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The Texas R&D Tax Credit Activities, enacted under Senate Bill 2206 (89th Legislature, signed into law in June 2025) and administered by the Texas Comptroller of Public Accounts, provides a permanent incentive for businesses conducting qualified research in the state. Effective for franchise tax reports originally due on or after January 1, 2026, this enhanced credit offsets franchise tax liabilities and introduces refundability for qualifying entities that owe no franchise tax, while repealing the prior elective sales and use tax exemption for R&D equipment under Tax Code §151.3182. For reports due before 2026, claims follow the prior 5% structure.
Eligibility requires performing qualified research activities (QRAs) in Texas that meet federal IRC §41 standards, focused on technological uncertainty resolved through experimentation for new/improved products, processes, or software. QREs must be Texas-apportioned from federal totals. The credit is claimed at the taxable entity or combined group level; it does not pass through to owners on a Texas individual income tax return.
Texas uses an incremental method tied to federal QREs, with a simplified provision for entities lacking prior-year data. Calculations apply to Texas-apportioned amounts from Form 6765. Claim the credit on your Texas franchise tax report (EZ Computation or Long Form) due May 15 for the applicable report year. If you are not required to file a franchise tax report because you owe no tax, you can still claim a refundable R&D credit by submitting the Comptroller’s refund application form for the R&D credit by the date a report would have been due.
Texas's enhanced R&D credit emphasizes federal alignment and cash benefits for early-stage innovators, integrated into the franchise tax framework to support high-growth sectors.
Illustrative results from a Texas biotech firm under the enhanced structure.
Under SB 2206 (effective 2026), the Franchise Tax Credit for R&D Activities provides 8.722% (10.903% enhanced) on excess Texas QREs from federal Form 6765 qualified research expenses, permanent and aligned with IRC §41 for in-state innovation.
Activities resolving technological uncertainty via experimentation for products/processes/software in Texas, per federal four-part test. Strike Tax verifies and documents for compliance.
$2M excess QREs yields $174,440 at 8.722%, plus federal stacking and potential refunds. Enhanced: up to $218,060. Use Strike Tax’s calculator for estimates.
Generally nonrefundable for entities that owe franchise tax (subject to the 50% cap), but refundable for eligible no-tax-due entities, including those under the no-tax-due threshold or qualifying new veteran-owned businesses.
Claim the credit on the Texas franchise tax report for the period in which the QREs are incurred. If you owe no franchise tax and are not required to file a report, submit the Comptroller’s R&D credit refund form by the normal report due date.
Yes, state credit stacks with federal §41 for same Texas QREs, enhanced by conformity. (Federal credits follow normal K-1 pass-through rules.) Strike Tax maximizes both.
SB 2206 (effective 2026) permanents the credit, boosts rates, adds refunds for no-tax-due entities, repeals sales exemption, and ties to federal Form 6765. 2025 uses 5% rules.
50% of prior 3-year average QREs (or 0 for no priors, halved rate). Texas-apportioned; favors R&D growth. Strike Tax handles computations.
Yes, no-prior provision at 4.361% (5.451% enhanced) on current QREs, plus federal payroll offsets ($500K/year, 5 years if <$5M receipts). Refunds boost cash; Strike Tax assists.
Federal records: timelines, logs, invoices, Form 6765. Texas follows IRS; sampling allowed. Retain 3-6 years as best practice; Strike Tax preps defenses.
Use our calculator to estimate your potential federal and state benefits.
Schedule a consultation to optimize your Texas R&D claims under SB 2206.