Honorable Joan Huffman, Chair, Senate Committee on Finance
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
SB524 by Campbell (relating to the exemption from the franchise tax and certain filing fees for certain businesses owned by veterans.), Committee Report 1st House, Substituted
The fiscal implications of the bill cannot be determined due to the unknown number of new veteran owned businesses that would qualify for the franchise tax exemption.
The bill would indefinitely extend the franchise tax exemption for new veteran-owned businesses, set to expire on January 1, 2026.
The bill would require the owner be a Texas resident and not own a different taxable entity that is receiving a new veteran-owned exemption.
The bill would repeal the expiration of the waiver of filing fees on new veteran-owned businesses under Section 12.005, Business Organizations Code. The bill would be effective September 1, 2025.
Under current law, businesses subject to the exemption do not have to pay franchise tax until the earlier of the fifth anniversary of the date on which the taxable entity began doing business in Texas or the date the taxable entity ceases to qualify as a new-veteran-owned business. The bill would repeal various relevant statutory provisions and eliminate the exemption's expiration.
New Veteran businesses no longer have to file No Tax Due Reports or Public Information Reports since January 1, 2024. In view of the increase to $2.47 million for the no tax due threshold enacted in 2023, it is likely revenue foregone due to the exemption proposed by this bill would not surpass $1 million annually, but the amount cannot be estimated.
Local Government Impact
No fiscal implication to units of local government is anticipated.