Texas Senate bill by Sen. Bettencourt introduces franchise tax credit for research and development expenses

Passed bill authored by State Sen. Paul Bettencourt aims to provide tax credits for certain research and development expenses, seeking to encourage innovation and investment in Texas through defined credit percentages and reporting requirements, according to the Texas Legislature website.

In the Senate, 11 Democrats and 20 Republicans voted in favor of the bill, with no opposition.

Meanwhile, in the House, 55 Democrats and 47 Republicans voted in favor, while 38 Republicans voted against it.

Paul Bettencourt introduced the bill in the Texas Senate on Tuesday, March 11, during the 89th regular legislative session.

Bettencourt graduated from Texas A&M University with a BS.

Bettencourt, a Republican, was elected to the Texas State Senate in 2015 to represent the state’s 7th Senate district, replacing previous state senator Dan Patrick.

According to the Texas Legislature, the bill’s official text was summarized as follows: ‘Relating to a franchise tax credit for, and the application of sales and use taxes to, certain research and development expenses’.

The following is our breakdown, based on the actual bill text, and may include interpretation to clarify its provisions.

In essence, this bill introduces a franchise tax credit for certain research and development (R&D) expenses in Texas, effective Jan. 1, 2026. It defines “qualified research expenses” based on Internal Revenue Service Form 6765 and specifies different tax credit percentages depending on the entity’s prior R&D expenses and collaboration with higher education institutions. Taxable entities that do not owe franchise tax can also obtain refundable credits. The bill prohibits the transfer of credits to other entities and allows unused credits to be carried forward for up to 20 years. It mandates the comptroller to report estimated credits applied and requires depositing certain tax revenues into the property tax relief fund. The bill repeals specific sections of the tax code related to sales and use tax exemptions for certain R&D activities but permits existing credits earned before this Act to continue under prior law.

The bill was co-authored by Sen. Joan Huffman (Republican – District 17).

The bill received its final legislative approval on Wednesday, May 28, and was signed into law by Gov. Greg Abbott on Sunday, June 22.

Bills in Texas go through a multi-step legislative process, including committee review, debates, and votes in both chambers before reaching a final decision. Each session, there are typically thousands of bills introduced, but only a portion successfully navigate the process to become law.

You can read more about the bills and other measures here.