By: Thompson, G. H.B. No. 926 73R4500 DAK-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the imposition, collection, administration, and civil 1-3 and criminal enforcement of a tax on the income of certain resident 1-4 and nonresident individuals, trusts and estates, and partnerships. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 SECTION 1. Title 2, Tax Code, is amended by adding Subtitle 1-7 L to read as follows: 1-8 SUBTITLE L. PERSONAL INCOME TAX 1-9 CHAPTER 261. PERSONAL INCOME TAX 1-10 SUBCHAPTER A. IMPOSITION OF TAX 1-11 Sec. 261.001. Tax Imposed. (a) A tax is imposed for each 1-12 tax year: 1-13 (1) on the taxable income of every resident of this 1-14 state; and 1-15 (2) on the taxable income derived from sources in this 1-16 state of every nonresident. 1-17 (b) The rate of the tax is determined according to the 1-18 following table: 1-19 If taxable income is: The amount of tax is: 1-20 Not over $50,000 0 1-21 Over $50,000 but not over $65,000 three percent of the amount 1-22 over $50,000 1-23 Over $65,000 but not over $80,000 $450 plus 3.5 percent of the 1-24 amount over $65,000 2-1 Over $80,000 but not over $100,000 $975 plus four percent of 2-2 the amount over $80,000 2-3 Over $100,000 but not over $200,000 $1,775 plus 4.5 percent of 2-4 the amount over $100,000 2-5 Over $200,000 $6,275 plus five percent of 2-6 the amount over $200,000 2-7 Sec. 261.002. Joint Return or Return of surviving Spouse. 2-8 If a husband and wife file a joint return, the tax imposed by 2-9 Section 261.001 is twice the tax that would be imposed if the 2-10 taxable income were divided by two. 2-11 Sec. 261.003. Meaning of Terms. (a) In this chapter: 2-12 (1) An individual is a resident of this state if the 2-13 individual: 2-14 (A) is domiciled in this state unless the 2-15 individual does not maintain a permanent place of abode in this 2-16 state and does maintain a permanent place of abode elsewhere and 2-17 spends, in the aggregate, not more than 30 days of the tax year in 2-18 this state; or 2-19 (B) is not domiciled in this state but maintains 2-20 a permanent place of abode in this state and spends, in the 2-21 aggregate, more than 183 days of the tax year in this state. 2-22 (2) An individual is a nonresident if the individual 2-23 is not a resident of this state. 2-24 (b) Any term used in this chapter and not defined by or for 2-25 purposes of this chapter has the same meaning as when used in a 2-26 comparable context in the laws of the United States relating to 2-27 federal income taxes, unless a different meaning is clearly 3-1 required. Any reference in this chapter to federal law means the 3-2 provisions of the Internal Revenue Code of 1986 in effect on 3-3 December 31, 1993, and other provisions of federal laws relating to 3-4 federal income taxes in effect on December 31, 1993. 3-5 (Sections 261.004-261.050 reserved for expansion 3-6 SUBCHAPTER B. COMPUTATION OF TAXABLE INCOME 3-7 Sec. 261.051. Taxable Income. The taxable income of a 3-8 resident of this state is the resident's federal adjusted gross 3-9 income as defined by the federal law. 3-10 Sec. 261.052. Credit for Income Tax Paid to Another State. 3-11 (a) A resident individual is allowed a credit against the tax 3-12 otherwise due under this chapter for the amount of any income tax 3-13 imposed on the individual for the tax year by another state of the 3-14 United States on income that is derived from sources in that state 3-15 and that is subject to tax under this chapter. 3-16 (b) The credit provided by this section may not exceed the 3-17 proportion of the tax otherwise due under this chapter that the 3-18 amount of the taxpayer's adjusted gross income derived from sources 3-19 in the other taxing jurisdiction bears to the taxpayer's entire 3-20 adjusted gross income as modified by this subchapter. 3-21 Sec. 261.053. Dual Residence; Reduction of Tax. If a 3-22 taxpayer is a resident of this state and is regarded as a resident 3-23 of another jurisdiction for purposes of personal income taxation, 3-24 the comptroller shall reduce the tax on that portion of the 3-25 taxpayer's income that is subject to tax in both jurisdictions 3-26 solely by virtue of dual residence. The reduction shall be in an 3-27 amount equal to that portion of the lower of the two taxes 4-1 applicable to the income taxed twice that the tax imposed by this 4-2 state bears to the combined taxes of the two jurisdictions on the 4-3 income taxed twice. 4-4 Sec. 261.054. Nonresident Individuals--Taxable Income. The 4-5 taxable income of a nonresident individual is that part of the 4-6 individual's federal adjusted gross income derived from sources in 4-7 this state determined under Section 261.056. 4-8 Sec. 261.055. Husband and Wife--Nonresident. (a) If the 4-9 federal taxable income of a husband and wife, both of whom are 4-10 nonresidents of this state, is determined on separate federal 4-11 returns, their taxable incomes in this state shall be separately 4-12 determined. 4-13 (b) If the federal taxable income of a husband and wife, 4-14 both of whom are nonresidents, is determined on a joint federal 4-15 return, their tax shall be determined in this state on their 4-16 combined taxable income. 4-17 (c) If one spouse is a nonresident and the other a resident, 4-18 separate taxes shall be determined on their separate taxable 4-19 incomes in this state on forms prescribed by the comptroller unless 4-20 both elect to determine their combined taxable income in this state 4-21 as if both were residents. If a husband and wife file a joint 4-22 federal income tax return but determine their taxable income in 4-23 this state separately, they must compute their taxable incomes in 4-24 this state as if their federal adjusted gross incomes had been 4-25 determined separately. 4-26 Sec. 261.056. Adjusted Gross Income From Sources in This 4-27 State--Nonresident. (a) The adjusted gross income of a 5-1 nonresident derived from sources in this state is the net amount of 5-2 items of income, gain, loss, and deduction entering into the 5-3 nonresident's federal adjusted gross income that are derived from 5-4 or connected with sources in this state including: 5-5 (1) the nonresident's distributive share of 5-6 partnership income and deductions determined under Section 261.403; 5-7 and 5-8 (2) the nonresident's share of estate or trust income 5-9 and deductions derived from sources in this state. 5-10 (b) Items of income, gain, loss, and deduction derived from 5-11 or connected with sources in this state are those items 5-12 attributable to: 5-13 (1) the ownership or disposition of an interest in 5-14 real or tangible personal property in this state; and 5-15 (2) a business, trade, profession, or occupation 5-16 conducted in this state. 5-17 (c) Income from intangible personal property including 5-18 annuities, dividends, interest, and gains from the disposition of 5-19 intangible personal property, constitutes income derived from 5-20 sources in this state only to the extent that the income is from 5-21 property used in a business, trade, profession, or occupation 5-22 carried on in this state. 