Bill Text: TX HB2943 | 2013-2014 | 83rd Legislature | Introduced
Bill Title: Relating to a sales and use tax exemption and a franchise tax credit related to certain research and development activities of entities in the aerospace industry.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2013-03-25 - Referred to Economic & Small Business Development [HB2943 Detail]
Download: Texas-2013-HB2943-Introduced.html
83R5625 KLA-D | ||
By: Cortez | H.B. No. 2943 |
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relating to a sales and use tax exemption and a franchise tax credit | ||
related to certain research and development activities of entities | ||
in the aerospace industry. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subchapter H, Chapter 151, Tax Code, is amended | ||
by adding Section 151.3182 to read as follows: | ||
Sec. 151.3182. CERTAIN PROPERTY AND SERVICES USED IN | ||
RESEARCH AND DEVELOPMENT ACTIVITIES. (a) In this section: | ||
(1) "Defense base development authority" means an | ||
authority established under Chapter 379B, Local Government Code, or | ||
Subtitle B, Title 4, Special District Local Laws Code. | ||
(2) "Internal Revenue Code" has the meaning assigned | ||
by Section 171.651. | ||
(3) "Qualified research" and "qualified service" have | ||
the meanings assigned by Section 41, Internal Revenue Code. | ||
(b) The sale, storage, use, or other consumption of tangible | ||
personal property directly used or consumed in qualified research | ||
or of qualified services is exempted from the taxes imposed by this | ||
chapter if the property or services are sold, leased, or rented to, | ||
or stored, used, or consumed by, a person who: | ||
(1) is primarily engaged in a business involved in the | ||
aerospace industry; | ||
(2) performs qualified research in the territory of a | ||
defense base development authority; and | ||
(3) will not, as a taxable entity as defined by Section | ||
171.0002 or as a member of a combined group that is a taxable | ||
entity, claim a credit under Subchapter M, Chapter 171, on a | ||
franchise tax report for the period during which the sale, storage, | ||
use, or other consumption occurs. | ||
SECTION 2. Chapter 171, Tax Code, is amended by adding | ||
Subchapter M to read as follows: | ||
SUBCHAPTER M. TAX CREDIT FOR CERTAIN RESEARCH AND DEVELOPMENT | ||
ACTIVITIES | ||
Sec. 171.651. DEFINITIONS. In this subchapter: | ||
(1) "Defense base development authority" means an | ||
authority established under Chapter 379B, Local Government Code, or | ||
Subtitle B, Title 4, Special District Local Laws Code. | ||
(2) "Internal Revenue Code" means the Internal Revenue | ||
Code of 1986 in effect on December 31, 2011, excluding any changes | ||
made by federal law after that date, but including any regulations | ||
adopted under that code applicable to the tax year to which the | ||
provisions of the code in effect on that date applied. | ||
(3) "Qualified research" has the meaning assigned by | ||
Section 41, Internal Revenue Code, except that the research must be | ||
conducted in this state. | ||
(4) "Qualified research expense" has the meaning | ||
assigned by Section 41, Internal Revenue Code, except that the | ||
expense must be for research conducted in this state. | ||
Sec. 171.652. ELIGIBILITY FOR CREDIT. A taxable entity is | ||
eligible for a credit against the tax imposed under this chapter in | ||
the amount and under the conditions and limitations provided by | ||
this subchapter if the entity: | ||
(1) is primarily engaged in a business involved in the | ||
aerospace industry; and | ||
(2) performs qualified research in the territory of a | ||
defense base development authority. | ||
Sec. 171.653. INELIGIBILITY FOR CREDIT FOR CERTAIN PERIODS. | ||
(a) A taxable entity is not eligible for a credit on a report | ||
against the tax imposed under this chapter for qualified research | ||
expenses incurred during the period on which the report is based if | ||
the taxable entity, or a member of the combined group if the taxable | ||
entity is a combined group, received an exemption under Section | ||
151.3182 during that period. | ||
(b) A taxable entity's ineligibility under this section for | ||
a credit on a report for the period on which the report is based does | ||
not affect the taxable entity's eligibility to claim a carryforward | ||
of unused credit under Section 171.659 on that report. | ||
Sec. 171.654. AMOUNT OF CREDIT. (a) Except as provided by | ||
Subsection (b), the credit for any report equals five percent of the | ||
difference between: | ||
(1) the qualified research expenses incurred during | ||
the period on which the report is based, subject to Section 171.655; | ||
and | ||
(2) 50 percent of the average amount of qualified | ||
research expenses incurred during the three tax periods preceding | ||
the period on which the report is based, subject to Section 171.655. | ||
(b) If the taxable entity has no qualified research expenses | ||
in one or more of the three tax periods preceding the period on | ||
which the report is based, the credit for the period on which the | ||
report is based equals 2.5 percent of the qualified research | ||
expenses incurred during that period. | ||
(c) Notwithstanding whether the time for claiming a credit | ||
under this subchapter has expired for any tax period used in | ||
determining the average amount of qualified research expenses under | ||
Subsection (a)(2), the determination of which research expenses are | ||
qualified research expenses for purposes of computing that average | ||
must be made in the same manner as that determination is made for | ||
purposes of Subsection (a)(1). This subsection does not apply to a | ||
credit to which a taxable entity was entitled under Subchapter O as | ||
that subchapter existed before January 1, 2008. | ||
(d) The comptroller may adopt rules for determining which | ||
research expenses are qualified research expenses for purposes of | ||
Subsection (a) to prevent disparities in those determinations that | ||
