1-1 By: Parker S.B. No. 554
1-2 (In the Senate - Filed March 2, 1993; March 3, 1993, read
1-3 first time and referred to Committee on Economic Development;
1-4 April 27, 1993, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 7, Nays 0; April 27, 1993,
1-6 sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Parker x
1-10 Lucio x
1-11 Ellis x
1-12 Haley x
1-13 Harris of Dallas x
1-14 Harris of Tarrant x
1-15 Leedom x
1-16 Madla x
1-17 Rosson x
1-18 Shapiro x
1-19 Wentworth x
1-20 COMMITTEE SUBSTITUTE FOR S.B. No. 554 By: Parker
1-21 A BILL TO BE ENTITLED
1-22 AN ACT
1-23 relating to the determination and apportionment of taxable capital
1-24 and taxable earned surplus for franchise tax purposes.
1-25 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-26 SECTION 1. Subsection (a), Section 171.101, Tax Code, is
1-27 amended to read as follows:
1-28 (a) Except as provided by Subsections (b) and (c), the net
1-29 taxable capital of a corporation is computed by:
1-30 (1) adding the corporation's stated capital, as
1-31 defined by Article 1.02, Texas Business Corporation Act, and the
1-32 corporation's surplus, to determine the corporation's taxable
1-33 capital;
1-34 (2) apportioning the corporation's taxable capital to
1-35 this state as provided by Section 171.106(a) or (c), as applicable,
1-36 or, if a banking corporation, as provided in Section 171.1065, to
1-37 determine the corporation's apportioned taxable capital; and
1-38 (3) subtracting from the amount computed under
1-39 Subdivision (2) any other allowable deductions to determine the
1-40 corporation's net taxable capital.
1-41 SECTION 2. Section 171.103, Tax Code, is amended to read as
1-42 follows:
1-43 Sec. 171.103. Determination of Gross Receipts From Business
1-44 Done in this State for Taxable Capital. Except as specifically
1-45 provided by Section 171.1031 for a savings and loan association or
1-46 Section 171.1033 for a banking corporation, in <In> apportioning
1-47 taxable capital, the gross receipts of a corporation from its
1-48 business done in this state is the sum of the corporation's
1-49 receipts from:
1-50 (1) each sale of tangible personal property if the
1-51 property is delivered or shipped to a buyer in this state
1-52 regardless of the FOB point or another condition of the sale, and
1-53 each sale of tangible personal property shipped from this state to
1-54 a purchaser in another state in which the seller is not subject to
1-55 taxation;
1-56 (2) each service performed in this state;
1-57 (3) each rental of property situated in this state;
1-58 (4) each royalty for the use of a patent or copyright
1-59 in this state; and
1-60 (5) other business done in this state.
1-61 SECTION 3. Section 171.1031, Tax Code, is amended to read as
1-62 follows:
1-63 Sec. 171.1031. APPORTIONMENT OF TAXABLE CAPITAL AND TAXABLE
1-64 EARNED SURPLUS OF A <BANKING CORPORATION AND> SAVINGS AND LOAN
1-65 ASSOCIATION. (a) Interest and dividends received by <a banking
1-66 corporation or> a savings and loan association are gross receipts
1-67 of the <banking corporation or> savings and loan association from
1-68 its business done in this state if the <banking corporation or>
2-1 savings and loan association has its commercial domicile in this
2-2 state.
2-3 (b) This section does not apply to any corporation other
2-4 than a <banking corporation and a> savings and loan association.
