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 sets eligibility criteria for taxable entities to claim a credit amounting to 8.722% of the difference between their qualified research expenses for the reporting period 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 allows entities with no prior qualified research expenses to claim the credit and permits the carryforward of any unused credits. Additionally, it enables taxable entities not required to pay the franchise tax to claim the credit as a refundable amount.

The bill includes several amendments and repeals within the Tax Code, particularly concerning tax credits and property tax relief revenue management. It establishes a new section, 171.9213, requiring the comptroller to ensure sufficient revenue deposits into the property tax relief fund to offset any decreases due to the new subchapter. It amends Section 171.212(a) to clarify the definition of "qualified research expense" and the conditions for filing amended reports. The bill also repeals Section 151.3182 and Subchapter M of Chapter 171, while ensuring that tax liabilities accrued before the effective date remain enforceable. Unused credits from the repealed subchapter can still be applied until their expiration date, and the new provisions will apply only to reports due after January 1, 2026.

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