Texas Legislative Guide

The tax has long drawn criticism from business groups and education groups. Among the concerns has been that the tax drew less than initially anticipated. Also, in some cases, businesses have had to pay the tax even in years when they didn’t make a profit.

Since its initial launch, the Legislature has made several revisions to the tax, including exemptions for some smaller businesses. Lawmakers were determined to cut the tax even further this session, and Gov. Greg Abbott had said he would veto a budget with no cut in the tax.

Both the House and the Senate made cuts to the franchise tax in their respective plans. Budget negotiators eventually reached an agreement that included an across-the-board 25 percent cut in the franchise tax rate paid by businesses. It will cost roughly $2.56 billion over the next two years and is part of an overall $3.8 billion tax cut package that includes an increase in the homestead exemption.

Updated: May 31, 2015