Texas Nonprofit Tax Exemption Guide
Complete guide to nonprofit tax exemptions in Texas — income tax, sales tax, franchise tax, and property tax. Learn what exemptions are available, what applications are required, and the step-by-step process.
Texas nonprofits benefit from no state income tax. Here's what you need to know about all available tax exemptions.
Tax Exemption Overview
| Tax Type | Status | Application Required? |
|---|---|---|
| Income Tax | No state income tax — no exemption needed | — |
| Sales Tax | Exemption available — separate application required | ✓ |
| Franchise Tax | Franchise tax eliminated — see current requirements | — |
| Property Tax | Exemption available — separate application required | ✓ |
Income Tax
No state income tax — no exemption neededTEXAS STATE INCOME TAX ON NONPROFITS
- NO STATE INCOME TAX: Texas has no personal or corporate state income tax
- Nonprofits do NOT owe state income tax (not applicable)
- Federal 501(c)(3) exemption does not need separate Texas income tax exemption
- Tax exemption not auto-granted: Organization must apply for federal
exemption and Texas tax exemptions separately
FEDERAL 501(c)(3) APPLICATION
- Form: IRS Form 1023 (full application) or Form 1023-EZ (streamlined)
- Submission: Electronic submission via Pay.gov
- User fee: Required (varies by form type - 2026 fees NEEDS VERIFICATION)...
Sales Tax
Exemption available — separate application requiredSALES TAX EXEMPTION STATUS
- NOT AUTOMATIC: Nonprofits are NOT automatically exempt from sales tax
- REQUIRED APPLICATION: Separate exemption application must be filed with
Texas Comptroller of Public Accounts
- Applies to: Purchases of taxable items when properly documented
EXEMPTION APPLICATION FORMS
Organizations use different forms based on exemption type:
1. FORM AP-204 (Application for Exemption - Federal and All Others)
- For 501(c)(3), (4), (8), (10), or (19) organizations
- Requirements:
* Copy of IRS exemption determination letter...
Action Required: You'll need to apply for this exemption.
Form: AP-204
Franchise Tax
Franchise tax eliminated — see current requirementsTEXAS FRANCHISE TAX ON NONPROFITS
Texas NO LONGER imposes a franchise tax on most businesses (replaced by Texas
Business & Occupation Tax as of January 1, 2022). However, tax code provisions
still reference franchise tax exemptions for certain organizations.
FRANCHISE TAX EXEMPTION
- Exempt organizations: 501(c)(3), (4), (8), (10), or (19) with federal
exemption
- Also exempt: 501(c)(5), (6), (7) [with federal exemption]
- Application: File Form AP-204 (Federal and All Others) or Form AP-205
(Charitable)
- Result: Approved exemption = organization does not file franchise tax reports
...
Property Tax
Exemption available — separate application requiredPROPERTY TAX EXEMPTION STATUS
- NOT AUTOMATIC: Nonprofits must apply
- Jurisdiction: Local county tax appraisal district (not state-level)
- Available to: Organizations primarily engaged in charitable activities
STEP 1: STATE COMPTROLLER DETERMINATION (Form AP-199)
- Form: AP-199 (Texas Application for Organizations Engaged Primarily in
Performing Charitable Functions and for Corporations that Hold Title to
Property for Such Organizations)
- Requirement: Organization must be engaged primarily in charitable activities
(see Section 4 definition)...
Action Required: You'll need to apply for this exemption.
Ready to get your Texas nonprofit tax-exempt?
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