By Parker S.B. No. 554
Substitute the following for S.B. No. 554:
By Craddick C.S.S.B. No. 554
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the determination and apportionment of taxable capital
1-3 and taxable earned surplus for franchise tax purposes.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 171.101(a), Tax Code, is amended to read
1-6 as follows:
1-7 (a) Except as provided by Subsections (b) and (c), the net
1-8 taxable capital of a corporation is computed by:
1-9 (1) adding the corporation's stated capital, as
1-10 defined by Article 1.02, Texas Business Corporation Act, and the
1-11 corporation's surplus, to determine the corporation's taxable
1-12 capital;
1-13 (2) apportioning the corporation's taxable capital to
1-14 this state as provided by Section 171.106(a) or (c), as applicable,
1-15 or, if a banking corporation, as provided by Section 171.1065, to
1-16 determine the corporation's apportioned taxable capital; and
1-17 (3) subtracting from the amount computed under
1-18 Subdivision (2) any other allowable deductions to determine the
1-19 corporation's net taxable capital.
1-20 SECTION 2. Section 171.103, Tax Code, is amended to read as
1-21 follows:
1-22 Sec. 171.103. Determination of Gross Receipts From Business
1-23 Done in this State for Taxable Capital. Except as specifically
1-24 provided by Section 171.1031 for a savings and loan association or
2-1 Section 171.1033 for a banking corporation, in <In> apportioning
2-2 taxable capital, the gross receipts of a corporation from its
2-3 business done in this state is the sum of the corporation's
2-4 receipts from:
2-5 (1) each sale of tangible personal property if the
2-6 property is delivered or shipped to a buyer in this state
2-7 regardless of the FOB point or another condition of the sale, and
2-8 each sale of tangible personal property shipped from this state to
2-9 a purchaser in another state in which the seller is not subject to
2-10 taxation;
2-11 (2) each service performed in this state;
2-12 (3) each rental of property situated in this state;
2-13 (4) each royalty for the use of a patent or copyright
2-14 in this state; and
2-15 (5) other business done in this state.
2-16 SECTION 3. Section 171.1031, Tax Code, is amended to read as
2-17 follows:
2-18 Sec. 171.1031. APPORTIONMENT OF TAXABLE CAPITAL AND TAXABLE
2-19 EARNED SURPLUS OF <BANKING CORPORATION AND> A SAVINGS AND LOAN
2-20 ASSOCIATION. (a) Interest and dividends received by <a banking
2-21 corporation or> a savings and loan association are gross receipts
2-22 of the <banking corporation or> savings and loan association from
2-23 its business done in this state if the <banking corporation or>
2-24 savings and loan association has its commercial domicile in this
2-25 state.
2-26 (b) This section does not apply to any corporation other
2-27 than <a banking corporation and> a savings and loan association.
3-1 <(c) To the extent that this subsection does not conflict
3-2 with Article 8, Chapter 9, The Texas Banking Code of 1943 (Article
3-3 342-908, Vernon's Texas Civil Statutes), the Banking Department of
3-4 Texas is required to revoke the charter of any banking corporation
3-5 certified by the Comptroller as being delinquent in the payment of
3-6 its franchise tax.>
3-7 SECTION 4. Section 171.1032(a), Tax Code, is amended to read
3-8 as follows:
3-9 (a) Except as specifically provided under Section 171.1031
3-10 for a savings and loan association or Section 171.1033 for a
3-11 banking corporation, in <In> apportioning taxable earned surplus,
3-12 the gross receipts of a corporation from its business done in this
3-13 state is the sum of the corporation's receipts from:
3-14 (1) each sale of tangible personal property if the
3-15 property is delivered or shipped to a buyer in this state
3-16 regardless of the FOB point or another condition of the sale, and
3-17 each sale of tangible personal property shipped from this state to
3-18 a purchaser in another state in which the seller is not subject to
3-19 taxation;
3-20 (2) each service performed in this state;
3-21 (3) each rental of property situated in this state;
3-22 (4) each royalty for the use of a patent or copyright
3-23 in this state; and
3-24 (5) other business done in this state.
