Acting Texas Comptroller Kelly Hancock today announced an immediate update to the agency’s interpretation of Texas franchise tax depreciation rules, allowing Texas businesses to take advantage of bonus depreciation authorized by the federal One Big Beautiful Bill Act of 2025.
The Texas franchise tax is a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas. Franchise tax rates, thresholds and deduction limits vary by report year.
A qualifying new veteran- owned business is not subject to franchise tax for its initial five-year period, and the entity must be formed or organized in Texas on or after Jan. 1, 2016, and before Jan. 1, 2020; or on or after Jan. 1, 2022, and before Jan. 1, 2026; be 100 percent owned by a natural person or persons, with each owner being an honorably discharged veteran from a branch of the U. S. Armed Services; and provide a Letter of Verification of Veteran’s Honorable Discharge issued for each owner by the Texas Veterans Commission.
The decision follows a statutory review confirming that Texas franchise tax law provides the flexibility to apply the current internal revenue code (IRC) for depreciation calculations — rather than the outdated 2007 IRC, which required businesses to spread asset deductions over multiple years.
“Effective immediately, Texas will align its franchise tax depreciation rules with the bonus depreciation provisions of the One Big Beautiful Bill,” Hancock said. “Texas should never be stuck in yesterday’s rules when federal law has moved forward. Our statute allows this modernization, and it’s the right call for taxpayers.”
Historically, the Comptroller’s office used the 2007 IRC for franchise tax depreciation. After a fresh legal review, the agency determined the depreciation provision in Texas law is not tied to 2007 and can reflect the IRC in effect for each tax year. This means that beginning with the 2026 franchise tax report, businesses may elect to deduct the full cost of qualifying fixed assets — such as machinery, equipment and furnishings — in the year of purchase.
“This is a big win for Texas taxpayers,” Hancock said. “Not only does it deliver upfront tax relief, it also eliminates the burden of maintaining two different sets of books for federal and state taxes, slashing red tape for business operations in Texas.”