Tax Insight

Texas Comptroller adopts amended margin tax rule on determining total revenue

Insight
5 minute read
March 04, 2026

What happened?

The Texas Comptroller of Public Accounts on February 20 adopted final rule amendments impacting the calculation of total revenue subject to the franchise (margin) tax.

[Texas Register, 34 TAC Sec. 3.587, Vol. 51, No. 8, 2/20/2026, effective 3/1/2026]

Why is it relevant?

The amended rule reflects statutory changes, judicial decisions, and the Comptroller’s policy positions potentially impacting a broad range of businesses. In particular, the amended rule formally adopts the Comptroller’s interpretation regarding the state’s application of the Internal Revenue Code (IRC) announced in December (see PwC’s Insight for details here).

Actions to consider

Taxpayers should re-evaluate their Texas franchise tax calculations for the 2026 franchise tax report, which is based on the accounting period ending date in 2025. Taxpayers particularly should focus on items of total revenue and related subtractions or deductions that previously were not considered due to the general understanding that Texas conformed to the 2007 IRC for all components of the franchise tax. Further, because it is the Comptroller’s statutory interpretation, and the statute has not been amended in this respect, there could be refund opportunities based on applying the IRC then in effect for open years.