Hughes 529 Credit Bill Opens An Unlimited Resale Market

The text as introduced · 862 words

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.