2024 Texas Franchise Tax Report Change Overview

In July of 2023, the Texas State Legislature passed a bill which increased the no tax due threshold and eliminated reporting requirements for certain entities required to file a 2024 Texas Franchise Tax Report. Effective January 1, 2024, the no tax due reporting threshold for business entities formed or qualified to do business in the state of Texas will increase from $1.23 million to $2.47 million in annualized total revenue, regardless of where that revenue was derived. This law will apply to reports due on or after January 1, 2024. In addition, for entities falling below the new threshold, the No Tax Due report filing requirement is being eliminated. This means that only the Public Information (Corporation) or Ownership Information (LLC) report will need to be filed on an annual basis by entities at or below the $2.47M threshold. Further, the newly promulgated law changes the filing requirements for certain entities that have historically fallen into the no tax due filing exemption resulting in these entities having to file a financial report.

Impact of Change on Entities Eligible to File a No Tax Due Report under the Pre 2024 Law

Under the pre-2024 law, there are five categories of entities, outlined below, that are eligible to file a No Tax Due Report. The new legislation will reduce, extend, or continue the prior filing requirement regime for each of these category types, as follows:

1. Entities having $2.47 million in annual total revenue or less need only file a Public Information or Ownership Information report.
2. New Veteran-Owned Businesses do not have any reporting obligations during their initial 5-year period of existence.
3. Entities that have zero Texas receipts (irrespective of revenue amount) will file:
   1. the EZ Computation Report or the Long Form; and
   2. Public Information or Ownership Information report.
4. Passive Entities as defined under TTC 171.0003 will file:
   1. the EZ Computation Report or the Long Form; and
   2. a Public Information or Ownership Information report
5. Real Estate Investment Trusts (REIT) that meet the qualifications specified in TTC 171.0002(c)(4) will file:
   1. the EZ Computation Report or the Long Form; and
   2. a Public Information or Ownership Information report.

Additionally, the new law provides that consolidated groups that do not exceed the new threshold will file a Public Information or Ownership Information report for each entity of the consolidated group.

Conclusion

While not every entity transacting business in the state of Texas will be impacted by the new law, a significant number of entities will. Staying informed about changes in state tax laws and regulations is crucial for individuals and businesses to fulfil their financial obligations and maintain their legal standing to operate. Navigating the ever-changing landscape of tax regulations can be a daunting task. We at 3H Corporate Services are continuously monitoring these changes and are here to provide your business with comprehensive services and support. Please do not hesitate to contact us today if you are looking for a business partner in the corporate filing regulatory space.