SB266

Regular Session

Relating to certain tax and fee collection procedures and taxpayer suits.

ModeratePlan for compliance

Low Cost

Effective:2025-09-01

Enforcing Agencies

Comptroller of Public Accounts • Attorney General of Texas

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: September 1, 2025 (or immediately upon signature if passed by a 2/3 vote).
Compliance Deadline: Immediate upon Effective Date. The law applies retroactively to any managed audit currently in progress and any proceeding pending or filed on or after the effective date.
Agency Rulemaking: The Comptroller must update audit manuals regarding the removal of the "contemporaneous" standard. Expect a "regulatory gray zone" regarding what constitutes "sufficient" non-contemporaneous evidence until the first wave of bypass lawsuits concludes.

Immediate Action Plan

1. Audit Inventory: Identify all active managed audits. If the bill passes, determine immediately if you will utilize the Bypass option for these pending cases.
2. Credit Check: Verify your capacity to issue a Letter of Credit or Surety Bond to cover potential disputed tax liabilities if you plan to litigate.
3. Document Recovery: If you previously accepted audit assessments due to a lack of "contemporaneous" records, pause settlements. Prepare to introduce retrospective evidence (e.g., new vendor certifications) once the law is effective.
4. Update AP Protocols: Hard-code the 20-day payment deadline for tax judgments into your financial software to prevent the 10% penalty.

Operational Changes Required

Contracts

Tax Indemnity Agreements (M&A/MSAs): Review agreements where you indemnify a buyer or client for taxes. You must amend these to ensure you retain control over the forum selection (Administrative vs. District Court) to utilize the "Bypass" option.
Outside Counsel Engagement Letters: Update terms to require counsel to draft the "Notice of Intent to Bypass" with the same level of detail as a court petition, as the law limits future litigation strictly to issues raised in this initial notice.

Hiring/Training

Tax & Accounting Staff: Train staff on the new "Bypass" workflow. They must identify material facts and legal bases within 60 days of receiving a Managed Audit Letter of Results.
Accounts Payable: Establish a "Red Alert" protocol for tax judgments. Payment must be cleared within 20 days of a judgment becoming final to avoid the automatic 10% penalty.

Reporting & Record-Keeping

Evidence Generation: You are no longer required to possess "contemporaneous" records to prove a deduction or exemption. You may now create affidavits or obtain vendor statements *during* the audit to fill documentation gaps.
New Filing: Create a template for the "Notice of Intent to Bypass Redetermination." This document must assert specific disputed amounts and legal grounds; it is not a generic placeholder.

Fees & Costs

New Penalty Risk: A mandatory 10% penalty applies if the final amount due is not paid within 20 days of the judgment.
Litigation Security: If you choose the Bypass route, the Comptroller may require you to post a Surety Bond, Letter of Credit, or Cash Deposit to secure the disputed tax. Ensure your credit facility has capacity for this issuance.

Strategic Ambiguities & Considerations

"Sufficient" Documentation: While the law deletes "contemporaneous," it still requires records to be "sufficient." The Comptroller has not defined what non-contemporaneous records meet this standard. Expect auditors to initially reject "self-serving" affidavits created years after a transaction until case law settles the standard.
Conference Scheduling: The law requires a "Bypass Conference" before suing. If you fail to agree on a date within 90 days of your Notice, you lose the right to sue. The definition of a "good faith effort" to schedule this is vague; do not allow the Comptroller to run out the clock.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsTaxation Taxation--general Audits & Auditors Comptroller of Public Accounts Civil Remedies & Liabilities Taxation--property-appeal of Tax Decisions Attorney General

Official Analysis

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BILL ANALYSIS

Senate Research Center	S.B. 266
89R2947 BEF-F	By: Perry
	Finance
	3/11/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Currently, the refund bypass procedure does not apply to tax assessments from the results of managed audits. The Tax Code currently provides that a taxpayer may protest a tax assessment by: (1) paying the entire amount under protest and filing suit within 90 days or (2) going to the State Office of Administrative Hearings (SOAH), paying the "undisputed" amount, and then filing suit to challenge the "disputed" amount. Although collection actions are generally suspended, the Comptroller of Public Accounts (comptroller) nevertheless may file liens against the taxpayer while the suit is pending. Maneuvering a protest through administrative review and obtaining a hearing at the State Office of Administrative Hearings (SOAH) is a lengthy and expensive process for taxpayers.

