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Franchise Tax Reform Stalled in Texas House

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The Texas Senate has passed a package of bills that would enact substantive changes to the state’s franchise tax. Not a single bill related to franchise tax reform has received a public committee hearing in the Texas House.

The franchise tax is a tax on a business’ gross margins, and has been criticized for being overly complicated, harmful to Texas’ ability to compete for new businesses, and for sometimes imposing a tax on businesses that have shown a loss.  Last week, as Breitbart Texas reported, the Senate passed several bills that would lower the franchise tax rate, expand eligibility for simplified reporting, and create an across the board exemption for all businesses with less than $4 million in annual revenue, among other reforms.

The Senate’s work was proudly touted by the Senators who worked on the bills and by Lieutenant Governor Dan Patrick (R). The passage was praised by a number of conservative activists who had been closely following the issue. Governor Greg Abbott (R) has also publicly called for franchise tax reform, both in his State of the State address and in a recent web video.

Progress is moving much slower in the House. A search of the Texas Legislature Online database for all bills pending in the House dealing with any aspect of the franchise tax brings up 72 bills. Many of these bills were referred to committees in February or early March, but so far, only one — HB 3305 authored by Rep. René Oliviera (D-Brownsville) — has been scheduled for a public hearing.

It should be noted that HB 3305 proposes only a minor change to franchise tax credits for certain employees, and is not one of the many bills that have been proposed that would enact the kind of reforms that were passed by the Senate.

The holdup appears to be the House Ways and Means Committee, chaired by Rep. Dennis Bonnen (R-Friendswood), an appointee of Speaker Joe Straus (R-San Antonio). This committee is where the vast majority of the franchise tax bills filed in the House have been referred. They are still waiting for public hearing dates to be scheduled. The Committee has not even moved on the bills that Chairman Bonnen personally filed.

Supporters of franchise tax reforms are hopeful that the Ways and Means Committee will schedule public hearings on some of the pending bills soon. This would make certain the bills have time to work through the legislative process before the 84th Legislative Session ends on June 1. Without action by Ways and Means, there is no way for substantive franchise tax reform to proceed in the House.

The bills will need to be set for public hearing, have public testimony heard, be amended as necessary, and then be considered by the Committee to which they were referred (as noted, almost all are before the Ways and Means Committee). Any bills passed out of that committee would then proceed to the Calendars Committee, a required final step before they can be considered by the full House.

Members of the House Ways and Means Committee include: Chairman Dennis Bonnen (R-Friendswood), Vice Chairman Yvonne Davis (D-Dallas), Representatives Dwayne Bohac (R-Houston), Angie Chen Button (R-Richardson), Drew Darby (R-San Angelo), Trey Martinez Fischer (D-San Antonio), Jim Murphy (R-Houston), Tan Parker (R-Flower Mound), Drew Springer (R-Muenster), Chris Turner (D-Grand Prairie) and John Wray (R-Waxahachie).

Breitbart Texas will continue to follow this issue as the Legislature continues to debate franchise tax reform this session.

Follow Sarah Rumpf on Twitter @rumpfshaker.


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