By Holzheauser H.B. No. 1445
74R5111 CBH-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to administration and collection of the franchise tax.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 171.001(b), Tax Code, is amended by
1-5 amending Subdivisions (2)-(7) and adding Subdivision (8) to read as
1-6 follows:
1-7 (2) "Beginning date" means:
1-8 (A) for a corporation chartered in this state,
1-9 the date on which the corporation's charter takes effect; and
1-10 (B) for a foreign corporation, the earlier of
1-11 the date on which:
1-12 (i) the corporation's certificate of
1-13 authority takes effect; or
1-14 (ii) the corporation begins doing business
1-15 in this state.
1-16 (3) "Corporation" includes:
1-17 (A) a limited liability company, as defined
1-18 under the Texas Limited Liability Company Act; and
1-19 (B) a state or federal savings and loan
1-20 association.
1-21 (4) <(3)> "Charter" includes a limited liability
1-22 company's certificate of organization.
1-23 (5) <(4)> "Internal Revenue Code" means the Internal
1-24 Revenue Code of 1986 in effect for the federal tax year beginning
2-1 on or after January 1, 1994 <1990>, and before January 1, 1995
2-2 <1991>, and any regulations adopted under that code applicable to
2-3 that period.
2-4 (6) <(5)> "Officer" and "director" include a limited
2-5 liability company's directors and managers and a limited banking
2-6 association's directors and managers and participants if there are
2-7 no directors or managers.
2-8 (7) <(6)> "Savings and loan association" includes a
2-9 state or federal savings bank.
2-10 (8) <(7)> "Shareholder" includes a limited liability
2-11 company's member and a limited banking association's participant.
2-12 SECTION 2. Section 171.0021(c), Tax Code, is amended to read
2-13 as follows:
2-14 (c) The corporation may claim the credit beginning with the
2-15 first report due under this chapter after January 1, 1994, and may
2-16 carry all or part of the credit forward for not more than five
2-17 consecutive reports <privilege periods> beginning with the 1994
2-18 report. A corporation may not claim <for a privilege period> a
2-19 credit in an amount that exceeds the amount of tax due for that
2-20 report <privilege period. For the purposes of this section, an
2-21 initial period and a second period are considered one privilege
2-22 period>.
2-23 SECTION 3. Section 171.061, Tax Code, is amended to read as
2-24 follows:
2-25 Sec. 171.061. EXEMPTION--NONPROFIT CORPORATION ORGANIZED FOR
2-26 EDUCATIONAL PURPOSES. A nonprofit corporation organized solely for
2-27 educational purposes<, including a corporation organized solely to
3-1 provide a student loan fund or student scholarships,> is exempted
3-2 from the franchise tax.
3-3 SECTION 4. Section 171.063(g), Tax Code, is amended to read
3-4 as follows:
3-5 (g) If a corporation's federal tax exemption is withdrawn by
3-6 the Internal Revenue Service for failure of the corporation to
3-7 qualify or maintain its qualification for the exemption, the
3-8 corporation's exemption under this section ends on the effective
3-9 date of that <the> withdrawal by the Internal Revenue Service. The
3-10 effective date of the withdrawal is considered the corporation's
3-11 beginning date for purposes of determining the corporation's
3-12 privilege periods and for all other purposes of this chapter.
3-13 SECTION 5. Section 171.064, Tax Code, is amended to read as
3-14 follows:
3-15 Sec. 171.064. EXEMPTION--NONPROFIT CORPORATION ORGANIZED FOR
3-16 CONSERVATION PURPOSES. A nonprofit corporation organized solely to
3-17 educate the public about the protection and conservation of fish,
3-18 game, other wildlife, grasslands, or <and> forests is exempted from
3-19 the franchise tax.
3-20 SECTION 6. Section 171.069, Tax Code, is amended to read as
3-21 follows:
3-22 Sec. 171.069. EXEMPTION--MARKETING ASSOCIATIONS. A
3-23 marketing association incorporated under Chapter 52, Agriculture
3-24 Code <Article 5737 et seq., Revised Civil Statutes of Texas, 1925>,
3-25 is exempted from the franchise tax.
3-26 SECTION 7. Section 171.071, Tax Code, is amended to read as
3-27 follows:
4-1 Sec. 171.071. EXEMPTION--FARMERS' COOPERATIVE SOCIETY. A
4-2 farmers' cooperative society incorporated under Chapter 51,
4-3 Agriculture Code <Article 2514 et seq., Revised Civil Statutes of
4-4 Texas, 1925>, is exempted from the franchise tax.
4-5 SECTION 8. Section 171.076, Tax Code, is amended to read as
4-6 follows:
4-7 Sec. 171.076. EXEMPTION--COOPERATIVE CREDIT ASSOCIATION. A
4-8 cooperative credit association incorporated under Chapter 55,
4-9 Agriculture Code <Article 2508 et seq., Revised Civil Statutes of
4-10 Texas, 1925>, is exempted from the franchise tax.
