By: Smith, Dalton H.B. No. 302
73R1234 CBH-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to application of the franchise tax to S corporations.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 171.001(b)(2), Tax Code, is amended to
1-5 read as follows:
1-6 (2) "Corporation" includes<:>
1-7 <(A)> a limited liability company, as defined
1-8 under the Texas Limited Liability Company Act<;> and
1-9 <(B)> a state or federal savings and loan
1-10 association, but does not include an S corporation, as that term is
1-11 defined in Section 1361, Internal Revenue Code.
1-12 SECTION 2. Sections 171.110(b) and (d), Tax Code, are
1-13 amended to read as follows:
1-14 (b) A corporation is not required to add the compensation of
1-15 officers or directors as required by Subsection (a)(1) if the
1-16 corporation <is:>
1-17 <(1) a corporation that> has not more than 35
1-18 shareholders<; or>
1-19 <(2) an S corporation, as that term is defined by
1-20 Section 1361, Internal Revenue Code>.
1-21 (d) A corporation's reportable federal taxable income is the
1-22 corporation's federal taxable income after Schedule C special
1-23 deductions and before net operating loss deductions as computed
1-24 under the Internal Revenue Code<, except that an S corporation's
2-1 reportable federal taxable income is the amount of the income
2-2 reportable to the Internal Revenue Service as taxable to the
2-3 corporation's shareholders>.
2-4 SECTION 3. Section 171.113(a), Tax Code, is amended to read
2-5 as follows:
2-6 (a) This section applies only to:
2-7 (1) a corporation organized as a close corporation
2-8 under Part 12, Texas Business Corporation Act, that has not more
2-9 than 35 shareholders; and
2-10 (2) a foreign corporation organized under the close
2-11 corporation law of another state that has not more than 35
2-12 shareholders<; and>
2-13 <(3) an S corporation as that term is defined by
2-14 Section 1361, Internal Revenue Code of 1986 (26 U.S.C. Section
2-15 1361)>.
2-16 SECTION 4. This Act takes effect January 1, 1994, and
2-17 applies to a privilege period beginning on or after that date. The
2-18 change in law made by this Act does not affect the obligation for
2-19 or the payment, computation, and collection of the franchise tax
2-20 for a period not covered by this section.
2-21 SECTION 5. The importance of this legislation and the
2-22 crowded condition of the calendars in both houses create an
2-23 emergency and an imperative public necessity that the
2-24 constitutional rule requiring bills to be read on three several
2-25 days in each house be suspended, and this rule is hereby suspended.