Senator Hegar's Landmark Tax Reforms Signed Into Law
Massive franchise tax relief package receives governor's signature
Wednesday, June 14, 2013, marked a historic day as the almost one million businesses in Texas subject to the franchise or margin tax saw House Bill 500 signed into law by the governor. The bill's reduces the margin tax rate to 800,000 businesses in Texas, bringing meaningful tax relief to the heart and backbone of the Texas economic engine. The bill also provides significant relief to over 140,000 small businesses by establishing that any business making below $1million in revenues will always be free of any franchise tax obligation whatsoever.
"It was a true honor to pass a bill so important to Texas' future. Meaningful tax relief was given to every Texas business under the franchise tax with a tax rate cut, and making the small business exemption permanent for Texas' growing businesses," said Senator Hegar. "Texas was already one of the most sought after homes for businesses deciding where to locate and with the signing of this bill, those businesses have one more reason to look no further than the Lone Star State in deciding where to set up shop."
House Bill 500 will take effect on January 1, 2014. The bill contains an across-the-board reduction in the franchise tax rate for all of the nearly one million businesses subject to the franchise tax. Regardless of industry class, number of employees, or any of the many unique characteristics Texas businesses have, all will enjoy a 2.5% rate cut in 2014 and a 5% rate cut in 2015.
The smallest of Texas businesses will enjoy not only the rate cut, but also will benefit from a new deduction when calculating their taxable margin. The optional $1 million deduction will benefit businesses with up to approximately $3 million in total annual revenue. Businesses with $1 million or less in annual revenue have cause to celebrate as they no longer will need to wait on the legislature to renew their exemption, as has been done for the last four years. House Bill 500 permanently exempts those 140,000 Texas small businesses from the franchise tax, so that they can operate and grow without a penny of obligation in state business taxes.
"I am incredibly proud to live in a state where freedom from overly burdensome regulations is the norm and not a dream, where a balanced budget is constitutionally mandated, and businesses owners can make their home with the full knowledge that their state government is working to foster their success, rather than taking big government approaches to drive them out of business. House Bill 500 brings tangible, meaningful, quantifiable tax relief to every Texas business and helps to ensure our great state remains one of the world's premiere destinations for job creation. I am very thankful for the hard work and support of my colleagues who helped me to pass this historic tax cut and I am very optimistic and excited for our great state's bright future," said Senator Hegar.
Senator Hegar served two terms in the Texas House of Representatives and now represents Senate District 18 in the Texas Senate. Senate District 18 contains all or part of twenty-one Counties and over one-third of the Texas coastline. He is a sixth generation Texan, and earns a living farming on land that has been in his family since the mid-1800s. He currently resides in Katy, Texas with his wife Dara, and their three children, Claire, Julia, and Jonah.