3-25 SECTION 5. Chapter 171, Tax Code, is amended by adding
3-26 Section 171.1033 to read as follows:
3-27 Sec. 171.1033. DETERMINATION OF GROSS RECEIPTS, PROPERTY,
4-1 AND PAYROLL FOR TAXABLE CAPITAL AND TAXABLE EARNED SURPLUS OF A
4-2 BANKING CORPORATION. A banking corporation shall determine the
4-3 gross receipts factor, property factor, and payroll factor for
4-4 purposes of apportioning taxable capital and taxable earned surplus
4-5 in accordance with this section.
4-6 (b) The gross receipts factor is a fraction the numerator of
4-7 which is the gross receipts of the banking corporation from its
4-8 business done in this state during the period on which the tax is
4-9 based and the denominator of which is the gross receipts of the
4-10 banking corporation within and without this state during the period
4-11 on which the tax is based. Gross receipts of a banking corporation
4-12 not specifically described under the provisions of Subdivisions (1)
4-13 through (13) are apportioned as business done in this state under
4-14 the rules prescribed by Section 171.103 for taxable capital and
4-15 under the rules prescribed by Section 171.1032 for taxable earned
4-16 surplus. The numerator of the gross receipts factor includes all
4-17 interest and fees or penalties in the nature of interest and all
4-18 net gains (but not less than zero), charges, fees, or other
4-19 receipts of the banking corporation from:
4-20 (1) the lease or rental of real property owned by the
4-21 taxpayer if the property is located in this state or the sublease
4-22 of real property if the property is located in this state;
4-23 (2) the lease or rental of tangible personal property
4-24 owned by the taxpayer if the property is located in this state when
4-25 it is first placed in service, other than receipts from the lease
4-26 or rental of movable tangible property, such as rolling stock,
4-27 water vessels, or mobile equipment, included in the numerator of
5-1 the property factor under Subsection (c);
5-2 (3) loans secured by real property if the real
5-3 property securing the loan is primarily located in this state at
5-4 the time the original loan agreement was made, provided that if a
5-5 loan is secured by real property not primarily located in any one
5-6 state at the time the original loan agreement is made, the gross
5-7 receipts from the loan are apportioned to this state if the
5-8 borrower is engaged in a trade or business in this state and
5-9 maintains its commercial domicile in this state or if the borrower
5-10 is not engaged in a trade or business in this state but has its
5-11 billing address in this state;
5-12 (4) loans not secured by real property if the borrower
5-13 is engaged in a trade or business in this state and maintains its
5-14 commercial domicile in this state or if the borrower is not engaged
5-15 in a trade or business in this state but has its billing address in
5-16 this state;
5-17 (5) syndication loans or participation loans, provided
5-18 that the taxpayer's portion of the interest, fees, or penalties in
5-19 the nature of interest from syndication loans or participation
5-20 loans is included in the numerator of the gross receipts factor in
5-21 the same manner as gross receipts from loans are included in the
5-22 numerator of the gross receipts factor under Subdivisions (3) and
5-23 (4);
5-24 (6) syndicated lease transactions involving the lease
5-25 of real property or tangible personal property, provided that the
5-26 taxpayer's portion of the interest, fees, or penalties in the
5-27 nature of interest from syndicated lease transactions is included
6-1 in the numerator of the gross receipts factor in the same manner as
6-2 gross receipts from leases of real property or tangible personal
6-3 property are included in the numerator of the receipts factor under
6-4 Subdivisions (1) and (2);
6-5 (7) net gains, including income recorded under the
6-6 coupon stripping rule of Section 1286 of the Internal Revenue Code,
6-7 from the sale of all loans, including syndication loans and
6-8 participation loans, provided that:
6-9 (A) if the gains are from the sale of loans
6-10 secured by real property, the amount of the net gains included as
6-11 business done in this state is determined by multiplying the net
6-12 gains by a fraction, the numerator of which is the amount included
