Add this to your list of reasons to do business in Texas: Texas state legislators passed a bill that will permanently cut the franchise tax rate, also known as the Margin Tax, by 25% starting January 1, 2016. The bill, H.B. 32 – Franchise Tax Reduction Act of 2015, is expected to soon be signed into law by Governor Greg Abbott. The future goal of many legislators is to eliminate the tax completely to encourage businesses to stay in or move to Texas.
Here is how the new tax rate will be computed:
- The Margin Tax rate will be 0.375% for retail and wholesale trade businesses and 0.75 percent for all other taxpayers.
- Taxable entities with total Texas business revenue less than $20 million may compute the tax at a 0.331% rate, and may file an ‘E-Z’ Form.
The tax cut will cost the state of Texas $2.56 billion in revenue over the next two years. However, the state is in good financial condition with $11 billion in the state’s rainy day fund.
Another tax cut provision, to effectively lower property tax, must be voted on in the November 3 election. The Texas legislature proposes an amendment to increase homestead exemptions on school taxes from $15,000 to $25,000. The tax cut would save about $125/year for an average homeowner, and cost the state $1.24 billion over the next two years.
For questions about taxes and how to estimate the impact to your business or personal situation, talk with a Salmon Sims Thomas tax advisor.
Tags: tax reduction bill