House Bill No. 4393 introduces Subchapter T to Chapter 171 of the Texas Tax Code, creating a franchise tax credit for specific research and development activities. The bill defines "qualified research expense" and establishes eligibility criteria for taxable entities to claim a credit set at 8.722% of the difference between their qualified research expenses and 50% of their average qualified research expenses from the previous three tax periods. If a taxable entity collaborates with higher education institutions, the credit increases to 10.903%. The bill also accommodates entities with no prior qualified research expenses by allowing them to claim a reduced credit and permits those that do not owe tax to receive a refundable credit based on their qualified research expenses.

In addition to these provisions, the bill mandates the comptroller to manage the implementation of the new credits and ensure that revenue from certain taxes is deposited into the property tax relief fund to offset any decreases caused by the new subchapter. It also clarifies the definition of "qualified research expense" and outlines the requirements for filing amended reports in response to audits or changes in federal returns. The bill repeals Section 151.3182 and Subchapter M of Chapter 171, while allowing taxable entities to carry forward unused credits from the repealed subchapter. The new provisions will take effect for reports due after January 1, 2026, and entities that received exemptions under the repealed section will not be eligible for credits under the new subchapter.

Statutes affected:
Introduced: Tax Code 171.212 (Tax Code 171)