5-23 (d) Deductions for capital losses, net long-term capital 5-24 gains, and net operating losses derived from or connected with 5-25 sources in this state, are determined in the same manner as the 5-26 corresponding federal deductions. However, the extent to which the 5-27 deductions are derived from or connected with sources in this state 6-1 is determined under the comptroller's rules. 6-2 (e) For a nonresident individual who is a shareholder of a 6-3 corporation that is an electing small business corporation for 6-4 federal income tax purposes, the undistributed taxable income of 6-5 the corporation does not constitute income derived from sources in 6-6 this state and a net operating loss of the corporation does not 6-7 constitute a loss or deduction connected with sources in this 6-8 state. 6-9 (f) If a business, trade, profession, or occupation is 6-10 carried on partly in and partly outside this state, the items of 6-11 income and deduction derived from or connected with sources in this 6-12 state are determined by apportionment and allocation consistent 6-13 with Chapter 141 under the comptroller's rules. 6-14 (g) Compensation paid by the United States for service in 6-15 the armed forces of the United States performed by a nonresident is 6-16 not income derived from sources in this state. 6-17 (Sections 261.057-261.100 reserved for expansion 6-18 SUBCHAPTER C. WITHHOLDING TAX 6-19 Sec. 261.101. Employer to Withhold Tax From Wages. (a) 6-20 Each employer maintaining an office or doing business in this state 6-21 and making payment of wages taxable under this chapter to a 6-22 resident or nonresident individual shall withhold from those wages 6-23 for each payroll period a tax computed in a manner as to result, so 6-24 far as practicable, in withholding from the employee's wages during 6-25 each calendar year an amount equivalent to the amount of tax 6-26 reasonably estimated to be due from the employee under this chapter 6-27 from the amount of the wages paid by the employer and included in 7-1 the employee's adjusted gross income during the calendar year. The 7-2 method of determining the amount to be withheld shall be prescribed 7-3 by the comptroller's rules. Payments by the United States for 7-4 service in the armed forces of the United States are not subject to 7-5 state withholding. 7-6 (b) The comptroller may enter into agreements with the tax 7-7 departments of other states that require income tax to be withheld 7-8 from the payment of wages and salaries to govern the amounts to be 7-9 withheld from the wages and salaries of residents of those states 7-10 under this chapter. The agreements may provide for recognition of 7-11 anticipated tax credits in determining the amounts to be withheld, 7-12 and the comptroller, by rule, may relieve employers in this state 7-13 from withholding income tax on wages and salaries paid to 7-14 nonresident employees. An agreement authorized by this section is 7-15 subject to the condition that the tax department of the other state 7-16 grants similar treatment to residents of this state. 7-17 Sec. 261.102. Information Statement for Employee. An 7-18 employer required to withhold the tax under Section 261.101 from 7-19 the wages of an employee shall furnish to each employee from whom 7-20 the employer withheld the tax during the calendar year a written 7-21 statement as prescribed by rule showing the amount of wages paid by 7-22 the employer to the employee, the amount deducted and withheld as 7-23 tax, and other information the comptroller prescribes. The 7-24 withholding statement shall be given to the employee from whom the 7-25 tax is withheld on or before February 15 of the year succeeding the 7-26 calendar year in which the withholding occurs or, if the employee's 7-27 employment ends during the calendar year, before the 31st day after 8-1 the last day on which wages are paid to the employee. 8-2 Sec. 261.103. Credit for Tax Withheld. Wages on which the 8-3 withholding tax applies are included fully as taxable income under 8-4 this chapter as if no withholding were required. The amount of 8-5 withholding tax actually withheld under this subchapter in a 8-6 calendar year is considered to have been paid to the comptroller on 8-7 behalf of the person from whom withheld, and the person shall be 8-8 credited with having paid that amount of tax for the tax year in 8-9 which the wages are taxed. For a tax year of less than 12 months, 8-10 the credit shall be made under rules of the comptroller. 8-11 Sec. 261.104. Employer's Return and Payment of Tax Withheld. 8-12 (a) An employer required to deduct and withhold tax under this 8-13 chapter shall, for each calendar quarter, on or before the 15th 8-14 day of the month following the end of the calendar quarter, file a 8-15 withholding return as prescribed by the comptroller and pay to the 8-16 comptroller or to a depository designated by the comptroller, the 8-17 taxes required to be withheld, except that for the fourth quarter 8-18 of the calendar year, the return shall be filed and the taxes paid 8-19 on or before January 31 of the succeeding year. If the amount 8-20 required to be withheld by an employer for a calendar month exceeds 8-21 $500, the employer shall not later than the 15th day of the 8-22 succeeding month pay the withheld amount to the comptroller or to a 8-23 depository designated by the comptroller. The amount paid is 8-24 allowed as a credit against the liability shown on the employer's 8-25 quarterly withholding return required by this section. If the 8-26 amount required to be deducted and withheld by an employer is less 8-27 than $100 in a calendar quarter, the comptroller by rule may permit 9-1 an employer to file a withholding return on or before July 31 for 9-2 the semiannual period ending on June 30 and on or before January 31 9-3 of the succeeding year for the semiannual period ending on December 9-4 31. The comptroller may, if it is necessary for the protection of 9-5 the revenue, require an employer to make a return and pay to the 9-6 comptroller the tax withheld at any time. If the amount of wages 9-7 paid by an employer is not sufficient under this chapter to require 9-8 the withholding of tax from the wages of any of the employer's 9-9 employees, the comptroller by rule may permit the employer to file 9-10 an annual return on or before January 31 of the succeeding calendar 9-11 year. 9-12 (b) If an employer fails to collect the tax, truthfully 9-13 account for the tax, pay the tax, or make returns of the tax as 9-14 required by this section, the comptroller may serve a notice 9-15 requiring the employer to collect the taxes that became collectible 9-16 after service of notice, to deposit the taxes in a bank approved by 9-17 the comptroller, in a separate account, in trust for and payable to 9-18 the comptroller, and to keep the amount of the tax in the account 9-19 until paid over to the comptroller. A notice remains in effect 9-20 until a notice of cancellation is served by the comptroller. 