SB1097 - Relating to a franchise tax credit for taxable entities that make contributions to employees' Texas 529 plans.

  89R9677 CJC-D     By: Hughes S.B. No. 1097       A BILL TO BE ENTITLED   AN ACT   relating to a franchise tax credit for taxable entities that make   contributions to employees' Texas 529 plans.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Chapter 171, Tax Code, is amended by adding   Subchapter U to read as follows:   SUBCHAPTER U. TAX CREDIT FOR TEXAS 529 PLAN CONTRIBUTION           Sec. 171.9231.  DEFINITIONS. In this subchapter:                 (1)     "Texas 529 plan" means a qualified tuition program   under Section 529, Internal Revenue Code of 1986, as amended,   administered by the Prepaid Higher Education Tuition Board under   Chapter 54, Education Code.                 (2)     "Texas 529 plan contribution" means the dollar   amount of a contribution made by a taxable entity to a Texas 529   plan owned by an employee of the entity. The term does not include   salary or wages paid by the taxable entity to the employee for the   employee's service.           Sec.   171.9232.     ENTITLEMENT TO CREDIT.   A taxable entity is   entitled to a credit in the amount and under the conditions provided   by this subchapter against the tax imposed under this chapter.           Sec.   171.9233.     QUALIFICATION.     A taxable entity qualifies   for a credit under this subchapter if the taxable entity   contributes to at least one Texas 529 plan of each employee of the   taxable entity who owns one or more Texas 529 plans and agrees to   allow the entity to contribute to the plan.           Sec.   171.9234.     AMOUNT OF CREDIT; LIMITATION.     (a)     Subject   to Subsection (b), the amount of the credit a taxable entity may   claim on a report is equal to 25 percent of the total amount of Texas   529 plan contributions made by the entity during the period on which   the report is based.           (b)     The total credit claimed on a report, including the   amount of any carryforward under Section 171.9235, may not exceed   the amount of franchise tax due for the report after applying all   other applicable credits.             Sec.   171.9235.     CARRYFORWARD. (a)   If a taxable entity is   eligible for a credit that exceeds the limitation under Section   171.9234(b), the entity may carry the unused credit forward for not   more than five consecutive reports.           (b)     A carryforward is considered the remaining portion of a   credit that cannot be claimed on a report because of the limitation   under Section 171.9234(b).           (c)     Credits, including a carryforward, are considered to be   used in the following order:                 (1)  a carryforward under this section; and                 (2)     a credit for the period on which the report is   based.           Sec.   171.9236.     APPLICATION FOR CREDIT.   (a)   A taxable   entity must apply for a credit under this subchapter on or with the   report for the period for which the credit is claimed.           (b)     A taxable entity must apply for the credit in the manner   prescribed by the comptroller and include with the application any   information requested by the comptroller to determine whether the   entity is eligible for the credit under this subchapter.           Sec.   171.9237.     SALE OR ASSIGNMENT OF CREDIT. (a) A taxable   entity that makes a Texas 529 plan contribution may sell or assign   all or part of the credit that may be claimed for that contribution   to one or more taxable entities, and any taxable entity to which all   or part of the credit is sold or assigned may sell or assign all or   part of the credit to another taxable entity.   There is no limit on   the total number of transactions for the sale or assignment of all   or part of the total credit authorized under this subchapter.           (b)     A taxable entity that sells or assigns a credit under   this section and the taxable entity to which the credit is sold or   assigned shall jointly submit written notice of the sale or   assignment to the comptroller not later than the 30th day after the   date of the sale or assignment. The notice must include:                 (1)     the date on which the credit was originally   established;                 (2)  the date of the sale or assignment;                 (3)     the amount of the credit sold or assigned and the   remaining period during which it may be used;                 (4)     the names, addresses, and federal tax   identification numbers of the taxable entity that sold or assigned   the credit or part of the credit and the taxable entity to which the   credit or part of the credit was sold or assigned; and                 (5)     the amount of the credit owned by the selling or   assigning taxable entity before the sale or assignment, and the   amount the selling or assigning taxable entity retained, if any,   after the sale or assignment.           (c)     The sale or assignment of a credit in accordance with   this section does not extend the period for which a credit may be   carried forward.           (d)     After a taxable entity claims a credit for a Texas 529   plan contribution under this subchapter, another entity may not use   the same expenditure as the basis for another credit.           Sec.   171.9238.     RULES. The comptroller shall adopt rules   necessary to implement and administer this subchapter.          SECTION 2.  Subchapter U, Chapter 171, Tax Code, as added by   this Act, applies only to a report originally due on or after   January 1, 2026.          SECTION 3.  This Act takes effect January 1, 2026.