H.B. No. 1892
1-1 AN ACT
1-2 relating to the application and administration of the franchise
1-3 tax.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 171.0011, Tax Code, is amended to read as
1-6 follows:
1-7 Sec. 171.0011. Additional Tax. (a) An additional tax is
1-8 imposed on a corporation that for any reason becomes <is subject to
1-9 the tax imposed under Section 171.001 and that is> no longer
1-10 subject to the earned surplus component of the tax, without regard
1-11 to whether the corporation remains subject to the taxable capital
1-12 component of the tax <taxing jurisdiction of this state in relation
1-13 to the tax on net taxable earned surplus>.
1-14 (b) The additional tax is equal to 4.5 percent of <the rate
1-15 then in effect under Section 171.002(a)(2) multiplied by> the
1-16 corporation's net taxable earned surplus computed on the period
1-17 beginning on the day after the last day for which the tax imposed
1-18 on net taxable earned surplus was computed under Section 171.1532
1-19 and ending on the date the corporation is no longer subject to the
1-20 earned surplus component of the tax <taxing jurisdiction of this
1-21 state in relation to the tax on net taxable earned surplus>.
1-22 (c) The additional tax imposed and any report required by
1-23 the comptroller are due on the 60th day after the date the
2-1 corporation becomes no longer subject to the earned surplus
2-2 component of the tax <delinquent after the 60th day after the date
2-3 on which the corporation is no longer subject to the taxing
2-4 jurisdiction of this state in relation to the tax on net taxable
2-5 earned surplus>.
2-6 (d) Except as otherwise provided by this section, the
2-7 provisions of this chapter apply to the tax imposed under this
2-8 section.
2-9 <(e) A deduction authorized under Section 171.110(a)(3) is
2-10 prorated according to the length of the period on which the tax
2-11 under this section is imposed.>
2-12 SECTION 2. Section 171.052, Tax Code, is amended to read as
2-13 follows:
2-14 Sec. 171.052. CERTAIN CORPORATIONS. A corporation that is
2-15 an insurance company,<;> surety, guaranty, or fidelity company now
2-16 required to pay or who pays an annual tax measured by their gross
2-17 receipts is exempted from the franchise tax.
2-18 SECTION 3. Section 171.1032(a), Tax Code, is amended to read
2-19 as follows:
2-20 (a) Except for the gross receipts of a corporation that are
2-21 subject to the provisions of Section 171.1061, in <In> apportioning
2-22 taxable earned surplus, the gross receipts of a corporation from
2-23 its business done in this state is the sum of the corporation's
2-24 receipts from:
2-25 (1) each sale of tangible personal property if the
3-1 property is delivered or shipped to a buyer in this state
3-2 regardless of the FOB point or another condition of the sale, and
3-3 each sale of tangible personal property shipped from this state to
3-4 a purchaser in another state in which the seller is not subject to
3-5 any tax on, or measured by, net income, without regard to whether
3-6 the tax is imposed <taxation>;
3-7 (2) each service performed in this state;
3-8 (3) each rental of property situated in this state;
3-9 (4) each royalty for the use of a patent or copyright
3-10 in this state; and
3-11 (5) other business done in this state.
3-12 SECTION 4. Section 171.1051(a), Tax Code, is amended to read
3-13 as follows:
3-14 (a) Except for the gross receipts of a corporation that are
3-15 subject to the provisions of Section 171.1061, in <In> apportioning
3-16 taxable earned surplus, the gross receipts of a corporation from
3-17 its entire business is the sum of the corporation's receipts from:
3-18 (1) each sale of the corporation's tangible personal
3-19 property;
3-20 (2) each service, rental, or royalty; and
3-21 (3) other business.
3-22 SECTION 5. Subchapter C, Chapter 171, Tax Code, is amended
3-23 by adding Section 171.1061 to read as follows:
3-24 Sec. 171.1061. ALLOCATION OF CERTAIN TAXABLE EARNED SURPLUS
3-25 TO THIS STATE. An item of income included in a corporation's
4-1 taxable earned surplus, except that portion derived from dividends
4-2 and interest, that a state, other than this state, or a country,
4-3 other than the United States, cannot tax because the activities
4-4 generating that item of income do not have sufficient unitary
4-5 connection with the corporation's other activities conducted within
4-6 that state or country under the United States Constitution, is
4-7 allocated to this state if the corporation's commercial domicile is
4-8 in this state. Income that can only be allocated to the state of
4-9 commercial domicile because the income has insufficient unitary
4-10 connection with any other state or country shall be allocated to
4-11 this state or another state or country net of expenses related to
4-12 that income. A portion of a corporation's taxable earned surplus
4-13 allocated to this state under this section may not be apportioned
4-14 under Section 171.110(a)(2).
