1. (a) A franchise tax is imposed on each taxable entity that does business in this state or that is chartered or organized in this state.
2. (b) The tax imposed under this chapter extends to the limits of the United States Constitution and the federal law adopted under the United States Constitution.
3. (c) The tax imposed under this section or Section 171.0011 is not imposed on an entity if, during the period on which the report is based, the entity qualifies as a passive entity as defined by Section 171.0003.

4. (d) Notwithstanding Subsection (a), the tax imposed under this chapter is not imposed on a taxable entity that qualifies as a new veteran-owned business as defined by Section 171.0005 until the earlier of:

   1. (1) the fifth anniversary of the date on which the taxable entity begins doing business in this state; or
   2. (2) the date the taxable entity ceases to qualify as a new veteran-owned business as defined by Section 171.0005.

Acts 1981, 67th Leg., p. 1691, ch. 389, Sec. 1, eff. Jan. 1, 1982.

Amended by Acts 1991, 72nd Leg., ch. 901, Sec. 53(a), eff. Aug. 26, 1991;

Acts 1991, 72nd Leg., 1st C.S., ch. 5, Sec. 8.01, eff. Jan. 1, 1992;

Acts 1993, 73rd Leg., ch. 765, Sec. 7, eff. Aug. 30, 1993;

Acts 1995, 74th Leg., ch. 914, Sec. 12, eff. Sept. 1, 1995;

Acts 1995, 74th Leg., ch. 1002, Sec. 1, eff. Jan. 1, 1996;

Acts 1997, 75th Leg., ch. 1185, Sec. 1, eff. Jan. 1, 1998;

Acts 1999, 76th Leg., ch. 184, Sec. 1, eff. Jan. 1, 2000;

Acts 2003, 78th Leg., ch. 209, Sec. 31, 32, eff. Oct. 1, 2003.

Acts 2006, 79th Leg., 3rd C.S., Ch. 1 (H.B. 3), Sec. 2, eff. January 1, 2008.

Acts 2007, 80th Leg., R.S., Ch. 1282 (H.B. 3928), Sec. 5, eff. January 1, 2008.

Acts 2015, 84th Leg., R.S., Ch. 329 (S.B. 1049), Sec. 4, eff. January 1, 2016.

Acts 2015, 84th Leg., R.S., Ch. 329 (S.B. 1049), Sec. 9(2), eff. January 1, 2020.

Acts 2021, 87th Leg., R.S., Ch. 859 (S.B. 938), Sec. 5, eff. January 1, 2022.

Acts 2021, 87th Leg., R.S., Ch. 859 (S.B. 938), Sec. 9(3), eff. January 1, 2026.

Acts 2025, 89th Leg., R.S., Ch. 335 (H.B. 346), Sec. 2(3), eff. September 1, 2025.