Relating to certain expenditures by public institutions of higher education and university systems that are eligible for certain tax credits.
LowStandard timeline
Low Cost
Effective:2026-01-01
Enforcing Agencies
Comptroller of Public Accounts
01
Compliance Analysis
Key implementation requirements and action items for compliance with this legislation
Implementation Timeline
Effective Date: January 1, 2026
Compliance Deadline:Q4 2025 (Taxpayers must project 2026 liabilities to negotiate credit purchases; Contractors must adjust billing codes for projects active on 1/1/2026).
Agency Rulemaking: The Comptroller of Public Accounts and Texas Historical Commission (THC) must update transfer rules to accommodate public university sellers. Watch for proposed rules in Q3 2025 regarding procurement methods for selling these state-owned assets.
Immediate Action Plan
Tax Directors: Calculate projected 2026 Texas Franchise Tax liability immediately to determine the volume of credits required.
Legal Counsel: Draft a standard "Public Entity Tax Credit Purchase Agreement" with aggressive indemnification clauses regarding credit recapture.
Business Development (Construction): Review stalled university renovation proposals; re-submit feasibility studies incorporating the new 25% equity injection provided by these tax credits.
Government Affairs: Monitor the Comptroller’s office for guidance on whether credit sales will be handled via the Comptroller or individual university systems.
Operational Changes Required
Contracts
Tax Credit Purchase Agreements: Corporate buyers must draft Master Purchase Agreements specific to state entities. These must include "True-Up" provisions to adjust payments if the final certified credit amount differs from estimates.
Construction Agreements: Developers and contractors working for universities must accept "Liquidated Damages" clauses tied to credit recapture. If construction errors cause a loss of historic certification, the contractor will be liable for the financial loss of the credit.
Indemnification: Purchase agreements must indemnify the buyer against "recapture" events where the state disallows the credit post-transfer.
Hiring/Training
Accounting/Tax Teams: Staff must be trained on Form 05-901 (Franchise Tax Credit Transfer Affidavit) and the specific due diligence required to verify "Qualified Rehabilitation Expenditures" (QREs) generated by a non-taxable entity.
Project Managers (Construction): Must be trained to segregate QREs from non-qualified costs (e.g., landscaping, additions) in all payment applications to university clients, as this data is required for the Certificate of Eligibility.
Reporting & Record-Keeping
Audit Defense: Buyers must obtain and retain the Certificate of Eligibility issued by the THC and the Cost Segregation Report from the university.
Transfer Filing: The transfer is not valid until the Comptroller receives and processes the transfer affidavit. This must be filed immediately upon purchase to apply against current year estimated tax payments.
Fees & Costs
Capital Outlay: Buyers should budget for the purchase of credits. While no government fee is added, market rates for these credits typically float between $0.85 and $0.92 on the dollar.
Insurance: Buyers should evaluate "Tax Credit Recapture Insurance" premiums if the university refuses full indemnification.
Strategic Ambiguities & Considerations
Procurement vs. Negotiation: The law does not specify if universities must sell these credits via public bid or if they can negotiate directly with private buyers. This creates uncertainty regarding how quickly a corporation can secure these credits.
Valuation Floors: It is unclear if the State will mandate a minimum floor price for these credits to prevent the undervaluation of state assets.
Third-Party Leasing: The law exempts universities from "tax-exempt use" restrictions, but it is undefined whether this exemption flows through if the university leases the renovated property to a *different* tax-exempt entity.
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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.
In 2017, the 85th Texas Legislature enacted legislation establishing that certain costs and expenses incurred by public institutions of higher education and university systems are considered eligible costs and expenses for purposes of the Texas Historic Preservation Tax Credit Program. However, that legislation only made such project costs and expenses eligible for the credit if they were incurred before January 1, 2022. H.B. 4044 seeks to address this issue by establishing that certain costs and expenses incurred by such institutions and systems are once again considered eligible costs and expenses for purposes of the tax credit for the certified rehabilitation of certified historic structures.
