Texas Extends and Expands R&D Tax Credit
On June 1, Texas Governor Greg Abbott signed Senate Bill 2206, which extends the Texas R&D Credit that was set to expire on December 31, 2026. This extension provides welcome relief and additional certainty for taxpayers who conduct qualified research in Texas.
What’s Changing?
- Credit extension: The Texas R&D Tax Credit will remain in place beyond 2026, allowing business to continue planning long-term R&D strategies with confidence.
- Definition alignment: The bill aligns the Texas definition of qualified research to more closely match the federal definition found in IRC Section 41 and the amount of qualified research expenses (QRE) reported on Federal Form 6765. However, only research conducted within Texas qualifies for the state credit.
- Increased credit percentages: The legislation also increases the Texas R&D Credit percentage from 5% to 8.722%. Taxpayers that conduct research with institutes of higher education can increase the credit percentage even further to 10.903%.
These changes take effect on January 1, 2026, giving taxpayers ample time to assess and adjust to adjust their R&D strategies.
What You Should Do:
- Review your current and projected R&D activities to determine eligibility under the updated guidelines.
- Consider partnering with Texas-based colleges or universities to take advantage of the higher credit rate.
- Ensure documentation of qualified research is aligned with both federal and Texas-specific requirements.
If you have any questions about the Texas R&D Credit or any other issue, please reach out to McGuire Sponsel’s R&D Tax Credit Services team.
David Seibel is a Shareholder for the R&D Tax Credit Practice. He combines his knowledge of tax law with his engineering expertise to maximize companies’ research credits and reduce their overall tax burdens.
David ensures clients are receiving studies that meet the highest level of quality. He conducts fieldwork, produces detailed technical calculations, and builds narratives that accurately reflect each company’s research and experimentation activity.
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