9-21 Sec. 261.105. Employer's Liability for Withheld Taxes. An 9-22 employer required to withhold a tax under this chapter is liable 9-23 for the tax. For purposes of assessment and collection, any amount 9-24 required to be withheld and paid to the comptroller, and any 9-25 additions to tax, penalties, and interest with respect to it, is 9-26 the tax of the employer. Any amount of tax actually deducted and 9-27 withheld under this chapter shall be held to be a special fund in 10-1 trust for the comptroller. An employee does not have a right of 10-2 action against his employer in respect to money withheld from the 10-3 employee's wages and paid over to the comptroller in compliance or 10-4 in intended compliance with this chapter. 10-5 Sec. 261.106. Employer's Failure to Withhold. If an 10-6 employer fails to withhold tax as required, and thereafter the tax 10-7 against which that tax may be credited is paid, the tax so required 10-8 to be withheld may not be collected from the employer, but the 10-9 employer is liable for additions to tax penalties or interest 10-10 otherwise applicable resulting from a failure to withhold. 10-11 (Sections 261.107-261.200 reserved for expansion 10-12 SUBCHAPTER D. ACCOUNTING PERIODS AND METHODS 10-13 Sec. 261.201. Period for Computation of Taxable Income. (a) 10-14 For purposes of the tax imposed by this chapter, a taxpayer's tax 10-15 year is the same as the taxpayer's tax year for federal income tax 10-16 purposes. 10-17 (b) If a taxpayer's tax year is changed for federal income 10-18 tax purposes, the taxpayer's tax year for purposes of the tax 10-19 imposed by this chapter shall be similarly changed. 10-20 Sec. 261.202. Methods of Accounting. (a) A taxpayer's 10-21 method of accounting is the same as the taxpayer's method of 10-22 accounting for federal income tax purposes. If a single method of 10-23 accounting has not been regularly used by the taxpayer, taxable 10-24 income for purposes of this chapter shall be computed under any 10-25 method that in the opinion of the comptroller fairly reflects 10-26 income. 10-27 (b) If a taxpayer's method of accounting is changed for 11-1 federal income tax purposes, the taxpayer's method of accounting 11-2 for purposes of this chapter is changed in the same manner. 11-3 Sec. 261.203. Adjustments. In computing a taxpayer's 11-4 taxable income for any tax year under a method of accounting 11-5 different from the method under which the taxpayer's taxable income 11-6 for the previous year was computed, there shall be taken into 11-7 account those adjustments that are determined, under rules 11-8 prescribed by the comptroller, to be necessary solely by reason of 11-9 the change in order to prevent amounts from being duplicated or 11-10 omitted. 11-11 Sec. 261.204. Limitation on Additional Tax. (a) If a 11-12 taxpayer's method of accounting is changed, other than from an 11-13 accrual to an installment method, an additional tax that results 11-14 from adjustments determined to be necessary solely because of the 11-15 change may not be greater than if those adjustments were ratably 11-16 allocated and included for the tax year of the change and not more 11-17 than two preceding tax years during which the taxpayer used the 11-18 method of accounting from which the change is made. 11-19 (b) If a taxpayer's method of accounting is changed from an 11-20 accrual to an installment method, an additional tax for the year of 11-21 the change of method and for a subsequent year that is attributable 11-22 to the receipt of installment payments properly accrued in a prior 11-23 year shall be reduced by the portion of tax for any prior tax year 11-24 attributable to the accrual of the installment payments, under 11-25 rules adopted by the comptroller. 11-26 (Sections 261.205-261.400 reserved for expansion 11-27 SUBCHAPTER E. PARTNERS AND PARTNERSHIPS 12-1 Sec. 261.401. Entity Not Taxable. A partnership as an 12-2 entity is not subject to the tax imposed by this chapter. Persons 12-3 carrying on business as partners are liable for the tax imposed by 12-4 this chapter only in their separate or individual capacities. 12-5 Sec. 261.402. Resident Partner--Adjusted Gross Income. (a) 12-6 Partnership income, gain, loss, or deduction shall be allocated in 12-7 accordance with each partner's distributive share for federal 12-8 income tax purposes. 12-9 (b) Each item of partnership income, gain, loss, or 12-10 deduction has the same character for a partner under this chapter 12-11 as it has for federal income tax purposes. If an item is not 12-12 characterized for federal income tax purposes, it has the same 12-13 character for a partner as if realized directly from the source 12-14 from which realized by the partnership or incurred in the same 12-15 manner as incurred by the partnership. 12-16 (c) If a partner's distributive share of an item of 12-17 partnership income, gain, loss, or deduction is determined for 12-18 federal income tax purposes by a special provision in the 12-19 partnership agreement with respect to the item, and the principal 12-20 purpose of the provision is the avoidance or evasion of tax under 12-21 this chapter, the partner's distributive share of the item and a 12-22 modification required with respect to it is determined in 12-23 accordance with the partner's distributive share of the taxable 12-24 income or loss of the partnership generally, excluding those items 12-25 requiring separate computation under Section 702 of the Internal 12-26 Revenue Code of 1986. 12-27 Sec. 261.403. Nonresident Partner--Adjusted Gross Income 13-1 From Sources in This State. (a) In determining the adjusted gross 13-2 income of a nonresident partner of any partnership, there shall be 13-3 included only that part derived from or connected with sources in 13-4 this state of the partner's distributive share of items of 13-5 partnership income, gain, loss, and deduction entering into the 13-6 partner's federal adjusted gross income, as that part is determined 13-7 under rules adopted by the comptroller and consistent with the 13-8 rules under Section 261.056. 13-9 (b) Except as authorized in Subsection (c), in determining 13-10 the sources of a nonresident partner's income, no effect is given 13-11 to a provision in the partnership agreement that: 13-12 (1) characterizes payments to the partner as being for 13-13 services or for the use of capital, or allocated to the partner, as 13-14 income or gain from sources outside this state, a greater 13-15 proportion of his distributive share of partnership income or gain 13-16 than the ratio of partnership income or gain from sources outside 13-17 this state to partnership income or gain from all sources; or 13-18 (2) allocates to the partner a greater proportion of a 13-19 partnership item of loss or deduction connected with sources in 13-20 this state than the partner's proportionate share, for federal 13-21 income tax purposes, of partnership loss or deduction generally. 