Bill > HB4393

This bill creates a new franchise tax credit for research and development (R&D) expenses conducted in Texas, establishing detailed rules for how businesses can claim the credit. The credit is calculated based on a percentage of qualified research expenses, with different rates applied depending on whether the research is conducted in collaboration with higher education institutions. Specifically, businesses can claim 8.722% of their current R&D expenses above 50% of their average R&D expenses from the previous three years, with the rate increasing to 10.903% if the research is done in partnership with a public or private higher education institution. The bill also provides special provisions for businesses with no prior R&D expenses, allowing them to claim a lower percentage credit. There are important limitations, including that the total credit cannot exceed 50% of the tax due, and unused credits can be carried forward for up to 20 consecutive reporting periods. The bill repeals an existing sales tax exemption for R&D equipment and an older R&D tax credit subchapter, effectively replacing them with this new more comprehensive R&D tax credit system. The new provisions will take effect on January 1, 2026, and businesses that previously received a sales tax exemption for R&D are not eligible for this new credit.

Budget and Finance

https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=HB4393