S.B. 266 allows a taxpayer to challenge the results of a managed audit (for sales/use or natural gas production tax) by filing suit after completing a bypass conference with the comptroller. It makes conforming changes to Chapter 112. With respect to a managed audit that results in a net liability, it enjoins all collection action by the comptroller or attorney general while the suit is pending but the comptroller may require a bond or other security while the suit is pending.

S.B. 266 further builds upon the changes made by S.B. 903 from the 87th session, which provided a mechanism for taxpayers to bypass the administrative hearings process at SOAH and appeal the denial of a refund claim directly to a district court. S.B. 266 makes the same bypass mechanism available for taxpayers undergoing a managed audit at the comptroller's office.

Additionally, S.B. 266 permits the comptroller to utilize other alternatives in lieu of asserting tax liens in order to protect the state's fiscal interests in a disputed tax matter that is the subject of a lawsuit. These alternatives include requiring the taxpayer to provide security in the form of a cash deposit filed with the comptroller or paid into the registry of the court, a surety bond, a letter of credit, or other form of guarantee sufficient to secure payment of the disputed amount should the court rule in the state's favor.

As proposed, S.B. 266 amends current law relating to certain tax and fee collection procedures and taxpayer suits.

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 111.0041(c), Tax Code, as follows:

(c) Requires a taxpayer to produce sufficient, rather than contemporaneous, records and supporting documentation appropriate to the tax or fee for the transactions in question to substantiate and enable verification of the taxpayer's claim related to the amount of tax, penalty, or interest to be assessed, collected, or refunded in an administrative or judicial proceeding. Authorizes sufficient, rather than contemporaneous, records and supporting documentation appropriate to the tax or fee to include certain records. Makes a nonsubstantive change.

SECTION 2. Amends Section 111.0081, Tax Code, by amending Subsection (c) and adding Subsection (d), as follows:

(d) Provides that the penalty provided by Subsection (c) is abated with respect to the disputed amount that is the subject of a timely filed suit under Subchapter E (Suit After Redetermination), Chapter 112 (Taxpayers' Suits). Requires that a penalty of 10 percent of the amount due, exclusive of penalties and interest, if the amount determined to be due in a final judgment in the suit is not paid within 20 days after the day the judgment became final, be added.

SECTION 3. Amends Subchapter A, Chapter 111, Tax Code, by adding Section 111.0091, as follows:

Sec. 111.0091. DISPUTING RESULTS OF MANAGED AUDITS: NOTICE OF INTENT TO BYPASS REDETERMINATION PROCESS. (a) Authorizes a person who conducts a managed audit authorized by Section 151.0231 (Managed Audits) or 201.3021 (Managed Audits) to file with the comptroller of public accounts of the State of Texas (comptroller) a notice of intent to bypass the redetermination process under Section 111.009 (Redetermination). Requires that the notice of intent:

(1) be filed on or before the 60th day after the date the comptroller issues a letter notifying the person of the results of the managed audit;

(2) be in writing;

(3) assert the material facts and each specific legal basis for disputing the results of the managed audit; and

(4) specify the amounts of the disputed underpayments or overpayments contained in the report of the managed audit results.

(b) Authorizes a person who files a notice of intent under Subsection (a) to bypass the redetermination process under Section 111.009 and bring a suit under Subchapter D (Suit for Tax Refund), Chapter 112, if the person participated in a conference under Subsection (c), in which case the suit is required to be filed on or before the 60th day after the date the conference concludes or a later date agreed to by the comptroller, or the comptroller does not provide notice in the time required by Subsection (d) that a conference is required, in which case the suit is required to be be filed on or before the 90th day after the date the notice of intent was filed.

(c) Authorizes the comptroller to require a conference between a person who files a notice of intent under Subsection (a) and a designated officer or employee of the comptroller to clarify any fact or legal issue in dispute regarding the results of the managed audit and to discuss the availability of additional documentation that may assist in resolving outstanding issues regarding the managed audit. Authorizes the person who filed the notice of intent to amend a material fact or legal basis described by Subsection (a)(3) following the conference if the comptroller agrees in writing to the amendment.

