Relating to a franchise tax credit for certain research and development activities.
Impact
The bill is expected to significantly affect Texas's tax structure by providing financial incentives for businesses involved in research and development. By designating strategic investment areas that receive additional credit benefits, the bill aims to direct resources towards economically depressed regions of the state. This could lead to an increase in job creation and a rise in research and development positions, potentially improving local economies and reducing unemployment rates. Furthermore, it encourages businesses to remain within Texas rather than relocating to states with more favorable research tax incentives.
Summary
SB885 introduces a franchise tax credit aimed at promoting research and development activities within the state of Texas. Specifically, it allows qualified taxable entities to claim a tax credit based on their research expenses and payments. This credit is calculated as five percent of the excess of qualified research expenses over a base amount, incentivizing companies to conduct research in designated strategic investment areas, which are regions with higher unemployment and lower income compared to state averages. The bill seeks to bolster economic growth by encouraging investment and innovation in areas that may otherwise be overlooked.
Contention
Notable points of contention include the potential permanence of the designated areas that could benefit from the tax credit, as well as the effectiveness of the incentives in genuinely stimulating economic growth. Critics may argue that while providing tax credits is beneficial, it might also lead to inequitable benefits if larger corporations dominate the applications for these credits, potentially squeezing out smaller entities. Additionally, some legislators might express concerns regarding the breadth of the definitions for qualifying research activities and strategic areas, fearing that the bill could enable misuse or overreach, impacting state revenues in the long term.
Relating to measures to enhance and maintain the quality of state universities, including funding and incentives to support emerging public research universities, to the abolition of the higher education fund, to the institutional groupings under the Texas Higher Education Coordinating Board's accountability system, to the independent status of Lamar Institute of Technology, to research conducted by public universities and other state entities, and to the authorization of revenue bonds for certain institutions of higher education.