|
House Bill 500 |
House Author: Hilderbran et al. |
|
Effective: See below |
Senate Sponsor: Hegar et al. |
House Bill 500 amends the Tax Code to expand the definition of "retail trade," for purposes of the franchise tax, to include automotive repair shop services; rental-purchase agreements; and the renting or leasing of tools, party and event supplies, furniture, and heavy construction equipment. The bill provides a temporary franchise tax rate reduction for non-EZ rate filers, reducing the existing rate of one percent of taxable margin to a rate of 0.975 percent for the 2014 tax year and 0.95 percent for the 2015 tax year and reducing the current rate of 0.5 percent for a taxable entity primarily engaged in retail or wholesale trade to a rate of 0.4875 percent for the 2014 tax year and 0.475 percent for the 2015 tax year. The rate reductions for 2015 are contingent on certification by the comptroller of public accounts that sufficient surplus revenue will be available to offset the loss of tax revenue that would result from the rate reduction.
House Bill 500 provides a taxable entity the option of determining its taxable margin on the basis of the taxable entity's total revenue from its entire business minus $1 million if that amount is less than the alternative computations of taxable margin.
House Bill 500 exempts from the franchise tax a corporation formed by one or more political subdivisions to negotiate the purchase of electricity on those local governments' behalf and a nonadmitted insurance organization that is subject to an occupation tax or any other tax that is imposed for the privilege of doing business in another state or a foreign jurisdiction.
House Bill 500 sets out the following exclusions that certain taxable entities must make from their total revenue for purposes of determining their respective taxable margins:
· pharmacy network reimbursements for payments to network pharmacies
· subcontracting payments made by an aggregate transporter, a barite transporter, or a landman services business for specific services performed on the entity's behalf
· actual cost paid by any taxable entity for a vaccine
· direct costs of a waterways transport business transporting goods via an intrastate or interstate waterway, if the business does not subtract the cost of goods sold
· motor carrier flow-through revenues derived from taxes and fees
The bill also authorizes a pipeline entity, other than a refinery, that is engaged primarily in gathering, storing, transporting, or processing for other entities crude oil and finished petroleum products, natural gas, condensate, and natural gas liquids that it does not own to subtract as a cost of goods sold its depreciation, operations, and maintenance costs related to the services provided.
Effective September 1, 2013, House Bill 500 clarifies that, for a movie theater that elects to subtract costs of goods sold, those costs are the theater's costs to acquire, produce, exhibit, or use a film or motion picture.
Previous law capped a combined group's taxable margin at 70 percent of the group's total revenue from its entire business. The bill instead caps the group's taxable margin at the lesser of that amount or the group's total revenue minus $1 million. The bill prohibits a retail or wholesale electric utilities provider from being included as a member of a combined group that includes one or more taxable entities that do not provide such utilities under certain conditions. The bill establishes that, for purposes of apportioning taxable margin, revenue from Internet hosting is apportioned to Texas only if the customer to whom the service is provided is located in Texas.
Effective September 1, 2013, the bill authorizes a taxable entity to deduct from its apportioned margin certain relocation costs incurred in relocating the entity's main office or other place of business to Texas from another state if the entity did not do business in Texas before the relocation and is not affiliated in a unitary business with another entity already doing business in Texas. The bill requires a taxable entity that takes such a deduction to file with the comptroller proof of the deducted relocation costs on the comptroller's request.
Effective January 1, 2015, the bill makes an entity eligible for a credit against the franchise tax for eligible costs and expenses incurred in the certified rehabilitation of a certified historic structure if the entity has an ownership interest in the structure and invests $5,000 or more in the rehabilitation. The bill caps the credit at 25 percent of the total eligible costs and expenses incurred in the rehabilitation, allows a carryforward of unused credits for up to five consecutive reports, and caps the total credit that may be applied for in a report, including the amount of any carryforward credit, at the amount of the franchise tax due for the report after any other applicable credits.
House Bill 500 repeals provisions relating to the effective dates for successive changes to the maximum amount of a taxable entity's total revenue that would exempt such an entity from franchise tax liability; discounts from tax liability for small businesses with total business revenue at various ranges below $900,000; and the contents of a franchise tax report filed by a combined group.
House Bill 500 takes effect January 1, 2015, except as otherwise provided.