Bill Caption

Relating to the $1 million total revenue exemption for the franchise tax.

Fiscal Notes

Estimated Two-year Net Impact to General Revenue Related Funds for HB213, As Introduced: an impact of $0 through the biennium ending August 31, 2015. Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($164,032,000) for the 2014-15 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.

Bill Analysis

Summary: Texas allows companies with a franchise tax liability of up to $1 million to be exempted from paying the franchise tax in 2011 and 2012. This exemption is scheduled to expire and revert back to the original $300,000 threshold. Texas businesses have benefited from the increase in the franchise tax exemption because they have been able to keep more resources. HB 213 seeks to permanently extend the $1 million exemption. The Legislative Budget Board predicts HB 213 will directly impact the Property Tax Relief Fund by approximately $164 million over the 2014-2015 biennium, which will have to be made up with General Revenue appropriations to the Foundation School Program.

Analysis: HB 213 provides a limitation on the amount of revenue Texas government can take from businesses through the franchise tax by extending this $1 million exemption for businesses. HB 213 also allows businesses to keep more resources, which promotes the protection of private property from government. While it is unfortunate that Texas has the franchise tax in the first place, requiring legislators to give out exemptions to deal with the tax’s onerous impact on Texans, this exemption takes a step in the right direction. Support HB 213.