13-22 (c) The comptroller may, on application, authorize the use 13-23 of other methods of determining a nonresident partner's portion of 13-24 partnership items derived from or connected with sources in this 13-25 state, and the modifications related to it, that are appropriate 13-26 and equitable, on terms and conditions the comptroller may require. 13-27 (d) A nonresident partner's distributive share of items of 14-1 income, gain, loss, or deduction is determined under Section 14-2 261.402(a). The character of partnership items for a nonresident 14-3 partner is determined under Section 261.402(b). The effect of a 14-4 special provision in a partnership agreement, other than a 14-5 provision referred to in Subsection (b), having as a principal 14-6 purpose the avoidance or evasion of tax under this chapter is 14-7 determined under Section 261.402(c). 14-8 (Sections 261.404-261.500 reserved for expansion 14-9 SUBCHAPTER F. TAX RETURNS AND PAYMENTS 14-10 Sec. 261.501. Persons Required to Make Returns of Income. A 14-11 state income tax return shall be made by every individual who has 14-12 adjusted gross income from sources in this state of more than 14-13 $40,000. 14-14 Sec. 261.502. Joint Returns By Husband and Wife. (a) A 14-15 husband and wife may make a joint state income tax return even 14-16 though one of the spouses has no gross income or deductions except 14-17 that: 14-18 (1) a joint return may not be made if the spouses are 14-19 not permitted to file a joint federal income tax return; 14-20 (2) if the federal income tax liability of either 14-21 spouse is determined on a separate federal return, their income tax 14-22 liabilities under this chapter shall be determined on separate 14-23 returns; 14-24 (3) if the federal income tax liabilities of husband 14-25 and wife, other than a husband and wife described in Subsection 14-26 (b), are determined on a joint federal return, the husband and wife 14-27 shall file a joint return under this chapter and their tax 15-1 liabilities are joint and several; and 15-2 (4) if neither spouse is required to file a federal 15-3 income tax return and either or both are required to file an income 15-4 tax return under this chapter, they may elect to file separate 15-5 returns or a joint return, and according to their election, their 15-6 liabilities are separate or joint and several. 15-7 (b) If either husband or wife is a resident and the other is 15-8 a nonresident, they shall file on forms required by the comptroller 15-9 separate income tax returns in this state if either spouse has 15-10 income that is not community property, and in that case their tax 15-11 liabilities are separate; but they may elect to determine their 15-12 joint taxable income as if both were residents, and in that case 15-13 their liabilities are joint and several. 15-14 Sec. 261.503. Returns by Fiduciaries. (a) An income tax 15-15 return for a deceased individual shall be made and filed by the 15-16 executor, administrator, or other person charged with the care of 15-17 the property of the decedent. A final return of a decedent is due 15-18 when it would have been due if the decedent had not died. 15-19 (b) An income tax return for an individual who is unable to 15-20 make a return because of minority or other disability shall be made 15-21 and filed by the individual's duly authorized agent, guardian, 15-22 conservator, fiduciary, or other person charged with the care of 15-23 the individual or the individual's property other than a receiver 15-24 in possession of only a part of the individual's property. 15-25 (c) If two or more fiduciaries are acting jointly, the 15-26 return may be made by any one of them. 15-27 Sec. 261.504. Notice of Qualification as Receiver. A 16-1 receiver, trustee in bankruptcy, assignee for benefit of creditors, 16-2 or other similar fiduciary shall give notice of his or her 16-3 qualification to the comptroller, as may be required by rule. 16-4 Sec. 261.505. Change of Status as Resident or Nonresident 16-5 During Year. (a) If the status of an individual changes during 16-6 the individual's tax year from resident to nonresident or from 16-7 nonresident to resident, the comptroller by rule may require the 16-8 individual to file one return for the portion of the year during 16-9 which the individual is a resident and one for the portion of the 16-10 year during which the individual is a nonresident. 16-11 (b) Except as provided in Subsection (c), the taxable income 16-12 of an individual is determined as provided in Section 261.051 for 16-13 residents and Section 261.054 for nonresidents as if the 16-14 individual's tax year for federal income tax purposes were limited 16-15 to the period of the individual's resident and nonresident status 16-16 respectively. 16-17 (c) There shall be included in determining taxable income 16-18 from sources in or outside this state, as the case may be, income, 16-19 gain, loss, or deduction accrued prior to the change of status even 16-20 though not otherwise includable or allowable in respect to the 16-21 period before the change, but the taxation or deduction of items 16-22 accrued before the change of status is not affected by the change. 16-23 (d) If two returns are required to be filed under this 16-24 section, the total of the taxes due may not be less than would be 16-25 due if the total of the taxable incomes reported on the two returns 16-26 were includable in one return. 16-27 Sec. 261.506. Time and Place for Filing Returns and Paying 17-1 Tax. The income tax return required by this chapter shall be filed 17-2 not later than the 15th day of the fourth month following the end 17-3 of the taxpayer's tax year. A person required to make and file a 17-4 return under this chapter shall pay a tax due to the comptroller 17-5 not later than the last day that the filing of the return is 17-6 allowed without penalty, excluding an extension of time for filing 17-7 the return. The comptroller by rule shall prescribe the place for 17-8 filing a return, statement, or other document required by this 17-9 chapter and for the payment of a tax. 17-10 Sec. 261.507. ESTIMATED TAX. (a) An individual subject to 17-11 the income tax imposed by this chapter shall make estimated 17-12 payments of the tax. The provisions of Section 6654, Internal 17-13 Revenue Code of 1986, other than Subsections (a), (b), (d)(2), and 17-14 (e) of that section, governing the payment of estimated federal 17-15 income taxes on individuals apply to the payments required by this 17-16 section, including exemptions from the estimated tax payment 17-17 requirement. A reference in that section to the federal income tax 17-18 imposed on individuals is construed as a reference to the tax 17-19 imposed by this chapter as required to administer this section. A 17-20 power or duty given by Section 6654 to the United States secretary 17-21 of the treasury is assigned to the comptroller for purposes of the 17-22 estimated payments required by this section. 17-23 (b) The comptroller shall adopt rules for the administration 17-24 of this section. 