LEGISLATIVE BUDGET BOARD
                          Austin, Texas

                           FISCAL NOTE
                       74th Regular Session

                          April 10, 1995



 TO:     Honorable John T. Montford, Chair      IN RE: Committee Substitute
         Committee on Finance                                   for Senate
         Senate                                 Bill No. 644
         Austin, Texas








FROM: John Keel, Director

In response to your request for a Fiscal Note on Senate Bill No.
644 (relating to administration and collection of the franchise
tax.) this office has determined the following:

The bill makes several changes relating to the administration of
the franchise tax.

The bill writes existing Comptroller policy into statute by
clarifying that:

(1) merger credits are applicable to the taxable capital portion
only;
(2) business loss carryovers must be computed after apportionment
and allocation;
(3) the "parallel accounting treatment" required for earned
surplus is also applicable to the computation of taxable capital;
and
(4) dividends declared but not paid within one year are not
deductible in computing taxable capital.

The bill  makes nonsubstantive changes to several franchise tax
exemptions and authorizes additional exemptions for corporations
qualifying for IRS 501(c)(8), (10), or (19) treatment.  The bill
simplifies language describing the date on which a corporation
begins to do business in Texas.

In addition, the bill would require that corporations annually
provide to the Comptroller an update of the identity of the    




firm's officers and directors.

 Finally, the bill would update the link between the franchise
tax and the Internal Revenue Code to the 1994 accounting year.

This bill takes effect on January 1, 1996 and applies to a report
originally due on or after that date.


No significant fiscal implication to the State or units of local
government is anticipated.


Source:   Comptroller of Public Accounts
          LBB Staff: JK, CT, DF