6-13 as business done in this state under Subdivision (3) and the
6-14 denominator of which is the taxpayer's total amount of interest and
6-15 fees or penalties in the nature of interest from loans secured by
6-16 real property; and
6-17 (B) if the gains are from the sale of loans not
6-18 secured by real property, the amount of the net gains included as
6-19 business done in this state is determined by multiplying the net
6-20 gains by a fraction, the numerator of which is the amount included
6-21 as business done in this state under Subdivision (4) and the
6-22 denominator of which is the taxpayer's total amount of interest and
6-23 fees or penalties in the nature of interest from loans not secured
6-24 by real property;
6-25 (8) credit card receivables and credit card fees
6-26 charged to card holders, such as annual fees, if the billing
6-27 address of the card holder is in this state;
7-1 (9) credit card issuer's reimbursement fees and any
7-2 net gains from the sale of credit card receivables; provided that
7-3 the amount of credit card issuer's reimbursement fees or net gains
7-4 from the sale of credit card receivables included as business done
7-5 in this state is determined by multiplying the credit card
7-6 reimbursement fees or net gains from the sale of credit card
7-7 receivables, respectively, by a fraction, the numerator of which is
7-8 the amount included as business done in this state from credit card
7-9 receivables and credit card fees under Subdivision (8) and the
7-10 denominator of which is the taxpayer's total amount of gross
7-11 receipts from credit card receivables and credit card fees charged
7-12 to card holders;
7-13 (10) merchant discounts, if the commercial domicile of
7-14 the merchant is in this state;
7-15 (11) loan servicing fees, provided that:
7-16 (A) if the loan servicing fees are derived from
7-17 loans secured by real property, the amount of the loan servicing
7-18 fees included as business done in this state is determined by
7-19 multiplying the loan servicing fees by a fraction, the numerator of
7-20 which is the amount included as business done in this state under
7-21 Subdivision (3) and the denominator of which is the taxpayer's
7-22 total amount of gross receipts from loans secured by real property;
7-23 and
7-24 (B) if the loan servicing fees are derived from
7-25 loans not secured by real property, the amount of the loan
7-26 servicing fees included as business done in this state is
7-27 determined by multiplying the loan servicing fees by a fraction,
8-1 the numerator of which is the amount included as business done in
8-2 this state under Subdivision (4) and the denominator of which is
8-3 the taxpayer's total amount of gross receipts from loans not
8-4 secured by real property;
8-5 (12) all other fees or charges for services not
8-6 otherwise apportioned under this subsection, if the service is
8-7 performed in this state; and
8-8 (13) interest, dividends, net gains, and other income
8-9 from investments in securities and from trading activities,
8-10 including investment securities, assets held in trading accounts,
8-11 federal funds, securities purchased or sold under agreements to
8-12 resell or repurchase, options, futures contracts, forward
8-13 contracts, notional principal contracts such as swaps, and foreign
8-14 currency transactions, provided that:
8-15 (A) if the income is from investments in
8-16 securities in the investment portfolio, the amount of the income
8-17 included as business done in this state is determined by
8-18 multiplying all the income by a fraction, the numerator of which is
8-19 the average value of such investments that are properly booked for
8-20 tax purposes at a regular place of business of the taxpayer in this
8-21 state and the denominator of which is the average value of all such
8-22 investments; and
8-23 (B) if the income is from investments in
8-24 securities not in the investment portfolio or from trading
8-25 activities, the amount of the income included as business done in
8-26 this state shall be determined by multiplying all the income by a
8-27 fraction, the numerator of which is the average value of such
9-1 investments and trading activities that are properly booked for tax
9-2 purposes at a regular place of business of the taxpayer in this
9-3 state and the denominator of which is the average value of all such
9-4 investments.
