Texas 2025 - 89th Regular

Texas Senate Bill SB2206 Compare Versions

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Version 2 (New)

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	1	+	89R5699 CJC-F
1	2		By: Bettencourt, Huffman S.B. No. 2206
2		-	(In the Senate - Filed March 11, 2025; March 25, 2025, read
3		-	first time and referred to Committee on Finance; April 9, 2025,
4		-	reported favorably by the following vote: Yeas 13, Nays 0;
5		-	April 9, 2025, sent to printer.)
6		-	Click here to see the committee vote
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9	7		A BILL TO BE ENTITLED
10	8		AN ACT
11	9		relating to a franchise tax credit for, and the application of sales
12	10		and use taxes to, certain research and development expenses.
13	11		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
14	12		SECTION 1. Chapter 171, Tax Code, is amended by adding
15	13		Subchapter T to read as follows:
16	14		SUBCHAPTER T. TAX CREDIT FOR CERTAIN RESEARCH AND DEVELOPMENT
17	15		ACTIVITIES
18	16		Sec. 171.9201. DEFINITION. In this subchapter, "public or
19	17		private institution of higher education" means:
20	18		(1) an institution of higher education, as defined by
21	19		Section 61.003, Education Code; or
22	20		(2) a private or independent institution of higher
23	21		education, as defined by Section 61.003, Education Code.
24	22		Sec. 171.9202. QUALIFIED RESEARCH EXPENSE. (a) In this
25	23		subchapter, "qualified research expense" means, subject to this
26	24		section, the portion of the amount reported by a taxable entity as
27	25		the entity's total qualified research expenses on line 9 or 28, as
28	26		applicable, of Form 6765, that is attributable to research
29	27		conducted in this state. The term does not include any amount that
30	28		is not paid or incurred by the taxable entity, a member of the
31	29		entity's combined group, or a lower tier entity as provided by
32	30		Section 171.9206.
33	31		(b) For purposes of this section:
34	32		(1) a reference to Form 6765 is a reference to Internal
35	33		Revenue Service Form 6765 and includes a revised version of that
36	34		form or a subsequent form with a different number or designation
37	35		that substantially provides the same information as Form 6765; and
38	36		(2) a reference to a line number on Form 6765 includes
39	37		a different line number on a revised or subsequent form described by
40	38		Subdivision (1) that substantially provides the same information as
41	39		the line number originally referenced.
42	40		(c) Notwithstanding Section 171.0001(9), for purposes of
43	41		this section, a reference to an amount reported on a line number on
44	42		Form 6765 is:
45	43		(1) a reference to the amount entered on that line
46	44		number to the extent the amount entered complies with federal law in
47	45		effect for the federal tax year for which the form is filed with the
48	46		Internal Revenue Service;
49	47		(2) if an amended Form 6765 is filed by the taxable
50	48		entity with the Internal Revenue Service before the expiration of
51	49		the period for claiming a refund of federal income tax for the
52	50		federal tax year for which the amended form is filed, a reference to
53	51		the amount entered on that line number on the amended form; or
54	52		(3) if the Internal Revenue Service has audited the
55	53		federal income tax return of a taxable entity for a federal tax year
56	54		for which the taxable entity filed Form 6765 with the Internal
57	55		Revenue Service and the audit has been made final, a reference to
58	56		the amount reported on that line number on the form as audited or
59	57		adjusted by the Internal Revenue Service.
60	58		(d) For purposes of determining the amount on line 9 or 28,
61	59		as applicable, of Form 6765 under this section:
62	60		(1) a taxable entity or the comptroller may use
63	61		statistical sampling procedures if the procedures are permitted by
64	62		the Internal Revenue Service's Revenue Procedure 2011-42 or a
65	63		successor publication issued by the service; and
66	64		(2) expenses for supplies properly reportable by a
67	65		taxable entity as qualified research expenses on either of those
68	66		lines may not be excluded from the computation of those expenses for
69	67		purposes of this subchapter on the basis that the supplies are
70	68		taxable, nontaxable, or exempted from taxation under Chapter 151.
71	69		(e) Notwithstanding any other provision of this subchapter,
72	70		if the Internal Revenue Service or the comptroller determines that
73	71		a taxable entity has satisfied the requirements of the Internal
74	72		Revenue Service to accept as sufficient evidence of the entity's
75	73		qualified research expenses the entity's adjusted Accounting
76	74		Standards Codification 730 financial statement research and
77	75		development costs for a federal tax credit year, then the portion of
78	76		those adjusted costs that is related to research conducted in this
79	77		state is sufficient evidence of the entity's qualified research
80	78		expenses for that federal tax credit year for purposes of this
81	79		subchapter.
82	80		Sec. 171.9203. ELIGIBILITY FOR CREDIT. A taxable entity is
83	81		eligible for a credit against the tax imposed under this chapter in
84	82		the amount and under the conditions provided by this subchapter.
