BILL ANALYSIS C.S.H.J.R. 20 By: Corte 02-23-95 Committee Report (Substituted) BACKGROUND Article VIII, Texas Constitution, addresses taxation and revenue. In the 72nd Legislature, First Called Session, H.B. 11 was passed under which the franchise tax on business was changed to include income in the tax calculation. Businesses now calculate the tax on both capital assets and income, paying tax on whichever is greater. Like other state taxes, the franchise tax rate is set in statute and can be amended by the legislature without a constitutional amendment. In the 73rd Legislative Session, H.J.R. 36 was passed by the House, which would have limited the income component of the franchise tax to 4.5 percent, but it was never voted on in the Senate. PURPOSE This joint resolution amends Article VIII, Texas Constitution, by placing a limit on the franchise tax rate at its current amount of 4.5 percent of income, and .25 percent of capital and assets. 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 Article VIII, Texas Constitution, by adding Section 25 which limits the rate of tax on a corporation's or other legal entity's income (gross, net, or other adjusted income) to 4.5 percent. The rate of tax on capital or assets is also limited to .25 percent. SECTION 2. Election Date: November 7, 1995; Specifies the ballot language. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.J.R. 20 Limits both components of the franchise tax, while H.J.R. 20 only limits the income component. SUMMARY OF COMMITTEE ACTION Public notice was posted in accordance to the rules and a public hearing was held on February 21, 1995. Without objection, the committee approved C.S.H.J.R. 20 by Representative Horn. By a record vote of 8 ayes, 2 nays, 0 present not voting and 1 absent, the committee voted to report H.J.R. 20 to the House as substituted with the recommendation that it do pass. Testimony received in favor of the bill: Robert Howden, representing National Federation of Independent Business/Texas Testimony received against the bill: Charles Holt, representing Common Cause