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