A corporation in Texas engaged solely in the business of manufacturing, selling, or installing solar energy devices is exempted from the franchise tax. There is no ceiling on this exemption, so it is a substantial incentive for solar manufacturers.

For the purposes of this exemption, a solar energy device means "a system or series of mechanisms designed primarily to provide heating or cooling or to produce electrical or mechanical power by collecting and transferring solar-generated energy. The term includes a mechanical or chemical device that has the ability to store solar-generated energy for use in heating or cooling or in the production of power."

Revisions to Texas' franchise tax enacted by the 79th and 80th Legislatures are effective for franchise tax reports originally due on our after January 1, 2008. The revisions to Texas Tax Code Chapter 171 change the tax base, lower the rate, and extending coverage to active businesses receiving state law liability protection. The revisions also repealed Texas' franchise tax credit programs. (The law does not void tax credit carryovers.)

Franchise tax exemptions (such as the solar energy device corporation exemption above and other exemptions such as those that apply to certain financial services businesses, nonprofits, and others) are not affected by the new law. Bills to replace the repealed tax credits may be considered by future sessions of the legislature.