S.B. No. 2206 introduces Subchapter T to the Texas Tax Code, establishing a franchise tax credit for certain research and development activities. The bill defines "qualified research expense" and sets eligibility criteria for taxable entities to claim a credit amounting to 8.722% of the difference between their qualified research expenses during the reporting period and 50% of their average qualified research expenses from the previous three tax periods. If entities collaborate with higher education institutions, the credit increases to 10.903%. The bill allows credits to be claimed even if no tax is owed and permits unused credits to be carried forward 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 also 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 expiration dates. The new provisions will apply to reports due on or after January 1, 2026, and entities that received exemptions under the repealed section will not be eligible for credits under the new subchapter, ensuring a smooth transition to the new tax framework.

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)