JWB H.B. 2674 75(R)BILL ANALYSIS


WAYS & MEANS
H.B. 2674
By: Isett
4-18-97
Committee Report (Unamended)



BACKGROUND 

Section 171.001, Tax Code (Tax Imposed), provides for the imposition of
the state's franchise tax.  For purposes of calculating the franchise tax,
the Internal Revenue Code is defined in such a way that subsequent changes
to the Internal Revenue Code are not recognized. This "freezes" the
version used and causes complying businesses to track multiple versions of
the Internal Revenue Code. Many businesses may be unaware of this aspect
of the Tax Code and therefore are not in compliance, but those businesses
that follow the letter of the law have the burden of calculating Federal
Income Tax twice -- once (using the current rules) for federal tax
purposes and once (using the old rules) for franchise taxes. 

PURPOSE

This bill changes the Tax Code definition of the Internal Revenue Code to
include subsequent amendments, so that the franchise tax calculation is
tied to the current Internal Revenue Code.  

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency or
institution. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 171.001(b)(5), Tax Code (Tax Imposed), to define
Internal Revenue Code as the code of 1986, including any subsequent
amendments. 

SECTION 2. States that this Act applies only to a report due under Chapter
171, Tax Code (Franchise Tax), on or after the effective date of this Act. 

SECTION 3. Emergency clause.