S.B. No. 938
AN ACT
relating to an exemption from the franchise tax and certain filing
fees for certain businesses owned by veterans during an initial
period of operation in the state.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter A, Chapter 12, Business Organizations
Code, is amended by adding Section 12.005 to read as follows:
Sec. 12.005. FEE WAIVER FOR NEW VETERAN-OWNED BUSINESS.
The secretary of state shall waive all fees imposed under
Subchapter D, Chapter 4, for an entity that is a new veteran-owned
business as defined by Section 171.0005, Tax Code, until the
earlier of:
(1) the fifth anniversary of the date on which the
entity was formed; or
(2) the date the entity ceases to qualify as a new
veteran-owned business as defined by Section 171.0005, Tax Code.
SECTION 2. Section 171.0001(4), Tax Code, is amended to
read as follows:
(4) "Beginning date" means:
(A) except as provided by Paragraph (B):
(i) for a taxable entity chartered or
organized in this state, the date on which the taxable entity's
charter or organization takes effect; and
(ii) [(B)] for any other taxable entity,
the date on which the taxable entity begins doing business in this
state; or
(B) for a taxable entity that qualifies as a new
veteran-owned business as defined by Section 171.0005, the earlier
of:
(i) the fifth anniversary of the date on
which the taxable entity begins doing business in this state; or
(ii) the date the taxable entity ceases to
qualify as a new veteran-owned business as defined by Section
171.0005.
SECTION 3. Effective January 1, 2026, Section 171.0001(4),
Tax Code, is amended to read as follows:
(4) "Beginning date" means:
(A) for a taxable entity chartered or organized
in this state, the date on which the taxable entity's charter or
organization takes effect; and
(B) for any other taxable entity, the date on
which the taxable entity begins doing business in this state.
SECTION 4. Subchapter A, Chapter 171, Tax Code, is amended
by adding Section 171.0005 to read as follows:
Sec. 171.0005. DEFINITION OF NEW VETERAN-OWNED BUSINESS.
(a) A taxable entity is a new veteran-owned business only if the
taxable entity is a new business in which each owner is a natural
person who:
(1) served in and was honorably discharged from a
branch of the United States armed forces; and
(2) provides verification to the comptroller of the
person's service and discharge required by Subdivision (1).
(b) The Texas Veterans Commission shall provide to a person
who meets the requirements of Subsection (a)(1) written
verification of that status in a form required by the comptroller.
The comptroller shall adopt rules prescribing the form and content
of the verification and the manner in which the verification may be
provided to the comptroller.
(c) For purposes of Subsection (a), a new business is a
taxable entity that:
(1) is chartered or organized or otherwise formed in
this state; and
(2) first begins doing business in this state on or
after January 1, 2022.
SECTION 5. Section 171.001, Tax Code, is amended by adding
Subsection (d) to read as follows:
(d) Notwithstanding Subsection (a), the tax imposed under
this chapter is not imposed on a taxable entity that qualifies as a
new veteran-owned business as defined by Section 171.0005 until the
earlier of:
(1) the fifth anniversary of the date on which the
taxable entity begins doing business in this state; or
(2) the date the taxable entity ceases to qualify as a
new veteran-owned business as defined by Section 171.0005.
SECTION 6. Section 171.063(g), Tax Code, is amended to read
as follows:
(g) If a corporation's federal tax exemption is withdrawn by
the Internal Revenue Service for failure of the corporation to
qualify or maintain its qualification for the exemption, the
corporation's exemption under this section ends on the effective
date of that withdrawal by the Internal Revenue Service. The
effective date of the withdrawal is considered the corporation's
beginning date for purposes of determining the corporation's
privilege periods and for all other purposes of this chapter,
except that if the corporation would have been subject to Section
171.001(d) in the absence of the federal tax exemption, and the
effective date of the withdrawal is a date earlier than the date the
corporation would have become subject to the franchise tax as
provided by Section 171.001(d), the date the corporation would have
become subject to the franchise tax under that section is
considered the corporation's beginning date for those purposes.
SECTION 7. Effective January 1, 2026, Section 171.063(g),
Tax Code, is amended to read as follows:
(g) If a corporation's federal tax exemption is withdrawn by
the Internal Revenue Service for failure of the corporation to
qualify or maintain its qualification for the exemption, the
corporation's exemption under this section ends on the effective
date of that withdrawal by the Internal Revenue Service. The
effective date of the withdrawal is considered the corporation's
beginning date for purposes of determining the corporation's
privilege periods and for all other purposes of this chapter.
SECTION 8. Section 171.204, Tax Code, is amended by adding
Subsection (d) to read as follows:
(d) The comptroller may require a taxable entity on which
the tax imposed under this chapter is not imposed solely because of
the application of Section 171.001(d) to file an information report
stating the taxable entity's beginning date as determined under
Section 171.0001(4)(B) and any other information the comptroller
determines necessary. The comptroller may not require the taxable
entity to report or compute its margin.
SECTION 9. Effective January 1, 2026, the following
provisions are repealed:
(1) Section 12.005, Business Organizations Code;
(2) Section 171.0005, Tax Code;
(3) Section 171.001(d), Tax Code; and
(4) Section 171.204(d), Tax Code.
SECTION 10. The changes in law made by this Act that take
effect January 1, 2026, do not apply to a business that first
qualifies before that date as a new veteran-owned business as
defined by Section 171.0005, Tax Code, as that section exists
immediately before that date. A business that first qualifies
before January 1, 2026, as a new veteran-owned business is governed
by the law in effect immediately before that date, and that law is
continued in effect for that purpose.
SECTION 11. The agency is required to implement this Act
only if the legislature appropriates money specifically for that
purpose. If the legislature does not appropriate money
specifically for that purpose, the commission may, but is not
required to, implement this Act using other appropriations
available for the purpose.
SECTION 12. Except as otherwise provided by this Act, this
Act takes effect January 1, 2022.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 938 passed the Senate on
April 13, 2021, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 938 passed the House on
May 25, 2021, by the following vote: Yeas 104, Nays 1, one
present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor