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Bill

SB 2206

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

89th Legislature (2025) Introduced by Paul Bettencourt and 2 co-sponsors

Texas law creates franchise tax credits and sales tax exemptions for qualifying research and development expenses starting January 1, 2026, reducing corporate taxes to encourage innovation investment.

Effective on 1/1/26
#comptrollerofpublicaccounts(v2608) #education--higher--institutions&programs(i0223) #education--higher--privateschools(i0238) #research&development(s0135) #taxation--franchise(i0807) #taxation--sales(i0800)
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Bill Summary · SB 2206

Legislative bill overview

SB 2206 creates a franchise tax credit for qualified research and development (R&D) expenses and exempts certain R&D expenses from Texas sales and use taxes. The bill incentivizes corporate investment in research activities by reducing the state's tax burden on these investments, effective January 1, 2026.

Why is this important

The bill aims to attract and retain companies conducting R&D in Texas by lowering their effective tax costs, which could increase innovation, job creation, and economic competitiveness in the state. However, these tax incentives reduce state revenue, creating a tradeoff between immediate economic growth and available funding for public services.

Potential points of contention

  • Revenue impact: The franchise tax credit and sales tax exemption will reduce state general revenue, requiring either budget cuts elsewhere or assumptions that economic growth will generate offsetting tax increases
  • Equity concerns: The benefits primarily accrue to corporations and larger companies with R&D operations, raising questions about whether tax policy should favor business investment over individual tax relief or public services
  • Definition scope: The specific definition of "qualified R&D expenses" and which activities qualify could create compliance complexity and potential disputes between businesses and tax authorities

Compiled from official sources — confirm details with the bill’s official record.

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