CRIMINAL JUSTICE IMPACT
It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS
H.B. 4044 amends the Tax Code to establish that costs and expenses incurred by a public institution of higher education or university system as defined by the Higher Education Coordinating Act of 1965 are considered eligible costs and expenses for purposes of the tax credit for the certified rehabilitation of certified historic structures so long as the costs and expenses satisfy provisions, other than the depreciation and tax-exempt use provisions, of the federal Internal Revenue Code relating to rehabilitation credits. Effective January 1, 2035, the bill removes such institutions and systems from that provision. The bill applies only to costs and expenses incurred on or after the bill's effective date or on or after January 1, 2035, as applicable.
Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB4044 by Meyer (Relating to certain expenditures by public institutions of higher education and university systems that are eligible for certain tax credits.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB4044, As Introduced: a negative impact of ($3,360,000) through the biennium ending August 31, 2027.
Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($640,000) for the 2026-27 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.
General Revenue-Related Funds, Five- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2026
($1,680,000)
2027
($1,680,000)
2028
($1,680,000)
2029
($1,680,000)
2030
($1,680,000)
All Funds, Five-Year Impact:
Fiscal Year
Probable Revenue (Loss) from General Revenue Fund 1
Probable Revenue (Loss) from Foundation School Fund 193
Probable Revenue (Loss) from Property Tax Relief Fund 304
2026
($1,260,000)
($420,000)
($320,000)
2027
($1,260,000)
($420,000)
($320,000)
2028
($1,260,000)
($420,000)
($320,000)
2029
($1,260,000)
($420,000)
($320,000)
2030
($1,260,000)
($420,000)
($320,000)
Fiscal Analysis
The bill would amend the Tax Credit for Certified Rehabilitation of Certified Historic Structures to add that the depreciation and tax-exempt use provisions of Section 47(c)(2), of the Internal Revenue Code (Qualified Rehabilitation Expenditure Defined) do not apply to the costs and expenses incurred by institutions of higher education or university systems, as defined. The provisions of this bill apply only to costs and expenses incurred by institutions of higher education or universities systems on or after January 1, 2026. The provisions of this bill regarding higher education or university systems are no longer applicable after January 1, 2035.
The bill would take effect January 1, 2026.
Methodology
Regarding certain credits allowed under the Texas franchise and insurance premium taxes, this bill exempts institutions of higher education and university systems from the depreciation and tax-exempt use provisions of Section 47(c)(2), of the Internal Revenue Code regarding eligible costs and expenses incurred in the rehabilitation of historic structures. The result is expansion of types of entities whose historic structure expenses generate transferable tax credits.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies:
304 Comptroller of Public Accounts
LBB Staff:
JMc, KK, SD
Related Legislation
Explore more bills from this author and on related topics
Effective January 1, 2026, HB4044 authorizes public university systems to generate and sell transferable historic preservation tax credits, creating a new secondary market for Texas Franchise and Insurance Premium Tax offsets. This legislation creates a direct financial opportunity for corporate taxpayers to purchase credits at a discount and incentivizes new construction contracts for firms specializing in institutional historic rehabilitation. Implementation Timeline Effective Date: January 1, 2026 Compliance Deadline: Q4 2025 (Taxpayers must project 2026 liabilities to negotiate credit purchases; Contractors must adjust billing codes for projects active on 1/1/2026).
Q
Who authored HB4044?
HB4044 was authored by Texas Representative Morgan Meyer during the Regular Session.
Q
When was HB4044 signed into law?
HB4044 was signed into law by Governor Greg Abbott on June 20, 2025.
Q
Which agencies enforce HB4044?
HB4044 is enforced by Comptroller of Public Accounts.
Q
How urgent is compliance with HB4044?
The compliance urgency for HB4044 is rated as "low". Businesses and organizations should review the requirements and timeline to ensure timely compliance.
Q
What is the cost impact of HB4044?
The cost impact of HB4044 is estimated as "low". This may vary based on industry and implementation requirements.
Q
What topics does HB4044 address?
HB4044 addresses topics including education, education--higher, education--higher--general, education--higher--institutions & programs and taxation.
Legislative data provided by LegiScanLast updated: November 25, 2025
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