9-5 (c) The property factor is a fraction that represents the
9-6 percentage of the taxpayer's real property, tangible personal
9-7 property, loans, and credit card receivables apportioned to this
9-8 state during the period on which the tax is based. The numerator
9-9 of the fraction is the average value of such property located in
9-10 this state, and the denominator of the fraction is the average
9-11 value of all such property located both within and without this
9-12 state. The numerator of the property factor includes:
9-13 (1) real property owned or rented to the taxpayer, if
9-14 the property is physically located or situated in this state;
9-15 (2) movable tangible property, such as rolling stock,
9-16 water vessels, or mobile equipment, to the extent that the property
9-17 is used in this state;
9-18 (3) loans and all credit card receivables that are:
9-19 (A) properly booked for tax purposes at a
9-20 regular place of business of the taxpayer in this state; or
9-21 (B) if the taxpayer is organized under the laws
9-22 of the United States or of any state, properly booked for tax
9-23 purposes at a place that is not a regular place of business of the
9-24 taxpayer if the taxpayer's commercial domicile is in this state; or
9-25 (C) if the taxpayer is organized under the laws
9-26 of a foreign country, properly booked for tax purposes at a place
9-27 that is not a regular place of business of the taxpayer if the
10-1 taxpayer has declared this state to be its home state under the
10-2 International Banking Act or 1978 (12 U.S.C. Section 3101 et seq.),
10-3 provided that if that declaration has not been made or is not
10-4 required, the loan is presumed to be located at the place in the
10-5 United States where the taxpayer has the most employees as of the
10-6 last day of the period on which the tax is based; and
10-7 (4) any other loan that is demonstrated to have a
10-8 preponderance of substantive contact with this state under rules
10-9 established by the comptroller taking into consideration actions
10-10 such as solicitation, investigation, negotiation, approval and
10-11 administration of the loan in this state.
10-12 (d) The average value of property owned by the taxpayer is
10-13 determined for purposes of the property factor on an annual basis
10-14 by adding the value of the property on the first day of the taxable
10-15 year and the value on the last day of the taxable year and dividing
10-16 the sum by two. The average value of real property and tangible
10-17 personal property that the taxpayer has leased from another and
10-18 that is not treated as owned by the taxpayer for federal income tax
10-19 purposes is determined on an annual basis by multiplying the gross
10-20 rents payable during the taxable year by eight. The value of the
10-21 property is determined as follows:
10-22 (1) real property and tangible personal property owned
10-23 by the taxpayer is valued at the cost or other basis of the
10-24 property for federal income tax purposes without regard to
10-25 depletion, depreciation, or amortization;
10-26 (2) loans are valued at their outstanding principal
10-27 balance without regard to any reserve for bad debts, provided that
11-1 if a loan is charged off in whole or in part for federal income tax
11-2 purposes, the portion of the loan charged off is not considered
11-3 part of the outstanding balance and any specifically allocated
11-4 reserve established under regulatory or financial accounting
11-5 guidelines that is treated as charged off for federal income tax
11-6 purposes is treated as charged off for purposes of this subsection;
11-7 and
11-8 (3) credit card receivables are valued at their
11-9 outstanding principal balance without regard to any reserve for bad
11-10 debts, provided that if a credit card receivable is charged off in
11-11 whole or in part for federal income tax purposes, the portion of
11-12 the receivable charged off is not considered part of the
11-13 outstanding balance.
11-14 (e) The payroll factor is a fraction, the numerator of which
11-15 is the total amount paid in this state by the taxpayer as
11-16 compensation during the period on which the tax is based and the
11-17 denominator of which is the total amount paid by the taxpayer as
11-18 compensation within and without this state during the period on
11-19 which the tax is based. The amount paid to an employee for
11-20 services or activities connected to the production of non business
11-21 income and the amount paid to an independent contractor or a person
11-22 not deemed to be an employee of the taxpayer under Section 3401,
11-23 Internal Revenue Code, is excluded from both the numerator and
11-24 denominator of the factor. In this subsection:
11-25 (1) "Compensation" includes all wages, salaries,
11-26 commissions and any other forms of remuneration paid to an employee
11-27 for personal services that are considered income under the Internal
12-1 Revenue Code.
