The final day has passed for Governor Abbott to veto legislation that was approved during Texas’ 89th Legislature Regular Session. While the governor has called a special session commencing July 21, he has not identified any tax bills for further consideration. This means we can likely close the book on the 2025 Legislative Session as it relates to tax laws, and there were several noteworthy tax bills signed into law.

Property Tax 

As was the case for the last regular legislative session in 2023, property tax relief was the focus of this session. Governor Abbott identified property tax relief as one of seven emergency items he wanted addressed during the session. And as a result, the Legislature delivered property tax relief, albeit on a much smaller scale than last session.

Of note, the legislature passed HJR 1, proposing a constitutional amendment allowing the legislature to exempt from property tax $125,000 of business personal property. Assuming Texans vote to approve this constitutional amendment on November 4, 2025, the exemption will be made law by HB 9, effective January 1, 2026. Importantly, it entitles some taxpayers to claim this $125,000 exemption multiple times under certain facts. Taxpayers can generally claim separate exemptions at each location the taxpayer owns or leases within a single taxing unit, which may give rise to planning opportunities. Property located within a taxing unit at locations the taxpayer does not own or lease is aggregated with the taxpayer’s other personal property located in the taxing unit and receives a single $125,000 exemption. 

Similarly, HB9 limits the ability of taxpayers who lease taxable personal property to others to claim multiple exemptions. Property owned by a taxpayer/lessor that is subject to a lease and located within in a single taxing unit must be aggregated, receiving a single $125,000 exemption. While the intent of this provision and the provision aggregating property located at locations not owned by the taxpayer is clear — to limit instances where multiple exemptions can be received by a taxpayer against a single taxing unit’s property tax — the provisions could lead to administrative complications. For instance, in taxing units that span multiple county appraisal districts (e.g., school districts), neighboring appraisal districts will be forced to coordinate to ensure the appraisal rolls properly aggregate property to ensure the correct number of exemptions are granted. 

Finally, HB 9 further limits the ability of taxpayers to claim multiple exemptions via related party rules that would prevent “related business entities” from each claiming an exemption for property located at a single location shared by the related entities. Such property located at a single location must be aggregated and share a single exemption.

HB 22, effective January 1, 2026, continues the theme of exempting personal property from taxation by exempting all intangible personal property. While this sounds generous, almost all intangible personal property is already exempt from taxation. Only certain intangibles owned by insurance companies and savings and loan institutions are currently subject to tax and will be exempted by the new law.

SB 1502, effective January 1, 2026, prohibits school districts from raising property tax rates due to a disaster under Tex. Tax Code § 26.042 for years where voters have already voted against a tax rate increase. As background, Tex. Tax Code § 26.042 allows school districts in disaster areas to temporarily raise tax rates above the vote-approved limit in response to certain disasters. SB 1502 takes away a school district’s ability to bypass voters if voters have already voted against a rate increase for the year at issue.

HB 3093, effective immediately, impacts how property tax rates are determined in the 14 Texas counties on the Gulf Coast when large taxpayers protest their appraised values. County tax rates are set based on the estimated tax revenue needed for the county. The estimate is based on the appraised value of all property in the county, including appraised value that may be under protest at the time the tax rate is set. This can lead to very large budget shortfalls when large taxpayers successfully reduce their appraised values after the rate is set. HB 3093 would exclude the contested value of a property from rate calculations if (1) the taxable value of the property in the prior year was one of the 20 highest taxable values in the appraisal district, and (2) the current year taxable value exceeds 125 percent of the value of the property that is not in dispute. This legislation is a response to property tax lawsuits filed by two tax payers which, according to Nueces County, led to a $30 million budget shortfall. 

HB 1392 provides that, beginning January 1, 2026, if a tax collector’s office is closed on the date tax payments are due, the due date is extended to the following business day. Under current law, the due date is extended if the due date falls on a holiday or weekend. HB 1392 expands the extension to cover any office closure, such as closure for inclement weather or faulty plumbing. 

Franchise Tax / Sales and Use Tax 

While property tax was the focus of the 89th Legislature, the Legislature passed a few significant franchise tax and sales tax laws. 

SB 2206, effective January 1, 2026, overhauls Texas’ research and development exemptions and credits. It completely repeals the sales and use tax exemption for R&D currently found in Tex. Tax Code § 151.3182.

In return, the new law offers a more generous franchise tax credit, providing a credit of 8.722 percent of the difference between current period qualified research expenses (“QREs”) and 50 percent of the average QREs for the prior three periods, while current law only allows a 5 percent credit of the difference between current period QREs and 50 percent of the average QREs for the prior three periods. The new law also indefinitely extends this franchise tax credit, which was set to expire at the end of 2026. 

SB 266, effective immediately, allows a taxpayer who was subject to a managed audit to bypass redetermination and file a lawsuit in court. This would allow taxpayers to avoid the extra time and expense of redetermination in instances where it is unlikely to produce a favorable outcome. 

SB 266 also changes the current requirement that taxpayers provide “contemporaneous” records in administrative and judicial proceedings by instead requiring that a taxpayers provide “sufficient” records. The new law does not define “sufficient,” which may lead to future controversies.

SB 1058, effective January 1, 2026, is a narrow franchise tax exclusion intended to lure stock exchanges to Texas. The new law excludes “transaction rebate payments” from a “registered securities market operator’s” total revenue. “Transaction rebate payments” are payments made to incentivize a broker or dealer to provide liquidity to the market.

Economic Development Incentives 

The only noteworthy incentives bill to pass is HB 2027, which grants the Brazoria County Commissioners Court authority to grant property tax abatements for property within the Port Freeport District. The new law is effective immediately.

More noteworthy are the bills that did not pass. For the second straight session, the Legislature opted not to pass bills (HB 2027 and SB 878) that sought to prevent municipalities and counties from offering property tax incentives under Local Government Code Chapters 380 and 381.

Likewise, the Legislature did not pass SB 2322 or HB 105, which were intended to address issues in the JETI Act, which is 2023 legislation that allows school districts to offer property tax incentives to lure certain types of developments, replacing the old Chapter 313 program. SB 2322 would have removed utility services projects, including dispatchable electric generation facilities, from the compelling factor test under the Tex. Gov’t. Code § 403.609(b) (part of the JETI Act). HB 105 would have done the same, as well as made two other significant changes. First, it would have created a classification of “priority projects,” which are projects that invest at least $750 million by the end of the first year of the incentive project. Priority project would have been excluded from the compelling factor test and the JETI Act jobs requirements. Second, it would have fundamentally changed how required wages are calculated, correcting unintended issues with the current formula that can create egregiously high wage requirements for certain projects. These bills were intended to fix some of the myriad issues identified under the JETI Act.

Finally, SB 1756 would have limited municipalities to only one hotel project under Texas Tax Code Chapter 351, but it failed to get out of committee. Each subsequent hotel project would have required separate approval from the Texas Legislature, but instead the current system survives, allowing municipalities authorized under Chapter 351 to enter into hotel project agreements with multiple hotel projects.