New Veteran – Owned Businesses and Texas Franchise Tax Exemption:
A qualifying new veteran-owned business is not subject to franchise tax for its initial five-year period, but must file Form 05-163, Texas Franchise Tax No Tax Due Report (PDF), for each of those years. For more information, see Texas Tax Code Section 171.0005 and Rule 3.574, Margin: New Veteran-Owned Businesses.
To be considered a new veteran-owned business, an entity must:

  • be an entity formed or organized in Texas on or after Jan. 1, 2016, and before Jan. 1, 2020;
  • 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 Texas Veterans Commission (TVC) issued Letter of Verification of Veteran’s Honorable Discharge for each owner.

 

The Comptroller’s office verifies this information. If during the initial five-year period, a new veteran-owned business no longer meets the above criteria, the business:

  • must notify the Comptroller’s office; and
  • becomes subject to franchise tax.

 

Verification Process for a New Veteran-Owned Business
For your new veteran-owned business to qualify for the five-year franchise tax exemption, you must complete three steps. Here are the steps to follow:

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