SB263

Regular Session

Relating to the computation of the cost of goods sold by television and radio broadcasters for purposes of the franchise tax.

LowStandard timeline

Low Cost

Effective:2025-09-01

Enforcing Agencies

Texas Comptroller of Public Accounts

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: September 1, 2025 (Immediate if passed by 2/3 supermajority).
Compliance Deadline: Immediate/Retrospective. Because the bill defines itself as a clarification of existing law, you must apply this methodology to the Franchise Tax Report due May 15, 2025, and utilize it for any amended returns for open tax periods (generally the prior 4 years).
Agency Rulemaking: The Comptroller is not explicitly required to issue new rules immediately, but may eventually update Rule 3.588 to align with the statute. Expect a "regulatory gray zone" regarding the allocation of costs between broadcast and digital-only streams until specific guidance is issued.

Immediate Action Plan

Immediately forward this analysis to your external tax preparer with instructions to apply SB263 standards to the May 15, 2025 filing.
Audit Defense: If you are currently under audit or in administrative hearings regarding COGS disallowance, instruct counsel to introduce SB263 immediately as evidence of legislative intent.
Verify FCC License Status: Confirm all entities claiming this deduction hold active licenses under 47 C.F.R. Part 73 or 74; non-licensed subsidiaries must be treated differently.
Review Prior Years: Assess the last four tax years to determine if an amended return is warranted to claim missed deductions for broadcast rights or amortization.

Operational Changes Required

Contracts

Asset Purchase Agreements (APAs): When acquiring stations, ensure "broadcast rights" and "licensing rights" are clearly valued and itemized. This statute explicitly protects the amortization of these specific assets as COGS, potentially improving the tax efficiency of the acquisition.
Tax Engagement Letters: Update agreements with external CPA firms to ensure they are applying SB263 logic to current filings and reviewing open tax years for potential refund claims.

Hiring/Training

Finance Team Training: Staff preparing the "Cost of Goods Sold" worksheet (Form 05-158) must be trained to distinguish between *general* depreciation (not COGS) and *production/broadcast* depreciation (deductible COGS under this law).

Reporting & Record-Keeping

FCC License Verification: You must maintain a valid copy of your FCC license under 47 C.F.R. Part 73 or 74 in your permanent tax file. This is the statutory trigger for eligibility.
Chart of Accounts: Restructure your general ledger to segregate "Broadcast Rights Fees" (e.g., syndication, sports rights, music licensing) from general administrative expenses. The audit trail must clearly link these expenses to the "acquisition, production, or use" of broadcast property.

Fees & Costs

No New Fees: There are no new state fees associated with this filing.
Budget Impact: Positive. This secures a potentially aggressive deduction strategy, preventing future tax liabilities and penalties associated with COGS disallowance.

Strategic Ambiguities & Considerations

"Principal Business Activity": The law applies to entities where broadcasting is the *principal* activity. If your entity derives significant revenue from non-broadcast sources (e.g., digital marketing services, event hosting, or digital-only streaming ads), the Comptroller may challenge your eligibility.
Digital vs. Over-the-Air Allocation: The statute protects costs for "television or radio broadcasting" via FCC license. It is unclear if the Comptroller will attempt to disallow a portion of costs attributed to the *digital simulcast* of that content. Until rulemaking clarifies, maintain the position that costs to produce the primary broadcast signal are fully deductible.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsTaxation Taxation--franchise Radio Television

Official Analysis

View HRO Analysis View All Bill Documents

BILL ANALYSIS

Senate Research Center	S.B. 263
89R869 SRA-F	By: Perry
	Finance
	2/19/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

S.B. 263 confirms that certain existing franchise tax provisions applicable to broadcasting apply not only to free, over-the-air, local television broadcasters licensed by the Federal Communications Commission (FCC), but also to similarly situated, free, over-the-air, local FCC licensed radio broadcasters.

This clarification of law is consistent with current Tax Code provisions applicable to broadcasting and "live and prerecorded television and radio programs," that FCC-licensed radio broadcasters may take cost of goods sold into consideration when calculating franchise tax liability. This clarification also helps ensure franchise tax consistency between radio and television broadcasters.

