The franchise tax is imposed upon all corporations that are chartered to do business in Texas or have a Certificate of Authority to do business in the state. The tax is based on taxable capital or earned surplus. Both components are apportioned in Texas using a single gross receipts factor. Taxable capital is a corporation's stated capital (capital stock) plus surplus. The tax rate on taxable capital is 0.25 percent per year of privilege period. Earned surplus includes federal net taxable income with certain modifications. The tax rate on earned surplus is 4.5%. Corporations pay the higher of taxable capital or the tax on earned surplus. Those that owe less than $100 or have less than $150,000 of gross receipts do not pay any tax, but must file a report.