Texas Senate Bill SB2206

Texas 2025 - 89th Regular

• Filed: 3/11/25
• Out of Senate Committee: 4/9/25

Caption

Relating to a franchise tax credit for, and the application of sales and use taxes to, certain research and development expenses.

Impact

The enactment of SB2206 is expected to significantly impact Texas tax laws by repealing previous provisions regarding certain tax credits while allowing new types based on research expenses. The potential revenue implications for the state could be substantial, as the new credits will likely alter how businesses account for their R&D investments, either facilitating tax reductions or, conversely, leading to budget challenges as the state adjusts to the economic effects of increased tax credits. The intent is to stimulate economic growth by fostering innovation and drawing more research-oriented firms into Texas.

Summary

Senate Bill 2206 proposes new provisions in the Texas Tax Code regarding franchise tax credits specifically linked to research and development (R&D) activities. The bill introduces Subchapter T, which includes definitions related to qualified research expenses incurred within the state and establishes various percentages for tax credits based on these expenses. This would incentivize businesses to invest in R&D within Texas, potentially making the state more competitive in attracting and retaining innovative companies.

Sentiment

Overall sentiment around SB2206 appears to be supportive, especially among business organizations and groups focused on economic growth. Proponents argue that the bill will allow Texas to compete more effectively with other states for R&D investments. However, some legislators voice concerns about the sustainability of implementing such tax credits in the state budget, questioning whether increased spending on incentives could outpace long-term revenue generation from the industries the bill aims to support.

Contention

Notable points of contention include the implications of repealing existing tax code sections while creating new ones, as this could confuse businesses accustomed to the previous framework. Some opponents fear that the bill might disproportionately benefit larger corporations at the expense of smaller businesses that cannot easily absorb the R&D costs necessary to qualify for these tax credits. The careful crafting of measures within the bill, including eligibility criteria and the calculation methods for the credits, aims to mediate these concerns and ensure equitable access across different businesses.

Texas Constitutional Statutes Affected

Tax Code

• Chapter 171. Franchise Tax
  • Section: New Section
  • Section: 212
  • Section: 212
  • Section: New Section
  • Section: 212
  • Section: New Section

• Chapter 151. Limited Sales, Excise, And Use Tax
  • Section: 3182
  • Section: 3182