1-1 By: Oliveira (Senate Sponsor - Montford) H.B. No. 1892
1-2 (In the Senate - Received from the House May 10, 1993;
1-3 May 12, 1993, read first time and referred to Committee on Finance;
1-4 May 21, 1993, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 8, Nays 0; May 21, 1993,
1-6 sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Montford x
1-10 Turner x
1-11 Armbrister x
1-12 Barrientos x
1-13 Bivins x
1-14 Ellis x
1-15 Haley x
1-16 Moncrief x
1-17 Parker x
1-18 Ratliff x
1-19 Sims x
1-20 Truan x
1-21 Zaffirini x
1-22 COMMITTEE SUBSTITUTE FOR H.B. No. 1892 By: Montford
1-23 A BILL TO BE ENTITLED
1-24 AN ACT
1-25 relating to the application and administration of the franchise
1-26 tax.
1-27 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-28 SECTION 1. Section 171.0011, Tax Code, is amended to read as
1-29 follows:
1-30 Sec. 171.0011. Additional Tax. (a) An additional tax is
1-31 imposed on a corporation that for any reason becomes <is subject to
1-32 the tax imposed under Section 171.001 and that is> no longer
1-33 subject to the earned surplus component of the tax, without regard
1-34 to whether the corporation remains subject to the taxable capital
1-35 component of the tax <taxing jurisdiction of this state in relation
1-36 to the tax on net taxable earned surplus>.
1-37 (b) The additional tax is equal to 4.5 percent of <the rate
1-38 then in effect under Section 171.002(a)(2) multiplied by> the
1-39 corporation's net taxable earned surplus computed on the period
1-40 beginning on the day after the last day for which the tax imposed
1-41 on net taxable earned surplus was computed under Section 171.1532
1-42 and ending on the date the corporation is no longer subject to the
1-43 earned surplus component of the tax <taxing jurisdiction of this
1-44 state in relation to the tax on net taxable earned surplus>.
1-45 (c) The additional tax imposed and any report required by
1-46 the comptroller are due on the 60th day after the date the
1-47 corporation becomes no longer subject to the earned surplus
1-48 component of the tax <delinquent after the 60th day after the date
1-49 on which the corporation is no longer subject to the taxing
1-50 jurisdiction of this state in relation to the tax on net taxable
1-51 earned surplus>.
1-52 (d) Except as otherwise provided by this section, the
1-53 provisions of this chapter apply to the tax imposed under this
1-54 section.
1-55 <(e) A deduction authorized under Section 171.110(a)(3) is
1-56 prorated according to the length of the period on which the tax
1-57 under this section is imposed.>
1-58 SECTION 2. Section 171.1032(a), Tax Code, is amended to read
1-59 as follows:
1-60 (a) Except for the gross receipts of a corporation that are
1-61 subject to the provisions of Section 171.1061, in <In> apportioning
1-62 taxable earned surplus, the gross receipts of a corporation from
1-63 its business done in this state is the sum of the corporation's
1-64 receipts from:
1-65 (1) each sale of tangible personal property if the
1-66 property is delivered or shipped to a buyer in this state
1-67 regardless of the FOB point or another condition of the sale, and
1-68 each sale of tangible personal property shipped from this state to
2-1 a purchaser in another state in which the seller is not subject to
2-2 any tax on, or measured by, net income, without regard to whether
2-3 the tax is imposed <taxation>;
2-4 (2) each service performed in this state;
2-5 (3) each rental of property situated in this state;
2-6 (4) each royalty for the use of a patent or copyright
2-7 in this state; and
2-8 (5) other business done in this state.
2-9 SECTION 3. Section 171.1051(a), Tax Code, is amended to read
2-10 as follows:
2-11 (a) Except for the gross receipts of a corporation that are
2-12 subject to the provisions of Section 171.1061, in <In> apportioning
2-13 taxable earned surplus, the gross receipts of a corporation from
2-14 its entire business is the sum of the corporation's receipts from:
2-15 (1) each sale of the corporation's tangible personal
2-16 property;
2-17 (2) each service, rental, or royalty; and
2-18 (3) other business.
2-19 SECTION 4. Subchapter C, Chapter 171, Tax Code, is amended
2-20 by adding Section 171.1061 to read as follows:
2-21 Sec. 171.1061. ALLOCATION OF CERTAIN TAXABLE EARNED SURPLUS
2-22 TO THIS STATE. An item of income included in a corporation's
2-23 taxable earned surplus, except that portion derived from dividends
2-24 and interest, that a state, other than this state, or a country,
2-25 other than the United States, cannot tax because the activities
2-26 generating that item of income do not have sufficient unitary
2-27 connection with the corporation's other activities conducted within
2-28 that state or country under the United States Constitution, are
2-29 allocated to this state if the corporation's commercial domicile is
2-30 in this state. The income allocated to this state under this
2-31 section is net of any related expenses. A portion of a
2-32 corporation's taxable earned surplus allocated to this state under
2-33 this section may not be apportioned under Section 171.110(a)(2).
2-34 SECTION 5. Section 171.109, Tax Code, is amended by amending
2-35 Subsection (j) and adding Subsection (m) to read as follows:
2-36 (j) A corporation may not exclude from surplus:
2-37 (1) liabilities for compensation and other benefits
2-38 provided to employees, other than wages, that are not debt as of
2-39 the end of the accounting period on which the taxable capital
2-40 component is computed <payable in the current accounting year>,
2-41 including retirement, medical, insurance, postretirement, and other
2-42 similar benefits; and
2-43 (2) deferred investment tax credits.