may result from the taxable entity using different accounting | ||
methods for the period on which the report is based, as compared to | ||
any preceding tax periods used in determining the average amount of | ||
qualified research expenses under Subsection (a)(2). | ||
Sec. 171.655. ATTRIBUTION OF EXPENSES FOLLOWING TRANSFER OF | ||
CONTROLLING INTEREST. (a) If a taxable entity acquires a | ||
controlling interest in another taxable entity or in a separate | ||
unit of another taxable entity during a tax period with respect to | ||
which the acquiring taxable entity claims a credit under this | ||
subchapter, the amount of the acquiring taxable entity's qualified | ||
research expenses equals the sum of: | ||
(1) the amount of qualified research expenses incurred | ||
by the acquiring taxable entity during the period on which the | ||
report is based; and | ||
(2) subject to Subsection (d), the amount of qualified | ||
research expenses incurred by the acquired taxable entity or unit | ||
during the portion of the period on which the report is based that | ||
precedes the date of the acquisition. | ||
(b) A taxable entity that sells or otherwise transfers to | ||
another taxable entity a controlling interest in another taxable | ||
entity or in a separate unit of a taxable entity during a period on | ||
which a report is based may not claim a credit under this subchapter | ||
for qualified research expenses incurred by the transferred taxable | ||
entity or unit during the period if the taxable entity is ineligible | ||
for the credit under Section 171.653 or if the acquiring taxable | ||
entity claims a credit under this subchapter for the corresponding | ||
period. | ||
(c) If during any of the three tax periods following the tax | ||
period in which a sale or other transfer described by Subsection (b) | ||
occurs, the taxable entity that sold or otherwise transferred the | ||
controlling interest reimburses the acquiring taxable entity for | ||
research activities conducted on behalf of the taxable entity that | ||
made the sale or other transfer, the amount of the reimbursement is: | ||
(1) subject to Subsection (e), included as qualified | ||
research expenses incurred by the taxable entity that made the sale | ||
or other transfer for the tax period during which the reimbursement | ||
was paid; and | ||
(2) excluded from the qualified research expenses | ||
incurred by the acquiring taxable entity for the tax period during | ||
which the reimbursement was paid. | ||
(d) An acquiring taxable entity may not include on a report | ||
the amount of qualified research expenses otherwise authorized by | ||
Subsection (a)(2) to be included if the taxable entity that made the | ||
sale or other transfer described by Subsection (b) received an | ||
exemption under Section 151.3182 during the portion of the period | ||
on which the acquiring taxable entity's report is based that | ||
precedes the date of the acquisition. | ||
(e) A taxable entity that makes a sale or other transfer | ||
described by Subsection (b) may not include on a report the amount | ||
of reimbursement otherwise authorized by Subsection (c)(1) to be | ||
included if the reimbursement is for research activities that | ||
occurred during a tax period under this chapter during which that | ||
taxable entity received an exemption under Section 151.3182. | ||
Sec. 171.656. COMBINED REPORTING. (a) A credit under this | ||
subchapter for qualified research expenses incurred by a member of | ||
a combined group must be claimed on the combined report required by | ||
Section 171.1014 for the group. | ||
(b) An upper tier entity that includes the total revenue of | ||
a lower tier entity for purposes of computing its taxable margin as | ||
authorized by Section 171.1015 may claim the credit under this | ||
subchapter for qualified research expenses incurred by the lower | ||
tier entity to the extent of the upper tier entity's ownership | ||
interest in the lower tier entity. | ||
Sec. 171.657. BURDEN OF ESTABLISHING CREDIT. The burden of | ||
establishing entitlement to and the value of the credit is on the | ||
taxable entity. | ||
Sec. 171.658. LIMITATIONS. The total credit claimed under | ||
this subchapter for a report, including the amount of any | ||
carryforward credit under Section 171.659, may not exceed 50 | ||
percent of the amount of franchise tax due for the report before any | ||
other applicable tax credits. | ||
Sec. 171.659. CARRYFORWARD. If a taxable entity is | ||
eligible for a credit that exceeds the limitation under Section | ||
171.658, the taxable entity may carry the unused credit forward | ||
until all of the credit has been claimed. Credits and credit | ||
carryforwards are considered to be used in the following order: | ||
(1) a credit carryforward from a previous report; and | ||
(2) a current year credit. | ||
Sec. 171.660. ASSIGNMENT PROHIBITED. A taxable entity may | ||
not convey, assign, or transfer the credit allowed under this | ||
subchapter to another entity unless all of the assets of the taxable | ||
entity are conveyed, assigned, or transferred in the same | ||
transaction. | ||
Sec. 171.661. APPLICATION FOR CREDIT. A taxable entity | ||
must apply for a credit under this subchapter on or with the tax | ||
report for the period for which the credit is claimed. | ||
Sec. 171.662. RULES. The comptroller shall adopt rules and | ||
forms necessary to implement this subchapter. | ||
SECTION 3. Section 151.3182, Tax Code, as added by this Act, | ||
does not affect tax liability accruing before the effective date of | ||
this Act. That liability continues in effect as if this Act had not | ||
been enacted, and the former law is continued in effect for the | ||
collection of taxes due and for civil and criminal enforcement of | ||
the liability for those taxes. | ||
SECTION 4. Subchapter M, Chapter 171, Tax Code, as added by | ||
this Act, applies only to a report originally due on or after | ||
January 1, 2014. | ||
SECTION 5. This Act takes effect October 1, 2013. |