Recently, Texas passed a bill providing tax incentives for certain research and development ("R&D") activities conducted in the state of Texas. The new law, detailed in House Bill 800, offers taxpayers the choice of a Franchise Tax Credit for R&D expenditures or a Sales & Use Tax Exemption on the purchase or lease of depreciable tangible personal property used in qualified research in Texas. The new law also provides an incentive for taxpayers to contract with institutions of higher education to perform qualified research in Texas. The R&D Franchise Tax Credit can be claimed on Texas Form 05-178. The R&D Franchise Tax Credit is effective for reports due on or after January 1, 2014 and the Sales & Use Tax Exemption is effective January 1, 2014. Both incentives are currently set to expire on December 31, 2026.
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