(d) Requires the comptroller, if the comptroller requires a conference under Subsection (c), to notify the person of the conference requirement not later than the 30th day after the date the notice of intent under Subsection (a) was filed. Requires that the notice of the conference requirement be in writing and include a date and time for the conference. Requires that the conference date provided in the notice be not later than the 90th day after the date the notice of intent was filed.

(e) Authorizes the person who filed the notice of intent under Subsection (a) to request to reschedule the conference date provided in the notice under Subsection (d). Requires the comptroller to make a good faith effort to accommodate the request. Authorizes the person who filed the notice of intent, if the comptroller and the person do not agree on or before the 90th day after the date the notice of intent was filed to a rescheduled date for the conference, to, on or before the 120th day after the date the notice of intent was filed, rescind the notice of intent and petition the comptroller for a redetermination under Section 111.009.

(f) Provides that, except as provided by Subsection (e), a person who files a notice of intent under Subsection (a) waives the person's right to a redetermination under Section 111.009.

SECTION 4. Amends Section 112.052(d), Tax Code, to make a conforming change.

SECTION 5. Amends the heading to Subchapter D, Chapter 112, Tax Code, to read as follows:

SUBCHAPTER D. SUIT FOR TAX REFUND OR TO DISPUTE RESULTS OF MANAGED AUDIT

SECTION 6. Amends Section 112.151(f), Tax Code, to make a conforming change.

SECTION 7. Amends Subchapter D, Chapter 112, Tax Code, by adding Section 112.1511, as follows:

Sec. 112.1511. SUIT TO DISPUTE RESULTS OF MANAGED AUDIT. (a) Authorizes a person to sue the comptroller to dispute the results of a managed audit conducted under Section 151.0231 or 201.3021 if the person has been issued a letter by the comptroller notifying the person of the results of the managed audit and is authorized to bring the suit under Section 111.0091(b).

(b) Requires that the suit be brought against both the comptroller and the attorney general of the State of Texas (attorney general) and requires that it be filed in a district court.

(d) Requires that the amounts of the disputed underpayments or overpayments contained in the report of the managed audit results be set out in the original petition. Requires that a copy of the notice of intent filed under Section 111.0091(a) be attached to the original petition filed with the court and to the copies of the original petition served on the comptroller and the attorney general.

(e) Prohibits a person from intervening in the suit.

(f) Requires a taxpayer to produce sufficient records and supporting documentation appropriate to the tax or fee for the transactions in question to substantiate and enable verification of a taxpayer's claim relating to the amount of the tax, penalty, or interest to be assessed, collected, or refunded, as required by Section 111.0041, including the amounts of the disputed underpayments or overpayments contained in the report of the managed audit results.

(g) Provides that, after the comptroller has been timely served in a suit that complies with this section, the comptroller and the attorney general:

(1) are enjoined from collecting disputed underpayments identified in Section 111.0091(a)(4) from the person bringing the suit during the pendency of the suit; and

(2) are not enjoined from asserting tax liens or as an alternative to asserting tax liens, requiring the person to provide security in an amount sufficient to secure payment of the entire disputed amount, including penalties and accrued interest, that is the subject of the suit, and in the form of a cash deposit filed with the comptroller or paid into the registry of the court, a surety bond, a letter of credit, or another form of guarantee.

(h) Authorizes damages to be awarded under Chapter 65 (Injunction), Civil Practice and Remedies Code, if the court determines that all or part of the enjoined collection amounts under Subsection (g) were disputed solely for delay.

SECTION 8. Amends Section 112.152, as follows:

Sec. 112.152. ISSUES IN SUIT. (a) Authorizes only certain issues, as applicable, to be raised in a suit under Subchapter D, including material facts and legal bases contained in the notice of intent filed under certain sections, including Section 111.0091(a).

(b) Provides that the suit applies only to a tax liability period considered in the comptroller's decision or covered by the notice of intent filed under certain sections, including Section 111.0091, as applicable.

SECTION 9. Amends Section 112.201, Tax Code, by amending Subsection (c) and adding Subsections (c-1) and (c-2).

(c-1) Creates this subsection from existing text. Provides that, after the comptroller has been timely served in a suit that complies with this subchapter, the comptroller and the attorney general:

(1) creates this subdivision from existing text and makes nonsubstantive changes; and

(c-2) Creates this subsection from existing text. Authorizes damages to be awarded under Chapter 65, Civil Practice and Remedies Code, if the court determines that all or part of the enjoined collection amounts under Subsection (c-1) were disputed solely for delay.