12-2 (2) "Employee" means an officer of a corporation or an
12-3 individual who, under the usual common-law rules applicable in
12-4 determining the employer-employee relationship, has the status of
12-5 an employee. For an employee not subject to the Internal Revenue
12-6 Code, including for example, a person employed in a foreign
12-7 country, the determination of whether a payment to the employee
12-8 constitutes income paid to the employee is made as though the
12-9 employee were subject to the Internal Revenue Code. Compensation
12-10 paid in this state shall equal the total compensation taken from
12-11 the federal payroll tax reports for the period on which the tax is
12-12 based that is attributable to this state. Compensation is paid in
12-13 this state if any one of the following tests, applied
12-14 consecutively, is met:
12-15 (A) the employee's service is performed entirely
12-16 within this state;
12-17 (B) the employee's service is performed both
12-18 within and without this state, but the service performed without
12-19 this state is incidental to the employee's service within this
12-20 state because it is temporary or transitory in nature, or is
12-21 rendered in connection with an isolated transaction;
12-22 (C) if the employee's services are performed
12-23 both within and without this state, the employee's compensation is
12-24 attributed to this state:
12-25 (i) if the employee's base of operations
12-26 is within this state;
12-27 (ii) if there is no base of operations in
13-1 any state in which some part of the service is performed, but the
13-2 place from which the service is directed or controlled is in this
13-3 state; or
13-4 (iii) if the base of operations or the
13-5 place from which the service is directed or controlled is not in
13-6 any state in which some part of the service is performed, but the
13-7 employee's residence is in this state.
13-8 (3) "Place from which the service is directed or
13-9 controlled" means the place from which the power to direct or
13-10 control is exercised by the taxpayer.
13-11 (4) "Base of operations" means the place of more or
13-12 less permanent nature from which the employee starts the employee's
13-13 work and to which the employee customarily returns to:
13-14 (A) receive instructions from the taxpayer, or
13-15 communications from the employee's customers or other persons; or
13-16 (B) perform any other functions necessary to the
13-17 exercise of the employee's trade or profession at some other point
13-18 or points.
13-19 (f) In this section:
13-20 (1) "Billing address" means the location indicated in
13-21 the books and records of the taxpayer as the address where any
13-22 notice, statement, or bill relating to a customer's account is
13-23 mailed.
13-24 (2) "Commercial domicile" means the headquarters of
13-25 the trade or business, that is, the place from which the trade or
13-26 business is principally managed and directed.
13-27 (3) "Credit card" means a credit, travel or
14-1 entertainment card.
14-2 (4) "Credit card issuer's reimbursement fee" means the
14-3 receipts a taxpayer receives from a merchant's bank because one of
14-4 the persons to whom the taxpayer has issued a credit card has
14-5 charged merchandise or services to the credit card.
14-6 (5) "Gross rents" means the actual sum of money or
14-7 other consideration payable, directly or indirectly, by or on
14-8 behalf of the taxpayer for the use or possession of the property.
14-9 The term:
14-10 (A) includes any amount payable for the use or
14-11 possession of real property or tangible person property whether
14-12 designated as a fixed sum of money or as a percentage of receipts,
14-13 as profits, or otherwise;
14-14 (B) includes any amount payable as additional
14-15 rent or in lieu of rent, such as interest, taxes, insurance,
14-16 repairs, or any other amount required to be paid by the terms of a
14-17 lease or other arrangement;
14-18 (C) includes a proportionate part of the cost of
14-19 any improvement to real property made by or on behalf of the
14-20 taxpayer that reverts to the owner or lessor on termination of a
14-21 lease or other arrangement determined by computing the amount of
14-22 amortization or depreciation allowed in computing the taxable
14-23 income base for the taxable year; except that if a building is
14-24 erected on leased land by or on behalf of the taxpayer, the value
14-25 of the land is determined by multiplying the gross rent by eight
14-26 and the value of the building is determined in the same manner as
14-27 if owned by the taxpayer; and
15-1 (D) does not include:
15-2 (i) amounts payable as separate charges
15-3 for water and electric service provided by the lessor;
15-4 (ii) amounts payable as service charges,
15-5 such as janitorial services provided by the lessor;
15-6 (iii) amounts payable for storage,
15-7 provided the amounts are payable for space not designated and not
15-8 under the control of the taxpayer; and
15-9 (iv) that portion of any rental payment
15-10 that is applicable to the space subleased from the taxpayer and not
15-11 used by it.
