By Oliveira H.B. No. 1893
A BILL TO BE ENTITLED
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 171.001(b), Tax Code, is amended to read
1-6 as follows:
1-7 (b) In this chapter:
1-8 (1) "Banking corporation" means each state, national,
1-9 domestic, or foreign bank, and each bank organized under Section
1-10 25(a), Federal Reserve Act (12 U.S.C. Secs. 611-631) (edge
1-11 corporations), but does not include a bank holding company as that
1-12 term is defined by Section 2, Bank Holding Company Act of 1956 (12
1-13 U.S.C. Sec. 1841).
1-14 (2) "Corporation" includes:
1-15 (A) a limited liability company, as defined
1-16 under the Texas Limited Liability Company Act; and
1-17 (B) a state or federal savings and loan
1-18 association.
1-19 (3) "Charter" includes a limited liability company's
1-20 certificate of organization.
1-21 (4) "Internal Revenue Code" means the Internal Revenue
1-22 Code of 1986, as amended and in effect for the federal taxable year
1-23 beginning on or after January 1, 1992 <1990>, and before January 1,
2-1 1993 <1991>, and any regulations adopted under that code applicable
2-2 to that period.
2-3 (5) "Officer" and "director" include a limited
2-4 liability company's directors and managers.
2-5 (6) "Savings and loan association" includes a state or
2-6 federal savings bank.
2-7 (7) "Shareholder" includes a limited liability
2-8 company's member.
2-9 SECTION 2. Section 171.061, Tax Code, is amended to read as
2-10 follows:
2-11 Sec. 171.061. EXEMPTION--NONPROFIT CORPORATION ORGANIZED FOR
2-12 EDUCATIONAL PURPOSES
2-13 A nonprofit corporation organized solely for educational
2-14 purposes, <including a corporation organized solely to provide a
2-15 student loan fund or student scholarships,> is exempted from the
2-16 franchise tax.
2-17 SECTION 3. Section 171.082, Tax Code, is amended to read as
2-18 follows:
2-19 Sec. 171.082. EXEMPTION--CERTAIN HOMEOWNER'S ASSOCIATIONS
2-20 A nonprofit corporation is exempted from the franchise tax
2-21 if:
2-22 (1) the corporation is organized and operated
2-23 primarily to obtain, manage, construct, and maintain the property
2-24 in or of a residential condominium or residential real estate
2-25 development; and
3-1 (2) voting control of the corporation is vested in the
3-2 owners of individual lots, residences, or residential units, and
3-3 not in the developer or any one individual, partnership,
3-4 corporation, trust or other entity.
3-5 SECTION 4. Section 171.087, Tax Code, is added to read as
3-6 follows:
3-7 Sec. 171.087. EXEMPTION--NONPROFIT CORPORATIONS ORGANIZED
3-8 SOLELY TO PROVIDE STUDENT LOAN FUND OR STUDENT SCHOLARSHIPS
3-9 A nonprofit corporation organized solely to provide a student
3-10 loan fund or student scholarships is exempted from the franchise
3-11 tax.
3-12 SECTION 5. Section 171.101(a) and (d). Tax Code, are
3-13 amended to read as follows:
3-14 (a) Except as provided by Subsections (b) and (c), the net
3-15 taxable capital of a corporation is computed by:
3-16 (1) adding the corporation's stated capital as defined
3-17 by Article 1.02, Texas Business Corporation Act, and the
3-18 corporation's surplus, to determine the corporation's taxable
3-19 capital;
3-20 (2) apportioning the corporation's taxable capital to
3-21 this state as provided by Section 171.106(a) or (c), as applicable,
3-22 to determine the corporation's apportioned taxable capital; <and>
3-23 (3) adding the corporation's taxable capital allocated
3-24 to this state as provided in Section 171.1061; and
3-25 (4) <(3)> subtracting from the amount computed under
4-1 Subdivision (2) any other allowable deductions to determine the
4-2 corporation's net taxable capital.
4-3 (d) For purposes of this chapter, no deduction shall be
4-4 allowed for expenses otherwise allowable as deductions is such
4-5 expenses relate to income exempt or excluded from taxation under
4-6 this chapter.
4-7 SECTION 6. Section 171.103, Tax Code, is amended to read as
4-8 follows:
4-9 Except for the gross receipts of a corporation that are
4-10 subject to the provisions of Section 171.1061, in <In> apportioning
4-11 taxable capital, the gross receipts of a corporation from its
4-12 business done in this state is the sum of the corporation's
4-13 receipts from:
4-14 (1) each sale of tangible personal property if the
4-15 property is delivered or shipped to a buyer in this state
4-16 regardless of the FOB point or another condition of the sale, and
4-17 each sale of tangible personal property shipped from this state to
4-18 a purchaser in another state in which the seller is not subject to
4-19 taxation;
4-20 (2) each service performed in this state;
4-21 (3) each rental of property situated in this state;
4-22 (4) each royalty for the use of a patent or copyright
4-23 in this state; and
4-24 (5) other business done in this state.