As proposed, S.B. 263 amends current law relating to the computation of the cost of goods sold by television and radio broadcasters 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 171.1012(o), Tax Code, as follows:

(o) Requires that the cost of goods sold for a taxable entity, if the taxable entity, including a taxable entity with respect to which cost of goods sold is determined pursuant to Section 171.1014(e)(1) (relating to certain requirements regarding combined groups when determining the taxable margin of a taxable entity), whose principal business activity is film or television production, television or radio broadcasting, the distribution of tangible personal property described by Subsection (a)(3)(A)(ii) (relating to including films and certain other mass-distributed recordings in the definition of tangible personal property), or any combination of these activities, be the costs described in Section 171.1012 (Determination of Cost of Goods Sold) in relation to the property and include depreciation, amortization, and other expenses directly related to the acquisition, production, or use of the property, including expenses for the right to broadcast or use the property. Defines "television or radio broadcasting." Makes a nonsubstantive change.

SECTION 2.� Provides that the amendment made by this Act is a clarification of existing law and does not imply that existing law is authorized to be construed as inconsistent with the law as amended by this Act.

SECTION 3. �Effective date: upon passage or September 1, 2025.

Senate Authors

Sen. Charles PerryRepublican · Primary Author

House Sponsor

Rep. Angie ButtonRepublican · Primary Sponsor

Bill Text(with markup)

S.B. No. 263

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to the computation of the cost of goods sold by television
	and radio broadcasters for purposes of the franchise tax.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Section 171.1012(o), Tax Code, is amended to
	read as follows:
	(o) If a taxable entity, including a taxable entity with
	respect to which cost of goods sold is determined pursuant to
	Section 171.1014(e)(1), whose principal business activity is film
	or television production, television or radio broadcasting, [or]
	the distribution of tangible personal property described by
	Subsection (a)(3)(A)(ii), or any combination of these activities,
	elects to subtract cost of goods sold, the cost of goods sold for
	the taxable entity shall be the costs described in this section in
	relation to the property and include depreciation, amortization,
	and other expenses directly related to the acquisition, production,
	or use of the property, including expenses for the right to
	broadcast or use the property. For purposes of this subsection,
	"television or radio broadcasting" means television or radio
	broadcasting under a television or radio broadcast license issued
	by the Federal Communications Commission and regulated under 47
	C.F.R. Part 73 or 74.
	SECTION 2. The amendment made by this Act is a clarification
	of existing law and does not imply that existing law may be
	construed as inconsistent with the law as amended by this Act.
	SECTION 3. This Act takes effect immediately if it receives
	a vote of two-thirds of all the members elected to each house, as
	provided by Section 39, Article III, Texas Constitution. If this
	Act does not receive the vote necessary for immediate effect, this
	Act takes effect September 1, 2025.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


March 4, 2025

TO:	Honorable Joan Huffman, Chair, Senate Committee on Finance

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB263 by Perry (Relating to the computation of the cost of goods sold by television and radio broadcasters for purposes of the franchise tax.), As Introduced

No fiscal implication to the State is anticipated.

The bill would amend Section 171.1012(o) of the Tax Code (franchise tax) to clarify the list of taxable entities eligible to compute cost of goods sold includes those whose principal business activity is television and radio broadcasting. Cost of goods sold under this paragraph includes depreciation, amortization, and other expenses directly related to the acquisition, production, or use of the property, including expenses for the right to broadcast or use the property.

The bill would define “television or radio broadcasting” as television or radio broadcasting under a television or radio broadcast license issued by the Federal Communications Commission.

The bill would codify current administrative practice and thus have no fiscal implications.

The bill would take effect immediately upon enactment, assuming it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2025.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:

304 Comptroller of Public Accounts

LBB Staff:

JMc, KK, SD

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Frequently Asked Questions

Common questions about SB263

What does Texas SB263 do?

SB263 amends the Texas Tax Code to explicitly authorize FCC-licensed television and radio broadcasters to deduct depreciation, amortization, and licensing rights fees as Cost of Goods Sold (COGS) for franchise tax purposes. This legislation codifies current administrative practice as a "clarification of existing law," providing immediate statutory protection for these deductions against potential audit disallowance. Implementation Timeline Effective Date: September 1, 2025 (Immediate if passed by 2/3 supermajority).

Who authored SB263?

SB263 was authored by Texas Senator Charles Perry during the Regular Session.

When was SB263 signed into law?

SB263 was signed into law by Governor Greg Abbott on June 20, 2025.

Which agencies enforce SB263?

SB263 is enforced by Texas Comptroller of Public Accounts.

How urgent is compliance with SB263?

The compliance urgency for SB263 is rated as "low". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB263?

The cost impact of SB263 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does SB263 address?

SB263 addresses topics including taxation, taxation--franchise, radio and television.

Legislative data provided by LegiScanLast updated: November 25, 2025

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