on the amended form; or
52	52	(3) if the Internal Revenue Service has audited the
53	53	federal income tax return of a taxable entity for a federal tax year
54	54	for which the taxable entity filed Form 6765 with the Internal
55	55	Revenue Service and the audit has been made final, a reference to
56	56	the amount reported on that line number on the form as audited or
57	57	adjusted by the Internal Revenue Service.
58	58	(d) For purposes of determining the amount on line 9 or 28,
59	59	as applicable, of Form 6765 under this section:
60	60	(1) a taxable entity or the comptroller may use
61	61	statistical sampling procedures if the procedures are permitted by
62	62	the Internal Revenue Service's Revenue Procedure 2011-42 or a
63	63	successor publication issued by the service; and
64	64	(2) expenses for supplies properly reportable by a
65	65	taxable entity as qualified research expenses on either of those
66	66	lines may not be excluded from the computation of those expenses for
67	67	purposes of this subchapter on the basis that the supplies are
68	68	taxable, nontaxable, or exempted from taxation under Chapter 151.
69	69	(e) Notwithstanding any other provision of this subchapter,
70	70	if the Internal Revenue Service or the comptroller determines that
71	71	a taxable entity has satisfied the requirements of the Internal
72	72	Revenue Service to accept as sufficient evidence of the entity's
73	73	qualified research expenses the entity's adjusted Accounting
74	74	Standards Codification 730 financial statement research and
75	75	development costs for a federal tax credit year, then the portion of
76	76	those adjusted costs that is related to research conducted in this
77	77	state is sufficient evidence of the entity's qualified research
78	78	expenses for that federal tax credit year for purposes of this
79	79	subchapter.
80	80	Sec. 171.9203. ELIGIBILITY FOR CREDIT. A taxable entity is
81	81	eligible for a credit against the tax imposed under this chapter in
82	82	the amount and under the conditions provided by this subchapter.
83	83	Sec. 171.9204. AMOUNT OF CREDIT. (a) Except as provided by
84	84	Subsections (b), (c), and (d), the credit for any report equals
85	85	8.722 percent of the difference between:
86	86	(1) the qualified research expenses incurred during
87	87	the period on which the report is based; and
88	88	(2) 50 percent of the average amount of qualified
89	89	research expenses incurred during the three tax periods preceding
90	90	the period on which the report is based.
91	91	(b) If the taxable entity contracts with one or more public
92	92	or private institutions of higher education and the entity incurs
93	93	qualified research expenses under the contract during the period on
94	94	which the report is based, the credit for the report equals 10.903
95	95	percent of the difference between:
96	96	(1) all qualified research expenses incurred during
97	97	the period on which the report is based; and
98	98	(2) 50 percent of the average amount of all qualified
99	99	research expenses incurred during the three tax periods preceding
100	100	the period on which the report is based.
101	101	(c) Except as provided by Subsection (d), if the taxable
102	102	entity has no qualified research expenses in one or more of the
103	103	three tax periods preceding the period on which the report is based,
104	104	the credit for the period on which the report is based equals 4.361
105	105	percent of the qualified research expenses incurred during that
106	106	period.
107	107	(d) If the taxable entity contracts with one or more public
108	108	or private institutions of higher education and the entity incurs
109	109	qualified research expenses under the contract during the period on
110	110	which the report is based, but has no qualified research expenses in
111	111	one or more of the three tax periods preceding the period on which
112	112	the report is based, the credit for the period on which the report
113	113	is based equals 5.451 percent of all qualified research expenses
114	114	incurred during that period.
115	115	(e) Notwithstanding whether the time for claiming a credit
116	116	under this subchapter has expired for any tax period used in
117	117	determining the average amount of qualified research expenses under
118	118	Subsection (a)(2) or (b)(2), the determination of which research
119	119	expenses are qualified research expenses for purposes of computing
120	120	that average must be made in the same manner as that determination
121	121	is made for purposes of Subsection (a)(1) or (b)(1). This
122	122	subsection does not apply to a credit to which a taxable entity was
123	123	entitled under Subchapter O, as that subchapter existed before
124	124	January 1, 2008.