4-25 SECTION 7. Section 171.1032(a), Tax Code, is amended to
5-1 read as follows:
5-2 (a) Except for the gross receipts of a corporation that are
5-3 subject to the provisions of Section 171.1062, in <In> apportioning
5-4 taxable earned surplus, the gross receipts of a corporation from
5-5 its business done in this state is the sum of the corporation's
5-6 receipts from:
5-7 (1) each sale of tangible personal property if the
5-8 property is delivered or shipped to a buyer in this state
5-9 regardless of the FOB point or another condition of the sale, and
5-10 each sale of tangible personal property shipped from this state to
5-11 a purchaser in another state in which the seller is not subject to
5-12 taxation;
5-13 (2) each service performed in this state;
5-14 (3) each rental of property situated in this state;
5-15 (4) each royalty for the use of a patent or copyright
5-16 in this state; and
5-17 (5) other business done in this state.
5-18 SECTION 8. Section 171.105(a), Tax Code, is amended to read
5-19 as follows:
5-20 (a) Except for the gross receipts of a corporation that are
5-21 subject to the provisions of Section 171.1061, in <In> apportioning
5-22 taxable capital, the gross receipts of a corporation from its
5-23 entire business is the sum of the corporation's receipts from:
5-24 (1) each sale of the corporation's tangible personal
5-25 property;
6-1 (2) each service, rental, or royalty; and
6-2 (3) other business.
6-3 SECTION 9. Section 171.1051(a), Tax Code, is amended to read
6-4 as follows:
6-5 (a) Except for the gross receipts of a corporation that are
6-6 subject to the provisions of Section 171.1062, in <In> apportioning
6-7 taxable earned surplus, the gross receipts of a corporation from
6-8 its entire business is the sum of the corporation's receipts from:
6-9 (1) each sale of the corporation's tangible personal
6-10 property;
6-11 (2) each service, rental, or royalty; and
6-12 (3) other business.
6-13 SECTION 10. Section 171.106(c), Tax Code, is amended to read
6-14 as follows:
6-15 (c) A corporation's taxable capital or earned surplus that
6-16 is derived, directly or indirectly, from the sale of management,
6-17 distribution, or administration services to or on behalf of a
6-18 regulated investment company, including a corporation that includes
6-19 trustees or sponsors of employee benefit plans that have accounts
6-20 in a regulated investment company, is apportioned to this state to
6-21 determine the amount of the tax imposed under Section 171.002 by
6-22 multiplying the corporation's total taxable capital or earned
6-23 surplus from the sale of services to or on behalf of a regulated
6-24 investment company by a fraction, the numerator of which is the
6-25 average of the sum of shares owned at the beginning of the year and
7-1 the sum of shares owned at the end of the year by the investment
7-2 company shareholders who are commercially domiciled in this state
7-3 or domiciled in this state, if an individual, and the denominator
7-4 of which is the average of the sum of shares owned at the beginning
7-5 of the year and the sum of shares owned at the end of the year by
7-6 all investment company shareholders.
7-7 SECTION 11. Section 171.1061, Tax Code, is added to read as
7-8 follows:
7-9 Sec. 171.1061. ALLOCATION OF CERTAIN TAXABLE CAPITAL TO THIS
7-10 STATE
7-11 Any portion of a corporation's taxable capital not subject to
7-12 tax by a state or country other than this state because it does not
7-13 have sufficient unitary connection with such other state or country
7-14 in accordance with federal law, will be allocated to and taxed by
7-15 this state if the corporation's commercial domicile is in this
7-16 state.
7-17 SECTION 12. Section 171.1062, Tax Code, is added to read as
7-18 follows:
7-19 Sec. 171.1062. ALLOCATION OF CERTAIN TAXABLE EARNED SURPLUS
7-20 TO THIS STATE
7-21 Any portion of a corporation's taxable earned surplus not
7-22 subject to tax by a state or country other than this state because
7-23 it does not have sufficient unitary connection with such other
7-24 state or country in accordance with federal law, will be allocated
7-25 to and taxed by this state if the corporation's commercial domicile
8-1 is in this state.
8-2 SECTION 13. Section 171.109(m), Tax Code, is amended to add
8-3 Subsection (m) to read as follows:
8-4 (m) A corporation may not use the push-down method of
8-5 accounting in computing or reporting its surplus.
