---
title: "SB1058: Relating to the exclusion of certain securities transaction payments from the total revenue of a taxable entity that is a registered securities market operator."
bill_number: SB1058
session: Regular Session
status: Enacted
filed_date: 2025-02-03
signed_date: 2025-05-13
effective_date: 2026-01-01
primary_author: Tan Parker (R)
subjects:
  - Financial
  - Financial--General
  - Taxation
  - Taxation--Franchise
  - MORTGAGE BROKERS & BANKERS
compliance_urgency: moderate
cost_impact: low
enforcing_agencies:
  - Texas Comptroller of Public Accounts
canonical_url: "https://jdkey.com/texas-89th-legislature/sb1058-89th-regular"
source: JD Key Consulting - Texas Legislative Intelligence
---

# SB1058: Relating to the exclusion of certain securities transaction payments from the total revenue of a taxable entity that is a registered securities market operator.

**Status:** Signed into Law (May 13, 2025)
**Effective Date:** 2026-01-01

## Summary

## Executive Summary
SB1058 amends the Texas Tax Code to allow registered securities market operators (specifically NAICS 523210) to exclude "transaction rebate payments" made to brokers or dealers from their total revenue calculations. This legislation is designed to lower the Franchise Tax burden for exchanges, such as the incoming Texas Stock Exchange (TXSE), by treating liquidity incentives as pass-through costs rather than taxable revenue.

## Implementation Timeline
- **Effective Date:** January 1, 2026.
- **Compliance Deadline:** **Immediate.** While the law applies to reports due in 2026, the Texas Franchise Tax is based on the prior year's business activity. You must segregate these payments in your accounting systems starting **January 1, 2025**, to claim the exclusion on the May 2026 report.
- **Agency Rulemaking:** The Texas Comptroller has not yet issued specific guidance on the definition of "incentivize." Expect rulemaking or policy memos between Q4 2025 and Q1 2026 to clarify acceptable documentation for these rebates.

## Operational Changes Required

### Contracts
Master Service Agreements (MSAs) with Market Makers and Liquidity Providers must be reviewed.
*   **Terminology:** Amend contracts to explicitly label payments as "Transaction Rebate Payments" intended to "incentivize liquidity."
*   **Risk:** If contracts define these as "marketing fees" or generic "administrative fees," the Comptroller is likely to disallow the exclusion.

### Hiring/Training
*   **Finance/Accounting:** Staff must be trained to distinguish between standard commission expenses and liquidity rebates.
*   **Settlement Teams:** Personnel managing settlement software must ensure automated tagging is configured correctly to separate these specific outflows.

### Reporting & Record-Keeping
*   **General Ledger:** Create specific GL codes for "Transaction Rebate Payments." Do not commingle these with Cost of Goods Sold (COGS).
*   **Counterparty Verification:** Maintain active files proving payment recipients meet the federal definition of a "Broker" (15 U.S.C. Section 78c(a)(4)) or "Dealer" (15 U.S.C. Section 78c(a)(5)).
*   **Transaction Linking:** Ensure your system can reconcile rebates to specific securities transactions or transaction batches.

### Fees & Costs
*   **Tax Liability:** This results in a decrease in Franchise Tax liability. Adjust tax reserve models for FY 2026.
*   **Implementation Cost:** Minimal one-time administrative costs to update accounting software and legal contract review.

## Strategic Ambiguities
*   **"Incentivize" vs. "Compensate":** The statute requires the rebate be used to "incentivize" liquidity. It is unclear if fixed monthly payments qualify. **Guidance:** Structure rebates as variable payments tied to volume; fixed fees are at high risk of audit scrutiny.
*   **NAICS Classification:** The law strictly limits this to NAICS 523210. If your entity operates under a different primary code (e.g., general financial investment), you may be ineligible even if you perform similar functions.