125	125	(f) The comptroller may adopt rules for determining which
126	126	research expenses are qualified research expenses for purposes of
127	127	Subsection (a) or (b) to prevent disparities in those
128	128	determinations that may result from the taxable entity using
129	129	different accounting methods for the period on which the report is
130	130	based, as compared to any preceding tax periods used in determining
131	131	the average amount of qualified research expenses under Subsection
132	132	(a)(2) or (b)(2).
133	133	Sec. 171.9205. CREDIT FOR CERTAIN TAXABLE ENTITIES THAT OWE
134	134	NO TAX. (a) A taxable entity that incurs qualified research
135	135	expenses during a period for which the entity is not required to pay
136	136	the tax imposed by this chapter under Section 171.001(d) or
137	137	171.002(d) may calculate the amount of the credit to which the
138	138	entity would otherwise be entitled under this subchapter on a
139	139	report and receive that amount as a refundable credit.
140	140	(b) In determining the amount of the credit that may be
141	141	refunded to a taxable entity under Subsection (a) of this section,
142	142	the limitation prescribed by Section 171.9207 does not apply.
143	143	(c) Notwithstanding Section 171.204(b), a taxable entity
144	144	must apply for a credit under this section on or with the report for
145	145	the period for which the credit is claimed or, if the entity does
146	146	not file a report for the applicable period, on a form adopted by
147	147	the comptroller. The form must be submitted to the comptroller on
148	148	or before the date a report for the period for which the credit is
149	149	claimed would be due.
150	150	Sec. 171.9206. COMBINED REPORTING. (a) A credit under
151	151	this subchapter for qualified research expenses incurred by a
152	152	member of a combined group must be claimed on the combined report
153	153	required by Section 171.1014 for the group, and the combined group
154	154	is the taxable entity for purposes of this subchapter.
155	155	(b) An upper tier entity that includes the total revenue of
156	156	a lower tier entity for purposes of computing its taxable margin as
157	157	authorized by Section 171.1015 may claim the credit under this
158	158	subchapter for qualified research expenses incurred by the lower
159	159	tier entity to the extent of the upper tier entity's ownership
160	160	interest in the lower tier entity.
161	161	Sec. 171.9207. LIMITATION. The total credit claimed under
162	162	this subchapter for a report, including the amount of any
163	163	carryforward under Section 171.9208, may not exceed 50 percent of
164	164	the amount of tax due for the report before any other applicable tax
165	165	credits.
166	166	Sec. 171.9208. CARRYFORWARD. (a) If a taxable entity is
167	167	eligible for a credit that exceeds the limitation under Section
168	168	171.9207, the entity may carry the unused credit forward for not
169	169	more than 20 consecutive reports.
170	170	(b) Credits, including credit carryforwards, are considered
171	171	used in the following order:
172	172	(1) a credit carryforward of unused credits accrued
173	173	under Subchapter O before its repeal on January 1, 2008, and claimed
174	174	as authorized by Section 18(d), Chapter 1 (H.B. 3), Acts of the 79th
175	175	Legislature, 3rd Called Session, 2006;
176	176	(2) a credit carryforward of unused credits accrued
177	177	under Subchapter M before its repeal on January 1, 2026, and claimed
178	178	as authorized by Section 4, _.B. _, Regular Session, 2025;
179	179	(3) a credit carryforward under this subchapter; and
180	180	(4) a current year credit.
181	181	Sec. 171.9209. ASSIGNMENT PROHIBITED. A taxable entity may
182	182	not convey, assign, or transfer the credit allowed under this
183	183	subchapter to another entity unless substantially all of the assets
184	184	of the taxable entity are conveyed, assigned, or transferred in the
185	185	same transaction.
186	186	Sec. 171.9210. APPLICATION FOR CREDIT. Except as provided
187	187	by Section 171.9205(c), a taxable entity must apply for a credit
188	188	under this subchapter on or with the report for the period for which
189	189	the credit is claimed.