2-5 <(c) To the extent that this subsection does not conflict
2-6 with Article 8, Chapter 9, The Texas Banking Code of 1943 (Article
2-7 342-908, Vernon's Texas Civil Statutes), the Banking Department of
2-8 Texas is required to revoke the chapter of any banking corporation
2-9 certified by the Comptroller as being delinquent in the payment of
2-10 its franchise tax.>
2-11 SECTION 4. Subsection (a), Section 171.1032, Tax Code, is
2-12 amended to read as follows:
2-13 (a) Except as specifically provided under Section 171.1031
2-14 for a savings and loan association or Section 171.1033 for a
2-15 banking corporation, in <In> apportioning taxable earned surplus,
2-16 the gross receipts of a corporation from its business done in this
2-17 state is the sum of the corporation's receipts from:
2-18 (1) each sale of tangible personal property if the
2-19 property is delivered or shipped to a buyer in this state
2-20 regardless of the FOB point or another condition of the sale, and
2-21 each sale of tangible personal property shipped from this state to
2-22 a purchaser in another state in which the seller is not subject to
2-23 taxation;
2-24 (2) each service performed in this state;
2-25 (3) each rental of property situated in this state;
2-26 (4) each royalty for the use of a patent or copyright
2-27 in this state; and
2-28 (5) other business done in this state.
2-29 SECTION 5. Subchapter C, Chapter 171, Tax Code, is amended
2-30 by adding Section 171.1033 to read as follows:
2-31 Sec. 171.1033. APPORTIONMENT OF TAXABLE CAPITAL AND TAXABLE
2-32 EARNED SURPLUS OF A BANKING CORPORATION. (a) A banking
2-33 corporation shall determine the gross receipts factor, property
2-34 factor, and payroll factor for purposes of apportioning taxable
2-35 capital and taxable earned surplus in accordance with this section.
2-36 (b) The gross receipts factor is a fraction, the numerator
2-37 of which is the gross receipts of the banking corporation from its
2-38 business done in this state during the period on which the tax is
2-39 based and the denominator of which is the gross receipts of the
2-40 banking corporation within and without this state during the period
2-41 on which the tax is based. Gross receipts of a banking corporation
2-42 not specifically described under the provisions of Subdivisions (1)
2-43 through (13) are apportioned as business done in this state under
2-44 the rules prescribed by Section 171.103 for taxable capital and
2-45 under the rules prescribed by Section 171.1032 for taxable earned
2-46 surplus. The numerator of the gross receipts factor includes all
2-47 interest and fees or penalties in the nature of interest and all
2-48 net gains (but not below zero), charges, fees, or other receipts of
2-49 the banking corporation from:
2-50 (1) the lease or rental of real property owned by the
2-51 taxpayer if the property is located in this state or the sublease
2-52 of real property if the property is located in this state;
2-53 (2) the lease or rental of tangible personal property
2-54 owned by the taxpayer if the property is located in this state when
2-55 it is first placed in service, other than receipts from the lease
2-56 or rental of movable tangible property, such as rolling stock,
2-57 water vessels, or mobile equipment, included in the numerator of
2-58 the property factor under Subsection (c);
2-59 (3) loans secured by real property if the real
2-60 property securing the loan is primarily located in this state at
2-61 the time the original loan agreement was made, provided that if a
2-62 loan is secured by real property not primarily located in any one
2-63 state at the time the original loan agreement is made, the gross
2-64 receipts from the loan are apportioned to this state if the
2-65 borrower is engaged in a trade or business in this state and
2-66 maintains its commercial domicile in this state or if the borrower
2-67 is not engaged in trade or business in this state but has its
2-68 billing address in this state;
2-69 (4) loans not secured by real property if the borrower
2-70 is engaged in a trade or business in this state and maintains its
3-1 commercial domicile in this state or if the borrower is not engaged
3-2 in a trade or business in this state but has its billing address in
3-3 this state;
3-4 (5) syndication loans or participation loans, provided
3-5 that the taxpayer's portion of the interest, fees, or penalties in
3-6 the nature of interest from syndication loans or participation
3-7 loans is included in the numerator of the gross receipts factor in
3-8 the same manner as gross receipts from loans are included in the
3-9 numerator of the gross receipts factor under Subdivisions (3) and
3-10 (4);
3-11 (6) syndicated lease transactions involving the lease
3-12 of real property or tangible personal property, provided that the
3-13 taxpayer's portion of the interest, fees, or penalties in the
3-14 nature of interest from syndicated lease transactions is included
3-15 in the numerator of the gross receipts factor in the same manner as