15-12 (6) "Loan" means any extension of credit resulting
15-13 from direct negotiations between the taxpayer and its customer, or
15-14 the purchase, in whole or in part, of the extension of credit from
15-15 another, or both. The term includes leases treated as loans for
15-16 federal income tax purposes, but shall not include:
15-17 (A) loans representing property acquired in lieu
15-18 of or pursuant to a foreclosure under Section 595, Internal Revenue
15-19 Code;
15-20 (B) futures or forward contracts, options, and
15-21 notional principal contracts, such as swaps;
15-22 (C) credit card receivables, including purchased
15-23 credit card relationships;
15-24 (D) non interest-bearing balances due from other
15-25 depository institutions;
15-26 (E) cash items in the process of collection;
15-27 (F) federal funds sold;
16-1 (G) securities purchased under agreements to
16-2 resell;
16-3 (H) assets held in a trading account; and
16-4 (I) securities held for investment.
16-5 (7) "Merchant discount" means the fee or negotiated
16-6 discount charged to a merchant by the taxpayer for the privilege of
16-7 participating in a program in which a credit card is accepted in
16-8 payment for merchandise or services sold to the card holder. The
16-9 fee is computed net of any card holder charge-backs, but is not
16-10 reduced by any interchange transaction fee or by a credit card
16-11 issuer's reimbursement fee paid to another for charges made by its
16-12 card holders.
16-13 (8) "Real property owned" and "tangible personal
16-14 property owned" mean real and tangible personal property,
16-15 respectively,:
16-16 (A) on which the taxpayer may claim depreciation
16-17 for federal income tax purposes, or
16-18 (B) to which the taxpayer holds legal title and
16-19 on which no other person may claim depreciation for federal income
16-20 tax purposes or could claim depreciation if subject to federal
16-21 income tax. Real and tangible personal property includes land,
16-22 stocks in goods and real and tangible personal property rented to
16-23 the taxpayer. Real and tangible personal property does not include
16-24 coin, currency, or property acquired in lieu of or pursuant to a
16-25 foreclosure.
16-26 (9) "Regular place of business" means an office at
16-27 which the taxpayer carries on the taxpayer's business in a regular
17-1 and systematic manner and that is continuously maintained,
17-2 occupied, and used by employees of the taxpayer.
17-3 (g) This section does not apply to any corporation other
17-4 than a banking corporation.
17-5 SECTION 6. Chapter 171, Tax Code, is amended by adding
17-6 Section 171.1065 to read as follows:
17-7 Sec. 171.1065 APPORTIONMENT OF TAXABLE CAPITAL AND TAXABLE
17-8 EARNED SURPLUS OF A BANKING CORPORATION. (a) Except as provided
17-9 by Section 171.106(c), the taxable capital and the taxable earned
17-10 surplus of a banking corporation is apportioned to this state by
17-11 multiplying the taxable capital and taxable earned surplus,
17-12 respectively, of the banking corporation by the apportionment
17-13 percentage. The apportionment percentage is determined by adding
17-14 the following three factors and dividing the sum by three:
17-15 (1) the gross receipts factor computed as prescribed
17-16 by Section 171.1033(b);
17-17 (2) the property factor computed as prescribed by
17-18 Section 171.1033(c) and (d); and
17-19 (3) the payroll factor computed as prescribed by
17-20 Section 171.1033(e).
