Texas has long been known for its booming economy that supports a wide and diverse range of industries. As our state solidifies its position as a global hub for innovation, it’s important we take the steps necessary to secure our leadership in the years and decades to come. Investment in Research and Development (R&D) helps fuel innovation, which in turn drives even more economic growth. Time and time again, we’ve seen how states with strong R&D incentives consistently attract high-impact industries like technology, healthcare, advanced manufacturing, and energy. These industries not only offer high-paying jobs but also create economic multipliers that benefit the communities where they operate.
With our current R&D tax incentives set to expire in 2026, extending these credits this session is a strategic move that will yield long-term economic gains. These critical incentives encourage businesses to invest in innovation, develop cutting-edge technologies, and create high-paying jobs.
To secure our economic future, we must seize an opportunity to extend these crucial incentives – which the Texas Legislature can accomplish by passing SB 2206 by Senators Paul Bettencourt and Joan Huffman and HB 4393 by Representative Charlie Geren.
According to a new study published by Texans for Innovation, extending these incentives would create thousands of jobs and generate billions in economic output over the next decade. As the study’s author, Dr. John W. Diamond of Rice University’s Baker Institute, made 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.”
The study finds that strategic investments in R&D incentives will ultimately drive increased tax revenues, offsetting the cost of the incentives. Increased economic activity, particularly in high-wage, high-growth industries, will boost property, sales, and business tax revenues, helping enhance the health of our state and local budgets over time. In fact, the study finds that by year 20, Texas could see a net economic benefit of nearly $58.8 billion, demonstrating that the long-term gains far outweigh any upfront costs.
The Texas Association of Business (TAB) is proud to stand alongside 40 leading business organizations, chambers, and economic development organizations across the state who sent a letter to the Texas Legislature last week urging state lawmakers extend these critical R&D tax credits before they expire next year.
SB 2206 and HB 4393 would specifically allow small and veteran-owned businesses to receive a rebate that they can apply to reduce their state sales tax burden, or carry those credits forward to apply to future franchise tax credits. This is especially important for smaller businesses and startups that are often undertaking critical R&D activities but may not yet qualify for Texas franchise tax credits.
Put simply: Texas cannot afford to stand still. Other states are aggressively competing for R&D investments, and without action to extend our current incentives, Texas risks falling behind. Extending R&D tax incentives is a proactive step to ensure our state remains a top destination for business and innovation.
Investing in R&D is especially important right now as businesses seek to harness the power of artificial intelligence (AI) to enhance the efficiency of their operations and spur even more economic growth. The TAB Tech Means Business coalition is united behind the core principle that all businesses are tech businesses, and that we should continue supporting Texas-based companies that are already at the forefront of investing in R&D technology and infrastructure across a wide range of fields, from AI and robotics to healthcare.
At TAB, we believe in the power of innovation to help our state’s economic growth reach new heights. Texas needs to lead—not follow—in the race for R&D investment. We must take this opportunity to extend R&D incentives to secure our state’s position as a global leader in innovation and continue to attract the industries of tomorrow, create high-paying jobs, and drive sustained economic growth.
- Glenn Hamer, President & CEO, Texas Association of Business
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