3-16 gross receipts from leases of real property or tangible personal
3-17 property are included in the numerator of the receipts factor under
3-18 Subdivisions (1) and (2);
3-19 (7) net gains, including income recorded under the
3-20 coupon stripping rule of Section 1286, Internal Revenue Code, from
3-21 the sale of all loans, including syndication loans, provided that:
3-22 (A) if the gains are from the sale of loans
3-23 secured by real property, the amount of the net gains included as
3-24 business done in this state is determined by multiplying the net
3-25 gains by a fraction, the numerator of which is the amount included
3-26 as business done in this state under Subdivision (3) and the
3-27 denominator of which is the taxpayer's total amount of interest and
3-28 fees or penalties in the nature of interest from loans secured by
3-29 real property; and
3-30 (B) if the gains are from the sale of loans not
3-31 secured by real property, the amount of the net gains included as
3-32 business done in this state is determined by multiplying the net
3-33 gains by a fraction, the numerator of which is the amount included
3-34 as business done in this state under Subdivision (4) and the
3-35 denominator of which is the taxpayer's total amount of interest and
3-36 fees or penalties in the nature of interest from loans not secured
3-37 by real property;
3-38 (8) credit card receivables and credit card fees
3-39 charged to cardholders, such as annual fees, if the billing address
3-40 of the cardholder is in this state;
3-41 (9) credit card issuer's reimbursement fees and any
3-42 net gains from the sale of credit card receivables, provided that
3-43 the amount of credit card issuer's reimbursement fees or net gains
3-44 from the sale of credit card receivables included as business done
3-45 in this state is determined by multiplying such credit card
3-46 reimbursement fees or net gains from the sale of credit card
3-47 receivables, respectively, by a fraction, the numerator of which is
3-48 the amount included as business done in this state from credit card
3-49 receivables and credit card fees under Subdivision (8) and the
3-50 denominator of which is the taxpayer's total amount of gross
3-51 receipts from credit card receivables and credit card fees charged
3-52 to cardholders;
3-53 (10) merchant discounts, if the commercial domicile of
3-54 the merchant is in this state;
3-55 (11) loan servicing fees from loans secured by real
3-56 property, provided that:
3-57 (A) if the loan servicing fees are derived from
3-58 loans secured by real property, the amount of the loan servicing
3-59 fees included as business done in this state is determined by
3-60 multiplying the loan servicing fees by a fraction, the numerator of
3-61 which is the amount included as business done in this state under
3-62 Subdivision (3) and the denominator of which is the taxpaper's
3-63 total amount of gross receipts from loans secured by real property;
3-64 and
3-65 (B) if the loan servicing fees are derived from
3-66 loans not secured by real property, the amount of the loan
3-67 servicing fees included as business done in this state is
3-68 determined by multiplying such loan servicing fees by a fraction,
3-69 the numerator of which is the amount included as business done in
3-70 this state under Subdivision (4) and the denominator of which is
4-1 the taxpayer's total amount of gross receipts from loans not
4-2 secured by real property;
4-3 (12) all other fees or charges for services not
4-4 otherwise apportioned under this subsection, if the service is
4-5 performed in this state; and
4-6 (13) investments in securities and from trading
4-7 activities, including investment securities, assets held in trading
4-8 accounts, federal funds, securities purchased or sold under
4-9 agreements to resell or repurchase, options, futures contracts,
4-10 forward contracts, notional principal contracts such as swaps, and
4-11 foreign currency transactions, provided that:
4-12 (A) if the income is from investments in
4-13 securities in the investment portfolio, the amount of the income
4-14 included as business done in this state shall be determined by
4-15 multiplying all the income by a fraction, the numerator of which is
4-16 the average value of such investments that are booked at a regular
4-17 place of business of the taxpayer in this state and the denominator
4-18 of which is the average value of all such investments; and
4-19 (B) if the income is from investments in
4-20 securities not in the investment portfolio and from trading
4-21 activities, the amount of the income included as business done in
4-22 this state shall be determined by multiplying all the income by a
4-23 fraction, the numerator of which is the average value of such
4-24 investments and trading activities that are booked at a regular
4-25 place of business of the taxpayer in this state and the denominator
4-26 of which is the average value of all such investments.
