Changes

The Texas Franchise Tax is a business tax imposed on all companies and corporations in return for state liability protections for doing business in the state. In 2006, the tax was rewritten in attempts to raise annual state revenue. In 2015, Governor Greg Abbott signed a legislative bill to decrease tax rates by 25%. These changes to the franchise tax make Texas a favorable business climate in terms of taxes, especially for smaller corporations.

The Texas Franchise Tax, commonly known as the "margin" tax, is a business tax that has been in place in Texas since the 1880s. Businesses are required to pay this tax as a fee in return for liability protections under state law that allow them to be legal, separate entities from the state. It is also known as the "privilege" tax, to signify the "privilege" of doing business within the state. For most of the 1900s, the amount paid by the business depended on its net taxable capital (taxable capital gain minus loss, such as debt). But in 1991, the franchise tax was changed to include "earned surplus," which not only includes company profits but also compensation for directors and officers. The Texas Franchise tax is based off of specific rates of a business' taxable margin rather than a minimum amount. According to Comptroller.texas.gov, the taxable margin must be computed in one of the following ways:

*total revenue times 70%