Texas House Bill HB720

Texas 2009 - 81st Regular

Caption

Relating to the total revenue exemption for the franchise tax.

Impact

The proposed changes in HB 720 are expected to have a positive effect on economic growth within Texas, particularly for small business entities that operate on relatively low income levels. By exempting entities with total revenues below the new threshold, the bill encourages the expansion and sustainability of small businesses. This could potentially lead to increased job creation and enhanced economic activity within local communities as businesses allocate their resources toward growth rather than tax liabilities.

Summary

House Bill 720 seeks to amend the Texas Tax Code regarding the total revenue exemption for the franchise tax. Specifically, the bill raises the revenue threshold that determines whether a taxable entity must pay franchise taxes. The threshold is proposed to increase from $300,000 to $1 million, meaning that many small businesses would no longer be required to pay this tax, thereby providing significant financial relief. Additionally, the bill includes provisions to ensure periodic adjustments to the thresholds based on the consumer price index, which aims to align tax responsibilities with economic growth over time.

Contention

While supporters of the bill argue that it fosters a more business-friendly environment, there are concerns regarding the revenue impact on the state's budget. Opponents may raise issues about the fairness of tax exemptions, particularly how they could affect the funding available for public services and infrastructure improvements. The debate may focus on the long-term sustainability of funding for essential services if significant tax revenues are retained by businesses due to these exemptions.