4-27 (c) The property factor is a fraction that represents the
4-28 percentage of the taxpayer's real property, tangible personal
4-29 property, loans, and credit card receivables apportioned to this
4-30 state during the period on which the tax is based. The numerator
4-31 of the fraction is the average value of such property located in
4-32 this state, and the denominator of the fraction is the average
4-33 value of all such property located both within and without this
4-34 state. The numerator of the property factor includes:
4-35 (1) real property owned or rented to the taxpayer, if
4-36 the property is physically located or situated in this state;
4-37 (2) movable tangible property, such as rolling stock,
4-38 water vessels, or mobile equipment, to the extent that the property
4-39 is used in this state;
4-40 (3) loans and all credit card receivables that are:
4-41 (A) booked at a regular place of business of the
4-42 taxpayer in this state; or
4-43 (B) if the taxpayer is organized under the laws
4-44 of the United States or of any state, booked at a place of business
4-45 in this state that is not a regular place of business of the
4-46 taxpayer if the taxpayer's commercial domicile is in this state; or
4-47 (C) if the taxpayer is organized under the laws
4-48 of a foreign country, booked at a place of business in this state
4-49 that is not a regular place of business of the taxpayer if the
4-50 taxpayer has declared this state to be its home state under the
4-51 International Banking Act of 1978 (12 U.S.C. Section 3101 et seq.),
4-52 provided that if that declaration has not been made or is not
4-53 required, the loan is presumed to be located at the place in the
4-54 United States where the taxpayer has the most employees; and
4-55 (4) any other loan that is demonstrated to have a
4-56 preponderance of substantive contact with this state under rules
4-57 established by the comptroller taking into consideration such
4-58 actions as solicitation, investigation, negotiation, approval, and
4-59 administration of the loan in this state.
4-60 (d) The average value of property owned by the taxpayer is
4-61 determined on an annual basis by adding the value of the property
4-62 on the first day of the taxable year and the value on the last day
4-63 of the taxable year and dividing the sum by two. The average of
4-64 real property and tangible personal property that the taxpayer has
4-65 leased from another and that is not treated as owned by the
4-66 taxpayer for federal income tax purposes is determined on an annual
4-67 basis by multiplying the gross rents payable during the taxable
4-68 year by eight. The value of the property is determined as follows:
4-69 (1) real property and tangible personal property owned
4-70 by the taxpayer is valued at the cost or other basis of the
5-1 property for federal income tax purposes without regard to
5-2 depletion, depreciation, or amortization;
5-3 (2) loans are valued at their outstanding principal
5-4 balances without regard to any reserve for bad debts, provided that
5-5 if a loan is charged off in whole or in part for federal income tax
5-6 purposes, the portion of the loan charged off is not considered
5-7 part of the outstanding balance and any specifically allocated
5-8 reserve established under regulatory or financial accounting
5-9 guidelines that is treated as charged off for federal income tax
5-10 purposes shall be treated as charged off for purposes of this
5-11 subsection;
5-12 (3) credit card receivables are valued at their
5-13 outstanding principal balance without regard to any reserve for bad
5-14 debts, provided that if a credit card receivable is charged off in
5-15 whole or in part for federal income tax purposes, the portion of
5-16 the receivable charged off is not considered part of the
5-17 outstanding balance.
