TexasCHLforum.com

This is still a gray area under the law. According to the law on failure to identify, you do not need to give any ID at all unless you are arrested. It is illegal to give a false ID if you are a suspect or a witness but you do not need to ID in those cases. As a side note, when you are stopped for a traffic violation, a Court of Criminal Appeals case says it is an arrest, not a detention.

Based on this lack of requirement to produce ID, some people have opined you do not need to unless you are under arrest where the officer can legally require ID. The law on producing your CHL however says it is required whenever the officer "demands" ID. This is not a term defined in the law to the best of my knowledge. I think most people concede that it would be required if you are armed and are detained. Most people also, I think say it is not required if you are just randomly stopped. I am not as sure of this point.

As a matter of tactics, I recommend going along with the officer as the quickest way to avoid problems in your day to day life. As you point out that you would do, give him the ID and CHL. I also recognize that this will lead to more encroachment on your rights and helps create the opinion that police can demand ID anytime (which they can in some states, we are lucky to live in Texas).