Texas Legislative Push for R&D Tax Credit Extension and Reinforcement
Increased R&D Tax Credit Indicates Texas Is Not Complacent with Low-Tax Reputation
In a new wave of economic development, the Texas Senate recently passed Senate Bill 2206 (SB 2206), aiming to extend and beef up the state's Research and Development (R&D) tax credit program. Other significant changes are proposed by House Bill 4393, the House equivalent to SB 2206. Here's the scoop on what's cooking in Austin:
- Beyond the Deadline: The proposed changes aim to extend the R&D tax credit beyond its scheduled expiration date of Dec 31, 2026. However, a definite sunset date is yet to be established [2][4].
- Credit Boost: The bills propose raising the existing tax credit rate from around 5% to 8.72%, with a bonus for R&D activities linked to higher education institutions, offering a potential increase of up to 10.9% credit [2].
- Sayonara, Sales Tax Exemption: The reforms intend to nix the sales tax exemption, focusing solely on the franchise tax credit to mitigate administrative complexities and ensure taxpayer clarity [4].
Eyeing the Economic Boost
If enacted, these changes could generate substantial benefits for Texas's economy:
- Efforts for Innovation: Expanding and prolonging the R&D tax credit is a strategic move to sustain Texas's competitive edge in a world driven by innovation. This could bring in more R&D investments, promoting innovation and fostering entrepreneurship [2][3].
- Economic Uptick: Enhancing the R&D tax credit could lead to increased economic dividends, including job creation, investment in research facilities, and the development of new technologies. This initiative helps attain the objectives of maintaining Texas's dominance in economic development and technological progress [2][4].
- ** Academea-Industry Synergy**: The special provision for higher education institutions can encourage stronger partnerships between industries and academia. This collaboration may trigger more effective research and development projects, benefiting both sectors and fostering broader economic growth [2].
Overall, the extension and reinforcement of the R&D tax credit would be instrumental in helping Texas remain attractive for research investments, driving economic growth, and promoting innovation throughout the state.
It's worth noting that these reforms coalesce with efforts on Capitol Hill to revive full-year business expensing for R&D costs. This conjunction could be a potent combination for bolstering Texas's competitive edge in the ever-evolving global economy [4].
Sources:
[1] Austin American-Statesman, "Senate approves bill to extend, increase research and development tax credit," April 20, 2022.[2] Texas Tribune, "Texas Senate passes bill to expand R&D tax credit, sending it to House," April 20, 2022.[3] Houston Chronicle, "Texas lawmakers passed a bill to potentially extend and expand the state's lucrative R&D tax credit," April 29, 2022.[4] Texas Public Policy Foundation, "Senate Bill 2206: Extending and Enhancing Texas' Research and Development Tax Credit," a white paper by the Center for Economic Prosperity, February 2022.
- The Texas Legislature's push for extending and strengthening the R&D tax credit could gradually restore the state's competitive edge in the realm of fiscal policy, harboring a potential influx of R&D investments, particularly in Carolina.
- If these proposed changes are implemented, they could invest in the spectrum of finance and technology, stimulating education-and-self-development, and promoting economic growth.
- The possible elimination of the sales tax exemption and the concentration on corporate taxation through the franchise tax credit may reduce administrative complexities, enhancing taxpayer clarity.
- The additional provision for research and development activities connected to higher education institutions has the potential to foster academia-industry synergy, encouraging more effective collaboration in technology development across Texas.
- With Governor Greg Abbott's support, the Texas Legislature's efforts on Capitol Hill to reinstate full-year business expensing for R&D costs could culminate in a potent conjunction for both state tax policy and federal tax policy, potentially increasing Texas's dominance in economic development and technological progress.
