H.B. No. 32 Sets New Franchise Tax Rates for 2016

Lower franchise tax rates went into effect on January 1, 2016. H.B. No. 32 lowered the franchise tax rate for report years beginning in 2016 from 1% to 0.75% of taxable margin for most taxpayers. For retailers and wholesalers, the tax rate is decreased from 0.5% to 0.375%. H.B. No. 32 also favors businesses electing the E-Z computation and rate provisions. It raises the total revenue qualification threshold from $10 million to $20 million and lowers the E-Z tax rate from 0.575% to 0.331%. The Legislature’s stated intent is “to promote economic growth by repealing the franchise tax.” 84th Leg., R.S., H.B. 32 § 1(b).