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Texas has long been known for its booming economy that supports a wide and diverse range of industries. As our state solidifies its position as a global hub for innovation, it’s important we take the steps necessary to secure our leadership in the years and decades to come. Investment in Research and Development (R&D) helps states attract high-impact industries like technology, healthcare, advanced manufacturing, and energy.
The state’s current R&D tax incentives are set to expire in 2026. According to a new study published by Texans for Innovation, extending these incentives could create thousands of jobs and generate billions in economic output over the next decade. As the study’s author, Dr. John W. Diamond of Rice University’s Baker Institute, made clear:
“The question is not whether Texas can afford to extend the R&D tax credit, but instead whether Texas can afford not to extend the R&D tax credit.”
The study finds that strategic investments in R&D incentives will lead to increased tax revenues and increased economic activity, particularly in high-wage, high-growth industries. The study finds that within 20 years, Texas could see a net economic benefit of nearly $58.8 billion.
A pair of bills currently before the Legislature would extend these expiring credits: SB 2206 by Senators Paul Bettencourt and Joan Huffman and HB 4393 by Representative Charlie Geren.
These bills would also benefit smaller businesses that already engage in R&D activities but may not yet qualify for Texas franchise tax credits. These businesses could apply for a rebate to reduce their state sales taxes, or carry those credits forward to apply to future franchise tax credits.
Other states are aggressively competing for R&D investments. Supporters of the bills argue that extending R&D tax incentives is a proactive step to ensure our state remains a top destination for business and innovation, particularly as businesses seek to harness the power of artificial intelligence (AI) to enhance their operational efficiency and spur further economic growth.
Both bills are awaiting referrals to committees.
We hope you enjoyed today’s read!
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