BILL ANALYSIS



C.S.H.B. 1201
By: Romo
May 2, 1995
Committee Report (Substituted)


BACKGROUND

The state franchise tax is levied on corporations and limited
liability companies for the privilege of doing business in Texas. 
Chapter 171, Tax Code, provides for this tax.  The law provides a
single due date, May 15, both for paying the tax and filing a tax
report.  Unlike most other states and the federal government, Texas
does not allow the tax to be prepaid in increments according to a
regular schedule.  Most taxpayers pay their entire year's tax in
one lump sum, and those granted extensions must pay at least 90
percent of their annual liability in one payment.

PURPOSE

This bill would allow a corporation to pay the franchise tax in
quarterly installments. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency, or institution.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 171.152 (Date on Which Payment is Due),
Subsection (c), Tax Code, to require the payment of the full amount
of the tax covering the regular annual period or the amount of the
tax covering the regular annual period less the amount of any
prepayments made under Section 171.1525 [Optional Quarterly
Prepayments (Added by this Act)] is due May 15, of each year after
the beginning of the regular annual period.

SECTION 2.  Amends Subchapter D, Chapter 171 (Franchise Tax), Tax
Code, by adding Section 171.1525 OPTIONAL QUARTERLY PREPAYMENTS.

     (a)  Allows a corporation to pay the franchise tax in four
installments.  The first      installment is due on August 15,
before the beginning of the regular annual period.     Subsequent
payments are due on November 15, February 15, and May 15.

     (b)  Requires a corporation electing to pay the tax in
quarterly installments to estimate      the tax due and pay a
quarter of the amount on each of the first three due dates.

     (c)  Requires a corporation electing to pay the tax in
quarterly installments to notify the    comptroller in writing and
include the first installment on or before the due date.

     (d)  Provides that an election under this section remains in
effect until revoked by the   comptroller or by the taxpayer.

SECTION 3.  Amends Section 171.202 (Annual Report), Subsection (c)
and (e), Tax Code, to include in the criteria necessary for a
corporation to be granted an extension of time by the comptroller
a remittance of a certain amount of tax owed before or with a
request made to the comptroller.  Current language states only that
the money be sent with the request.

SECTION 4.  Establishes effective date of January 1, 1996, and
applies to payment of tax covering a regular annual period that
begins on or after January 1, 1997.

SECTION 5.  Emergency clause

COMPARISON OF ORIGINAL TO SUBSTITUTE

The original bill added a new section (Quarterly Payments) to the
Tax Code to allow a taxpayer to pay franchise taxes in four
installments.  The first installment would be made on May 15.  In
comparison, the committee substitute added a new section (Optional
Quarterly Prepayments) to allow a corporation to pay franchise
taxes in four installments.  The first installment for this
substitute version would be due on August 15.

The original bill would apply to the payment of franchise tax
covering a regular annual period that begins on or after January 1,
1996.  C.S.H.B. 1201 applies to the payment of franchise tax
covering a regular annual period that begins on or after January 1,
1997.

SUMMARY OF COMMITTEE ACTION

Public notice was posted in accordance with the rules, and a public
hearing was held on March 28, 1995.  Without objection, H.B. 1201
was left pending before the committee.

On April 25, 1995, the committee met in a public hearing and
considered H.B. 1201 on pending business.  The committee considered
a committee substitute by Representative Romo.  Without objection,
C.S.H.B. 1201 was adopted.  By a record vote of 8 ayes, 0 nays, 0
present not voting, and 3 absent, the committee voted to report
H.B. 1201 to the House as substituted with the recommendation that
it do pass.