17-25 (c) Payment of the estimated tax or an installment is 17-26 considered payment on account of the tax imposed by this chapter. 17-27 Sec. 261.508. Extension of Time for Filing and Payment. (a) 18-1 The comptroller, on terms and conditions the comptroller may 18-2 require, may grant a reasonable extension of time for payment of 18-3 tax or an installment, or for filing a return, statement, or other 18-4 document required under this chapter. Except for an extension for 18-5 a taxpayer who is outside the United States, an extension for 18-6 filing any return, statement, or document may not exceed six 18-7 months. 18-8 (b) If the time for the payment of an amount of tax is 18-9 extended, the comptroller may require the taxpayer to furnish a 18-10 bond or other security in an amount not exceeding twice the amount 18-11 of tax for which the extension of time for payment is granted, on 18-12 terms and conditions the comptroller may require. 18-13 Sec. 261.509. Change of Election. An election expressly 18-14 authorized by this chapter may be changed as authorized by the 18-15 comptroller or by the comptroller's rule. 18-16 Sec. 261.510. Signing of Returns and Other Documents. (a) 18-17 A return, statement, or other document required to be made or filed 18-18 under this chapter shall be signed as provided by the comptroller. 18-19 An individual's name signed to a return, statement, or other 18-20 document is prima facie evidence that the individual signed the 18-21 return, statement, or other document. 18-22 (b) A return, statement, or other document required of a 18-23 partnership must be signed by at least one partner. A partner's 18-24 name signed to a return, statement, or other document is prima 18-25 facie evidence that the partner is authorized to sign on behalf of 18-26 the partnership. 18-27 (c) The making or filing of a return, statement, or other 19-1 document or copy required to be made or filed under this chapter, 19-2 including a copy of a federal return, constitutes a certification 19-3 by the person making or filing the return, statement, or other 19-4 document or copy that the statements contained in it are true and 19-5 that a copy filed is a true copy. 19-6 (Sections 261.511-261.520 reserved for expansion 19-7 SUBCHAPTER G. INFORMATION RETURNS 19-8 Sec. 261.521. General Requirements. The comptroller by rule 19-9 may require the keeping of records, the content and form of returns 19-10 and statements, and the filing of copies of federal income returns 19-11 and determinations. The comptroller may require a person, by rule 19-12 or by notice served on the person, to make returns, render 19-13 statements, or keep records, as the comptroller considers 19-14 sufficient to show whether the person is liable under this chapter 19-15 for tax or for the collection of tax. 19-16 Sec. 261.522. Partnership Return. Each partnership having a 19-17 resident partner or having income derived from sources in this 19-18 state, determined in accordance with the applicable rules of 19-19 Section 261.056 as in the case of a nonresident individual, shall 19-20 make a return for the tax year setting forth all items of income, 19-21 gain, loss, and deduction, and the names and addresses of the 19-22 individuals, whether residents or nonresidents, who would be 19-23 entitled to share in the net income if distributed and the amount 19-24 of the distributive share of each individual, and other relevant 19-25 information the comptroller requires by rules or instructions. The 19-26 return must be filed not later than the 15th day of the fourth 19-27 month following the end of each tax year. For purposes of this 20-1 section, "tax year" means a year or period that would be a tax year 20-2 of the partnership if it were subject to tax under this chapter. 20-3 Sec. 261.523. Information Returns. The comptroller by rule 20-4 may require returns of information to be made and filed not later 20-5 than February 28 of each year by a person making payment or 20-6 crediting in a calendar year the amount of $600 or more ($10 or 20-7 more in the case of interest or dividends) to a person who may be 20-8 subject to the tax imposed under this chapter. The returns may be 20-9 required of any person, including a lessee or mortgagor of real or 20-10 personal property, a fiduciary, an employer, and an officer or 20-11 employee of this state, or of any municipality or other political 20-12 subdivision of this state, having the control, receipt, custody, 20-13 disposal, or payment of dividends, interest, rents, salaries, 20-14 wages, premiums, annuities, compensations, remunerations, 20-15 emoluments, or other fixed or determinable gains, profits, or 20-16 income, except interest coupons payable to bearer. A copy of the 20-17 withholding statement required to be furnished by an employer to an 20-18 employee constitutes the return of information required to be made 20-19 under this section for wages. 20-20 Sec. 261.524. Report of Change in Federal Taxable Income. 20-21 (a) If the amount of a taxpayer's federal taxable income reported 20-22 on the taxpayer's federal income tax return for a tax year is 20-23 changed or corrected by the United States Internal Revenue Service 20-24 or other competent authority, or as the result of a renegotiation 20-25 of a contract or subcontract with the United States, the taxpayer 20-26 shall: 20-27 (1) report the change or correction in federal taxable 21-1 income not later than the 90th day after the final determination of 21-2 the change, correction, or renegotiation, or as required by the 21-3 comptroller; and 21-4 (2) concede the accuracy of the determination or state 21-5 in what way it is erroneous. 21-6 (b) A taxpayer filing an amended federal income tax return 21-7 shall also file, not later than the 90th day after filing, an 21-8 amended return under this chapter, and shall give any information 21-9 required by the comptroller. 21-10 (c) The comptroller by rule may prescribe exceptions to the 21-11 requirements of this section. 21-12 (Sections 261.525-261.600 reserved for expansion 21-13 SUBCHAPTER H. ADDITIONS TO TAX; PENALTIES 21-14 Sec. 261.601. Failure to File Tax Return. (a) A person who 21-15 does not file a return required under this chapter on or before the 21-16 prescribed date is subject to the following penalty based on a 21-17 percentage of the full amount of tax owed on the prescribed day: 21-18 (1) if the return is filed not later than the 30th day 21-19 after the prescribed date, five percent; 21-20 (2) if the return is filed later than the 30th day 21-21 after the prescribed date, but not later than the 60th day after 21-22 the prescribed date, 10 percent; 21-23 (3) if the return is filed later than the 60th day 21-24 after the prescribed date, but not later than the 90th day after 21-25 the prescribed date, 15 percent; 21-26 (4) if the return is filed later than the 90th day 21-27 after the prescribed date, but not later than the 120th day after 22-1 the prescribed date, 20 percent; or 22-2 (5) if the return is filed later than the 120th day 22-3 after the prescribed date, 25 percent. 