[(F)one or more members of the combined group is terminated,
dissolved, or otherwise loses its status as a legal entity.]
(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.
(1)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 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)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 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 May 24, 2022
TRD-202202020 Jennifer Burleson
Director, Tax Policy
Comptroller of Public Accounts
Earliest possible date of adoption: July 10, 2022
For further information, please call: (512) 475-2220
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