Alert

The Texas Legislature recently passed Senate Bill (SB) 2206, which makes important changes to the state’s R&D credit. The state credit is now tied to the taxpayer’s federal calculation—except it only applies to R&D expenses incurred in Texas. Governor Greg Abbott signed the bill on June 22, 2025.

What Changes with SB 2206?

Significant changes to the credit include the following:

• The regular credit rate increases from 5% to 8.722%
• The credit rate for taxpayers who contract with institutions of higher learning has been increased from 6.25% to 10.903%
• The credit is still limited to 50% of a taxpayer’s franchise tax liability, except that new veteran-owned businesses and taxpayers that don’t owe franchise tax can receive a refund of the credit
• The R&D credit is now permanent
• The sales tax exemption for depreciable property used in R&D activities has been repealed

The changes apply to franchise tax reports due on or after January 1, 2026.

We’re Here to Help

To learn more about R&D tax credits, see Five Misconceptions about R&D Tax Credits—and if You Qualify, request a complimentary credit benefit estimate to see how much your company could save, or contact your firm professional.

Additional Resources

• Cost Segregation Services
• R&D Tax Services