2-44 (m) A corporation may not use the push-down method of
2-45 accounting in computing or reporting its surplus.
2-46 SECTION 6. Section 171.110(a), Tax Code, is amended to read
2-47 as follows:
2-48 (a) The net taxable earned surplus of a corporation is
2-49 computed by:
2-50 (1) determining the corporation's reportable federal
2-51 taxable income, subtracting from that amount any amount included in
2-52 reportable federal taxable income under Section 78 or Sections
2-53 951-964, Internal Revenue Code, and dividends received from a
2-54 subsidiary, associate, or affiliated corporation that does not
2-55 transact a substantial portion of its business or regularly
2-56 maintain a substantial portion of its assets in the United States,
2-57 and adding to that amount any compensation of officers or
2-58 directors, or if a bank, any compensation of directors and
2-59 executive officers, to the extent excluded in determining federal
2-60 taxable income to determine the corporation's taxable earned
2-61 surplus;
2-62 (2) apportioning the corporation's taxable earned
2-63 surplus to this state as provided by Section 171.106(b) or (c), as
2-64 applicable, to determine the corporation's apportioned taxable
2-65 earned surplus; <and>
2-66 (3) adding the corporation's taxable earned surplus
2-67 allocated to this state as provided by Section 171.1061; and
2-68 (4) subtracting from that amount any allowable
2-69 deductions and any business loss that is carried forward to the tax
2-70 reporting period and deductible under Subsection (e).
3-1 SECTION 7. Section 171.1121(a), Tax Code, is amended to read
3-2 as follows:
3-3 (a) For purposes of this section, "gross receipts" means all
3-4 revenues reportable by a corporation on its federal tax return,
3-5 without deduction for the cost of property sold, materials used,
3-6 labor performed, or other costs incurred, unless otherwise
3-7 specifically provided in this chapter. "Gross receipts" does not
3-8 include revenues that are not included in taxable earned surplus.
3-9 For example, Schedule C special deductions and any amounts
3-10 subtracted from reportable federal taxable income under Section
3-11 171.110(a)(1) are not included in taxable earned surplus and
3-12 therefore are not considered gross receipts.
3-13 SECTION 8. Section 171.113(e), Tax Code, is amended to read
3-14 as follows:
3-15 (e) The election under Subsection (b) becomes effective when
3-16 written notice of the election is received by the comptroller from
3-17 the corporation. An election under Subsection (b) must be
3-18 postmarked not later than the <original> due date for the electing
3-19 corporation's franchise tax report to which the election applies.
3-20 <No extension of time for filing the election under this section is
3-21 available.>
3-22 SECTION 9. Section 171.251, Tax Code, is amended to read as
3-23 follows:
3-24 Sec. 171.251. Forfeiture of Corporate Privileges. The
3-25 comptroller shall forfeit the corporate privileges of a corporation
3-26 on which the franchise tax is imposed if the corporation:
3-27 (1) does not file, in accordance with this chapter and
3-28 within 45 <90> days after the date notice of forfeiture is mailed
3-29 <it is due>, a report required by this chapter;
3-30 (2) does not pay, within 45 <90> days after the date
3-31 notice of forfeiture is mailed <it is due>, a tax imposed by this
3-32 chapter or does not pay, within those 45 <90> days, a penalty
3-33 imposed by this chapter relating to that tax; or
3-34 (3) does not permit the comptroller to examine under
3-35 Section 171.211 of this code the corporation's records.
3-36 SECTION 10. Section 171.256(c), Tax Code, is amended to read
3-37 as follows:
3-38 (c) The comptroller shall mail the notice to the corporation
3-39 at least <within> 45 days before the forfeiture of corporate
3-40 privileges <after the day on which the report, tax, or penalty is
3-41 due>. The notice shall be addressed to the corporation and mailed
3-42 to the address named in the corporation's charter as its principal
3-43 place of business or to another known place of business of the
3-44 corporation.
3-45 SECTION 11. The following sections of the Tax Code are
3-46 repealed:
3-47 (1) Section 171.156; and
3-48 (2) Section 171.157.
3-49 SECTION 12. This Act takes effect January 1, 1994, and
3-50 applies to a report originally due on or after that date.
3-51 SECTION 13. The importance of this legislation and the
3-52 crowded condition of the calendars in both houses create an
3-53 emergency and an imperative public necessity that the
3-54 constitutional rule requiring bills to be read on three several
3-55 days in each house be suspended, and this rule is hereby suspended.
3-56 * * * * *
3-57 Austin,
3-58 Texas
3-59 May 21, 1993
3-60 Hon. Bob Bullock
3-61 President of the Senate
3-62 Sir:
3-63 We, your Committee on Finance to which was referred H.B. No. 1892,
3-64 have had the same under consideration, and I am instructed to
3-65 report it back to the Senate with the recommendation that it do not
3-66 pass, but that the Committee Substitute adopted in lieu thereof do
3-67 pass and be printed.
3-68 Montford,
3-69 Chairman
3-70 * * * * *
4-1 WITNESSES
4-2 FOR AGAINST ON
4-3 ___________________________________________________________________
4-4 Name: Wade Anderson x
4-5 Representing: Comptroller's Office
4-6 City: Austin
4-7 -------------------------------------------------------------------
4-8 Name: Teresa Comer x
4-9 Representing: Comptroller's Office
4-10 City: Austin
4-11 -------------------------------------------------------------------