SJR18

Regular Session

Proposing a constitutional amendment prohibiting the imposition of a tax on the realized or unrealized capital gains of an individual, family, estate, or trust.

LowStandard timeline

Low Cost

Effective:2025-09-01

Enforcing Agencies

Comptroller of Public Accounts • Texas Legislature

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: January 1, 2026 (Contingent upon voter approval).
Compliance Deadline: May 15, 2026 (Due date for the 2026 Franchise Tax Report).
Agency Rulemaking: The Comptroller of Public Accounts must revise Franchise Tax Rule 3.587 (Margin: Total Revenue) prior to the 2026 reporting season to explicitly exclude capital gains for the specific entities listed in the amendment.

Immediate Action Plan

November 4, 2025: Incorporate this proposition into trade association "Get Out The Vote" (GOTV) efforts; passage is required for enactment.
Q4 2025: Review entity structures. If operating as a Business Trust, prepare to adjust tax reporting methodology for the 2026 tax year.
Q1 2026: For pending asset sales involving trusts or estates, delay closing until after January 1, 2026, if commercially feasible.
Ongoing: Ensure all trust accounting software clearly distinguishes between "Ordinary Income" and "Capital Gains."

Operational Changes Required

Contracts

Mergers & Acquisitions (M&A): For transactions involving sellers structured as trusts or estates, deal teams should evaluate closing dates. Closing after January 1, 2026, ensures constitutional protection against state-level tax leakage on the proceeds.
Trust Indentures: Review trust agreements to ensure the definition of "Capital Gains" aligns with federal tax code definitions. This ensures that distributions are automatically categorized correctly to trigger the state-level protection.

Hiring/Training

Tax Preparation Coordination: In-house tax teams and external CPAs must be instructed to modify the "Total Revenue" calculation for Business Trusts. They must strip realized capital gains from the revenue base for the 2026 report.

Reporting & Record-Keeping

Fund Segregation: Trusts and Estates must maintain rigorous accounting that separates corpus/capital appreciation from ordinary income (rents, dividends, interest). The amendment prohibits taxing *gains*, but does not prohibit taxing *income*.
Asset Basis Tracking: Entities must maintain federal-level basis tracking. In the event of a state audit regarding the nature of a transaction (business inventory vs. capital asset), federal definitions will likely control.

Fees & Costs

Tax Liability Reduction: Business Trusts holding appreciating assets (real estate, IP) will see a reduction in Franchise Tax liability.
No New Fees: There are no new filing fees associated with this amendment.

Strategic Ambiguities & Considerations

Definition of "Family": The text prohibits taxing the gains of a "family," which is not a standard taxable entity type. It is unclear if this protection extends to Family Limited Partnerships (FLPs) directly, or if the FLP is treated as a pass-through where the partners claim the protection. Watch for Comptroller guidance defining "Family" in the context of business entities.
Entity Classification: The Fiscal Note assumes corporations will not convert to Business Trusts to utilize this exemption. However, the law creates a disparity where a Business Trust is exempt from tax on capital gains, but a C-Corp or LLC taxed as a C-Corp is not.
"Unrealized" Gains: While Texas currently has no mechanism to tax unrealized gains, the Comptroller may need to clarify the boundary between "unrealized gains" and "constructive receipt" of income to prevent aggressive tax avoidance strategies.

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Legislative Timeline

This bill's path through the Texas Legislature

Passed House

Passed House

TopicsResolutions Resolutions--constitutional Amendments Taxation Taxation--inheritance

Official Analysis

View HRO Analysis View All Bill Documents

BILL ANALYSIS

Senate Research Center	S.J.R. 18
89R2668 RDS-F	By: Perry
	Finance
	2/20/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Currently, several states do not have a state income tax, including Texas. Although state law in the State of Washington prohibits the state from adopting an income tax, the Washington Legislature successfully enacted a capital gains tax that has survived court challenges.

Many Texans were previously reassured that Texas would not be able to enact a capital gains tax because the state has a constitutional amendment barring the establishment of an income tax.

However, after this recent development in the State of Washington and discussions in Congress about taxing unrealized capital gains, many Texans are concerned that a future legislature could enact a capital gains tax.

This constitutional amendment would prohibit Texas from ever enacting a capital gains tax on realized or unrealized capital gains of an individual, family, estate, or trust. This amendment will ensure Texas remains a tax friendly state.

S.J.R. 18 proposes a constitutional amendment prohibiting the imposition of a tax on the realized or unrealized capital gains of an individual, family, estate, or trust.

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 Article VIII, Texas Constitution, by adding Section 24-b, as follows:

Sec. 24-b. (a) Prohibits the legislature, subject to Subsection (b) of this section, from imposing a tax on the realized or unrealized capital gains of an individual, family, estate, or trust, including a tax on the sale or transfer of a capital asset that is payable by the individual, family, estate, or trust selling or transferring the asset.