190	190	Sec. 171.9211. RULES. The comptroller may adopt rules and
191	191	forms necessary to implement this subchapter.
192	192	Sec. 171.9212. REPORTING OF ESTIMATES. (a) Before the
193	193	beginning of each regular session of the legislature, the
194	194	comptroller shall submit to the legislature and the governor
195	195	estimates of:
196	196	(1) the total number of taxable entities that applied
197	197	credits under this subchapter against the tax imposed under this
198	198	chapter or received refundable credits under this subchapter;
199	199	(2) the total amount of those credits and refundable
200	200	credits; and
201	201	(3) the total amount of unused credits carried
202	202	forward.
203	203	(b) The comptroller shall provide the estimates required by
204	204	this section as part of the report required by Section 403.014,
205	205	Government Code.
206	206	Sec. 171.9213. DEPOSIT OF CERTAIN REVENUE. Notwithstanding
207	207	any other law, for each state fiscal year, the comptroller shall
208	208	deposit to the credit of the property tax relief fund an amount of
209	209	revenue received from the tax imposed under this chapter sufficient
210	210	to offset any decrease in deposits to that fund for the state fiscal
211	211	year that results from the implementation of this subchapter.
212	212	SECTION 2. Section 171.212(a), Tax Code, is amended to read
213	213	as follows:
214	214	(a) In this subsection, "qualified research expense" has
215	215	the meaning assigned by Section 171.9202. A taxable entity must
216	216	file an amended report under this chapter if:
217	217	(1) the [taxable entity's] taxable margin of the
218	218	taxable entity or the amount of qualified research expenses
219	219	incurred by the taxable entity is changed as the result of an audit
220	220	or other adjustment by the Internal Revenue Service or another
221	221	competent authority; or
222	222	(2) the taxable entity files an amended federal income
223	223	tax return or other return that changes the [taxable entity's]
224	224	taxable margin of the taxable entity or the amount of qualified
225	225	research expenses incurred by the taxable entity.
226	226	SECTION 3. The following provisions are repealed:
227	227	(1) Section 151.3182, Tax Code; and
228	228	(2) Subchapter M, Chapter 171, Tax Code.
229	229	SECTION 4. (a) The repeal by this Act of Section 151.3182,
230	230	Tax Code, does not affect tax liability accruing before the
231	231	effective date of this Act. That liability continues in effect as
232	232	if Section 151.3182, Tax Code, had not been repealed, and the former
233	233	law is continued in effect for the collection of taxes due and for
234	234	civil and criminal enforcement of the liability for those taxes.
235	235	(b) The repeal by this Act of Subchapter M, Chapter 171, Tax
236	236	Code, does not affect an unused credit a taxable entity was
237	237	authorized to carry forward under that subchapter. A taxable
238	238	entity may continue to apply those credits on or with each
239	239	consecutive report until the date the credit would have expired
240	240	under Subchapter M, Chapter 171, Tax Code, had that subchapter
241	241	continued in effect, and the former law under which the taxable
242	242	entity accrued the credits is continued in effect for purposes of
243	243	determining the amount of the credits the taxable entity may claim
244	244	and the manner in which the taxable entity may claim the credits.
245	245	SECTION 5. (a) Subchapter T, Chapter 171, Tax Code, as
246	246	added by this Act, applies only to a report originally due on or
247	247	after the effective date of this Act.
248	248	(b) Notwithstanding any other provision of this Act, a
249	249	taxable entity is not eligible for and may not claim on a report a
250	250	credit under Subchapter T, Chapter 171, Tax Code, as added by this
251	251	Act, if the taxable entity, or a member of the taxable entity's
252	252	combined group if the taxable entity is a combined group, received
253	253	an exemption under Section 151.3182, Tax Code, during the period
254	254	for which the report is based.
255	255	SECTION 6. This Act takes effect January 1, 2026.