17-21 (b) If one of the factors is missing, the two remaining
17-22 factors are added and the sum is divided by two. If two of the
17-23 factors are missing, the remaining factor is the apportionment
17-24 percentage. A factor is missing if both its numerator and
17-25 denominator are zero, but it is not missing solely because its
17-26 numerator is zero.
17-27 (c) Each factor is computed on a cash or accrual basis
18-1 according to the method of accounting required or allowed to be
18-2 used by the taxpayer in determining taxable capital or earned
18-3 surplus for the period on which the tax is based.
18-4 (d) The receipts factor includes only receipts that are
18-5 included in the computation of the taxable income base for the
18-6 period on which the tax is based.
18-7 (e) The payroll factor includes only expenses that are
18-8 included in the computation of the taxable income base for the
18-9 period on which the tax is based.
18-10 (f) The property factor includes only property the income or
18-11 expenses of which are included or would have been included if not
18-12 fully depreciated or expensed, or depreciated or expensed to a
18-13 nominal amount, in the computation of the taxable income base for
18-14 the period on which the tax is based.
18-15 (g) If the apportionment percentage, computed on the basis
18-16 of all or any of the three factors of gross receipts, property, or
18-17 payroll, does not properly reflect the activity, business, or
18-18 income of the taxpayer in this state, the taxpayer may request an
18-19 adjustment or the comptroller may adjust the apportionment
18-20 percentage by:
18-21 (1) excluding one or more factors;
18-22 (2) including one or more other factors; or
18-23 (3) using any other method calculated to effect a fair
18-24 and proper apportionment to this state.
18-25 SECTION 7. Section 171.110, Tax Code, is amended by amending
18-26 Subsection (a) and adding Subsection (h) to read as follows:
18-27 (a) The net taxable earned surplus of a corporation is
19-1 computed by:
19-2 (1) determining the corporation's reportable federal
19-3 taxable income, subtracting from that amount any amount included in
19-4 reportable federal taxable income under Section 78 or Sections
19-5 951-964, Internal Revenue Code, and dividends received from a
19-6 subsidiary, associate, or affiliated corporation that does not
19-7 transact a substantial portion of its business or regularly
19-8 maintain a substantial portion of its assets in the United States,
19-9 and adding to that amount any compensation of officers or
19-10 directors, or if a bank, any compensation of directors and
19-11 executive officers, to the extent excluded in determining federal
19-12 taxable income to determine the corporation's taxable earned
19-13 surplus;
19-14 (2) apportioning the corporation's taxable earned
19-15 surplus to this state as provided by Section 171.106(b) or (c), as
19-16 applicable, or, if a banking corporation, as provided by Section
19-17 171.1065, to determine the corporation's apportioned taxable earned
19-18 surplus; and
19-19 (3) subtracting from that amount any allowable
19-20 deductions and any business loss that is carried forward to the tax
19-21 reporting period and deductible under Subsection (e).
19-22 (h) Dividends and interest received from federal obligations
19-23 are not included in earned surplus or gross receipts for earned
19-24 surplus purposes.
19-25 (1) For purposes of this subsection, the term "federal
19-26 obligations" means:
19-27 (A) stocks and other direct obligations of, and
20-1 obligations unconditionally guaranteed by, the United States
20-2 government and United States government agencies; and
20-3 (B) direct obligations of United States
20-4 government-sponsored agencies.
20-5 (2) For purposes of this subsection:
20-6 (A) "Obligation" means any bond, debenture,
20-7 security, mortgage-backed security, pass-through certificate, or
20-8 other evidence of indebtedness of the issuing entity. The term
20-9 does not include a deposit, a repurchase agreement, a loan, a
20-10 lease, a participation in a loan or pool of loans, a loan
20-11 collateralized by an obligation of an agency of the United States
20-12 or a loan guaranteed by an agency of the United States government.
20-13 (B) "United States government" means any
20-14 department and ministry of the federal government including the
20-15 twelve federal reserve banks. The term does not include state or
20-16 local governments or commercial enterprises owned in whole or part
20-17 by the United States government.
