Introduction
Texas offers a powerful incentive for veteran entrepreneurs: a 5-year franchise tax exemption for qualifying new veteran-owned businesses. In 2025, this exemption empowers eligible startups to invest more in growth, not taxes.
Tex. Tax Code & Rules
- Texas Tax Code §171.0005 – Defines new veteran-owned businesses
- Comptroller Rule 3.574 – Franchise tax relief details
- Senate Bill 938 (2021) – Extends exemption to January 1, 2026
How It Works
- Eligible Period: Formed between Jan 1, 2022 and Dec 31, 2025
- Ownership Requirement: 100% veteran-owned, with honorably discharged veterans
- Benefits: No franchise tax, no no-tax-due report, and no Public Information Report for 5 years
- Certification: Each veteran must obtain a Veteran Verification Letter (VVL) from the Texas Veterans Commission; then file Form 05-904 and SOS/comptroller forms
Example
Example: “Lone Star Apps LLC” is formed in March 2025 by two veterans.
- Both acquire VVLs
- File Form 05-904 and register the LLC
- From 2025 to 2029: no franchise tax, no additional reports required
Step-by-Step Guide
- Confirm eligibility – must be 100% veteran-owned, incorporated 2022–2025
- Obtain VVL – request via Texas Veterans Commission portal
- File Form 05-904 – submit VVL along with entity details
- Register with SOS or Comptroller – include certification documentation
- Operate & Grow – no franchise tax or extra filings for 5 years
Conclusion
The veteran franchise tax exemption is a major advantage for qualifying Texas startups. If you meet the criteria, missing this could cost you up to 5 years of tax savings and compliance relief.
Call to Action
Veteran founder starting a business in Texas?
Book a consultation with Anshul Goyal, CPA, EA, FCA to help you:
- Verify veteran status and eligibility
- Navigate Form 05-904 and registration process
- Secure your tax exemption and focus on growth
Maximize your five-year window and build confidently.
https://calendly.com/anshulcpa/
About Our CPA
Anshul Goyal, CPA, EA, FCA
Anshul brings 15+ years of U.S. and international tax experience. He specializes in helping online sellers, foreign founders, and U.S. residents with IRS and multi-state compliance. Known for his deep knowledge in Shopify and Amazon seller tax strategy, Anshul has helped hundreds of entrepreneurs minimize taxes and scale legally.
Disclaimer
This blog is for informational purposes only and not legal or tax advice. Please consult a tax professional for your situation.
Top 5 FAQs
1. Who qualifies for the exemption?
Must form between 2022–2025, be 100% veteran-owned, and have honorable discharges.
2. What benefits apply?
No franchise tax, and no reporting for 5 years.
3. How do I apply?
Obtain VVLs, file Form 05-904, and register with the state.
4. When does it expire?
Exemption ends on earliest of: 5 years post to formation, or loss of qualifications (e.g., non-veteran purchase)
5. Is this still active after Dec 31, 2025?
Unclear; must form by end of 2025. Future extensions may follow.