BILL ANALYSIS
C.S.S.B. 644
By: Montford
Finance
04-04-95
Committee Report (Substituted)
BACKGROUND
Each year the comptroller of public accounts evaluates tax
collection and enforcement procedures of the state. Several
revisions were made in the franchise tax law in 1991, including
changes to the privilege period covered by the tax, the due date
for filing and paying the tax, and the addition of an earned
surplus component to the tax. Many questions related to these
revisions were addressed by legislation in the 1993 session, but
some questions still remain and others have arisen.
PURPOSE
As proposed, C.S.S.B. 644 amends the collection period of the
franchise tax from corporations. Establishes and deletes
exemptions from the franchise tax for nonprofit corporations.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 171.001(b), Tax Code, by amending
Subdivisions (2)-(7) and adding Subdivision (8), as follows:
(2) Defines "beginning date."
(3) Created from existing text.
(4)-(8) Redesignates existing Subdivisions (3)-(7).
SECTION 2. Amends Section 171.0021(c), Tax Code, to authorize a
corporation to claim credit beginning with the first report after
January 1, 1994, and may carry all or part of the credit forward
for not more than five consecutive reports, rather than privilege
periods, beginning with the 1994 report. Prohibits a corporation
from claiming a credit in an amount that exceeds the amount of tax
due for that report, rather than for the privilege period. Deletes
language providing that an initial period and a second period are
a privilege period.
SECTION 3. Amends Section 171.061, Tax Code, to delete language
exempting certain corporations from the franchise tax.
SECTION 4. Amends Sections 171.063(a) and (g), Tax Code, as
follows:
(a) Sets forth corporations that are exempt from the franchise
tax, including a nonprofit organization exempted from the
federal income tax under Sections 501(c)(3)-(8), (10), or
(19), Internal Revenue Code, among others. Makes
nonsubstantive changes.
(g) Provides that if a corporation's federal tax exemption is
withdrawn by the Internal Revenue Service (IRS), the
corporation's exemption ends on the effective date of the
withdrawal of the IRS. Provides that the effective date of
the withdrawal is considered the corporation's beginning date
for purposes of determining the corporation's privilege
periods and all other purposes of this chapter. Makes a
nonsubstantive change.
SECTION 5. Amends Section 171.064, Tax Code, to make a
nonsubstantive change.
SECTION 6. Amends Section 171.069, Tax Code, to make a conforming
change.
SECTION 7. Amends Section 171.071, Tax Code, to make a conforming
change.
SECTION 8. Amends Section 171.076, Tax Code, to make a conforming
change.
SECTION 9. Amends Section 171.082, Tax Code, as follows:
Sec. 171.082. EXEMPTION--CERTAIN HOMEOWNERS' ASSOCIATIONS.
(a) Provides that a corporation is exempt from the franchise
tax if the corporation is organized and operated to obtain,
manage, construct, and maintain property in or of a
residential condominium or residential real estate
development; and the owners of individual lots, residences, or
residential units control at least 51 percent of the votes of
the corporation and the voting control, however acquired, is
not held by certain persons or business entities.
(b) Provides that a condominium project is considered
residential if the project is legally restricted for
residence use. Provides that a real estate development is
considered residential if the property is legally restricted
for residence use.
SECTION 10. Amends Chapter 171B, Tax Code, by adding Section
171.087, as follows:
Sec. 171.087. EXEMPTION--NONPROFIT CORPORATION ORGANIZED FOR
STUDENT LOAN FUNDS OR STUDENT SCHOLARSHIP PURPOSES. Provides
that a nonprofit corporation organized solely to provide a
student loan fund or student scholarships is exempted from the
franchise tax.
SECTION 11. Amends Section 171.109(f), Tax Code, to require a
corporation to exclude declared dividends from its taxable income
and include received dividends in its gross receipts and taxable
capital as of the earlier of the date the dividends are declared,
if a dividend is paid within one year after the declaration date;
or the date the dividends are actually paid. Deletes language
relating to the declaration of dividends.
SECTION 12. Amends Section 171.110(e), Tax Code, to provide that
a business loss is any negative amount after apportionment and
allocation.
SECTION 13. Amends Section 171.112, Tax Code, by adding
Subsection (h), to require a corporation to use the same accounting
methods to apportion its taxable capital as it used to compute its
taxable capital, except as otherwise provided by this section.
SECTION 14. Amends Section 171.151, Tax Code, to require a
franchise tax to be paid, among others, for an initial period
beginning on the corporation's beginning date, and ending the day
before the first anniversary of the beginning date. Makes a
conforming change.
SECTION 15. Amends Section 171.152(c), Tax Code, makes a
conforming change.
SECTION 16. Amends Sections 171.153(a) and (c), Tax Code, to
make conforming changes.
SECTION 17. Amends Sections 171.1531(b) and (c), Tax Code, as
follows:
(b) Entitles the survivor of a merger to a credit against the
tax computed on its net taxable capital under Section
171.022(b)(1) in the amount of the franchise tax computed on
net taxable capital paid by the nonsurvivors for the credit
period, provided the tax computed on net taxable capital is
based on the survivor's financial condition after the merger.
Deletes provisions utilizing a survivor to a refund.
(c) Provides that the credit, rather than the credit or
refund, will be limited to the lesser of the amount of tax on
net taxable capital paid for the credit period by the survivor
or the nonsurvivors.
SECTION 18. Amends Section 171.1532, Tax Code, as follows:
(a) Makes a conforming change.
(b) Provides that a tax covering the regular annual period is
based on the business done by the corporation during the
period beginning with the date after the last date upon which
net taxable earned surplus on a previous report, rather than
the initial report, was based, rather than as required by
Subsection (a) of this section, and ending with its last
accounting period ending date for federal income tax purposes
in the year previous to the year in which the report is due.
SECTION 19. Amends Section 171.203, Tax Code, by amending
Subsection (a) and adding Subsections (d) and (e), as follows:
(a) Requires a corporation on which the franchise tax is
imposed to file a report with the comptroller containing,
among other information, the name, title, and mailing address
of each person who is an officer or director of the
corporation on the date the report is filed and the expiration
date of each person's term as officer or director, if any.
(d) Requires the corporation to send a copy of the report to
each person named in the report. Requires an officer or
director of the corporation to sign the report under a
certification that all information in the report is correct;
and a copy of the report has been mailed to each officer or
director of the corporation on the date the return is filed.
(e) Authorizes a person whose name is included in a report but
is not an officer or director of the corporation on the date
the report is filed, to file with the comptroller a sworn
statement disclaiming the person's status as shown on the
report. Requires the comptroller to maintain a record of
statements filed under this subsection and to make that
information available on request using the same procedures
used for other requests for public information.
SECTION 20. Amends Section 171.363(b), Tax Code, to provide that
a person commits an offense if the person is an accountant or an
agent for or an officer or employee of a corporation and the person
knowingly provides false information on any report, return, or
other document filed by the corporation.
SECTION 21. Repealer: Section 171.202(g), Tax Code (Annual
Report).
SECTION 22. Effective date: January 1, 1996.
Makes application of this Act prospective.
SECTION 23. Emergency clause.