From the Office of State Senator Troy Fraser

For Immediate Release
February 25, 1999
Contact: William A. Scott - (512) 463-0124

Senate Approves Franchise Tax Elimination for Small Businesses

AUSTIN -- An estimated 28,000 small businesses would be exempt from paying corporate franchise taxes and would no longer be required to file an annual report with the Comptroller's Office under legislation approved today by the Texas Senate.

Senate Bill 148, authored by Senator Troy Fraser, R-Horseshoe Bay, was approved by a unanimous vote. Similar legislation authored by Rep. Tony Goolsby, R Dallas, is pending in the Texas House.

"This bill exempts small businesses with annual gross receipts of less than $100,000 from what is essentially a business income tax," Fraser said. "Because these small operations have such small profit margins, every dollar counts. This bill will allow some of the those business to redirect those dollars to expand their business or hire more employees."

The bill was amended during floor debate to add a provision authored by Sen. Mario Gallegos, D-Houston, that requires the Comptroller's Office to review the impact of legislation in six years.

In addition to Gallegos, the bill was co-authored by Senators David Bernsen, D Beaumont; Eddie Lucio, D-Brownsville; Mike Moncrief, D-Fort Worth; and Jane Nelson, R-Flower Mound.

The legislation also was endorsed by the state's largest advocacy group representing small businesses in Texas.

"This is proof positive that the Texas Senate is pro-small business," said Robert Howden, executive director of the National Federation of Independent Businesses.

In addition to eliminating the franchise tax for 28,000 businesses that are incorporated, it also exempts another 203,000 small businesses from the annual reporting requirement.

"It doesn't make much sense for these small business to have to fill out a franchise tax form when the actual tax payment may only be about $100," Fraser said. "In some cases, business operators have to hire an accountant to do that, and that's money that can now be spent elsewhere. I really believe this bill is about job growth."

"All of us know that the growth engine for Texas over the last five years has been the larger technology companies," Fraser said. "If we are to continue that growth, it has to come from individuals stepping forward to form small spin-off businesses, and this legislation helps to create a healthier business climate for that to occur."