SECTION 10. Amends Section 112.202, Tax Code, to make a conforming change.

SECTION 11. Repealer: Section 111.105(e) (relating to requiring a person claiming a refund to submit documentation to enable the comptroller to verify the claim), Tax Code.

SECTION 12. Provides that this Act applies to a managed audit that is in progress and an administrative or judicial proceeding that is pending or filed on or after the effective date of this Act, without regard to whether the taxes that are the subject of the managed audit or proceeding were due before, on, or after that date.

SECTION 13. Effective date: upon passage or September 1, 2025.

Senate Authors

Sen. Charles PerryRepublican · Primary Author

House Sponsor

Rep. Tom CraddickRepublican · Primary Sponsor

Bill Text(with markup)

S.B. No. 266

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to certain tax and fee collection procedures and taxpayer
	suits.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Section 111.0041(c), Tax Code, is amended to
	read as follows:
	(c) A taxpayer shall produce sufficient [~~contemporaneous~~]
	records and supporting documentation appropriate to the tax or fee
	for the transactions in question to substantiate and enable
	verification of the taxpayer's claim related to the amount of tax,
	penalty, or interest to be assessed, collected, or refunded in an
	administrative or judicial proceeding. Sufficient
	[~~Contemporaneous~~] records and supporting documentation appropriate
	to the tax or fee may include[~~, for example,~~] invoices, vouchers,
	checks, shipping records, contracts, or other equivalent records,
	such as electronically stored images of such documents, reflecting
	legal relationships and taxes collected or paid.
	SECTION 2. Section 111.0081, Tax Code, is amended by
	amending Subsection (c) and adding Subsection (d) to read as
	follows:
	(c) The amount of a determination made under this code is
	due and payable 20 days after a comptroller's decision in a
	redetermination hearing becomes final. Except as provided by
	Subsection (d), if [If] the amount of the determination is not paid
	within 20 days after the day the decision became final, a penalty of
	10 percent of the amount of the determination, exclusive of
	penalties and interest, shall be added.
	(d) The penalty provided by Subsection (c) is abated with
	respect to the disputed amount that is the subject of a timely filed
	suit under Subchapter E, Chapter 112. If the amount determined to
	be due in a final judgment in the suit is not paid within 20 days
	after the day the judgment became final, a penalty of 10 percent of
	the amount due, exclusive of penalties and interest, shall be
	added.
	SECTION 3. Subchapter A, Chapter 111, Tax Code, is amended
	by adding Section 111.0091 to read as follows:
	Sec. 111.0091. DISPUTING RESULTS OF MANAGED AUDITS: NOTICE
	OF INTENT TO BYPASS REDETERMINATION PROCESS. (a) A person who
	conducts a managed audit authorized by Section 151.0231 or 201.3021
	may file with the comptroller a notice of intent to bypass the
	redetermination process under Section 111.009. The notice of
	intent must:
	(1) be filed on or before the 60th day after the date
	the comptroller issues a letter notifying the person of the results
	of the managed audit;
	(2) be in writing;
	(3) assert the material facts and each specific legal
	basis for disputing the results of the managed audit; and
	(4) specify the amounts of the disputed underpayments
	or overpayments contained in the report of the managed audit
	results.
	(b) A person who files a notice of intent under Subsection
	(a) may bypass the redetermination process under Section 111.009
	and bring a suit under Subchapter D, Chapter 112, if:
	(1) the person participated in a conference under
	Subsection (c), in which case the suit must be filed on or before
	the 60th day after the date the conference concludes or a later date
	agreed to by the comptroller; or
	(2) the comptroller does not provide notice in the
	time required by Subsection (d) that a conference is required, in
	which case the suit must be filed on or before the 90th day after the
	date the notice of intent was filed.
	(c) The comptroller may require a conference between a
	person who files a notice of intent under Subsection (a) and a
	designated officer or employee of the comptroller to clarify any
	fact or legal issue in dispute regarding the results of the managed
	audit and to discuss the availability of additional documentation
	that may assist in resolving outstanding issues regarding the
	managed audit. The person who filed the notice of intent may amend
	a material fact or legal basis described by Subsection (a)(3)
	following the conference if the comptroller agrees in writing to
	the amendment.
	(d) If the comptroller requires a conference under
	Subsection (c), the comptroller shall notify the person of the
	conference requirement not later than the 30th day after the date
	the notice of intent under Subsection (a) was filed. The notice of
	the conference requirement must be in writing and include a date and
	time for the conference. The conference date provided in the notice
	must be not later than the 90th day after the date the notice of
	intent was filed.
	(e) The person who filed the notice of intent under
	Subsection (a) may request to reschedule the conference date
	provided in the notice under Subsection (d). The comptroller shall
	make a good faith effort to accommodate the request. If the
	comptroller and the person who filed the notice of intent do not
	agree on or before the 90th day after the date the notice of intent
	was filed to a rescheduled date for the conference, the person may
	on or before the 120th day after the date the notice of intent was
	filed rescind the notice of intent and petition the comptroller for
	a redetermination under Section 111.009.
	(f) Except as provided by Subsection (e), a person who files
	a notice of intent under Subsection (a) waives the person's right to
	a redetermination under Section 111.009.
	SECTION 4. Section 112.052(d), Tax Code, is amended to read
	as follows:
	(d) A taxpayer shall produce sufficient [~~contemporaneous~~]
	records and supporting documentation appropriate to the tax for the
	transactions in question to substantiate and enable verification of
