Texas (TX) Corporate Tax Rate, Economic Nexus, Apportionment & IRC §174 Conformity Guide (2025/2026)
Texas corporate tax guide for CFOs and CPAs: 0.75% Franchise Margin Tax (70% Rev), 100% Single Gross Receipts apportionment, $2,470,000 economic nexus threshold, IRC §174 R&D conformity, and §168(k) bonus depreciation rules.
1. How Texas Apportionment & Economic Nexus Impact ASC 740 Tax Provisions
For multi-state C-Corporations and SaaS companies selling into Texas (TX), exceeding $2,470,000 in annual TX-sourced receipts (or maintaining remote W-2 employees inside the state) establishes nexus under Texas's Franchise Margin Tax (70% Rev). Under 100% Single Gross Receipts apportionment and Customer Location (Market) rules, SaaS subscription revenue is sourced to Texas based on where the customer receives the benefit of the software.
2. Texas Federal-to-State Tax Base Modifications (§174 R&D & §168(k) Bonus Depreciation)
- IRC §174 R&D Capitalization Rule in Texas: Texas DECOUPLES from federal TCJA IRC §174 capitalization! Taxpayers filing in Texas may deduct 100% of current-year domestic R&D expenses on their TX return via a state subtraction modification—dramatically lowering TX taxable income compared to Federal Form 1120.
- IRC §168(k) Bonus Depreciation Rule in Texas: Texas decouples from federal IRC §168(k) bonus depreciation. Corporate taxpayers must add back federal bonus depreciation on the TX return and track a separate state depreciation basis rollforward.
- Pass-Through Entity Tax (PTET) Election: Texas does not currently levy a traditional individual income tax with a corresponding PTET election.
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