Texas changed the R&D credit on January 1, 2026.

Rate	8.722% of Texas QRE over 50% of the prior 3-year average
With university contract	10.903%
No Texas QRE in prior 3 periods	4.361% of all Texas QRE (5.451% with a university contract)
Limit	50% of franchise tax due before other credits
Carryforward	20 consecutive reports
Refundable	Only for entities that owe no franchise tax (Form 05-183)
Applies to	Reports originally due on or after Jan 1, 2026
Note	QREs must be reported on federal Form 6765

Three things, all at once.

• Subchapter M was repealed. SB 2206 (89th Legislature), signed June 22, 2025, repealed the original Texas R&D credit, codified at Texas Tax Code Chapter 171 Subchapter M and authorized by HB 800 (83rd Legislature, 2013).
• Subchapter T replaced it. The new credit lives at Texas Tax Code Section 171.9201 and following. It applies to franchise tax reports originally due on or after January 1, 2026.
• The sales tax exemption is gone. SB 2206 also repealed Tax Code Section 151.3182 (the qualified-research sales tax exemption). An entity that used that exemption during a report's accounting period cannot claim the Subchapter T credit on that report. The franchise tax credit is now the only Texas R&D incentive.

Unused Subchapter M credit carried forward from earlier reports survives until it would have expired. The Texas Comptroller routes Subchapter M carryforward through lines 8 and 9 of the 2026 Form 05-181 (Credits Summary Schedule).

The rate depends on your Texas research history and on whether you work with a university.

• Standard rate. 8.722 percent of Texas QRE above 50 percent of the average Texas QRE for the prior 3 years.
• With a university. 10.903 percent if the entity has a qualifying research contract with a university.
• No prior Texas QRE. If the entity had no Texas QRE in any of the prior 3 periods, the credit is 4.361 percent of all Texas QRE, or 5.451 percent with a qualifying university contract.
• Limit and carryforward. The credit can offset at most 50 percent of the franchise tax due before other credits. Unused credit carries forward for 20 consecutive reports. It cannot be transferred except with a transfer of substantially all of the entity's assets.

The new credit is calculated against qualified research expenses attributable to research conducted in Texas. The Comptroller defines the Texas QRE pool by reference to federal IRS Form 6765: specifically, the portion of the qualified research expenses reported on Form 6765 that is attributable to research conducted in Texas. Those QREs follow federal law in effect for the federal tax year.

That reference creates a hard requirement: you cannot claim the Subchapter T credit unless you have filed federal Form 6765 with the IRS for the same year. The Texas Comptroller treats Form 6765 filing as a precondition.

For a Texas SaaS company, the practical impact is that the federal and state credits now share one documentation foundation. Whatever supports your federal Section 41 claim also supports the Texas credit, provided the QREs are properly attributed to research conducted in Texas (employee location, contractor performance location, supplies consumed in Texas).

The forms involved for a standard 2026 report:

• Form 05-158-A and 05-158-B, the Texas franchise tax long-form report.
• Form 05-181, Credits Summary Schedule (used to claim the Subchapter T credit on the franchise tax return).
• Form 05-182, Subchapter T Research and Development Activities Credits Schedule (the credit computation and per-credit-year detail).

The credit is refundable for taxable entities that owe no Texas franchise tax (tax under $1,000, revenue at or below the No Tax Due Threshold, or a qualifying new veteran-owned business). They claim it on Form 05-183, or Form 05-184 for a combined group, due November 15 of the report year. Entities that owe tax claim the credit on Forms 05-181 and 05-182.

R&D Binder produces federal Section 41 documentation from your GitHub commit history. The binder is what supports your federal Form 6765 and, starting tax year 2026, the Form 6765 Section G appendix (mandatory for non-exempt filers). That artifact is the same one Subchapter T now requires you to have filed federally before the Texas credit is even available.

The Texas state credit workpaper is a $995 add-on to the standard binder engagement. It produces:

• A Texas-attributable QRE breakdown (employee, contractor, and supplies expenses tied to research conducted in Texas, using the same business-component partition as the federal binder).
• Form 05-182 input values (qualified research expenses, base period calculation, credit amount).
• Filing notes for your CPA: which Texas forms apply, which lines, due dates, refundable-credit path if applicable.