5-18 (e) The payroll factor is a fraction, the numerator of which
5-19 is the total amount paid in this state by the taxpayer for
5-20 compensation during the period on which the tax is based and the
5-21 denominator of which is the total amount paid by the taxpayer as
5-22 compensation within and without this state during the period on
5-23 which the tax is based. The amount paid to an employee for
5-24 services or activities connected to the production of nonbusiness
5-25 income and the amount paid to an independent contractor or a person
5-26 not deemed to be an employee of the taxpayer under Section 3401,
5-27 Internal Revenue Code, is excluded from both the numerator and
5-28 denominator of the factor. In this subsection:
5-29 (1) "Compensation" includes all wages, all salaries,
5-30 all commissions, and any other forms of remuneration paid to an
5-31 employee for personal services that are considered income under the
5-32 Internal Revenue Code.
5-33 (2) "Employee" means an officer of a corporation or an
5-34 individual who, under the usual common-law rules applicable in
5-35 determining the employer-employee relationship, has the status of
5-36 an employee. For an employee not subject to the Internal Revenue
5-37 Code, for example, a person employed in a foreign country, the
5-38 determination of whether a payment to the employee constitutes
5-39 income paid to the employee is made as though the employee were
5-40 subject to the Internal Revenue Code. Compensation paid in this
5-41 state shall equal the total compensation taken from the federal
5-42 payroll tax reports for the period on which the tax is based that
5-43 is attributable to this state. Compensation is paid in this state
5-44 if any one of the following tests, applied consecutively, is met:
5-45 (A) the employee's service is performed entirely
5-46 within this state;
5-47 (B) the employee's service is performed both
5-48 within and without this state, but the service performed without
5-49 this state is incidental to the employee's service within this
5-50 state because it is temporary or transitory in nature or is
5-51 rendered in connection with an isolated transaction;
5-52 (C) if the employee's services are performed
5-53 both within and without this state, the employee's compensation is
5-54 attributed to this state:
5-55 (i) if the employee's base of operations
5-56 is within this state;
5-57 (ii) if there is no base of operations in
5-58 any state in which some part of the service is performed, but the
5-59 place from which the service is directed or controlled is in this
5-60 state; or
5-61 (iii) if the base of operations or the
5-62 place from which the service is directed or controlled is not in
5-63 any state in which some part of the service is performed, but the
5-64 employee's residence is in this state.
5-65 (3) "Place from which the service is directed or
5-66 controlled" means the place from which the power to direct or
5-67 control is exercised by the taxpayer.
5-68 (4) "Base of operations" means the place of a more or
5-69 less permanent nature from which the employee starts the employee's
5-70 work and to which the employee customarily returns to:
6-1 (A) receive instructions from the taxpayer or
6-2 communications from the employee's customers or other persons; or
6-3 (B) perform any other functions necessary to the
6-4 exercise of the employee's trade or profession at some other point
6-5 or points.
6-6 (f) In this section:
6-7 (1) "Billing address" means the location indicated in
6-8 the books and records of the taxpayer as the address where any
6-9 notice, statement, or bill relating to a customer's account is
6-10 mailed.
6-11 (2) "Commercial domicile" means the headquarters of
6-12 the trade or business, that is, the place from which the trade or
6-13 business is principally managed and directed.
6-14 (3) "Credit card" means a credit, travel, or
6-15 entertainment card.
6-16 (4) "Credit card issuer's reimbursement fee" means the
6-17 receipts a taxpayer receives from a merchant's bank because one of
6-18 the persons to whom the taxpayer has issued a credit card has
6-19 charged merchandise or services to the credit card.
6-20 (5) "Gross rents" means the actual sum of money or
6-21 other consideration payable, directly or indirectly, by or on
6-22 behalf of the taxpayer for the use or possession of the property.
