| (B) subject to paragraph (4) of this subsection, 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.
(2) 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 section
for qualified research expenses incurred by the transferred taxable
entity or unit during the period if:
(A) the taxable entity that makes the sale or transfer
is ineligible for the credit under subsection (f) of this section;
or
(B) the acquiring taxable entity claims a credit under
this section for the corresponding period.
(3) If during any of the three tax periods following
the period in which a sale or other transfer described by paragraph
(2) of this subsection 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:
(A) 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, subject to paragraph
(5) of this subsection; and
(B) excluded from the qualified research expenses incurred
by the acquiring taxable entity for the tax period during which the
reimbursement was paid.
(4) An acquiring taxable entity may not include on
a report the amount of qualified research expenses otherwise authorized
by paragraph (1)(B) of this subsection if the taxable entity that
made the sale or other transfer described by paragraph (2) of this
subsection received an exemption under Tax Code, §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.
(5) A taxable entity that makes a sale or other transfer
described by paragraph (2) of this subsection may not include on a
report the amount of reimbursement otherwise authorized by paragraph
(3)(A) of this subsection if the reimbursement is for research activities
that occurred during a tax period in which the entity that makes a
sale or other transfer received an exemption under Tax Code, §151.3182.
(i) Combined reporting.
(1) The combined group is the taxable entity for purposes
of calculating and reporting this credit.
(2) A credit under this section for qualified research
expenses incurred by a member of a combined group must be claimed
on the combined report for the group required by Tax Code, §171.1014.
The total qualified research expenses of each member of the combined
group shall be added together to determine the total credit claimed
on the combined report.
(3) When the membership of a combined group changes,
the credit carryforward under subsection (l) of this section will
be determined as follows:
(A) For the purposes of this paragraph, the carryforward
attributable to a member of a combined group for each prior report
year is determined by multiplying the total credit carryforward available
for that report year by a fraction, the numerator of which is the
qualified research expenses paid or incurred by the member during
that report year, and the denominator of which is the total qualified
research expenses paid or incurred by the combined group during that
report year.
(B) If a combined group loses a member, the credit
carryforward will be attributed to each member of the combined group
that was included on the report for the report year to which the carryforward
relates. Each member of the combined group that has a carryforward
attributed to it under this subparagraph, including the member that
leaves the combined group, may continue to use that carryforward on
its future franchise tax reports.
(C) If a taxable entity that was not part of a combined
group when it created a credit carryforward later joins a combined
group, any credit carryforward it had previously established may be
claimed on the combined group's future franchise tax reports.
(D) If a taxable entity, including a member of a combined
group, is a non-surviving entity in a merger transaction, any credit
carryforward established by the non-surviving entity may be claimed
on the surviving entity's future franchise tax reports.
(E) If a taxable entity, including a member of a combined
group, is terminated, dissolved, or otherwise loses its status as
a legal entity, the credit carryforward attributable to that taxable
entity may not be claimed on any future franchise tax report. This
subparagraph does not apply if subparagraph (D) of this paragraph
or subsection (m) of this section applies.
(F) If all of the assets of a member of a combined
group are conveyed, assigned or transferred in a manner that qualifies
under subsection (m) of this section, the carryforward attributable
to that member may be conveyed, assigned, or transferred as part of
that transaction.
(G) A combined group may only use a credit carryforward
attributable to a member under subparagraphs (B), (C), or (D) of this
paragraph if that member is part of the combined group on the last
day of the accounting period on which that report is based.
(4) A combined group with any qualified research expenses
under higher education contracts in a tax period may include all of
its qualified research expenses in the calculations under subsection
(g)(3) and (4) of this section, even if not all of the members of
the combined group have qualified research expenses that are related
to higher education contracts.
(j) Tiered partnership reporting.
(1) An upper tier entity and a lower tier entity may
claim a credit under this section for qualified research expenses;
however, an upper tier entity and a lower tier entity cannot claim
a credit under this section for the same qualified research expense.
(2) An upper tier entity that includes the total revenue
of a lower tier entity for purposes of computing its taxable margin
as authorized by Tax Code, §171.1015 (Reporting for Certain Partnerships
in Tiered Partnership Arrangement) may claim the credit under this
section 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.
(k) Limitation. The total credit claimed under this
section for a report, including the amount of any carryforward credit
under subsection (l) of this section, may not exceed 50% of the amount
of franchise tax due for the report before any other applicable tax
credits.
(l) Carryforward.
(1) If a taxable entity is eligible for a credit that
exceeds the limitation under subsection (k) of this section, the taxable
entity may carry the unused credit forward for not more than 20 consecutive
reports.
(2) Research and development credits, including credit
carryforwards, are considered to be used in the following order:
(A) a credit carryforward of unused research and development
credits accrued under Tax Code, Chapter 171, Subchapter O (Tax Credit
for Certain Research and Development Activities), before its repeal
on January 1, 2008, and claimed as authorized by §3.593 of this
title (relating to Margin: Franchise Tax Credits);
(B) a credit carryforward under this section; and
(C) a current year credit.
(3) If a taxable entity claims a carryforward on a
report within the statute of limitations, the comptroller may verify
that the credit that established the carryforward was based on qualified
research activities, even if the statute of limitations for the year
in which the credit was created has expired. This verification will
not result in an adjustment to tax, penalty, or interest for any report
year for which the statute of limitations has expired. The verification
may result in an adjustment to the carryforward for all periods within
the unexpired statute of limitations and for all future periods in
which the taxable entity may claim the carryforward.
(4) For application of the carryforward to combined
groups, see subsection (i)(3) of this section.
(m) Assignment prohibited. A taxable entity may not
convey, assign, or transfer the credit allowed under this section
to another entity unless all of the assets of the taxable entity are
conveyed, assigned, or transferred in the same transaction. The conveyance,
assignment, or transfer of an ownership interest in the taxable entity
is not a conveyance, assignment, or transfer of the credit by the
taxable entity.
(n) Application for credit.
Cont'd... |