85	83		Sec. 171.9204. AMOUNT OF CREDIT. (a) Except as provided by
86	84		Subsections (b), (c), and (d), the credit for any report equals
87	85		8.722 percent of the difference between:
88	86		(1) the qualified research expenses incurred during
89	87		the period on which the report is based; and
90	88		(2) 50 percent of the average amount of qualified
91	89		research expenses incurred during the three tax periods preceding
92	90		the period on which the report is based.
93	91		(b) If the taxable entity contracts with one or more public
94	92		or private institutions of higher education and the entity incurs
95	93		qualified research expenses under the contract during the period on
96	94		which the report is based, the credit for the report equals 10.903
97	95		percent of the difference between:
98	96		(1) all qualified research expenses incurred during
99	97		the period on which the report is based; and
100	98		(2) 50 percent of the average amount of all qualified
101	99		research expenses incurred during the three tax periods preceding
102	100		the period on which the report is based.
103	101		(c) Except as provided by Subsection (d), if the taxable
104	102		entity has no qualified research expenses in one or more of the
105	103		three tax periods preceding the period on which the report is based,
106	104		the credit for the period on which the report is based equals 4.361
107	105		percent of the qualified research expenses incurred during that
108	106		period.
109	107		(d) If the taxable entity contracts with one or more public
110	108		or private institutions of higher education and the entity incurs
111	109		qualified research expenses under the contract during the period on
112	110		which the report is based, but has no qualified research expenses in
113	111		one or more of the three tax periods preceding the period on which
114	112		the report is based, the credit for the period on which the report
115	113		is based equals 5.451 percent of all qualified research expenses
116	114		incurred during that period.
117	115		(e) Notwithstanding whether the time for claiming a credit
118	116		under this subchapter has expired for any tax period used in
119	117		determining the average amount of qualified research expenses under
120	118		Subsection (a)(2) or (b)(2), the determination of which research
121	119		expenses are qualified research expenses for purposes of computing
122	120		that average must be made in the same manner as that determination
123	121		is made for purposes of Subsection (a)(1) or (b)(1). This
124	122		subsection does not apply to a credit to which a taxable entity was
125	123		entitled under Subchapter O, as that subchapter existed before
126	124		January 1, 2008.
127	125		(f) The comptroller may adopt rules for determining which
128	126		research expenses are qualified research expenses for purposes of
129	127		Subsection (a) or (b) to prevent disparities in those
130	128		determinations that may result from the taxable entity using
131	129		different accounting methods for the period on which the report is
132	130		based, as compared to any preceding tax periods used in determining
133	131		the average amount of qualified research expenses under Subsection
134	132		(a)(2) or (b)(2).
135	133		Sec. 171.9205. CREDIT FOR CERTAIN TAXABLE ENTITIES THAT OWE
136	134		NO TAX. (a) A taxable entity that incurs qualified research
137	135		expenses during a period for which the entity is not required to pay
138	136		the tax imposed by this chapter under Section 171.001(d) or
139	137		171.002(d) may calculate the amount of the credit to which the
140	138		entity would otherwise be entitled under this subchapter on a
141	139		report and receive that amount as a refundable credit.
142	140		(b) In determining the amount of the credit that may be
143	141		refunded to a taxable entity under Subsection (a) of this section,
144	142		the limitation prescribed by Section 171.9207 does not apply.
145	143		(c) Notwithstanding Section 171.204(b), a taxable entity
146	144		must apply for a credit under this section on or with the report for
147	145		the period for which the credit is claimed or, if the entity does
148	146		not file a report for the applicable period, on a form adopted by
149	147		the comptroller. The form must be submitted to the comptroller on
150	148		or before the date a report for the period for which the credit is
151	149		claimed would be due.
152	150		Sec. 171.9206. COMBINED REPORTING. (a) A credit under
153	151		this subchapter for qualified research expenses incurred by a
154	152		member of a combined group must be claimed on the combined report
155	153		required by Section 171.1014 for the group, and the combined group
156	154		is the taxable entity for purposes of this subchapter.
157	155		(b) An upper tier entity that includes the total revenue of
158	156		a lower tier entity for purposes of computing its taxable margin as
159	157		authorized by Section 171.1015 may claim the credit under this
160	158		subchapter for qualified research expenses incurred by the lower
161	159		tier entity to the extent of the upper tier entity's ownership
162	160		interest in the lower tier entity.
163	161		Sec. 171.9207. LIMITATION. The total credit claimed under
164	162		this subchapter for a report, including the amount of any
165	163		carryforward under Section 171.9208, may not exceed 50 percent of
166	164		the amount of tax due for the report before any other applicable tax
167	165		credits.
168	166		Sec. 171.9208. CARRYFORWARD. (a) If a taxable entity is
169	167		eligible for a credit that exceeds the limitation under Section
170	168		171.9207, the entity may carry the unused credit forward for not
171	169		more than 20 consecutive reports.