6-23 The term:
6-24 (A) includes any amount payable for the use or
6-25 possession of real property or tangible property whether designated
6-26 as a fixed sum of money or as a percentage of receipts, as profits,
6-27 or otherwise;
6-28 (B) includes any amount payable as additional
6-29 rent or in lieu of rent, such as interest, taxes, insurance,
6-30 repairs, or any other amount required to be paid by the terms of a
6-31 lease or other arrangement;
6-32 (C) includes a proportionate part of the cost of
6-33 any improvement to real property made by or on behalf of the
6-34 taxpayer that reverts to the owner or lessor on termination of a
6-35 lease or other arrangement determined by computing the amount of
6-36 amortization or depreciation allowed in computing the taxable
6-37 income base for the taxable year; except that if a building is
6-38 erected on leased land by or on behalf of the taxpayer, the value
6-39 of the land is determined by multiplying the gross rent by eight
6-40 and the value of the building is determined in the same manner as
6-41 if owned by the taxpayer; and
6-42 (D) does not include:
6-43 (i) amounts payable as separate charges
6-44 for water and electric service furnished by the lessor;
6-45 (ii) amounts payable as service charges,
6-46 such as janitorial services provided by the lessor;
6-47 (iii) amounts payable for storage,
6-48 provided the amounts are payable for space not designated and not
6-49 under the control of the taxpayer; and
6-50 (iv) that portion of any rental payment
6-51 that is applicable to the space subleased from the taxpayer and not
6-52 used by it.
6-53 (6) "Loan" means any extension of credit resulting
6-54 from direct negotiations between the taxpayer and its customer or
6-55 the purchase, in whole or in part, of the extension of credit from
6-56 another, or both. The term includes leases treated as loans for
6-57 federal income tax purposes but shall not include:
6-58 (A) loans representing property acquired in lieu
6-59 of or pursuant to a foreclosure under Section 595, Internal Revenue
6-60 Code;
6-61 (B) futures or forward contracts, options, and
6-62 notional principal contracts, such as swaps;
6-63 (C) credit card receivables, including purchased
6-64 credit card relationships;
6-65 (D) non-interest-bearing balances due from other
6-66 depository institutions;
6-67 (E) cash items in the process of collection;
6-68 (F) federal funds sold;
6-69 (G) securities purchased under agreements to
6-70 resell;
7-1 (H) assets held in a trading account; and
7-2 (I) securities held for investment.
7-3 (7) "Merchant discount" means the fee or negotiated
7-4 discount charged to a merchant by the taxpayer for the privilege of
7-5 participating in a program in which a credit card is accepted in
7-6 payment for merchandise or services sold to the cardholder. The
7-7 fee is computed net of any cardholder charge-backs but is not
7-8 reduced by any interchange transaction fee or by a credit card
7-9 issuer's reimbursement fee paid to another for charges made by its
7-10 cardholders.
7-11 (8) "Real property owned" and "tangible personal
7-12 property owned" mean real and tangible personal property,
7-13 respectively:
7-14 (A) on which the taxpayer may claim depreciation
7-15 for federal income tax purposes; or
7-16 (B) to which the taxpayer holds legal title and
7-17 on which no other person may claim depreciation for federal income
7-18 tax purposes or could claim depreciation if subject to federal
7-19 income tax. Real and tangible personal property includes land,
7-20 stocks in goods, and real and tangible personal property rented to
7-21 the taxpayer. Real and tangible personal property does not include
7-22 coin, currency, or property acquired in lieu of or pursuant to a
7-23 foreclosure.
7-24 (9) "Regular place of business" means an office at
7-25 which the taxpayer carries on the taxpayer's business in a regular
7-26 and systematic manner and that is continuously maintained,
7-27 occupied, and used by employees of the taxpayer.
7-28 (g) This section does not apply to any corporation other
7-29 than a banking corporation.
7-30 SECTION 6. Chapter 171, Tax Code, is amended by adding
7-31 Section 171.1065 to read as follows:
7-32 Sec. 171.1065. APPORTIONMENT OF TAXABLE CAPITAL AND TAXABLE
7-33 EARNED SURPLUS OF BANKING CORPORATION TO THIS STATE. (a) Except
7-34 as provided by Section 171.106(c), the taxable capital and the
7-35 taxable earned surplus of a banking corporation is apportioned to
7-36 this state by multiplying the taxable capital and taxable earned
7-37 surplus, respectively, of the banking corporation by the
7-38 apportionment percentage. The apportionment percentage is
7-39 determined by adding the following three factors and dividing the
7-40 sum by three:
7-41 (1) the gross receipts factor computed as prescribed
7-42 by Section 171.1033(b);
7-43 (2) the property factor computed as prescribed by
7-44 Sections 171.1033(c) and (d); and
7-45 (3) the payroll factor computed as prescribed by
7-46 Section 171.1033(e).