8-6 SECTION 14. Section 171.110 Tax Code, is amended by amending
8-7 Subsection (a) and adding Subsections (h), and (i) to read as
8-8 follows:
8-9 (a) The net taxable earned surplus of a corporation is
8-10 computed by:
8-11 (1) determining the corporation's reportable federal
8-12 taxable income, subtracting from that amount any amount included in
8-13 reportable federal taxable income under Section 78 or Sections
8-14 951-964, Internal Revenue Code, and dividends received from a
8-15 subsidiary, associate, or affiliated corporation that does not
8-16 transact a substantial portion of its business or regularly
8-17 maintain a substantial portion of its assets in the United States,
8-18 and adding to that amount any compensation of officers or
8-19 directors, or if a bank, any compensation of directors and
8-20 executive officers, to the extent excluded in determining federal
8-21 taxable income to determine the corporation's taxable earned
8-22 surplus;
8-23 (2) apportioning the corporation's taxable earned
8-24 surplus to this state as provided by Section 171.106(b) or (c), as
8-25 applicable, to determine the corporation's apportioned taxable
9-1 earned surplus; <and>
9-2 (3) adding the corporation's taxable earned surplus
9-3 allocated to this state as provided in Section 171.1062; and
9-4 (4) <(3)> subtracting from that amount any allowable
9-5 deductions and any business loss that is carried forward to the tax
9-6 reporting period and deductible under Subsection (e).
9-7 (h) For purposes of this chapter, no deduction shall be
9-8 allowed for expenses otherwise allowable as deductions if such
9-9 expenses relate to income exempt or excluded from taxation under
9-10 this chapter.
9-11 (i) Except as provided in subsection (g) of this section,
9-12 each partner in a partnership shall be considered one shareholder
9-13 and each beneficiary of a trust shall be considered one
9-14 shareholder, if the shares are held in the name of a partnership or
9-15 of a trust.
9-16 SECTION 15. Section 171.151, Tax Code, is amended to read as
9-17 follows:
9-18 Sec. 171.151. PRIVILEGE PERIOD COVERED BY TAX.
9-19 The franchise tax shall be paid for each of the following:
9-20 (1) an initial period beginning on the date that the
9-21 corporation files its charter or is granted a certificate of
9-22 authority or the date that a foreign corporation begins doing
9-23 business in this state, whichever is earlier, and ending on the day
9-24 before the first anniversary of that date;
9-25 (2) a second period beginning on the first anniversary
10-1 of the date that the corporation files its charter or is granted
10-2 its certificate of authority or the date that a foreign corporation
10-3 begins doing business in this state, whichever is earlier, and
10-4 ending on December 31 following that date, unless the date of the
10-5 first anniversary is December 31, in which event the second period
10-6 begins and ends on that December 31; and
10-7 (3) after the initial and second periods have expired,
10-8 a regular annual period beginning each year on January 1 and ending
10-9 the following December 31.
10-10 SECTION 16. Section 171.204, Tax Code, is amended to read as
10-11 follows:
10-12 Sec. 171.204. INFORMATION REPORT
10-13 To determine eligibility for the exemption provided by
10-14 Section 171.2022, or to determine the amount of the franchise tax
10-15 or the correctness of a franchise tax report, the comptroller may
10-16 require <an officer of> a corporation that may be subject to the
10-17 tax imposed under this chapter to file an information report with
10-18 the comptroller stating the amount of the corporation's taxable
10-19 capital and earned surplus, or any other information the
10-20 comptroller may request.
10-21 SECTION 17. Subchapter H, Chapter 171, Tax Code is amended
10-22 by adding Section 171.364 to read as follows:
10-23 Sec. 171.364. TRANSACTIONS ENTERED INTO TO AVOID OR EVADE
10-24 TAX
10-25 If the principal purpose of any transaction or series of
11-1 transactions entered into by a corporation is determined by the
11-2 comptroller to be entered into to avoid or evade the imposition of
11-3 the tax under this Title, the comptroller may take the following
11-4 actions:
11-5 (a) In the case of a transaction or a series of transactions
11-6 between a corporation and one or more businesses (whether or not
11-7 incorporated, and whether or not affiliated), owned or controlled
11-8 directly or indirectly by the same interests, the comptroller may
11-9 distribute, apportion, or allocate gross income, deductions,
11-10 credits or allowances between or among the corporation and such
11-11 businesses if it is determined that such allocation is necessary in
11-12 order to
11-13 (1) prevent evasion of taxes, or
11-14 (2) clearly reflect the income of any of such
11-15 corporation.
11-16 (b) In the case of certain reorganization transactions in
11-17 which the principal purpose of the transaction or series of
11-18 transactions is the avoidance or evasion of tax, the comptroller
11-19 may disregard the transaction or take such other action as may be
11-20 necessary to prevent the avoidance or evasion of tax.
11-21 SECTION 18. This Act takes effect for franchise tax reports
11-22 originally due on or after January 1, 1994.
11-23 SECTION 19. The importance of this legislation and the
11-24 crowded condition of the calendars in both houses create an
11-25 emergency and an imperative public necessity that the
12-1 constitutional rule requiring bills to be read on three several
12-2 days in each house be suspended, and this rule is hereby suspended.