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Depending upon the number of special-purpose corporations that might be formed and the extent their business activities, there could be an indeterminate fiscal impact on the state and units of local government.
HB 590 seeks to allow an institution of higher education to create a special-purpose corporation for the exclusive purpose of developing and commercializing one or more technologies owned wholly or partly by the institution.
The bill would require that the principal offices of the research technology corporation be in Texas, and the majority of goods and services of the research technology corporation must be produced or performed in Texas. The corporation is limited to 15 years but after may amend their certificate of formation to become a for-profit corporation.
Research technology corporations under HB 590 would be exempt from ad valorem taxes, franchise tax, and sales and use taxes. The corporations may still receive other tax benefits, including Chafpter 312 or 313 of the Tax Code. The corporations created under this bill must keep a record of all tax exemptions received.
The penalty for noncompliance under HB 590 makes the research technology corporation liable for all taxes exempted for 5 years before the noncompliance began. Money collected from these penalties will go into the General Revenue Fund.
The committee substitute extends these exemptions to medical centers associated with institutions of higher education.
HB 590 is the enabling legislation for HJR 64.
HB 590 would allow institutions of higher education and their qualifying medical centers to benefit for a limited amount of time from their research and development. After 15 years the corporation would become a for-profit company. This type of spin-off from universities to the private sector is common and useful. However, this legislation allows the corporation, for the 15-year period that it is owned in whole or in part by the university, to be exempt from the franchise tax, ad valorem tax, and the sales and use tax. This gives a competitive advantage not offered to other companies. We are neutral on this legislation.