7-47 (b) If one of the factors is missing, the two remaining
7-48 factors are added and the sum is divided by two. If two of the
7-49 factors are missing, the remaining factor is the apportionment
7-50 percentage. A factor is missing if both its numerator and
7-51 denominator are zero, but it is not missing merely because its
7-52 numerator is zero.
7-53 (c) Each factor shall be computed on a cash or accrual basis
7-54 according to the method of accounting required or allowed to be
7-55 used by the taxpayer in determining taxable capital or earned
7-56 surplus for the period on which the tax is based.
7-57 (d) The receipts factor includes only receipts that are
7-58 included in the computation of the taxable income base for the
7-59 period on which the tax is based.
7-60 (e) The payroll factor includes only expenses that are
7-61 included in the computation of the taxable income base for the
7-62 period on which the tax is based.
7-63 (f) The property factor includes only property the income or
7-64 expenses of which are included or would have been included if not
7-65 fully depreciated or expensed or depreciated or expensed to a
7-66 nominal amount in the computation of the taxable income base for
7-67 the period on which the tax is based.
7-68 (g) If the apportionment percentage, computed on the basis
7-69 of all or any of the three factors of gross receipts, property, or
7-70 payroll, does not properly reflect the activity, business, or
8-1 income of the taxpayer in this state, the taxpayer may request an
8-2 adjustment or the comptroller may adjust the apportionment
8-3 percentage by:
8-4 (1) excluding one or more factors;
8-5 (2) including one or more other factors; or
8-6 (3) using any other method calculated to effect a fair
8-7 and proper apportionment to this state.
8-8 SECTION 7. Section 171.110, Tax Code, is amended by amending
8-9 Subsection (a) and adding Subsection (h) to read as follows:
8-10 (a) The net taxable earned surplus of a corporation is
8-11 computed by:
8-12 (1) determining the corporation's reportable federal
8-13 taxable income, subtracting from that amount any amount included in
8-14 reportable federal taxable income under Section 78 or Sections
8-15 951-964, Internal Revenue Code, and dividends received from a
8-16 subsidiary, associate, or affiliated corporation that does not
8-17 transact a substantial portion of its business or regularly
8-18 maintain a substantial portion of its assets in the United States,
8-19 and adding to that amount any compensation of officers or
8-20 directors, or if a bank, any compensation of directors and
8-21 executive officers, to the extent excluded in determining federal
8-22 taxable income to determine the corporation's taxable earned
8-23 surplus;
8-24 (2) apportioning the corporation's taxable earned
8-25 surplus to this state as provided by Section 171.106(b) or (c), as
8-26 applicable, or, if a banking corporation, as provided in Section
8-27 171.1065, to determine the corporation's apportioned taxable earned
8-28 surplus; and
8-29 (3) subtracting from that amount any allowable
8-30 deductions and any business loss that is carried forward to the tax
8-31 reporting period and deductible under Subsection (e).
8-32 (h) Dividends and interest received from federal obligations
8-33 are not included in earned surplus or gross receipts for earned
8-34 surplus purposes.
8-35 (1) For purposes of this subsection, the term "federal
8-36 obligations" means:
8-37 (A) stocks and other direct obligations of and
8-38 obligations unconditionally guaranteed by the United States
8-39 government and United States government agencies; and
8-40 (B) direct obligations of United States
8-41 government-sponsored agencies.
