BILL ANALYSIS

Senate Research Center	C.S.S.B. 524
89R28288 CJC-D	By: Campbell
	Finance
	5/13/2025
	Committee Report (Substituted)

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

In 2021, the Texas Legislature passed S.B. 938 (87th Regular Session) to create a meaningful pathway for veterans to pursue entrepreneurship by offering a five-year exemption from the state franchise tax and certain filing fees for new veteran-owned businesses. This policy acknowledged the service of Texas veterans while promoting economic mobility, small business formation, and job creation.

Since the enactment of S.B. 938, the program has proven highly effective, with over 13,700 veteran-owned businesses established under the exemption. However, as originally structured, the program's provisions are set to expire on January 1, 2026, unless renewed or made permanent.

S.B. 524 builds on this success by proposing to make the franchise tax and filing fee exemptions for new veteran-owned businesses permanent, rather than temporary. The goal is to sustain and expand the positive impact this program has had on veterans, their families, and the broader Texas economy.

Legislative Intent:��
The intent of S.B. 524 is to permanently codify the five-year exemption from the franchise tax and certain filing fees for new veteran-owned businesses. This measure is designed to consistently support veteran entrepreneurship, recognize the unique challenges veterans face during their transition to civilian life, honor their service by reducing barriers to business formation, and promote economic growth and job creation.

Key Provision
� Eliminates the expiration date (January 1, 2026) originally set under S.B. 938 (87th Regular Session).

C.S.S.B. 524 has the following changes:��
1. Specifies that each owner must be honorably discharged from the U.S. military, a Texas resident, and not receiving a similar exemption through another entity (exemption limited to one).

2. Requires the Texas Veterans Commission to verify military service and the Comptroller of Public Accounts of the State of Texas to adopt rules for proof of residency and documentation standards.

3. Limits the exemption to businesses newly formed in Texas.

C.S.S.B. 524 amends current law relating to the exemption from the franchise tax and certain filing fees for certain businesses owned by veterans.

RULEMAKING AUTHORITY

Rulemaking authority previously granted to the Comptroller of Public Accounts of the State of Texas is modified in SECTION 1 (Section 171.0005, Tax Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 171.0005, Tax Code, as follows:

Sec. 171.0005. DEFINITION OF NEW VETERAN-OWNED BUSINESS. (a) Provides that a taxable entity is a new veteran-owned business only if the taxable entity is a new business each owner of which is a natural person who:

(1) served in and was honorably discharged from a branch of the United States armed forces;

(2) is a resident of this state;

(3) is not an owner of a different taxable entity that is receiving an exemption from the tax imposed by Chapter 171 (Franchise Tax) as a new veteran-owned business;

(4) provides to the Comptroller of Public Accounts of the State of Texas (comptroller) verification of the person's service and discharge required by Subdivision (1) and documentation demonstrating the person's residency required by Subdivision (2).

Makes nonsubstantive changes to this subsection.

(b) Makes no changes to this subsection.

(c) Creates this subsection from existing text. Requires the comptroller to adopt rules prescribing the form and content of the verification required under Subsection (b) (relating to requiring the Texas Veterans Commission to provide written verification of eligibility) and the manner in which that verification is authorized to be provided to the comptroller and the documentation required to be provided to demonstrate that a person is a resident of this state, which is authorized to include the person's United States Department of Defense Form DD-214, and the manner in which that documentation is authorized to be provided to the comptroller. Makes nonsubstantive changes.

(d) Authorizes the comptroller to require a taxable entity to provide any information reasonably necessary to determine whether the entity is a new veteran-owned business for purposes of Subsection (a).

(e) Redesignates existing Subsection (c) as Subsection (e).

SECTION 2. Repealer: Section 3 (relating to amending Section 171.0001(4), Tax Code), Chapter 859 (S.B. 938), Acts of the 87th Legislature, Regular Session, 2021, as effective January 1, 2026.

Repealer: Section 7 (relating to amending Section 171.063(g), Tax Code), Chapter 859 (S.B. 938), Acts of the 87th Legislature, Regular Session, 2021, as effective January 1, 2026; and

Repealers: Section 9 (relating to providing for the repeal of Section 12.005, Business Organizations Code, and Sections 171.0005, 171.001(d), and 171.204(d), Tax Code), Chapter 859 (S.B. 938), Acts of the 87th Legislature, Regular Session, 2021, as effective January 1, 2026.

SECTION 3. Makes application of the change in law to Section 171.0005, Tax Code, prospective.

SECTION 4.� Effective date: September 1, 2025.