4-11 SECTION 9. Section 171.082, Tax Code, is amended to read as
4-12 follows:
4-13 Sec. 171.082. EXEMPTION--CERTAIN HOMEOWNERS' ASSOCIATIONS.
4-14 (a) A nonprofit corporation is exempted from the franchise tax if:
4-15 (1) the corporation is organized and operated
4-16 primarily to obtain, manage, construct, and maintain the property
4-17 in or of a residential condominium or residential real estate
4-18 development; and
4-19 (2) <voting control of the corporation is vested in>
4-20 the owners of individual lots, residences, or residential units
4-21 control at least 51 percent of the votes of the corporation and
4-22 that voting control, however acquired, is not held by:
4-23 (A) a single individual or family; or
4-24 (B) one or more developers, declarants, banks,
4-25 investors, or other similar parties<, and not in the developer>.
4-26 (b) For purposes of this section, a condominium project is
4-27 considered residential if the project is legally restricted for use
5-1 as residences. A real estate development is considered residential
5-2 if the property is legally restricted for use as residences.
5-3 SECTION 10. Subchapter B, Chapter 171, Tax Code, is amended
5-4 by adding Section 171.087 to read as follows:
5-5 Sec. 171.087. EXEMPTION--NONPROFIT CORPORATION ORGANIZED FOR
5-6 STUDENT LOAN FUNDS OR STUDENT SCHOLARSHIP PURPOSES. A nonprofit
5-7 corporation organized solely to provide a student loan fund or
5-8 student scholarships is exempted from the franchise tax.
5-9 SECTION 11. Section 171.109(f), Tax Code, is amended to read
5-10 as follows:
5-11 (f) A corporation declaring dividends shall exclude those
5-12 dividends from its taxable capital, and a <as of the date the
5-13 dividends are declared. A> corporation receiving dividends shall
5-14 include those dividends in its gross receipts<, to the extent not
5-15 excluded under Section 171.1032(b) or 171.1051(c),> and taxable
5-16 capital as of the earlier of:
5-17 (1) the date the dividends are declared, if the
5-18 dividends are actually paid within one year after the declaration
5-19 date; or
5-20 (2) the date the dividends are actually paid <by the
5-21 corporation declaring the dividends>.
5-22 SECTION 12. Section 171.110(e), Tax Code, is amended to read
5-23 as follows:
5-24 (e) For purposes of this section, a business loss is any
5-25 negative amount after apportionment and allocation. The business
5-26 loss shall be carried forward to the year succeeding the loss year
5-27 as a deduction to net taxable earned surplus, then successively to
6-1 the succeeding four taxable years after the loss year or until the
6-2 loss is exhausted, whichever occurs first, but for not more than
6-3 five taxable years after the loss year. Notwithstanding the
6-4 preceding sentence, a business loss from a tax year that ends
6-5 before January 1, 1991, may not be used to reduce net taxable
6-6 earned surplus.
6-7 SECTION 13. Section 171.112, Tax Code, is amended by adding
6-8 Subsection (h) to read as follows:
6-9 (h) Except as otherwise provided by this section, a
6-10 corporation shall use the same accounting methods to apportion its
6-11 taxable capital as it used to compute its taxable capital.
6-12 SECTION 14. Section 171.151, Tax Code, is amended to read as
6-13 follows:
6-14 Sec. 171.151. PRIVILEGE PERIOD COVERED BY TAX. The
6-15 franchise tax shall be paid for each of the following:
6-16 (1) an initial period beginning on the corporation's
6-17 beginning date <that the corporation files its charter or is
6-18 granted a certificate of authority or the date that a foreign
6-19 corporation begins doing business in this state, whichever is
6-20 earlier,> and ending on the day before the first anniversary of the
6-21 beginning <that> date;
6-22 (2) a second period beginning on the first anniversary
6-23 of the beginning date <that the corporation files its charter or is
6-24 granted its certificate of authority or the date that a foreign
6-25 corporation begins doing business in this state, whichever is
6-26 earlier,> and ending on December 31 following that date; and
6-27 (3) after the initial and second periods have expired,
7-1 a regular annual period beginning each year on January 1 and ending
7-2 the following December 31.
7-3 SECTION 15. Section 171.152(c), Tax Code, is amended to read
7-4 as follows:
7-5 (c) Payment of the tax covering the regular annual period is
7-6 due May 15, of each year after the beginning of the regular annual
7-7 period. However, if the first anniversary of the corporation's
7-8 beginning date <that the domestic corporation files its charter or
7-9 the foreign corporation begins doing business in Texas or is
7-10 granted its certificate of authority, whichever occurs first,> is
7-11 after October 3 and before January 1, the payment of the tax
7-12 covering the first regular annual period is due on the same date as
7-13 the tax covering the initial period.
