Texas Senate Bill 5, filed in the 2023 regular session, proposed raising the business personal property tax exemption and creating franchise tax credits for businesses paying local taxes on equipment and inventory. SB 5 did not pass as a standalone bill, but its core goals were absorbed into the broader property tax package the legislature enacted through Senate Bill 2 during the second special session and voters approved as Proposition 4 in November 2023. The business personal property exemption now sits at $125,000 per location under Texas Tax Code Section 11.145, and a separate circuit breaker limits annual appraisal increases on qualifying non-homestead real property to 20 percent through the end of 2026.
What Happened to SB 5
SB 5 as originally filed targeted two pressure points for Texas small businesses: local property taxes on tangible commercial assets and the state franchise tax. The regular session ended without passing it. Governor Abbott then called special sessions focused on property tax relief, and the reforms that became law arrived through SB 2 and the follow-on legislation that raised the business personal property exemption to its current $125,000 threshold.1State of Texas. Texas Code Tax 11.145 – Income-Producing Tangible Personal Property If you came here looking for SB 5, the practical answer is in the statutes those sessions produced.
The $125,000 Business Personal Property Exemption
For years, the exemption for business personal property sat at just $2,500. That barely covered a single computer setup. Under the current version of Tax Code Section 11.145, the exemption is $125,000 of the appraised value of tangible personal property held or used for the production of income at each location within a taxing unit.1State of Texas. Texas Code Tax 11.145 – Income-Producing Tangible Personal Property If your business personal property at a single location is appraised at $125,000 or less, you owe no property tax on it.
The exemption applies separately to each location within a taxing unit, so a business operating from two addresses in the same county may qualify at both. The statute has an anti-abuse rule, though: related businesses operating as part of a common enterprise at the same physical address must combine their property values when calculating whether they fall under the threshold.1State of Texas. Texas Code Tax 11.145 – Income-Producing Tangible Personal Property Two LLCs sharing a warehouse and running a joint operation cannot each claim a separate $125,000 exemption on property at that location.
What Counts as Business Personal Property
Business personal property is tangible property you own that is held or used to produce income. That covers office furniture, computers, machinery, warehouse equipment, retail inventory, raw materials, and finished goods.2Texas Comptroller of Public Accounts. Business Personal Property Rendition of Taxable Property If you can see it, touch it, and it plays a role in operations, it almost certainly qualifies.
The exemption does not cover real property like land or buildings, which have their own appraisal rules. It also does not cover intangible assets such as patents, copyrights, or goodwill. Personal belongings and vehicles used exclusively outside the business are outside the scope.
The 20 Percent Cap on Commercial Appraisal Increases
Tax Code Section 23.231 added a circuit breaker for qualifying non-homestead real property. The appraisal district cannot increase the appraised value by more than 20 percent over the preceding year’s appraised value, plus the value of any new improvements.3State of Texas. Texas Code Tax 23.231 – Circuit Breaker Limitation on Appraised Value of Real Property Other Than Residence Homestead Before the cap, a commercial building in a hot market could jump 40 or 50 percent in appraised value in a single year, dragging the tax bill up with it.
The cap only applies to property with an appraised value at or below a threshold that adjusts annually with the consumer price index. The base amount was $5 million for the 2024 tax year and rises modestly each year after. That covers a wide range of commercial buildings, industrial facilities, and multifamily complexes. Larger properties are excluded, and so are residence homesteads (which have their own protections) and property appraised under special-use methods like agricultural or timberland valuation.3State of Texas. Texas Code Tax 23.231 – Circuit Breaker Limitation on Appraised Value of Real Property Other Than Residence Homestead
The circuit breaker kicks in on January 1 of the tax year after you first own the property on January 1. Buy a commercial building in March 2024, and the cap starts applying in 2025. Anyone who owned qualifying property before the 2023 tax year is treated as having acquired it on January 1, 2023, which means the cap applied starting in 2024.