8-42 (2) For purposes of this subsection:
8-43 (A) "Obligation" means any bond, debenture,
8-44 security, mortgage-backed security, pass-through certificate, or
8-45 other evidence of indebtedness of the issuing entity. The term
8-46 does not include a deposit, a repurchase agreement, a loan, a
8-47 lease, a participation in a loan or pool or loans, a loan
8-48 collateralized by an obligation of an agency of the United States,
8-49 or a loan guaranteed by an agency of the United States government.
8-50 (B) "United States government" means any
8-51 department or ministry of the federal government including the 12
8-52 federal reserve banks. The term does not include state or local
8-53 governments or commercial enterprises owned in whole or part by the
8-54 United States government.
8-55 (C) "United States government agency" means an
8-56 instrumentality of the United States government whose obligations
8-57 are fully and explicitly guaranteed as to the timely payment of
8-58 principal and interest by the full faith and credit of the United
8-59 States government. These agencies include the Government National
8-60 Mortgage Association (GNMA), the Veterans' Administration (VA), the
8-61 Federal Housing Administration (FHA), the Farmers Home
8-62 Administration (FmHA), the Export-Import Bank (Exim Bank), the
8-63 Overseas Private Investment Corporation (OPIC), the Commodity
8-64 Credit Corporation (CCC), and the Small Business Administration
8-65 (SBA).
8-66 (D) "United States government-sponsored agency"
8-67 means agencies originally established or chartered by the United
8-68 States government to serve public purposes specified by the United
8-69 States Congress but whose obligations are not explicitly guaranteed
8-70 by the full faith and credit of the United States government.
9-1 These agencies include the Federal Home Loan Mortgage Corporation
9-2 (FHLMC), the Federal National Mortgage Association (FNMA), the
9-3 Federal Farm Credit System, the Federal Home Loan System, and the
9-4 Student Loan Marketing Association (SLMA).
9-5 SECTION 8. Section 171.316, Tax Code, is amended to read as
9-6 follows:
9-7 Sec. 171.316. Banking Corporations. (a) Except as
9-8 prohibited by Article 8, Chapter 9, The Texas Banking Code of 1943
9-9 (Article 342-908, Vernon's Texas Civil Statutes), the Banking
9-10 Department of Texas shall revoke the charter of a banking
9-11 corporation that the comptroller certifies is delinquent in the
9-12 payment of the tax imposed under this chapter.
9-13 (b) Except as provided by Subsection (a), this <This>
9-14 subchapter does not apply to a banking corporation.
9-15 SECTION 9. This Act takes effect and applies to reports
9-16 originally due on or after January 1, 1994.
9-17 SECTION 10. The importance of this legislation and the
9-18 crowded condition of the calendars in both houses create an
9-19 emergency and an imperative public necessity that the
9-20 constitutional rule requiring bills to be read on three several
9-21 days in each house be suspended, and this rule is hereby suspended.
9-22 * * * * *
9-23 Austin,
9-24 Texas
9-25 April 27, 1993
9-26 Hon. Bob Bullock
9-27 President of the Senate
9-28 Sir:
9-29 We, your Committee on Economic Development to which was referred
9-30 S.B. No. 554, have had the same under consideration, and I am
9-31 instructed to report it back to the Senate with the recommendation
9-32 that it do not pass, but that the Committee Substitute adopted in
9-33 lieu thereof do pass and be printed.
9-34 Parker,
9-35 Chairman
9-36 * * * * *
9-37 WITNESSES
9-38 FOR AGAINST ON
9-39 ___________________________________________________________________
9-40 Name: N. J. Robnett, Jr. x
9-41 Representing: Dean Witter, Discover Co., Inc.
9-42 City: Austin
9-43 -------------------------------------------------------------------
9-44 Name: Wade Anderson x
9-45 Representing: Comptroller
9-46 City: Austin
9-47 -------------------------------------------------------------------
9-48 Name: Rob Norcross x
9-49 Representing: Texas Bankers Association
9-50 City: Austin
9-51 -------------------------------------------------------------------