89R9677 CJC-D
By: Hughes S.B. No. 1097
A BILL TO BE ENTITLED
AN ACT
relating to a franchise tax credit for taxable entities that make
contributions to employees' Texas 529 plans.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 171, Tax Code, is amended by adding
Subchapter U to read as follows:
SUBCHAPTER U. TAX CREDIT FOR TEXAS 529 PLAN CONTRIBUTION
Sec. 171.9231. DEFINITIONS. In this subchapter:
(1) "Texas 529 plan" means a qualified tuition program
under Section 529, Internal Revenue Code of 1986, as amended,
administered by the Prepaid Higher Education Tuition Board under
Chapter 54, Education Code.
(2) "Texas 529 plan contribution" means the dollar
amount of a contribution made by a taxable entity to a Texas 529
plan owned by an employee of the entity. The term does not include
salary or wages paid by the taxable entity to the employee for the
employee's service.
Sec. 171.9232. ENTITLEMENT TO CREDIT. A taxable entity is
entitled to a credit in the amount and under the conditions provided
by this subchapter against the tax imposed under this chapter.
Sec. 171.9233. QUALIFICATION. A taxable entity qualifies
for a credit under this subchapter if the taxable entity
contributes to at least one Texas 529 plan of each employee of the
taxable entity who owns one or more Texas 529 plans and agrees to
allow the entity to contribute to the plan.
Sec. 171.9234. AMOUNT OF CREDIT; LIMITATION. (a) Subject
to Subsection (b), the amount of the credit a taxable entity may
claim on a report is equal to 25 percent of the total amount of Texas
529 plan contributions made by the entity during the period on which
the report is based.
(b) The total credit claimed on a report, including the
amount of any carryforward under Section 171.9235, may not exceed
the amount of franchise tax due for the report after applying all
other applicable credits.
Sec. 171.9235. CARRYFORWARD. (a) If a taxable entity is
eligible for a credit that exceeds the limitation under Section
171.9234(b), the entity may carry the unused credit forward for not
more than five consecutive reports.
(b) A carryforward is considered the remaining portion of a
credit that cannot be claimed on a report because of the limitation
under Section 171.9234(b).
(c) Credits, including a carryforward, are considered to be
used in the following order:
(1) a carryforward under this section; and
(2) a credit for the period on which the report is
based.
Sec. 171.9236. APPLICATION FOR CREDIT. (a) A taxable
entity must apply for a credit under this subchapter on or with the
report for the period for which the credit is claimed.
(b) A taxable entity must apply for the credit in the manner
prescribed by the comptroller and include with the application any
information requested by the comptroller to determine whether the
entity is eligible for the credit under this subchapter.
Sec. 171.9237. SALE OR ASSIGNMENT OF CREDIT. (a) A taxable
entity that makes a Texas 529 plan contribution may sell or assign
all or part of the credit that may be claimed for that contribution
to one or more taxable entities, and any taxable entity to which all
or part of the credit is sold or assigned may sell or assign all or
part of the credit to another taxable entity. There is no limit on
the total number of transactions for the sale or assignment of all
or part of the total credit authorized under this subchapter.
(b) A taxable entity that sells or assigns a credit under
this section and the taxable entity to which the credit is sold or
assigned shall jointly submit written notice of the sale or
assignment to the comptroller not later than the 30th day after the
date of the sale or assignment. The notice must include:
(1) the date on which the credit was originally
established;
(2) the date of the sale or assignment;
(3) the amount of the credit sold or assigned and the
remaining period during which it may be used;
(4) the names, addresses, and federal tax
identification numbers of the taxable entity that sold or assigned
the credit or part of the credit and the taxable entity to which the
credit or part of the credit was sold or assigned; and
(5) the amount of the credit owned by the selling or
assigning taxable entity before the sale or assignment, and the
amount the selling or assigning taxable entity retained, if any,
after the sale or assignment.
(c) The sale or assignment of a credit in accordance with
this section does not extend the period for which a credit may be
carried forward.
(d) After a taxable entity claims a credit for a Texas 529
plan contribution under this subchapter, another entity may not use
the same expenditure as the basis for another credit.
Sec. 171.9238. RULES. The comptroller shall adopt rules
necessary to implement and administer this subchapter.
SECTION 2. Subchapter U, Chapter 171, Tax Code, as added by
this Act, applies only to a report originally due on or after
January 1, 2026.
SECTION 3. This Act takes effect January 1, 2026.