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Texas Needs a New Research & Development (R&D) Tax Structure to Compete Globally

Investing in R&D is essential for Texas to maintain its status as a top destination for innovation, business growth, and high-quality jobs. 

Texas must extend and improve its R&D incentive program within the Texas Tax Code to (1) be competitive, (2) support a thriving Innovation Economy and (3) achieve its goal of becoming a top destination for innovation, business growth, and high-quality jobs. 

Currently, Texas law provides a franchise tax credit and a sales tax exemption for qualifying research activities – which expire on December 31, 2026. The Legislature must act.

Texas Needs a New Research & Development (R&D) Tax Structure to Compete Globally

Investing in R&D is essential for Texas to maintain its status as a top destination for innovation, business growth, and high-quality jobs. 

The State of Texas must extend and improve its R&D incentive program within the Texas Tax Code to (1) be competitive, (2) support a thriving Innovation Economy and (3) achieve its goal of becoming a top destination for innovation, business growth, and high-quality jobs. 

Currently, Texas law provides a franchise tax credit and a sales tax exemption for qualifying research activities – which expire on December 31, 2026. The Legislature must act.

New Economic Study Shows that Texas’ Current R&D Tax Incentives Underperform and are Not Competitive

“The implication is clear. The question is not whether Texas can afford to extend the R&D tax credit, but instead whether Texas can afford not to extend the R&D tax credit.”

Dr. John Diamond

Lead Study Author
Edward A. and Hermena Hancock Kelly Senior Fellow in Public Finance
Director of the Center for Tax and Budget Policy, Baker Institute, Rice University,

Key findings from the study

The Economic Effects of R&D Tax Incentives in Texas,” John W. Diamond, Ph.D., Edward A. and Hermena Hancock Kelly Senior Fellow in Public Finance | Director of the Center for Tax and Budget Policy, Baker Institute , Rice University, November 2024.

Texans for Innovation Supporters

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Texas Needs a New Research & Development (R&D) Tax Structure to Compete Globally

Legislative Advertising paid for by Texas Association of Manufacturers, Tony Bennett, President, PO 11510, Austin, TX 78711