Mark the sunset date. The provision expires December 31, 2026.3State of Texas. Texas Code Tax 23.231 – Circuit Breaker Limitation on Appraised Value of Real Property Other Than Residence Homestead Unless the legislature extends it, property owners who have been shielded by the cap could see a significant appraisal jump in 2027 as values catch up to market. Appraisal districts must include a notice on appraisal statements warning that the cap will expire and may result in higher taxes if not renewed.
Filing Your Annual Rendition
Every Texas business that owns tangible personal property used for income production must file an annual rendition with the county appraisal district. The form is the Business Personal Property Rendition of Taxable Property (Form 50-144), developed by the Texas Comptroller.2Texas Comptroller of Public Accounts. Business Personal Property Rendition of Taxable Property You list each category of property, the historical cost when new, and the year you acquired it. The form also asks for your sales tax permit number, the physical location of the property, and a good-faith estimate of market value.
The deadline is April 15 each year.4Texas Comptroller of Public Accounts. Texas Businesses: April 15 is Deadline for Filing Property Tax Renditions Most county appraisal districts take renditions by mail, and larger counties offer online portals. Pull your purchase receipts, accounting ledgers, and inventory records before you sit down with the form. If you qualify for the $125,000 exemption, the rendition is the factual basis the appraisal district uses to verify eligibility. Vague descriptions give the appraiser reason to estimate values on their own, and those estimates rarely favor the business owner.
Penalties for Missing the Deadline
Missing April 15 costs real money. Under Tax Code Section 22.28, the chief appraiser imposes a penalty equal to 10 percent of the total taxes imposed on the property for that year.5State of Texas. Texas Code Tax 22.28 The penalty can reach 50 percent for renditions that are filed late, filed incomplete, or not filed at all.6Texas Comptroller of Public Accounts. Rendering Property It gets added directly to your tax bill and is secured by the same lien that attaches to the property for unpaid taxes.
If you receive a penalty notice, you can protest it before the Appraisal Review Board under Section 22.30. The penalty becomes final if you fail to protest, if the board denies a waiver and you do not appeal, or if a court upholds the penalty.5State of Texas. Texas Code Tax 22.28 File even if you believe your property falls under the exemption. Proving you qualify from a filed rendition is straightforward; explaining why you skipped filing is not.
Protesting Your Appraisal
After you file, the appraisal district sends a Notice of Appraised Value, typically in late spring or early summer. If the appraised value looks too high, or the district failed to apply the $125,000 exemption or the circuit breaker cap, you can protest. File Form 50-132 (Property Owner’s Notice of Protest) with the Appraisal Review Board. The deadline in most cases is May 15 or 30 days from the date the appraisal district mailed the notice, whichever is later.7Texas Comptroller of Public Accounts. Appraisal Protests and Appeals
Request an informal conference with the appraisal district before the formal hearing; that is often where disputes get resolved. Bring documentation that supports your position: purchase receipts, photographs, comparable sales data, or repair estimates. If the informal meeting does not produce a satisfactory result, the protest moves to a formal ARB hearing where both sides present evidence.7Texas Comptroller of Public Accounts. Appraisal Protests and Appeals Appraisers work from mass valuation models, and those models routinely miss property-specific factors that reduce value.
Franchise Tax Relief That Did Pass
SB 5 originally proposed franchise tax credits tied to business personal property taxes. That specific mechanism did not become law. Texas does offer separate franchise tax relief for smaller businesses, though. For the 2026 report year, the no-tax-due threshold is $2,650,000 in total revenue, up from $2,470,000 in 2024 and 2025. Businesses under the threshold still have to file a franchise tax report but owe nothing. The compensation deduction limit for 2026 is $480,000, and businesses with total revenue at or below $20 million can use the simplified EZ computation rate of 0.331 percent.8Texas Comptroller of Public Accounts. Franchise Tax
These franchise tax thresholds are separate from the property tax changes, but they stack. A small business under the $125,000 personal property exemption and under the $2,650,000 franchise tax no-tax-due threshold effectively pays neither local property tax on its equipment nor state franchise tax on its revenue.