Article

Senate bill 2206 makes R&D in Texas more appealing

July 1, 2025 · Authored by John LaBorde, Jason Hall

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The sales tax exemption for depreciable property used in R&D activities has been repealed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 Jan. 1, 2026.

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John LaBorde

Managing Director

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.