HBA-JRA, MAJ H.B. 980 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 980
By: Hill
Ways & Means
3/3/1999
Introduced



BACKGROUND AND PURPOSE 

Currently, Texas does not offer a tax incentive for research and
development.  Incentives to encourage the state's technology industry to
increase its research and development spending may produce more high-paying
jobs and help attract and retain research and development jobs in Texas.
H.B. 980 establishes a tax refund or credit for certain research and
development activities. 

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 in
SECTION 1 (Section 171.728, Tax Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 171, Tax Code, by adding Subchapter O, as
follows: 

SUBCHAPTER O.  TAX REFUND OR CREDIT FOR CERTAIN RESEARCH AND DEVELOPMENT
ACTIVITIES 

Sec. 171.721.  DEFINITIONS.  Provides that, in this subchapter, "base
amount," "basic research payment," and "qualified research expense" have
the meanings assigned by Section 41 (Credit for Increasing Research
Activities), Internal Revenue Code. 

Sec. 171.722.  ENTITLEMENT.  Provides that a corporation is entitled to a
refund against the tax imposed under this chapter in the amount and under
the conditions and limitations provided by this subchapter. 

Sec. 171.723.  AMOUNT.  (a)  Provides that the refund for any privilege
period equals five percent of the sum of the qualified research expenses
for this state divided by the base amount for this state and the basic
research payments determined under Section 41(e)(1)(A), Internal Revenue
Code, for this state, except as provided by Subsection (b). 

(b)  Prohibits the total refund claimed for a privilege period from
exceeding 25 percent of the amount of net franchise tax due for the
privilege period after any other applicable tax credits or refunds. 

(c)  Sets forth the required method for calculating the refund if the
corporation's accounting year does not correspond to the privilege period. 

Sec. 171.724.  APPLICATION.  Provides that a corporation must apply for a
refund on or with the tax report for the period for which the refund is
claimed.  Requires the comptroller to promulgate a form for the refund
application and provides that a corporation must use this form. 

Sec. 171.725.  DETERMINATION OF TOTAL AMOUNT OF REFUNDS.  Requires the
comptroller to determine the total amount of refunds claimed for a tax year
on all reports that are filed on or before November 15. 

 Sec. 171.726. ADJUSTMENT AND PAYMENT OF REFUND.  Requires the comptroller
to send to a corporation the full amount of the refund determined under
Section 171.723, if the amount under Section 171.725 is less than or equal
to $125 million, or a portion of the refund, if the amount is greater than
$125 million, on or before December 31 of a tax year. Sets forth the method
the comptroller is required to use to determine the amount of a
corporation's refund if the amount determined under Section 171.723 is
greater than $125 million. 

Sec. 171.727.  CREDIT.  Authorizes the comptroller, for a tax year, to
allow corporations to take a credit directly against the tax owed under
this chapter instead of issuing a refund after the tax is paid if the
comptroller determines that the amount under Section 171.725 for the tax
year is reasonably certain to be less than or equal to $125 million.
Establishes that the provisions of this subchapter that relate to the
entitlement to and amount of limitations of a refund apply in the same
manner to a credit if the comptroller allows a corporation to do so. 

Sec. 171.728.  RULES.  Requires the comptroller to adopt rules necessary to
implement this subchapter. 

SECTION 2.  Effective date:  January 1, 2000.  Specifies that this Act
applies only to a report originally due on or after the effective date of
this Act and an expense or payment made on or after January 1, 1999. 

SECTION 3.  Emergency clause.