\documentclass[11pt]{scrartcl}
\IfFileExists{luatex85.sty}
{
\usepackage{luatex85}
}
{}
\usepackage{amsmath}
\usepackage{luacode}
\usepackage{breqn}

%----------------------------------------------
\begin{luacode}
  function foo(arg)
  \ifdefined\HCode
     tex.print("\\begin{dmath*}")
     tex.print(arg)
     tex.print("\\end{dmath*}")
  \else
     tex.print("\\begin{align*}")
     tex.print(arg)
     tex.print("\\end{align*}")
  \fi
  end
\end{luacode}


\begin{document}

\directlua{foo("\luatexluaescapestring{\unexpanded{

Here is the error with make4ht
/usr/local/texlive/2016/texmf-dist/tex/generic/tex4ht/html4-math.4ht))
(/usr/local/texlive/2016/texmf-dist/tex/generic/tex4ht/html4.4ht)
(/usr/local/texlive/2016/texmf-dist/tex/generic/tex4ht/html4-math.4ht))
(./foo3.aux)
! TeX capacity exceeded, sorry [input stack size=5000].
<to be read again>
\a:display
l.33    }}")}

 28056 words of node memory still in use:
   17 hlist, 3 vlist, 2 rule, 4 local_par, 3 dir, 3330 math, 30 glue, 1 kern, 7
 penalty, 2 glyph, 61 glue_spec, 3 temp, 1665 if_stack, 2 write, 184 special no

\documentclass[11pt]{scrartcl}
\IfFileExists{luatex85.sty}
{
\usepackage{luatex85}
}
{}
\usepackage{amsmath}
\usepackage{luacode}

%----------------------------------------------
\begin{luacode}
  function foo(arg)

  \ifdefined\HCode
     tex.print("\\begin{align*}")
     tex.print(arg)
     tex.print("\\end{align*}")
  \else
     tex.print("\\begin{align}")
     tex.print(arg)
     tex.print("\\end{align}")
   \fi
  end
\end{luacode}


\begin{document}

\directlua{foo("\luatexluaescapestring{\unexpanded{

\makeatletter
\def\@doimport#1{\@ifstar
  {\@sub@import#1\IfFileExists}{\@sub@import#1\IfFileExists}}
\makeatother

TEXMF = {$TEXMFCONFIG,$TEXMFVAR,$TEXMFHOME,!!$TEXMFSYSCONFIG,!!$TEXMFSYSVAR,!!$TEXMFLOCAL,!!$TEXMFDIST}
TEXINPUTS.latex = .;$TEXMF/tex/{latex,generic,}//

@egreg I see., Thanks. So the answer I was reading was not really accurate? Here it is  tex.stackexchange.com/questions/12267/…

If you use mystyle.sty in multiple documents, you might consider putting it in a place that is searchable by TeX. Usually, this is the output of the command kpsewhich -var-value TEXMFHOME (more precisely, the tex/latex/ subdirectory of that directory). Once you put the file there, you should run the command texhash. Then, kpsewhich myfile.sty should print the path to the file. After doing this \usepacakge{myst…

\documentclass[11pt]{scrartcl}
\IfFileExists{luatex85.sty}
{\usepackage{luatex85}}{}

\usepackage{amsmath}
\usepackage{luacode}

%----------------------------------------------
\begin{luacode*}
  function foo(arg)
   tex.print("\\begin{verbatim}")
   tex.print("")
   tex.print(arg)
   tex.print("\\end{verbatim}")
   tex.print("")
  end
\end{luacode*}


\begin{document}

\directlua{foo("\luatexluaescapestring{\unexpanded{
x=10;
y=20;
A=zeros(10);
s="this is string";
   }}")}
\end{document}

But the call had this:
\directlua{foo("\luatexluaescapestring{\unexpanded{
x=10;
y=20;
A=zeros(10);
s="this is string";
   }}")}

\documentclass[11pt]{scrartcl}
\IfFileExists{luatex85.sty}
{\usepackage{luatex85}}{}

\usepackage{amsmath}
\usepackage{luacode}
\usepackage{listings}

%----------------------------------------------
\begin{luacode*}
  function foo(arg)
   tex.print("\\begin{lstlisting}")
   tex.print("")
   tex.print(arg)
   tex.print("\\end{lstlisting}")
   tex.print("")
  end
\end{luacode*}


\begin{document}

\directlua{foo("\luatexluaescapestring{\unexpanded{
x=10;
y=20;
A=zeros(10);
s="this is string";
   }}")}

\documentclass[11pt]{scrartcl}
\IfFileExists{luatex85.sty}
{\usepackage{luatex85}}{}

\usepackage{amsmath}
\usepackage{luacode}

%----------------------------------------------
\begin{luacode*}
  function foo(arg)
   tex.sprint("\\endlinechar=13 \\begin{verbatim}")
    for line in arg:gmatch("[^X]+") do
    tex.print(line)
    end
   tex.print("\\end{verbatim}")
   tex.print("")
  end
\end{luacode*}


\begin{document}

{\endlinechar=`X %
\directlua{foo([[x=10;
y=20;
A=zeros(10);
s="this is string";

That should be

\catcode`\^^M=12
\endlinechar=`\^^M

@DavidCarlisle I did
{%
\catcode`\^^M=12
\endlinechar=`\^^M
\directlua{foo("\luatexluaescapestring{\unexpanded{
x=10;
y=20;
A=zeros(10);
s="this is string";
}}")}
}%

@DavidCarlisle I am using what I show there
\documentclass[11pt]{scrartcl}
\IfFileExists{luatex85.sty}
{\usepackage{luatex85}}{}

{%
\catcode`\^^M=12 %%%%%%%%%
\endlinechar=`\^^M %%%%%%%%%%%%%%%
\directlua{foo("\luatexluaescapestring{\unexpanded{%%%%%%%%%%
x=10;
y=20;
A=zeros(10);
s="this is string";
}}")}%%%%%%%%%%
}%