	a taxpayer's claim relating to the amount of the tax, penalty, or
	interest that has been assessed or collected or will be refunded, as
	required by Section 111.0041.
	SECTION 5. The heading to Subchapter D, Chapter 112, Tax
	Code, is amended to read as follows:
	SUBCHAPTER D. SUIT FOR TAX REFUND OR TO DISPUTE RESULTS OF MANAGED
	AUDIT
	SECTION 6. Section 112.151(f), Tax Code, is amended to read
	as follows:
	(f) A taxpayer shall produce sufficient [~~contemporaneous~~]
	records and supporting documentation appropriate to the tax or fee
	for the transactions in question to substantiate and enable
	verification of a taxpayer's claim relating to the amount of the
	tax, penalty, or interest that has been assessed or collected or
	will be refunded, as required by Section 111.0041.
	SECTION 7. Subchapter D, Chapter 112, Tax Code, is amended
	by adding Section 112.1511 to read as follows:
	Sec. 112.1511. SUIT TO DISPUTE RESULTS OF MANAGED AUDIT.
	(a) A person may sue the comptroller to dispute the results of a
	managed audit conducted under Section 151.0231 or 201.3021 if the
	person:
	(1) has been issued a letter by the comptroller
	notifying the person of the results of the managed audit; and
	(2) is authorized to bring the suit under Section
	111.0091(b).
	(b) The suit must be brought against both the comptroller
	and the attorney general and must be filed in a district court.
	(c) The suit must be filed during the time provided by
	Section 111.0091(b) or it is barred.
	(d) The amounts of the disputed underpayments or
	overpayments contained in the report of the managed audit results
	must be set out in the original petition. A copy of the notice of
	intent filed under Section 111.0091(a) must be attached to the
	original petition filed with the court and to the copies of the
	original petition served on the comptroller and the attorney
	general.
	(e) A person may not intervene in the suit.
	(f) A taxpayer shall produce sufficient records and
	supporting documentation appropriate to the tax or fee for the
	transactions in question to substantiate and enable verification of
	a taxpayer's claim relating to the amount of the tax, penalty, or
	interest to be assessed, collected, or refunded, as required by
	Section 111.0041, including the amounts of the disputed
	underpayments or overpayments contained in the report of the
	managed audit results.
	(g) After the comptroller has been timely served in a suit
	that complies with this section, the comptroller and the attorney
	general:
	(1) are enjoined from collecting disputed
	underpayments identified in Section 111.0091(a)(4) from the person
	bringing the suit during the pendency of the suit; and
	(2) are not enjoined from:
	(A) asserting tax liens; or
	(B) as an alternative to asserting tax liens,
	requiring the person to provide security:
	(i) in an amount sufficient to secure
	payment of the entire disputed amount, including penalties and
	accrued interest, that is the subject of the suit; and
	(ii) in the form of a cash deposit filed
	with the comptroller or paid into the registry of the court, a
	surety bond, a letter of credit, or another form of guarantee.
	(h) Damages may be awarded under Chapter 65, Civil Practice
	and Remedies Code, if the court determines that all or part of the
	enjoined collection amounts under Subsection (g) were disputed
	solely for delay.
	SECTION 8. Section 112.152, Tax Code, is amended to read as
	follows:
	Sec. 112.152. ISSUES IN SUIT. (a) The only issues that may
	be raised in a suit under this subchapter are, as applicable, the:
	(1) grounds of error contained in the motion for
	rehearing; or
	(2) material facts and legal bases contained in the
	notice of intent filed under Section 111.0091(a) or 111.106(a).
	(b) The suit applies only to a tax liability period
	considered in the comptroller's decision or covered by the notice
	of intent filed under Section 111.0091 or 111.106, as applicable.
	SECTION 9. Section 112.201, Tax Code, is amended by
	amending Subsection (c) and adding Subsections (c-1) and (c-2) to
	read as follows:
	(c) A person bringing a suit under this subchapter may pay
	the disputed amounts as provided by Chapter 111. A disputed amount
	that is not paid as provided by Chapter 111 and that is determined
	to be due in a final judgment accrues penalties and interest as
	provided by Chapter 111.
	(c-1) After the comptroller has been timely served in a suit
	that complies with this subchapter, the comptroller and the
	attorney general:
	(1) are enjoined from collecting disputed amounts from
	the person bringing the suit during the pendency of the suit; and
	(2) [~~but~~] are not enjoined from:
	(A) asserting tax liens; or
	(B) as an alternative to asserting tax liens,
	requiring the person to provide security:
	(i) in an amount sufficient to secure
	payment of the entire disputed amount, including penalties and
	accrued interest, that is the subject of the suit; and
	(ii) in the form of a cash deposit filed
	with the comptroller or paid into the registry of the court, a
	surety bond, a letter of credit, or another form of guarantee.
	(c-2) Damages may be awarded under Chapter 65, Civil
	Practice and Remedies Code, if the court determines that all or part
	of the enjoined collection amounts under Subsection (c-1) were
	disputed solely for delay.
	SECTION 10. Section 112.202, Tax Code, is amended to read as
	follows:
	Sec. 112.202. RECORDS. A person shall produce, in
	connection with a suit under this subchapter, sufficient
	[~~contemporaneous~~] records and supporting documentation appropriate
	to the tax for the transactions in question to substantiate and
	enable verification of the person's claim relating to the amount of
	the tax, penalty, or interest that has been assessed or collected,
	as required by Section 111.0041.
	SECTION 11. Section 111.105(e), Tax Code, is repealed.
	SECTION 12. This Act applies to a managed audit that is in
	progress and an administrative or judicial proceeding that is
	pending or filed on or after the effective date of this Act, without
	regard to whether the taxes that are the subject of the managed
	audit or proceeding were due before, on, or after that date.
	SECTION 13. 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 14, 2025

