Texas businesses, including S-Corporations, must comply with state franchise tax laws. Recent changes to the no-tax-due threshold impact whether your S-Corp must file and pay franchise taxes. Understanding these updates helps you determine your tax obligations and financial planning strategies.
What is the no-tax-due threshold?
The no-tax-due threshold is the revenue limit below which businesses are not required to pay Texas franchise taxes. For 2024, Texas raised this threshold to $2.47 million in total revenue. If your S-Corp earns less than this amount, you are exempt from paying the franchise tax but may still need to file certain reports.
Filing requirements despite exemption
Even if your S-Corp qualifies for the no-tax-due threshold, Texas law still requires businesses to file an annual Public Information Report (PIR). This report ensures the state has updated information on your business structure and ownership. Failure to file can result in penalties or the loss of good standing with the Texas Comptroller.
Impact on business planning
The increased threshold allows more S-Corps to avoid franchise tax payments, reducing operating costs. This change benefits small businesses by freeing up funds for reinvestment. However, companies near the threshold should monitor their revenue closely. If earnings exceed $2.47 million, the business will be subject to franchise tax obligations and need to adjust its financial strategy.
Preparing for future changes
Texas tax laws change periodically, and businesses should stay informed about potential adjustments to the threshold. Consulting with a financial professional can help ensure compliance and optimize tax benefits. Keeping detailed financial records and tracking revenue trends can help S-Corps prepare for shifts in tax responsibilities.
