2024 Year-End Estate Planning: Texas Updates

It has been a quiet year in Texas on the Private Wealth front as the Texas State Legislature enjoyed its biennial recess. Nevertheless, Texas' increasingly business-friendly environment saw some activity with its special new courts. Last year, we reported that the Texas legislature established special courts to oversee complex business cases. In particular, the new business courts have jurisdiction over the following:

• Disputes over $5 million that involve various corporate affairs, such as derivative actions, actions by a business or its owner against another officer or owner, and actions to hold owners or executives responsible for breaches of duty; cases involving publicly traded companies, regardless of the amount in question; and cases in excess of $10 million that involve contracts or commercial transactions and where the parties consent to the business courts' jurisdiction.

Certain classes of disputes are expressly outside of the business courts' jurisdiction. For example, the business courts may not hear cases brought under the Texas Family Code, Estates Code, Insurance Code and Title 9 of the Property Code, nor medical and legal malpractice, personal injury or insurance coverage cases. Five business court divisions opened on September 1, 2024, in Dallas, Austin, San Antonio, Fort Worth and Houston, and Texas Governor Greg Abbott has appointed two judges to each court. At the time of publication, it is too early to tell what impact these new business courts will have, though we expect to have more developments in 2025.

Additionally, 2024 saw new changes implemented to Texas' Franchise Tax. By way of background, Texas imposes a franchise tax on business entities – including LLCs, C Corporations, S Corporations, limited and general partnerships, etc. – formed or doing business in the state. In general, the franchise tax is levied at a rate of 0.75 percent on an entity's taxable margin. However, no tax was historically due when an entity's annualized revenue was less than $1.23 million. Even if the entity was not subject to the franchise tax, it was still required to submit a timely No Tax Due Report. In 2024, though, the minimum threshold increased to $2.47 million. In addition, entities that do not meet the taxable threshold are no longer required to submit a No Tax Due Report, thereby simplifying and reducing the cost of tax compliance.

We look forward to next year's report, as there should be an abundance of activity once the Texas legislature is back in session in 2025.