Senate Bill 32, by Sen. Paul Bettencourt, R-Houston, would exempt up to $25,000 of businesses’ personal property, such as equipment, furniture and vehicles, from taxation. Texas business owners currently receive a tax exemption on property worth $2,500 or less.
Less than a week earlier, the Texas House approved a bill that would raise the tax exemption to cover businesses’ personal property worth $250,000 or less. Bills must be approved by both legislative chambers before they can become law.
What you need to know
The average Texas business pays a property tax rate of $2.20 per $100 of taxable value, according to Bettencourt’s office. He said the expanded exemption would reduce businesses’ tax bills by $495 annually, beginning in 2026.
If passed by both chambers, the business tax cut would appear on Texas voters’ ballots in November as a proposed constitutional amendment.
Businesses with personal property worth less than $25,000 would no longer have to pay the tax or submit related paperwork, Bettencourt said.
SB 32 would also create a 20% tax credit for franchise taxes paid on a business’ inventory. According to the Texas Taxpayers and Research Association, a franchise tax is similar to a fee for “the ‘privilege’ of doing business in a state.”
Texas lawmakers raised the annual state franchise tax exemption to $2.47 million in 2023, according to previous Community Impact reporting. Bettencourt said about 130,000 businesses pay franchise taxes in Texas and noted that about 59% of them would benefit from the proposed tax credit.
“Businesses have been waiting for this for a long time,” Lt. Gov. Dan Patrick said on the Senate floor April 9.
If SB 32 becomes law, the state would spend $700 million to help local governments cover the cost of the tax cuts.
Put in perspective
Texas is one of nine states that taxes businesses’ tangible personal property, according to the National Federation of Independent Businesses. In an April 10 news release, NFIB Texas encouraged lawmakers to finalize a plan to expand the exemption, although they did not endorse a specific bill.
“The percentage of small business owners reporting taxes as their single most important problem is on the rise,” NFIB Texas director Jeff Burdett said in the release. “That illustrates why it’s a challenge for local businesses to operate, add jobs and support their communities.”
During a March 3 hearing on the House’s proposed business tax exemption, Diego Galicia, chef and owner of the San Antonio restaurant Mixtli, said taxes and rising costs contributed to the closure of over 40 independent San Antonio restaurants in 2024.
“Every year—a lot of people don’t know this—we pay taxes on equipment that we use daily to operate the restaurant, that we paid sales taxes for when we purchased them,” Galicia said March 3. “I believe this places an undue burden on the independent restaurants [and] retailers, like barber shops, beauty salons, art shops and many other small businesses.”
More context
State lawmakers have vowed this session to further cut taxes after passing an $18 billion property tax relief package in 2023.
In February, the Senate approved a proposal that would raise tax exemptions on Texans’ primary homes to $140,000. In an April 2 interview, Patrick told Community Impact he wants to raise the exemption for seniors to $200,000.
House lawmakers are considering legislation that would reduce school district maintenance and operations taxes by about $0.10 per $100 of taxable value. That bill was approved by a House committee in March, although it has not reached the full chamber for debate.
The 140-day regular legislative session ends June 2.
