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- The sales tax exemption for depreciable property used in R&D activities has been repealed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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