20-18 (C) "United States government agency" means an
20-19 instrumentality of the United States government whose obligations
20-20 are fully and explicitly guaranteed as to the timely payment of
20-21 principal and interest by the full faith and credit of the United
20-22 States government. These agencies include the Government National
20-23 Mortgage Association, (GNMA), the Veterans Administration (VA), the
20-24 Federal Housing Administration (FHA), the Farmers Home
20-25 Administration (FmHA), the Export-Import Bank (Exim Bank), the
20-26 Overseas Private Investment Corporation (OPIC), the Commodity
20-27 Credit Corporation (CCC), and the Small Business Administration
21-1 (SBA).
21-2 (D) "United States government-sponsored agency"
21-3 means agencies original established or chartered by the United
21-4 States government to serve public purposes specified by the United
21-5 States Congress but whose obligations are not explicitly guaranteed
21-6 by the full faith and credit of the United States government.
21-7 These agencies include the Federal Home Loan Mortgage Corporation
21-8 (FHLMC), the Federal National Mortgage Association (FNMA), the Farm
21-9 Credit System, the Federal Home Loan Bank System, and the Student
21-10 Loan Marketing Association (SLMA).
21-11 SECTION 8. Section 171.316, Tax Code, is amended to read as
21-12 follows:
21-13 Sec. 171.316 BANKING CORPORATIONS. (a) Except as
21-14 prohibited by Article 8, Chapter 9, The Texas Banking Code of 1943
21-15 (Article 342-908, Vernon's Texas Civil Statutes), the Banking
21-16 Department of Texas shall revoke the charter of a banking
21-17 corporation that the comptroller certifies is delinquent in the
21-18 payment of the tax imposed under this chapter.
21-19 (b) Except as provided by Subsection (a), this <This>
21-20 subchapter does not apply to a banking corporation.
21-21 SECTION 9. Section 171.001(b), Tax Code, is amended to read
21-22 as follows:
21-23 (b) In this chapter:
21-24 (1) "Banking corporation" means each state, national,
21-25 domestic, or foreign bank, and each bank organized under Section
21-26 25(a), Federal Reserve Act (12 U.S.C. Secs. 611-631) (edge
21-27 corporations), but does not include (i) a bank holding company as
22-1 that term is defined by Section 2, Bank Holding Company Act of 1956
22-2 (12 U.S.C. Sec. 1841) or (ii) a limited-purpose bank.
22-3 (2) "Corporation" includes:
22-4 (A) a limited liability company, as defined
22-5 under the Texas Limited Liability Company Act; and
22-6 (B) a state or federal savings and loan
22-7 association.
22-8 (3) "Charter" includes a limited liability company's
22-9 certificate of organization.
22-10 (4) "Internal Revenue Code" means the Internal Revenue
22-11 Code of 1986 in effect for the federal tax year beginning on or
22-12 after January 1, 1990, and before January 1, 1991, and any
22-13 regulations adopted under that code applicable to that period.
22-14 (5) "Limited-purpose bank" means each bank as that
22-15 term is defined by Section 2, Bank Holding Company Act of 1956 (12
22-16 U.S.C. 1841) that is controlled by a corporation that is not
22-17 treated as a bank holding company under the Bank Holding Company
22-18 Act of 1956.
22-19 (6) <(5)> "Officer" and "director" include a limited
22-20 liability company's directors and managers.
22-21 (7) <(6)> "Savings and loan association" includes a
22-22 state or federal savings bank and, for purposes only of this
22-23 Chapter 171, each limited-purpose bank.
22-24 (8) <(7)> "Shareholder" includes a limited liability
22-25 company's member.
22-26 SECTION 10. This Act takes effect January 1, 1994, and
22-27 applies to a report originally due on or after that date.
23-1 SECTION 11. The importance of this legislation and the
23-2 crowded condition of the calendars in both houses create an
23-3 emergency and an imperative public necessity that the
23-4 constitutional rule requiring bills to be read on three several
23-5 days in each house be suspended, and this rule is hereby suspended.