22-4 (b) The prescribed date is determined with regard to an 22-5 extension of time for filing. 22-6 (c) In determining the amount owed on the prescribed date, 22-7 the taxpayer is entitled to credit for a portion of the tax paid on 22-8 or before the prescribed date and other credit that may be claimed 22-9 on the return. 22-10 (d) The penalty required by this section does not apply if 22-11 the taxpayer shows that the failure to file a return was not the 22-12 result of wilful neglect before the prescribed date or at any time 22-13 during the delinquency and that good cause for the failure existed 22-14 at all times before filing. 22-15 Sec. 261.602. Failure to File Information Return. (a) A 22-16 person who does not file a statement of payment to another person 22-17 required under the authority of this chapter or a duplicate 22-18 statement of tax withheld on wages on or before the prescribed date 22-19 for filing shall, after notice and demand by the comptroller, pay a 22-20 penalty of $5 for each statement not timely filed. 22-21 (b) The total amount of penalties imposed under this section 22-22 on any person during a single calendar year may not exceed $2,000. 22-23 (c) The prescribed date for filing is determined with regard 22-24 to any extension of time for filing. 22-25 (d) The penalty required by this section is not applicable 22-26 if the person required to file the statement shows that the failure 22-27 to file did not result from wilful neglect and that there was good 23-1 cause for the failure. 23-2 Sec. 261.603. Failure to Pay Tax. (a) A person who does 23-3 not pay any amount of tax owed by the person on the prescribed date 23-4 shall pay, in addition to all other penalties and additions, a 23-5 penalty of 10 percent of the amount of the tax due and owing on the 23-6 prescribed date. 23-7 (b) The prescribed date is determined with regard to 23-8 extensions of time allowed by the comptroller. 23-9 (c) A failure to pay all or part of an estimated tax is 23-10 considered to be an underpayment of estimated tax. The comptroller 23-11 by rule shall prescribe the method of determining the amount and 23-12 period of underpayment. 23-13 Sec. 261.604. Failure to Pay Over Withholding Tax. (a) An 23-14 employer who fails to pay the tax withheld by the employer or 23-15 required to be withheld by the employer at the time required under 23-16 this chapter is liable for the amount of the unpaid tax in addition 23-17 to the amount of the penalty prescribed in Section 261.603 together 23-18 with interest on the full amount of tax and penalty due. 23-19 (b) Interest and addition assessed under this section may 23-20 not be collected from the employee by the employer. 23-21 (c) The comptroller has the same rights and powers for the 23-22 collection of the tax, addition, and interest against an employer 23-23 as are prescribed for the collection of the tax against an 23-24 individual. 23-25 Sec. 261.605. Penalties and Additions Treated as Tax. The 23-26 penalties and additions provided by this subchapter shall be paid 23-27 on notice and demand and shall be assessed, collected, and paid in 24-1 the same manner as other taxes. The comptroller may issue a 24-2 deficiency notice for all or part of a penalty or addition along 24-3 with or separate from the amount of tax owed in absence of 24-4 additions or penalties. 24-5 (Sections 261.606-261.630 reserved for expansion 24-6 SUBCHAPTER I. CREDITS AND REFUNDS 24-7 Sec. 261.631. Credits and Refunds. (a) Within the 24-8 applicable period of limitations the comptroller may credit an 24-9 overpayment of income tax and interest on the overpayment against a 24-10 liability of a tax imposed by the tax laws of this state on the 24-11 person who made the overpayment, and the balance shall be refunded 24-12 by the comptroller out of the proceeds of the tax retained by the 24-13 comptroller. 24-14 (b) If the amount allowable as a credit for tax withheld 24-15 from the taxpayer exceeds the tax to which the credit relates, the 24-16 excess is an overpayment. 24-17 (c) If there has been an overpayment of tax required to be 24-18 deducted and withheld under Section 261.101, refund shall be made 24-19 to the employer only to the extent that the amount of the 24-20 overpayment was not deducted and withheld by the employer. 24-21 (d) The comptroller may prescribe rules providing for 24-22 crediting against the estimated tax for a tax year the amount 24-23 determined to be an overpayment of the income tax for a preceding 24-24 tax year. 24-25 (e) If an amount of income tax is assessed and collected 24-26 after the expiration of the period of limitations properly 24-27 applicable, the amount is an overpayment. 25-1 Sec. 261.632. Abatements. (a) The comptroller may abate 25-2 any unpaid portion of a tax or a tax liability that is excessive in 25-3 amount, assessed after the expiration of the applicable period of 25-4 limitations, or erroneously or illegally assessed. 25-5 (b) The comptroller may abate the unpaid portion of a tax or 25-6 a tax liability if the comptroller determines under uniform rules 25-7 prescribed by the comptroller that the administration and 25-8 collection costs involved would not warrant collection of the 25-9 amount due. 25-10 Sec. 261.633. EXTENDED LIMITATION PERIOD. (a) If a 25-11 taxpayer is required by Section 261.524 to report a change or 25-12 correction in federal taxable income reported on a federal income 25-13 tax return, or to report a change or correction that is treated in 25-14 the same manner as if it were an overpayment for federal income tax 25-15 purposes, or to file an amended return with the comptroller, a 25-16 claim for credit or refund of a resulting overpayment of tax must 25-17 be filed by the taxpayer not later than two years after the notice 25-18 of the change or correction or the amended return was required to 25-19 be filed with the comptroller. If the report or amended return 25-20 required by Section 261.524 is not filed within the period 25-21 specified by that section, interest on a resulting refund or credit 25-22 ceases to accrue after the period. The amount of credit or refund 25-23 may not exceed the amount of the reduction in tax attributable to 25-24 the federal change, correction, or items amended on the taxpayer's 25-25 amended federal income tax return. This subsection does not affect 25-26 the time within which or the amount for which a claim for credit or 25-27 refund may be filed apart from this section. 26-1 (b) If a claim for credit or refund relates to an 26-2 overpayment of tax on account of the deductibility by the taxpayer 26-3 of a debt as a debt that became worthless or a loss from 26-4 worthlessness of a security or the effect that the deductibility of 26-5 a debt or of a loss has on the application to the taxpayer of a 26-6 carryover, the claim may be made, under rules adopted by the 26-7 comptroller, not later than the seventh year after the date 26-8 prescribed by law for filing the return for the year with respect 26-9 to which the claim is made. 26-10 (c) If a claim for credit or refund relates to an 26-11 overpayment attributable to a net operating loss carryback, the 26-12 claim may be made, under rules adopted by the comptroller, not 26-13 later than the 15th day of the 40th month following the end of the 26-14 tax year of the net operating loss that resulted in the carryback 26-15 or the period prescribed by Section 111.104, whichever expires 26-16 later. 