By: Longoria	H.B. No. 4425

	A BILL TO BE ENTITLED
	AN ACT
	relating to the exemption for depreciable tangible personal
	property used in qualified research from the sales and use tax and
	the tax credit for certain research and development credit
	activities for franchise tax purposes.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Section 151.3182, Tax Code, is amended by
	amending Subsections (a) and (b) to read as follows:
	(a)  In this section:
	(1)  "Depreciable tangible personal property" means
	tangible personal property that:
	(A)  has a useful life that exceeds one year; and
	(B)  is subject to depreciation under:
	(i)  generally accepted accounting
	principles; or
	(ii)  Section 167 or 168, Internal Revenue
	Code.
	(2)  "Exclusively used in qualified research" means
	used in qualified research without an intervening, simultaneous, or
	subsequent use, unless the intervening, simultaneous, or
	subsequent use is otherwise exempt under this Chapter.
	(3)  "Good" means real or tangible personal property
	sold in the ordinary course of business.
	(4)  "Internal Revenue Code" has the meaning assigned
	by Section 171.651.
	[(3)] (5)  "Qualified research" has the meaning
	assigned by Section 41, Internal Revenue Code, except it does not
	include the use of depreciable tangible personal property in the
	production of a good or activities involved in the provision of
	services for a customer.
	(b)  The sale, storage, or use of depreciable tangible
	personal property directly and exclusively used in qualified
	research is exempted from the taxes imposed by this chapter if the
	property is sold, leased, or rented to, or stored or used by, a
	person who:
	(1)  is engaged in qualified research; and
	(2)  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,
	or use occurs.
	SECTION 2.  Section 171.651, Tax Code, is amended by
	amending Paragraphs (1), (3), (4), and (5) to read as follows:
	(1)  "Internal Revenue Code" means the Internal Revenue
	Code of 1986 in effect on December 31, 2011, including regulations
	adopted as of 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:
	(A)  the research must be conducted in this state;
	and
	(B)  it does not include activities performed in
	the production of a good or the performance of a service for a
	customer.
	(4)  "Qualified research expense" has the meaning
	assigned by Section 41, Internal Revenue Code, except that:
	(A)  the expense must be for research conducted in
	this state; and
	(B)  if an employee has performed both qualified
	services and nonqualified services, only wages for actual time
	spent for the performance of qualified services constitutes a
	qualified research expense and the "substantially-all" provisions
	of Section 41(b)(2)(B) do not apply.
	(5)  "Goods" has the meaning assigned by Section
	171.1012.
	SECTION 3.  Section 171.652, Tax Code, is amended to read as
	follows:
	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. Eligibility and acceptance by the Internal
	Revenue Service for credit under Section 41, Internal Revenue Code,
	on a taxable entity's federal tax return is not binding on the
	eligibility for credit under this Subchapter.
	SECTION 4.  Section 171.654, Tax Code, is amended by
	amending Subsections (a) and (b) to read as follows:
	(a)  Except as provided by Subsections (b), (c), and (d), 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 contracts with one or more public
	or private institutions of higher education for the performance of
	qualified research and the taxable entity has qualified research
	expenses incurred in this state by the taxable entity under the
	contract during the period on which the report is based, the credit
	for the report equals 6.25 percent of the difference between:
	(1)  all 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 all qualified
	research expenses incurred during the three tax periods preceding
	the period on which the report is based[, subject to Section
	171.655].
	SECTION 5.  Section 171.6541, Tax Code, is added to read as
	follows:
	Sec. 171.6541.  DETERMINATION OF THE AMOUNT OF CREDIT. (a)
	A taxable entity may use sampling to determine the amount of the
	credit using a generally accepted sampling method approved by the
	comptroller.
	(b)  The taxable entity must record the sampling method
	performed and must make available, on request by the comptroller,
	the records on which the computation was based.
	SECTION 6.  Section 171.656, Tax Code, is amended by
	amending Subsection (a) to read as follows:
	(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[,
	and the combined group is the taxable entity for purposes of this
	subchapter
	].
	(1)  Each member of the combined group shall determine
	its credit as if it were an individual taxable entity. The total
	credits of the members determined in this section shall be added
	together to determine the total credit claimed on the combined
	report.
	(2)  Any carryforward credit belongs to the member of
	the combined group that established that portion of the credit for
	future reports.
	SECTION 7.  Section 171.655, Tax Code, is deleted.
	SECTION 8.  The amendments made by this Act are a
	clarification of existing law and do not imply that existing law may
	be construed as inconsistent with the law as amended by this Act.