HBA-SEB H.B. 63 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 63
By: Greenberg
Ways & Means
2/16/1999
Introduced

BACKGROUND & PURPOSE 

Currently, Texas does not offer a tax credit for research and development
activities.  Such an incentive may enable the state to attract and retain
more research and development facilities.  H.B. 63 provides a franchise tax
credit for research and development expenses in Texas, which amounts to 10
percent of qualified research expenses and 15 percent of the basic research
payments per privilege period. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Comptroller of Public Accounts of
the State of Texas in SECTION 1 (Section 171.114, Tax Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter C, Chapter 171, Tax Code, by adding Section
171.114, as follows:  

Sec. 171.114.  CREDIT ON NET TAXABLE EARNED SURPLUS FOR RESEARCH AND
DEVELOPMENT ACTIVITIES.  (a)  Entitles a corporation to a credit against
the tax due under this chapter (Franchise Tax) on net taxable earned
surplus for research and development activities.   

(b)  Provides the method for calculating the credit earned for any
privilege period, as subject to Subsections (c) and (d).   

(c)  Prohibits the credit from exceeding specified amounts, depending on
the privilege period. 

(d)  Prohibits the credit from reducing the tax below zero.  

(e)  Authorizes the taxpayer to carry the credit forward for not more than
15 consecutive privilege periods if the taxpayer is entitled to a credit
that exceeds the specified limitations of this section.  

(f)  Requires any amount used to calculate the credit to be multiplied by a
specified ratio if a corporation's accounting year does not correspond to
the privilege period.   

(g)  Requires the Comptroller of Public Accounts of the State of Texas to
adopt rules necessary to implement this section.   

(h)  Provides that this section applies only to an expenditure by a
corporation made on or before December 31, 2017.   

(i)  Defines "basic research payment" and "qualified research expense."

SECTION 2.  Effective date:  January 1, 2002.  
            Makes the application of this Act prospective.

SECTION 3.  Emergency clause.