By Solomons, Craddick                                 H.B. No. 2043
       74R6954 CBH-D
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to the computation of net taxable earned surplus of an S
    1-3  corporation.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Section 171.110(d), Tax Code, is amended to read
    1-6  as follows:
    1-7        (d)  A corporation's reportable federal taxable income is the
    1-8  corporation's federal taxable income after Schedule C special
    1-9  deductions and before net operating loss deductions as computed
   1-10  under the Internal Revenue Code, except that an S corporation's
   1-11  reportable federal taxable income is the amount of the income
   1-12  reportable to the Internal Revenue Service as taxable to the
   1-13  corporation's shareholders minus the total property distributions
   1-14  (including cash) other than dividends reported to active
   1-15  shareholder employees.  For purposes of this subsection, a person
   1-16  is an active shareholder employee if the corporation issued to the
   1-17  person a W-2 form for that accounting period.
   1-18        SECTION 2.  This Act takes effect January 1, 1996, and
   1-19  applies to a report originally due on or after that date.
   1-20        SECTION 3.  The importance of this legislation and the
   1-21  crowded condition of the calendars in both houses create an
   1-22  emergency and an imperative public necessity that the
   1-23  constitutional rule requiring bills to be read on three several
   1-24  days in each house be suspended, and this rule is hereby suspended.