## Action Plan
*   **Direct the CFO** to isolate "Transaction Rebate Payments" in the General Ledger immediately (retroactive to Jan 1, 2025).
*   **Audit current MSAs** with brokers/dealers to ensure payment descriptions align with the statutory definition of a rebate.
*   **Verify NAICS registration** on federal tax filings to ensure it matches code 523210.
*   **Update Pro-Forma** tax models for the May 15, 2026, Franchise Tax Report to reflect the reduced revenue base.

## Compliance Badges
- **Urgency:** Moderate
- **Cost Impact:** Low (Cost Savings)
- **Primary Enforcing Agency:** Texas Comptroller of Public Accounts

## Business Impact

- **Compliance Urgency:** Moderate
- **Cost Impact:** Low
- **Enforcing Agencies:** Texas Comptroller of Public Accounts

## Key Compliance Information

### Reporting Requirements

- **Who:** Registered securities market operators (NAICS 523210 subject to SEC/CFTC regulation)
  - **What:** Exclude transaction rebate payments made to brokers or dealers from total revenue calculations
  - **When:** Franchise tax reports due on or after January 1, 2026
  - **To Whom:** Texas Comptroller of Public Accounts

## Official Analysis

**BILL ANALYSIS**





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Senate
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S.B. 1058

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89R8403 SRA-F

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By: Parker

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Business & Commerce

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3/13/2025

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As Filed

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**AUTHOR'S / SPONSOR'S STATEMENT OF
INTENT**



Texas
currently has no operating stock exchanges, but as the state continues to grow
as a financial hub, attracting a national stock exchange would be a natural
next step. However, the Texas Tax Code is unclear on how the Texas franchise tax
applies to stock exchanges, creating uncertainty that could deter potential
entrants.



Most
major U.S. stock exchanges use a maker-taker pricing model to facilitate
trading. This model encourages liquidity by rewarding participants who place
limit orders (makers) with rebates while charging fees to those who execute
trades immediately (takers). For example, if a maker rebate is $0.0025 per
share and a taker fee is $0.0030 per share, a stock exchange earns a net
revenue of $0.50 per 1,000 shares traded after paying out rebates. Given the
volume of trades on national exchanges, these rebates represent a significant
portion of transaction-based expenses, impacting the actual revenue a stock
exchange earns.



S.B. 1058
seeks to clarify how the Texas franchise tax applies to stock exchanges by
allowing transaction rebates to be deducted from total revenue when calculating
taxable margin. This adjustment ensures that stock exchanges are taxed on their
actual net revenue rather than an inflated figure that includes rebate
payments.



As proposed,
S.B. 1058 amends current law relating to the
exclusion of certain securities transaction payments from the total revenue of
a taxable entity that is an exchange or a member of an exchange for purposes of
the franchise tax.



**RULEMAKING AUTHORITY**



This bill does not expressly grant any
additional rulemaking authority to a state officer, institution, or agency.



**SECTION BY SECTION ANALYSIS**



SECTION 1. Amends Section 171.0001(13-a),
Tax Code, to redefine "security."



SECTION 2. Amends Section 171.1011, Tax
Code, by adding Subsections (y) and (z), as follows:



(y) Requires a taxable entity to exclude from its total revenue, if the
entity is an exchange, transaction rebate payments made by the exchange to a
member of the exchange as part of a securities transaction and, if the entity
is a member of an exchange, transaction rebate payments made to the member by
the exchange as part of a securities transaction.



(z) Defines "exchange," "member," "securities
transaction," and "transaction rebate payment."



SECTION 3. Makes application of this Act
prospective.



SECTION 4. Effective date: January 1, 2026.

## Topics

- Financial
- Financial--General
- Taxation
- Taxation--Franchise
- MORTGAGE BROKERS & BANKERS

## Author

**Primary Author:** Tan Parker (R)

## Source Links

- [Full Interactive Analysis](https://jdkey.com/texas-89th-legislature/sb1058-89th-regular)
- [Texas Legislature Online](https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=SB1058)
- [LegiScan](https://legiscan.com/TX/bill/SB1058/2025)

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*Analysis provided by [JD Key Consulting](https://jdkey.com). For questions about Texas legislative strategy, contact us at [jdkey.com/contact](https://jdkey.com/contact).*