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Tuesday, June 16, 2009

Bonnen Announces Signing of Small Business Franchise tax Exemption

Insider's Report Vol. 7, No. 26

Exempts more than 40,000 Texas small businesses

On Tuesday House Bill 4765, a proposal that I have adamantly pushed during the past several sessions, was signed into law.  This legislation will provide much-needed margins tax relief to small business owners by raising the small business tax exemption.   When the bill takes effect on January 1, it will raise the small business franchise tax exemption to $1 million.  Currently, only businesses with total revenue of $300,000 or less are exempt.  This higher exemption provides tax relief to more than 40,000 Texas businesses that will now be able to reinvest more of their earnings in their day-to-day operations.

This legislation is a culmination of my many efforts to ensure that the small business exemption was increased.  During the 2006 school finance special session, I proposed raising the small business exemption ceiling to $1 million.  In the 2007 session, I filed similar legislation that would have exempted businesses with no more than $750,000 in total revenue from the franchise tax.  And just this session I authored legislation that would have exempted small businesses with total revenue of $5 million or less from paying the state margins tax.

Greater protection of our small businesses is a vital component of the sound tax policies and predictable regulations that have helped Texas create an enviable business climate.  And these efforts do not go unnoticed.  Directorship Magazine just this month ranked Texas the number one state for business based on principles that I've always worked to promote, including a pro-business tax structure, low cost of living, solid economy, and reasonable litigation atmosphere.

Now more than ever we need to support small businesses, which serve as the backbone of our communities.  Small businesses comprise over ninety-eight percent of all business in Texas.  They are responsible for creating more than two-thirds of all new jobs in Texas over the last twenty years.  The people driving the center of our economy – industrialists, small business owners, entrepreneurs, etc. -- who create jobs and prosperity along the way, should not be crippled by undue tax burdens.  HB 4765 will help ensure that small businesses remain leaders in job creation as they continue to protect our local economies.