Article
Texas issues guidance on IRC conformity policy change
Feb. 11, 2026 · Authored by John LaBorde, Shannon Bonner
Texas issued guidance on the favorable policy change regarding the conformity of the Texas franchise tax to the Internal Revenue Code (IRC).
Specifically, due to the recent federal tax reform often referred to as the One Big Beautiful Bill Act (OBBBA), states have begun evaluating their IRC conformity and the potential implications of OBBBA on their state filings. Notably, Texas is among the states that recently issued updated IRC conformity guidance as detailed below.
Background
Historically, Texas adopted the IRC on a fixed conformity basis as of Jan. 1, 2007, known as the conformity date, for the Texas franchise tax.
The Texas franchise tax is calculated on a taxable entity’s margin — total revenue less specific enumerated deductions — which is unique to Texas. Due to the fixed conformity date and structure of the franchise tax, many adjustments were required when using the figures from the applicable federal income tax return to complete the Texas franchise tax return.
What’s new with the IRC conformity policy change guidance?
Changes include an IRC policy update, total revenue and apportionment changes, a one-time depreciation adjustment, and a OBBBA bonus depreciation update.
IRC policy update
The Texas Comptroller of Public Accounts, known as the comptroller, issued a press release on Dec. 1, 2025, stating “effective with the 2026 franchise tax report, Texas will align its franchise tax depreciation rules with the bonus depreciation provisions of the One Big Beautiful Bill.”
Due to the conformity date in the Texas franchise tax law, Texas has used the 2007 IRC for franchise tax depreciation calculations, so this update is very favorable for Texas taxpayers.
Subsequently, the comptroller issued additional guidance
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