(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)[(i)] Limitation. The total
credit claimed under this section for a report, including the amount
of any carryforward credit under subsection (l) [(j)]
of this section, may not exceed 50% of the amount of franchise tax
due for the report before any other applicable tax credits.
(l)[(j)] Carryforward.
(1)If a taxable entity is eligible for a credit that
exceeds the limitation under subsection (k) [(i)]
of this section, the taxable entity may carry the unused credit forward
for not more than 20 consecutive reports.
(2)Research and development credits [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.
(m)[(k)] 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.
(n)[(l)] Application for credit.
(1)[A taxable entity must apply for a credit
under this section. ]A taxable entity applies for the credit
by claiming the credit on or with the franchise tax report for the
period for which the credit is claimed. A [To apply
for a credit, a] taxable entity must also complete Form 05-178,
Texas Franchise Tax Research and Development Activities Credits Schedule,
its electronic equivalent, or any form promulgated by the comptroller
that succeeds such form.
(2)The comptroller may require a taxable entity that
claims a credit under this section to provide all data and information
required for the comptroller to evaluate the credit and to comply
with Tax Code, §151.3182(c).
(o)[(m)] Amending reports.
(1)If a report was originally due and filed after
the effective date of this section and a credit allowed under this
section was not claimed, a taxable entity may file an amended report
within the statute of limitation to claim a credit, if the taxable
entity or a member of its combined group does not have an active Registration
Number for that period. See §3.584 of this title for information
about filing an amended report.
(2)If a taxable entity or member of the combined group
has or had a Registration Number for a period for which it
intends to claim a credit allowed under this section, the taxable
entity or member of the combined group must submit a written request
to cancel the registration before claiming a credit. The written
request must contain [with ]the following information:
(A)the tax period(s) covered by the report for which
it intends to claim a credit allowed under this section; and
(B)a statement whether any tax-exempt purchases
were made. If tax-exempt purchases were made, include an original
or amended sales and use tax report with tax due, penalty, and interest
for the sales tax periods that cover the tax-exempt purchases.
(3)If a report was filed claiming a credit allowed
under this section and the taxable entity later decides to claim a
sales and use tax exemption under Tax Code §151.3182, the taxable
entity must:
(A)file an amended franchise tax report
that does not claim the credit under this section and pay any tax,
penalty, and interest due;
(B)apply for a Registration Number; and
(C)file a request for a sales and use tax refund for
taxes paid on purchases under Tax Code, §151.3182.
The agency certifies that legal counsel
has reviewed the proposal and found it to be within the state agency's
legal authority to adopt.
Filed with the Office
of the Secretary of State on April 5, 2021
TRD-202101422 William Hamner
Special Counsel for Tax Administration
Comptroller of Public Accounts
Earliest possible date of adoption: May 16, 2021
For further information, please call: (512) 475-0387
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