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

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB266 by Perry (Relating to certain tax and fee collection procedures and taxpayer suits.), As Introduced

No fiscal implication to the State is anticipated.

The bill would affect procedures regarding disposition of taxpayers' claims or disputes but would not alter tax base, rate, exemption policy or other factors determining tax liabilities and accordingly would not have 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, and would apply to a managed audit that is in progress and an administrative or judicial proceeding that is pending or filed on or after the effective date of the bill.

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 SB266

What does Texas SB266 do?

SB266 fundamentally restructures Texas tax audit defense by allowing businesses to bypass the Comptroller’s administrative redetermination process and file suit directly in District Court for managed audits. Crucially, it removes the requirement that records be "contemporaneous," allowing retrospective documentation to substantiate claims, while simultaneously imposing a strict 10% penalty for failure to pay final judgments within 20 days. Implementation Timeline Effective Date: September 1, 2025 (or immediately upon signature if passed by a 2/3 vote).

Who authored SB266?

SB266 was authored by Texas Senator Charles Perry during the Regular Session.

When was SB266 signed into law?

SB266 was signed into law by Governor Greg Abbott on May 24, 2025.

Which agencies enforce SB266?

SB266 is enforced by Comptroller of Public Accounts and Attorney General of Texas.

How urgent is compliance with SB266?

The compliance urgency for SB266 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB266?

The cost impact of SB266 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does SB266 address?

SB266 addresses topics including taxation, taxation--general, audits & auditors, comptroller of public accounts and civil remedies & liabilities.

Legislative data provided by LegiScanLast updated: November 25, 2025

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