Bill Caption

Relating to the total revenue exemption for the franchise tax.

Fiscal Notes

A fiscal note dated March 2, 2015 estimates that Senate Bill 8 would have no impact on General Revenue Related Funds through the biennium ending on August 31, 2017. But it adds that it will impact the Property Tax Relief Fund by a $759,826,000 loss for the 2016-17 biennium, adding to the State's responsibility to make up for this loss to fund the Foundation School Program. 

Bill Analysis

Senate Bill 8 would increase the limit under which a business is not liable to pay the franchise tax. Currently, a business whose total revenue from its entire business is less than or equal to $1 million is not considered to owe any franchise tax. Senate Bill 8 would increase this limit to $4 million.

A business would still not be required to pay any franchise tax if its amount of tax computed is less than $1,000.

Vote Recommendation Notes

The Franchise tax is a complex and unfair tax. It costs money and time to businesses to comply with and to file - whether they ultimately pay it or not, and since it is similar to a gross receipts tax, some businesses may end up having to pay taxes even without making a profit. It is of particular burden to small businesses.

The current limit in revenues under which a business is considered not to owe the franchise tax doesn't bring relief to enough small businesses. Not only is such a tax reducing businesses' potential investments and growth, and with it the growth of the Texas economy, it discourages entrepreneurial individuals to start their own business.

Senate Bill 8, also known as the Small Business Tax Relief Act, would provide relief to additional businesses by raising the limit under which a business doesn't owe the franchise tax, exempting 52 percent of businesses currently subject to the tax. It would allow these businesses to keep more of the wealth they create - which could translate into more investments or job creation. This would have a positive impact on property rights and the free market system, and it would reduce the impact of government on these businesses, as well as in general by limiting the amount in revenues that government can spend. 

Although a complete repeal of the tax for all businesses would be preferable, this is a step in the right direction. Consequently, we support Senate Bill 8.