4-15 SECTION 6. Section 171.109, Tax Code, is amended by amending
4-16 Subsection (j) and adding Subsection (m) to read as follows:
4-17 (j) A corporation may not exclude from surplus:
4-18 (1) liabilities for compensation and other benefits
4-19 provided to employees, other than wages, that are not debt as of
4-20 the end of the accounting period on which the taxable capital
4-21 component is based <payable in the current accounting year>,
4-22 including retirement, medical, insurance, postretirement, and other
4-23 similar benefits; and
4-24 (2) deferred investment tax credits.
4-25 (m) A corporation may not use the push-down method of
5-1 accounting in computing or reporting its surplus.
5-2 SECTION 7. Section 171.110(a), Tax Code, is amended to read
5-3 as follows:
5-4 (a) The net taxable earned surplus of a corporation is
5-5 computed by:
5-6 (1) determining the corporation's reportable federal
5-7 taxable income, subtracting from that amount any amount included in
5-8 reportable federal taxable income under Section 78 or Sections
5-9 951-964, Internal Revenue Code, and dividends received from a
5-10 subsidiary, associate, or affiliated corporation that does not
5-11 transact a substantial portion of its business or regularly
5-12 maintain a substantial portion of its assets in the United States,
5-13 and adding to that amount any compensation of officers or
5-14 directors, or if a bank, any compensation of directors and
5-15 executive officers, to the extent excluded in determining federal
5-16 taxable income to determine the corporation's taxable earned
5-17 surplus;
5-18 (2) apportioning the corporation's taxable earned
5-19 surplus to this state as provided by Section 171.106(b) or (c), as
5-20 applicable, to determine the corporation's apportioned taxable
5-21 earned surplus; <and>
5-22 (3) adding the corporation's taxable earned surplus
5-23 allocated to this state as provided by Section 171.1061; and
5-24 (4) subtracting from that amount any allowable
5-25 deductions and any business loss that is carried forward to the tax
6-1 reporting period and deductible under Subsection (e).
6-2 SECTION 8. Section 171.1121(a), Tax Code, is amended to read
6-3 as follows:
6-4 (a) For purposes of this section, "gross receipts" means all
6-5 revenues reportable by a corporation on its federal tax return,
6-6 without deduction for the cost of property sold, materials used,
6-7 labor performed, or other costs incurred, unless otherwise
6-8 specifically provided in this chapter. "Gross receipts" does not
6-9 include revenues that are not included in taxable earned surplus.
6-10 For example, Schedule C special deductions and any amounts
6-11 subtracted from reportable federal taxable income under Section
6-12 171.110(a)(1) are not included in taxable earned surplus and
6-13 therefore are not considered gross receipts.
6-14 SECTION 9. Section 171.113(e), Tax Code, is amended to read
6-15 as follows:
6-16 (e) The election under Subsection (b) becomes effective when
6-17 written notice of the election is received by the comptroller from
6-18 the corporation. An election under Subsection (b) must be
6-19 postmarked not later than the <original> due date for the electing
6-20 corporation's franchise tax report to which the election applies.
6-21 <No extension of time for filing the election under this section is
6-22 available.>
6-23 SECTION 10. Section 171.251, Tax Code, is amended to read as
6-24 follows:
6-25 Sec. 171.251. Forfeiture of Corporate Privileges. The
7-1 comptroller shall forfeit the corporate privileges of a corporation
7-2 on which the franchise tax is imposed if the corporation:
7-3 (1) does not file, in accordance with this chapter and
7-4 within 45 <90> days after the date notice of forfeiture is mailed
7-5 <it is due>, a report required by this chapter;
7-6 (2) does not pay, within 45 <90> days after the date
7-7 notice of forfeiture is mailed <it is due>, a tax imposed by this
7-8 chapter or does not pay, within those 45 <90> days, a penalty
7-9 imposed by this chapter relating to that tax; or
7-10 (3) does not permit the comptroller to examine under
7-11 Section 171.211 of this code the corporation's records.
7-12 SECTION 11. Section 171.256(c), Tax Code, is amended to read
7-13 as follows:
7-14 (c) The comptroller shall mail the notice to the corporation
7-15 at least <within> 45 days before the forfeiture of corporate
7-16 privileges <after the day on which the report, tax, or penalty is
7-17 due>. The notice shall be addressed to the corporation and mailed
7-18 to the address named in the corporation's charter as its principal
7-19 place of business or to another known place of business of the
7-20 corporation.
7-21 SECTION 12. The following sections of the Tax Code are
7-22 repealed:
7-23 (1) Section 171.156; and
7-24 (2) Section 171.157.
7-25 SECTION 13. This Act takes effect January 1, 1994, and
8-1 applies to a report originally due on or after that date.
8-2 SECTION 14. The importance of this legislation and the
8-3 crowded condition of the calendars in both houses create an
8-4 emergency and an imperative public necessity that the
8-5 constitutional rule requiring bills to be read on three several
8-6 days in each house be suspended, and this rule is hereby suspended.