R&D Tax Credits Are Back
SB 2206 creates the credit. The Comptroller decides who qualifies. Companies that engage now can ensure their R&D activities meet the requirements.
The Bottom Line
Texas is making a major play to attract R&D investment. SB 2206 creates a franchise tax credit for research and development expenses — a significant incentive for technology, manufacturing, life sciences, and energy companies operating in Texas.
The catch: The statute says “research and development,” but the Comptroller's office will define what qualifies. Manufacturing process improvements? Software development? Clinical trials? The answer isn't in the bill text — it's in the rules being developed now.
The opportunity: Combined with severance tax exemptions for oil and gas operators (HB 3159), higher education R&D partnerships (HB 4044), and fee eliminations for financial services (HB 4738, HB 4739), this package represents significant potential savings for qualifying businesses.
SB 2206: The Flagship Incentive
Compliance Urgency
CriticalCost Impact
High (Savings)Primary Author
Sen. Paul Bettencourt (R)
Who Should Pay Attention
- →Technology Companies: Software development, hardware R&D, data science
- →Manufacturing: Process improvements, product development, automation
- →Life Sciences: Drug development, medical devices, clinical research
- →Energy: Renewable energy technology, drilling innovations, carbon capture
- →Aerospace & Defense: Advanced materials, propulsion, navigation systems
Key Question: What Counts as R&D?
The federal R&D tax credit (IRC §41) provides a reference point, but Texas may adopt different criteria. The Comptroller's guidance will determine whether activities like software customization, quality testing, or incremental improvements qualify for the credit.
What's NOT Settled
Qualified Research Expenses Definition
The Comptroller will define which expenses qualify for the credit. Key questions: Does software development count? What about failed experiments? How do you document qualification? These answers will determine the credit's practical value.
Who decides: Texas Comptroller of Public Accounts
Documentation Requirements
What records must companies maintain to claim the credit? Real-time tracking? Contemporaneous documentation? The Comptroller's audit posture will shape compliance costs.
Who decides: Texas Comptroller of Public Accounts
Restimulation Well Eligibility (HB 3159)
The severance tax exemption applies to “previously inactive restimulation wells.” The Railroad Commission will determine eligibility criteria and verification procedures.
Who decides: Railroad Commission of Texas
Securities Market Operator Definition (SB 1058)
Which entities qualify as “registered securities market operators” for the revenue exclusion? The Comptroller will provide guidance on qualifying structures.
Who decides: Texas Comptroller of Public Accounts
The Bills
3Tax Credits & Incentives
What Smart Operators Are Doing Now
Inventory Your R&D Activities
Document all activities that might qualify as research and development. Include software development, process improvements, product testing, and experimental work. Have this inventory ready when Comptroller guidance drops.
Engage the Comptroller's Office
Request meetings with the Comptroller's tax policy staff. Provide industry perspective on what should qualify as R&D. Shape the guidance before it's finalized.
Upgrade Your Documentation
Start building the paper trail now. Time tracking, project documentation, expense allocation — whatever the final requirements, you'll need contemporaneous records.
Model Your Credit
Work with your tax team to estimate potential credit value under various Comptroller interpretations. Understand the range of outcomes so you can prioritize engagement.
How We Help
JD Key Consulting works with Texas businesses seeking to maximize tax incentives through strategic engagement with the Comptroller's office. We don't prepare tax returns — we help shape the rules that determine what you can claim.
- Strategic engagement with Comptroller staff on SB 2206 R&D credit guidance
- Coalition building among companies with shared R&D credit interests
- 90th Legislature positioning for potential credit expansions or modifications
Note: We focus on policy-level engagement, not tax preparation. For return filing and credit calculations, we partner with qualified tax professionals.
Don't Just Claim the Credit — Define It
The Comptroller's office is developing R&D credit guidance now. Companies that engage will shape what qualifies. Let's discuss your Texas R&D exposure.
Frequently Asked Questions
What is the Texas R&D tax credit under SB 2206?
SB 2206 creates a franchise tax credit for research and development expenses, effective January 1, 2026. The credit provides significant incentives for technology, manufacturing, life sciences, and energy companies operating in Texas. The Comptroller's office will issue guidance defining which expenses qualify.
Who qualifies for the Texas R&D tax credit?
The Comptroller will define qualifying R&D activities through rulemaking. Likely candidates include technology companies (software, hardware, data science), manufacturers (process improvements, product development), life sciences (drug development, medical devices), energy (renewables, drilling innovations), and aerospace companies. Engage the Comptroller now to shape the guidance.
What documentation is required for Texas R&D tax credit?
The Comptroller will establish documentation requirements through guidance. Companies should begin building paper trails now: time tracking, project documentation, expense allocation, and contemporaneous records. The Comptroller's audit posture will determine specific requirements and compliance costs.
What is the Texas severance tax exemption for restimulation wells?
HB 3159 creates a severance tax exemption for previously inactive restimulation wells, effective January 1, 2026. The Railroad Commission of Texas will determine eligibility criteria and verification procedures. Oil and gas operators should monitor RRC rulemaking.
What other Texas business tax incentives take effect January 2026?
Beyond SB 2206 (R&D credit), January 2026 incentives include: HB 3159 (severance tax exemption for restimulation wells), HB 4044 (higher education R&D expenditure credits), SB 1058 (securities transaction exclusion from revenue), and HB 4738/HB 4739 (fee eliminations for financial services).