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Summary: HB 2780 would allow public and private institutions of higher education to create technology corporations for the purpose of development and commercialization as well as economic development for Texas. The institutions would maintain partial or entire ownership in the corporations. The corporations would last for 15 years after which time an amended certificate of formation would have to be filed as a for-profit entity. In the meantime, the corporations would receive no special tax treatment since they would function either as a state run entity through public institutions or non-profit entity through private institutions. The institution will maintain shares in the corporations and the corporations would be required to operate in Texas.
Analysis: HB 2780 would allow institutions of higher education to benefit for a limited amount of time from their research and development. After 15 years the corporation would become a for profit company. This type of spinoff from universities to the private sector is common and useful. However, this legislation allows the corporation, for the 15 year period that it is owned in whole or in part by the university, to be exempt from the franchise tax. This gives a competitive advantage not offered to other companies. We are neutral on this legislation.