172	170		(b) Credits, including credit carryforwards, are considered
173	171		used in the following order:
174	172		(1) a credit carryforward of unused credits accrued
175	173		under Subchapter O before its repeal on January 1, 2008, and claimed
176	174		as authorized by Section 18(d), Chapter 1 (H.B. 3), Acts of the 79th
177	175		Legislature, 3rd Called Session, 2006;
178	176		(2) a credit carryforward of unused credits accrued
179	177		under Subchapter M before its repeal on January 1, 2026, and claimed
180	178		as authorized by Section 4, _.B. _, Regular Session, 2025;
181	179		(3) a credit carryforward under this subchapter; and
182	180		(4) a current year credit.
183	181		Sec. 171.9209. ASSIGNMENT PROHIBITED. A taxable entity may
184	182		not convey, assign, or transfer the credit allowed under this
185	183		subchapter to another entity unless substantially all of the assets
186	184		of the taxable entity are conveyed, assigned, or transferred in the
187	185		same transaction.
188	186		Sec. 171.9210. APPLICATION FOR CREDIT. Except as provided
189	187		by Section 171.9205(c), a taxable entity must apply for a credit
190	188		under this subchapter on or with the report for the period for which
191	189		the credit is claimed.
192	190		Sec. 171.9211. RULES. The comptroller may adopt rules and
193	191		forms necessary to implement this subchapter.
194	192		Sec. 171.9212. REPORTING OF ESTIMATES. (a) Before the
195	193		beginning of each regular session of the legislature, the
196	194		comptroller shall submit to the legislature and the governor
197	195		estimates of:
198	196		(1) the total number of taxable entities that applied
199	197		credits under this subchapter against the tax imposed under this
200	198		chapter or received refundable credits under this subchapter;
201	199		(2) the total amount of those credits and refundable
202	200		credits; and
203	201		(3) the total amount of unused credits carried
204	202		forward.
205	203		(b) The comptroller shall provide the estimates required by
206	204		this section as part of the report required by Section 403.014,
207	205		Government Code.
208	206		Sec. 171.9213. DEPOSIT OF CERTAIN REVENUE. Notwithstanding
209	207		any other law, for each state fiscal year, the comptroller shall
210	208		deposit to the credit of the property tax relief fund an amount of
211	209		revenue received from the tax imposed under this chapter sufficient
212	210		to offset any decrease in deposits to that fund for the state fiscal
213	211		year that results from the implementation of this subchapter.
214	212		SECTION 2. Section 171.212(a), Tax Code, is amended to read
215	213		as follows:
216	214		(a) In this subsection, "qualified research expense" has
217	215		the meaning assigned by Section 171.9202. A taxable entity must
218	216		file an amended report under this chapter if:
219	217		(1) the [taxable entity's] taxable margin of the
220	218		taxable entity or the amount of qualified research expenses
221	219		incurred by the taxable entity is changed as the result of an audit
222	220		or other adjustment by the Internal Revenue Service or another
223	221		competent authority; or
224	222		(2) the taxable entity files an amended federal income
225	223		tax return or other return that changes the [taxable entity's]
226	224		taxable margin of the taxable entity or the amount of qualified
227	225		research expenses incurred by the taxable entity.
228	226		SECTION 3. The following provisions are repealed:
229	227		(1) Section 151.3182, Tax Code; and
230	228		(2) Subchapter M, Chapter 171, Tax Code.
231	229		SECTION 4. (a) The repeal by this Act of Section 151.3182,
232	230		Tax Code, does not affect tax liability accruing before the
233	231		effective date of this Act. That liability continues in effect as
234	232		if Section 151.3182, Tax Code, had not been repealed, and the former
235	233		law is continued in effect for the collection of taxes due and for
236	234		civil and criminal enforcement of the liability for those taxes.
237	235		(b) The repeal by this Act of Subchapter M, Chapter 171, Tax
238	236		Code, does not affect an unused credit a taxable entity was
239	237		authorized to carry forward under that subchapter. A taxable
240	238		entity may continue to apply those credits on or with each
241	239		consecutive report until the date the credit would have expired
242	240		under Subchapter M, Chapter 171, Tax Code, had that subchapter
243	241		continued in effect, and the former law under which the taxable
244	242		entity accrued the credits is continued in effect for purposes of
245	243		determining the amount of the credits the taxable entity may claim
246	244		and the manner in which the taxable entity may claim the credits.
247	245		SECTION 5. (a) Subchapter T, Chapter 171, Tax Code, as
248	246		added by this Act, applies only to a report originally due on or
249	247		after the effective date of this Act.
250	248		(b) Notwithstanding any other provision of this Act, a
251	249		taxable entity is not eligible for and may not claim on a report a
252	250		credit under Subchapter T, Chapter 171, Tax Code, as added by this
253	251		Act, if the taxable entity, or a member of the taxable entity's
254	252		combined group if the taxable entity is a combined group, received
255	253		an exemption under Section 151.3182, Tax Code, during the period
256	254		for which the report is based.
257	255		SECTION 6. This Act takes effect January 1, 2026.
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