We do not file Form 05-182 or sign the Texas franchise tax return. That remains your CPA's role, the same way federal Form 6765 stays with your CPA. R&D Binder produces the workpaper; your CPA files.

If you operate in multiple states, additional state workpapers are $995 each. Most states with an R&D credit track the federal QRE definition closely, so the marginal cost per state is low once the federal binder is complete.

A worked example. An Austin-based SaaS company with 14 engineers, $3.2M in qualifying wages (federal QRE pool), and 11 engineers physically located in Texas.

• Federal Section 41 credit. Computed on the full $3.2M federal QRE pool through Form 6765, claimed by the CPA. R&D Binder produces the binder, QRE workpaper, and Form 6765 Section G appendix.
• Texas Subchapter T credit. Computed on the Texas-attributable portion of QREs, at 8.722 percent of the amount above half the prior 3-year Texas average. Roughly $2.51M ($3.2M times 11/14 engineer location ratio, with the actual allocation refined by per-employee research-activity location). R&D Binder produces the Texas state workpaper as a $995 add-on; CPA claims it on Forms 05-181 and 05-182 with the franchise tax report.
• Total engagement cost. SaaS Standard tier ($4,995, 6 to 25 FTE) plus Texas state workpaper add-on ($995). Total $5,990.

The CPA files both. R&D Binder never appears on the federal or Texas return.

If the Texas Comptroller examines a franchise tax return on which the Subchapter T credit was claimed, the substantiation expected is the same kind of documentation the IRS expects under federal Section 41: business-component identification, four-part-test rationale, contemporaneous evidence, QRE allocation by employee, contractor, and supplies. The binder R&D Binder produces is built to that standard from the federal side, and the Texas workpaper inherits the same business-component structure.

Our standard scope ends at delivering the binder and the state workpaper. Audit-defense engagement for a Texas Comptroller examination is a separate scope at $250 per hour, scoped per-incident. We do not represent before the Texas Comptroller; that remains your CPA's responsibility or your tax controversy attorney's.

• Texas Tax Code Chapter 171, Subchapter T (Section 171.9201 et seq.), Franchise Tax Credit for Research and Development Activities.
• Texas Tax Code Chapter 171, Subchapter M (repealed by SB 2206; carryforward of earlier credits survives until it would have expired).
• Texas Tax Code Section 151.3182 (sales tax exemption for qualified research, repealed by SB 2206).
• Texas Legislature, SB 2206 (89th Legislature), enrolled, signed June 22, 2025: repeals Subchapter M and section 151.3182 and creates Subchapter T, with the 8.722 and 10.903 percent rates, the 4.361 and 5.451 percent rates for entities with no prior Texas QRE, the 50 percent limit, and the 20-report carryforward.
• Texas Comptroller, Franchise Tax Credit for Research and Development Activities.
• Texas Comptroller, Sales Tax Exemption or Franchise Tax Credit for Qualified Research.
• Texas Comptroller Form 05-181 (Credits Summary Schedule), Form 05-182 (Subchapter T Research and Development Activities Credits Schedule), Form 05-183 (refund claim for entities that owe no franchise tax, due November 15) and Form 05-184 (the combined-group version).
• Reed Smith, Texas legislature overhauls the franchise tax R&D credit (Alert 2025-166), secondary.
• Cherry Bekaert, Texas R&D tax credit reform: key changes and how to claim (May 6, 2026), secondary.
• IRS Form 6765 (federal Credit for Increasing Research Activities), required as a precondition for Subchapter T eligibility.

This page is general informational content, not tax advice for any specific taxpayer. The Texas Subchapter T credit is administered by the Texas Comptroller of Public Accounts. Rates, form numbers, and procedural requirements reflect SB 2206 and the Comptroller's published guidance as of September 2026. Confirm current forms and deadlines with your CPA or the Comptroller before filing.

• Texas R&D credit rate
• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• Arizona R&D credit
• California R&D credit
• Connecticut R&D credit
• Delaware R&D credit