Texas House Bill HB4073

Texas 2009 - 81st Regular

Caption

Relating to a franchise tax credit for certain research and development activities.

Impact

The implementation of HB 4073 is expected to positively affect Texas' economic landscape by promoting more robust investment in research and development sectors. By providing tax credits equivalent to five percent of qualifying expenses and payments, this bill seeks to bolster innovation among local businesses, potentially leading to increased job creation and a stronger economy. Taxable entities can carry forward any unused credit, further enhancing the financial benefits for companies heavily invested in research and development efforts.

Summary

House Bill 4073 introduces a franchise tax credit targeted toward taxable entities engaging in certain research and development activities within Texas. The bill amends Chapter 171 of the Tax Code to establish a new subchapter dedicated to this tax credit, outlining various definitions, eligibility criteria, and calculation methods that align with federal guidelines specified in the Internal Revenue Code. Essentially, the bill aims to incentivize companies operating in Texas to invest in innovative projects by reducing their overall tax burden based on their qualified research expenditures incurred within the state.

Contention

However, the bill also presents points of contention which may arise during legislative discussions. Concerns include the potential fiscal impact on state tax revenues, as increased credits may lead to significant reductions in overall franchise tax contributions from qualifying entities. Critics may argue about whether such measures favor larger corporations over small businesses, potentially exacerbating inequalities in access to tax relief based on capacity to engage in intensive research activities. Legislative debates are likely to explore whether enough safeguards and conditions are in place to ensure that the credits effectively lead to desired economic outcomes.