26-17 (Sections 261.634-261.650 reserved for expansion 26-18 SUBCHAPTER J. MISCELLANEOUS ENFORCEMENT PROVISIONS 26-19 Sec. 261.651. Taxpayer not Resident. If notice and demand 26-20 for the payment of a tax is given to a nonresident and it appears 26-21 to the comptroller that it is not practicable to locate property of 26-22 the taxpayer sufficient in amount to cover the amount of tax due, 26-23 the comptroller may authorize the institution of any available 26-24 action or proceeding to collect or enforce the claim in any place 26-25 by any procedure by which a civil judgment of a court of record of 26-26 this state could be collected or enforced. The comptroller may 26-27 designate agents or retain counsel outside this state for the 27-1 purpose of collecting taxes due under this chapter and require of 27-2 them bonds or other security for the faithful performance of their 27-3 duties. The comptroller may enter into agreements with the tax 27-4 department of another state for the collection of taxes from 27-5 persons found in this state who are delinquent in the payment of 27-6 income taxes imposed by that state on condition that the agreeing 27-7 state afford similar assistance in the collection of taxes from 27-8 persons found in that state who are delinquent in the payment of 27-9 taxes imposed by this chapter. 27-10 Sec. 261.652. Income Tax Claims of Other States. The courts 27-11 of this state shall recognize and enforce liabilities for personal 27-12 income taxes lawfully imposed by another state that extends a like 27-13 comity to this state, and the duly authorized officer of the other 27-14 state may sue for the collection of personal income tax in the 27-15 courts of this state. A certificate by the secretary of state of 27-16 the other state that an officer suing for the collection of the tax 27-17 is duly authorized to collect the tax is conclusive proof of the 27-18 officer's authority. For the purposes of this section, "taxes" 27-19 includes additions to tax, interest, and penalties. 27-20 Sec. 261.653. Order to Compel Compliance. (a) On 27-21 application of the attorney general, a judge of a court of 27-22 appropriate jurisdiction for the county in which a taxpayer or 27-23 other person who intentionally or knowingly refuses to file a tax 27-24 return required by this chapter may, by order, direct the person to 27-25 file the return. A person who fails or refuses to obey the order 27-26 is guilty of contempt of court. 27-27 (b) If any person intentionally or knowingly refuses to make 28-1 available any books, papers, records, or memorandums for 28-2 examination by the comptroller or wilfully refuses to attend and 28-3 testify, pursuant to the powers conferred on the comptroller by 28-4 Chapter 111, on application of the comptroller, a judge in the 28-5 court of appropriate jurisdiction for the county where the person 28-6 resides may by order direct the person to comply with the 28-7 comptroller's request for books, papers, records, or memorandums or 28-8 for the person's attendance and testimony. If the books, papers, 28-9 records, or memorandums required by the comptroller are in the 28-10 custody of a corporation, the order of the court may be directed to 28-11 any principal officer of the corporation. A person who fails or 28-12 refuses to obey the order is guilty of contempt of court. 28-13 Sec. 261.654. Transferees. (a) The liability, at law or in 28-14 equity, of a transferee of property of a taxpayer for any tax, 28-15 addition to tax, penalty, or interest due under this chapter, is 28-16 assessed, paid, and collected in the same manner and subject to the 28-17 same provisions and limitations as in the case of the tax to which 28-18 the liability relates except as otherwise provided in this section. 28-19 "Transferee" includes an heir or a recipient of a donation, legacy, 28-20 devise, or distribution. 28-21 (b) The period of limitation for assessment of liability of 28-22 a transferee is: 28-23 (1) one year after the expiration of the period of 28-24 limitation against the initial transferor if the transferee is the 28-25 initial transferee; 28-26 (2) one year after the expiration of the period of 28-27 limitation against the preceding transferee, but not more than 29-1 three years after the expiration of the period of limitation for 29-2 assessment against the initial transferor if the transferee is not 29-3 the initial transferee; or 29-4 (3) notwithstanding Subdivisions (1) and (2), if 29-5 before the expiration of the period of limitation under Subdivision 29-6 (1) or (2) a proceeding for the collection of the liability has 29-7 been begun against the initial transferor or the last preceding 29-8 transferee, respectively, one year after the proceeding is 29-9 terminated. 29-10 (c) If, before the expiration of the period of limitation 29-11 applicable to a transferee, the comptroller and the transferee 29-12 consent in writing to an assessment after that time, the liability 29-13 may be assessed at any time before the expiration of the agreed 29-14 period. The period of limitation on credit or refund to the 29-15 transferee of overpayments of tax made by the transferee or of 29-16 overpayments of tax made by the transferor of which the transferee 29-17 is legally entitled to credit or refund is extended by an agreement 29-18 under this subsection and any extension of the agreement. 29-19 (d) If a person dies, the period of limitation for 29-20 assessment against that person is the period that would be in 29-21 effect had death not occurred. 29-22 Sec. 261.655. Jeopardy Determinations. (a) If the 29-23 comptroller issues a jeopardy determination for a tax for a current 29-24 period, the comptroller shall terminate the tax period of the 29-25 taxpayer immediately, and the notice and demand for a return and 29-26 immediate payment of the tax shall apply to the terminated period 29-27 and to income accrued and deductions incurred on or before 30-1 termination date if not otherwise properly includable or deductible 30-2 for the period. 30-3 (b) The comptroller may abate the jeopardy determination if 30-4 he finds that jeopardy does not exist. 30-5 Sec. 261.656. Bankruptcy or Receivership. (a) On the 30-6 adjudication of bankruptcy of any taxpayer in any bankruptcy 30-7 proceeding or the appointment of a receiver for any taxpayer in any 30-8 receivership proceeding before any court of the United States or 30-9 any state or territory, any deficiency, together with additions to 30-10 tax and interest provided by law, determined by the comptroller may 30-11 be immediately assessed. 