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.