(b) Prohibits this section from being construed as prohibiting the imposition of an ad valorem tax on property, a sales tax on the retail sale of goods or services, or a use tax on the storage, use, or other consumption in this state of goods or services purchased at retail.

SECTION 2. Requires that the proposed constitutional amendment be submitted to the voters at an election to be held November 4, 2025. Sets forth the required language of the ballot.

Senate Authors

Sen. Charles PerryRepublican · Primary Author

Coauthors (6)

House Sponsors

Rep. Giovanni CapriglioneRepublican · Primary Sponsor

Joint Sponsors

William Metcalf (R)

Bill Text(with markup)

S.J.R. No. 18

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original


	proposing a constitutional amendment prohibiting the imposition of
	a tax on the realized or unrealized capital gains of an individual,
	family, estate, or trust.
	BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Article VIII, Texas Constitution, is amended by
	adding Section 24-b to read as follows:
	Sec. 24-b. (a) Subject to Subsection (b) of this section,
	the legislature may not impose a tax on the realized or unrealized
	capital gains of an individual, family, estate, or trust, including
	a tax on the sale or transfer of a capital asset that is payable by
	the individual, family, estate, or trust selling or transferring
	the asset.
	(b) This section may not be construed as modifying the
	applicability or prohibiting the imposition or change in the rate
	of:
	(1) an ad valorem tax on property;
	(2) a sales tax on the sale of goods or services; or
	(3) a use tax on the storage, use, or other consumption
	in this state of goods or services.
	SECTION 2. This proposed constitutional amendment shall be
	submitted to the voters at an election to be held November 4, 2025.
	The ballot shall be printed to permit voting for or against the
	proposition: "The constitutional amendment prohibiting the
	imposition of a tax on the realized or unrealized capital gains of
	an individual, family, estate, or trust."

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:	SJR18 by Perry (Proposing a constitutional amendment prohibiting the imposition of a tax on the realized or unrealized capital gains of an individual, family, estate, or trust.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for SJR18, As Introduced: a negative impact of ($191,689) through the biennium ending August 31, 2027.

Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($304,000) for the 2026-27 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.

General Revenue-Related Funds, Five- Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2026	($191,689)
2027	$0
2028	$0
2029	$0
2030	$0

All Funds, Five-Year Impact:

Fiscal Year	Probable Revenue (Loss) from Property Tax Relief Fund 304	Probable (Cost) from General Revenue Fund 1
2026	($152,000)	($191,689)
2027	($152,000)	$0
2028	($152,000)	$0
2029	($152,000)	$0
2030	($152,000)	$0

Fiscal Analysis

The proposed resolution would amend Article VIII of the Texas Constitution to add Section 24-b. This section would prohibit the Legislature from imposing a tax on the realized or unrealized capital gains of an individual, family, estate, or trust; including a tax on the sale or transfer of a capital asset that is payable by the individual, family, estate, or trust selling or transferring the asset.

The section to be added would not prohibit: the imposition of ad valorem taxes on property; a sales tax on the retail sale of goods or services; or a use tax on storage, use or other consumption of goods or services purchased at retail.

The proposed amendment would be submitted to voters at an election to be held November 4, 2025, and would take effect January 1, 2026, if passed.

Methodology

This estimate, provided by the Comptroller of Public Accounts, is based on the assumption that business trusts would continue to be taxed on all revenue other than capital gains under current law and that other taxable entities would not elect to become business trusts in order to take advantage of the capital gain exemption. In Report Year 2024, the elimination of the capital gains tax would have resulted in a $152,000 loss of franchise tax revenue. Actual revenue loss would depend on the number of entities finally subject to the amendment's provisions and each entity's choice-once capital gains and all other prohibited items are removed from taxability-of the franchise tax base to be used and the applicable tax rate.

The cost to the state for publication of the resolution is $191,689, which is included in the table above.

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 SJR18

What does Texas SJR18 do?

SJR 18 proposes a Constitutional Amendment prohibiting the State of Texas from taxing realized or unrealized capital gains on individuals, families, estates, and trusts. While primarily a preventative measure against future wealth taxes, this amendment creates an immediate operational change for Business Trusts subject to the Texas Franchise Tax, effectively exempting their capital asset sales from the apportionment base beginning in the 2026 tax year. Implementation Timeline Effective Date: January 1, 2026 (Contingent upon voter approval).

Who authored SJR18?

SJR18 was authored by Texas Senator Charles Perry during the Regular Session.

When was SJR18 signed into law?

SJR18 was signed into law by Governor Greg Abbott on May 7, 2025.

Which agencies enforce SJR18?

SJR18 is enforced by Comptroller of Public Accounts and Texas Legislature.

How urgent is compliance with SJR18?

The compliance urgency for SJR18 is rated as "low". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SJR18?

The cost impact of SJR18 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does SJR18 address?

SJR18 addresses topics including resolutions, resolutions--constitutional amendments, taxation and taxation--inheritance.

Legislative data provided by LegiScanLast updated: November 25, 2025

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