30-12 (b) Claims for the deficiency and additions to tax and 30-13 interest may be presented, for adjudication in accordance with law, 30-14 to the court before which the bankruptcy or receivership proceeding 30-15 is pending, despite the pendency of a protest before the 30-16 comptroller under Section 261.603. A protest against a proposed 30-17 assessment may not be filed with the comptroller after the 30-18 adjudication of bankruptcy or appointment of the receiver. 30-19 Sec. 261.657. EVIDENCE OF RELATED FEDERAL DETERMINATION. 30-20 Evidence of a federal determination relating to issues raised in a 30-21 proceeding under Section 261.603 is admissible in an administrative 30-22 or judicial proceeding relating to taxes imposed by this chapter. 30-23 (Sections 261.658-261.670 reserved for expansion 30-24 SUBCHAPTER K. OFFENSES 30-25 Sec. 261.671. Attempt to Evade or Defeat Tax. (a) A person 30-26 commits an offense if the person intentionally or knowingly 30-27 attempts in any manner to evade or defeat a tax imposed by this 31-1 chapter or the payment of tax imposed by this chapter. 31-2 (b) An offense under this section is a felony of the third 31-3 degree. 31-4 Sec. 261.672. Failure to Collect or Pay Over. (a) A person 31-5 commits an offense if the person is required under this chapter to 31-6 collect, truthfully account for, and pay over a tax imposed by this 31-7 chapter and the person intentionally or knowingly fails to collect 31-8 or truthfully account for and pay over the tax. 31-9 (b) An offense under this section is a felony of the third 31-10 degree. 31-11 Sec. 261.673. Failure to File Return, Supply Information, or 31-12 Pay Tax. (a) A person commits an offense if the person is 31-13 required under this chapter to pay a tax, or required by this 31-14 chapter or rule adopted under this chapter to make a return, to 31-15 keep records, or to supply information, and the person 31-16 intentionally or knowingly fails to pay the tax, make the return, 31-17 keep the records, or supply the information, at the time or times 31-18 required by law. 31-19 (b) An offense under this section is a Class A misdemeanor. 31-20 (Sections 261.674-261.680 reserved for expansion 31-21 SUBCHAPTER L. POWERS OF COMPTROLLER 31-22 Sec. 261.681. Cooperation with Other Jurisdictions. The 31-23 comptroller may permit the United States secretary of the treasury 31-24 or the secretary's delegate, or the proper officer of any state or 31-25 other jurisdiction imposing an income tax on the incomes of 31-26 individuals, or the authorized representative of either officer, to 31-27 inspect the income tax returns of an individual, or may furnish to 32-1 the officer or authorized representative an abstract of the return 32-2 of income of an individual or supply the officer with information 32-3 concerning an item of income contained in a return, or disclosed by 32-4 the report of an investigation of the income or return of income of 32-5 an individual, but permission may be granted only if the statutes 32-6 of the United States or of the other jurisdiction, as applicable, 32-7 grant substantially similar privileges to the comptroller. 32-8 Sec. 261.682. Cooperation with Other Tax Officials of This 32-9 State. The comptroller may permit other tax officials of this 32-10 state to inspect tax returns and reports filed under this chapter 32-11 but the inspection shall be permitted only for purposes of 32-12 enforcing a tax law and only to the extent and under the conditions 32-13 prescribed by rule of the comptroller. 32-14 Sec. 261.683. Contract with Secretary of Treasury for 32-15 Collection of Tax. The comptroller may enter into an agreement 32-16 with the United States secretary of the treasury or the secretary's 32-17 delegate, under which, to the extent provided by the terms of the 32-18 agreement, the secretary or delegate will administer, enforce, and 32-19 collect a tax imposed by this chapter on behalf of this state. The 32-20 cost of the services performed by the secretary or delegate in 32-21 administering, enforcing, or collecting the tax under the terms of 32-22 the agreement may be paid from the appropriations for the general 32-23 operations of the comptroller. 32-24 Sec. 261.684. Armed Forces Relief Provisions. (a) The 32-25 period of service in the armed forces of the United States in a 32-26 combat zone plus a period of continuous hospitalization outside 32-27 this state attributable to that service plus the next 180 days 33-1 shall be disregarded in determining, under rules of the 33-2 comptroller, whether an act required by this chapter was performed 33-3 by a taxpayer or the taxpayer's representative within the time 33-4 prescribed. 33-5 (b) In the case of an individual who dies during an 33-6 induction period while in active service as a member of the armed 33-7 forces of the United States, if the death occurred while the 33-8 individual was serving in a combat zone or as a result of wounds, 33-9 disease, or injury incurred while so serving, the tax imposed by 33-10 this chapter does not apply to the tax year in which the individual 33-11 dies or to any prior tax year ending on or after the first day the 33-12 individual so served in a combat zone. 33-13 Sec. 261.685. Disposition of Proceeds. The revenue from the 33-14 tax imposed by this chapter shall be deposited to the credit of the 33-15 general revenue fund. 33-16 SECTION 2. Section 111.201, Tax Code, is amended to read as 33-17 follows: 33-18 Sec. 111.201. ASSESSMENT LIMITATION. (a) No tax imposed by 33-19 this title may be assessed after four years from the date that the 33-20 tax becomes due and payable except as provided by Subsection (b) of 33-21 this section. 33-22 (b) A tax imposed by Chapter 261 may not be assessed after 33-23 six years from the date the tax becomes due and payable. 33-24 SECTION 3. (a) This Act takes effect January 1, 1994, and 33-25 except as provided by Subsection (b) of this section, applies to 33-26 income earned, accrued, or received on or after that date. 33-27 (b) Income, deductions, losses, credits against income, or 34-1 other adjustment allowed in determining the amount of tax under 34-2 this Act or the amount of federal adjusted gross income under this 34-3 Act, including carryovers, are not prohibited in computing the 34-4 taxes for a tax period beginning on January 1, 1994, because those 34-5 adjustments may have accrued or otherwise originated before the 34-6 effective date of this Act. 34-7 (c) In 1994, the comptroller by rule may suspend the 34-8 application of Section 261.507, Tax Code, in whole or in part, and 34-9 may extend the deadlines for estimated tax payments under that 34-10 section. 34-11 SECTION 4. The importance of this legislation and the 34-12 crowded condition of the calendars in both houses create an 34-13 emergency and an imperative public necessity that the 34-14 constitutional rule requiring bills to be read on three several 34-15 days in each house be suspended, and this rule is hereby suspended.