7-14 SECTION 16. Sections 171.153(a) and (c), Tax Code, are
7-15 amended to read as follows:
7-16 (a) The tax covering the initial period is reported on the
7-17 initial report and is based on the business done by the corporation
7-18 during the period beginning on the corporation's beginning date
7-19 <day the corporation files its charter or is granted a certificate
7-20 of authority or the date that a foreign corporation begins doing
7-21 business in this state, whichever is earlier,> and:
7-22 (1) ending on the last accounting period ending date
7-23 that is at least six months after the beginning date and at least
7-24 60 days before the original due date of the initial report; or
7-25 (2) if there is no such period ending date in
7-26 Subdivision (1) of this subsection, then ending on the day that is
7-27 the last day of a calendar month and that is nearest to the end of
8-1 the corporation's first year of business; or
8-2 (3) ending on the day after the merger occurs, for the
8-3 survivor of a merger which occurs after the day on which the tax is
8-4 based in Subdivision (1) or Subdivision (2), whichever is
8-5 applicable, of Subsection (a) and before January 1, of the year an
8-6 initial report is due by the survivor.
8-7 (c) The tax covering the regular annual period is based on
8-8 the business done by the corporation during its last accounting
8-9 period that ends in the year before the year in which the tax is
8-10 due; unless a corporation is the survivor of a merger which occurs
8-11 between the end of its last accounting period in the year before
8-12 the report year and January 1 of the report year, in which case the
8-13 tax will be based on the financial condition of the surviving
8-14 corporation for the 12-month period ending on the day after the
8-15 merger. However, if the first anniversary of the corporation's
8-16 beginning date <that the corporation files its charter, is granted
8-17 its certificate of authority, or begins doing business in this
8-18 state> is after October 3 and before January 1, the tax covering
8-19 the first regular annual period is based on the same business on
8-20 which the tax covering the initial period is based and is reported
8-21 on the initial report.
8-22 SECTION 17. Sections 171.1531(b) and (c), Tax Code, are
8-23 amended to read as follows:
8-24 (b) The survivor of a merger is entitled to a credit against
8-25 the tax computed on its net taxable capital under Section
8-26 171.002(b)(1) <or refund> in the amount of the franchise tax
8-27 computed on net taxable capital paid by the nonsurvivors for the
9-1 credit period, provided the tax computed on net taxable capital
9-2 paid by the survivor for the credit period is based on the
9-3 survivor's financial condition after the merger. Only a survivor
9-4 that is subject to the franchise tax is entitled to the merger
9-5 credit <or refund>. The merger credit shall be allocated among
9-6 survivors based on net taxable capital reported, and as provided by
9-7 Section 171.153.
9-8 (c) The credit <or refund> will be limited to the lesser of
9-9 the amount of tax on net taxable capital paid for the credit period
9-10 by the survivor or by the nonsurvivors.
9-11 SECTION 18. Section 171.1532, Tax Code, is amended to read
9-12 as follows:
9-13 Sec. 171.1532. BUSINESS ON WHICH TAX ON NET TAXABLE EARNED
9-14 SURPLUS IS BASED. (a) The tax covering the privilege periods
9-15 included on the initial report, as required by Section 171.153, is
9-16 based on the business done by the corporation during the period
9-17 beginning on the corporation's beginning date <day the corporation
9-18 files its charter or is granted a certificate of authority or the
9-19 date that a foreign corporation begins doing business in this
9-20 state, whichever is earlier,> and:
9-21 (1) ending on the last accounting period ending date
9-22 that is at least 60 days before the original due date of the
9-23 initial report; or
9-24 (2) if there is no such period ending date in
9-25 Subdivision (1) of this subsection, then ending on the day that is
9-26 the last day of a calendar month and that is nearest to the end of
9-27 the corporation's first year of business.
10-1 (b) The tax covering the regular annual period, other than a
10-2 regular annual period included on the initial report, is based on
10-3 the business done by the corporation during the period beginning
10-4 with the day after the last date upon which net taxable earned
10-5 surplus on a previous report was <the initial report is> based<, as
10-6 required by Subsection (a) of this section,> and ending with its
10-7 last accounting period ending date for federal income tax purposes
10-8 in the year before the year in which the report is originally due.
10-9 SECTION 19. Section 171.202(g), Tax Code, is repealed.
10-10 SECTION 20. This Act takes effect January 1, 1996, and
10-11 applies to a report originally due on or after that date.
10-12 SECTION 21. The importance of this legislation and the
10-13 crowded condition of the calendars in both houses create an
10-14 emergency and an imperative public necessity that the
10-15 constitutional rule requiring bills to be read on three several
10-16 days in each house be suspended, and this rule is hereby suspended.