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House OKs R&D Tax Credit

A $250 million franchise and sales tax exemption for business research and development won tentative approval from the House on Wednesday. A similar exemption expired in 2006.

The crowded House floor during debate on SB 1 April 4, 2013.

Texas would join most other states in providing tax credits and exemptions to research and development endeavors under legislation tentatively approved in the House Wednesday.

HB 800, by state Rep. Jim Murphy, R-Houston, authorizes $250 million in sales and franchise tax credits for companies pursuing "qualified" research and development in Texas. The exemption, reinstating a similar provision that expired in 2006, aims to bring new businesses and enterprise to Texas and to keep the state competitive with rivals. Most other states have such a credit, said Rep. Eddie Rodriguez, D-Austin, a co-author of the bill. A February report released by Texans for Innovation, a coalition of business and industry leaders, said that increased research and development in Texas could bring in $13 billion and add 97,000 new jobs. 

“Without this bill we are at a competitive disadvantage,” Rodriguez said.

Many Democrats expressed concern that the tax credit would not be reviewed and would remain in place even if it doesn't successfully bring expected business and revenue to the state. Rodriguez added an amendment to attaching a 2026 expiration date, so that the Legislature can review the tax break then.

“There is no free money for individuals, and there is no free money for business and corporations,” said Rep. Sylvester Turner, D-Houston, who adamantly supported adding the sunset provision to the bill.

An attempt to cap the tax credit at $250 million, offered by Rep. Mike Villarreal, D-San Antonio, didn't pass.

“I’ve seen many businesses fail because they didn’t plan to be successful,” Murphy said. "If Texas has tremendous success bringing in R&D activities, our costs will be higher and so will our benefits.”

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