S.B. No. 2206 introduces a new subchapter to Chapter 171 of the Texas Tax Code, creating a franchise tax credit for specific research and development activities. This new subchapter, titled "Tax Credit for Certain Research and Development Activities," defines "qualified research expense" and sets eligibility criteria for taxable entities to claim the credit, which is calculated at 8.722% of the difference between qualified research expenses incurred during the reporting period and 50% of the average qualified research expenses from the previous three tax periods. The credit increases to 10.903% if the entity collaborates with higher education institutions. The bill also allows entities that do not owe tax to receive a refundable credit based on their qualified research expenses and establishes rules for combined reporting among entities.

Additionally, the bill amends Section 171.212(a) of the Tax Code to clarify the definition of "qualified research expense" and modifies the conditions under which taxable entities must file amended reports due to changes in their taxable margin or qualified research expenses. It repeals Section 151.3182 and Subchapter M of Chapter 171, while ensuring that any tax liabilities and unused credits accrued under these provisions remain enforceable. The new provisions will apply only to reports due after the effective date of the Act, set for January 1, 2026, and entities that received exemptions under the repealed section during the relevant reporting period will not be eligible for credits under the new subchapter.

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)