S.B. No. 2206 establishes a new Subchapter T in the Texas Tax Code, creating a franchise tax credit for certain research and development (R&D) expenses incurred by taxable entities. The credit is set at 8.722% of the difference between qualified research expenses for the reporting period and 50% of the average qualified research expenses from the previous three tax periods, with an increased rate of 10.903% for entities collaborating with higher education institutions. The bill also allows for a refundable credit for entities that do not owe tax during the reporting period and includes provisions for combined reporting, limitations on total credits claimed, and the ability to carry forward unused credits for up to 20 consecutive reports.

Additionally, the bill amends Section 171.212(a) to clarify the definition of "qualified research expense" and requires entities to file amended reports if there are changes due to audits or adjustments. It repeals Section 151.3182 and Subchapter M of Chapter 171 while ensuring that any tax liabilities and unused credits under these provisions remain enforceable until their original expiration dates. The new Subchapter T will apply to reports due on or after January 1, 2026, and entities that received exemptions under the repealed section during the relevant reporting period will be ineligible for the new credits. The effective date for the provisions of this Act is set for January 1, 2026.

Statutes affected:
Introduced: Tax Code 171.212 (Tax Code 171)
Senate Committee Report: Tax Code 171.212 (Tax Code 171)
Engrossed: Tax Code 171.212 (Tax Code 171)
House Committee Report: Tax Code 171.212 (Tax Code 171)
Enrolled: Tax Code 171.212 (Tax Code 171)