By: Armbrister S.B. No. 861
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the administration of franchise taxes; imposing
1-2 penalties.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subdivisions (3) and (5), Subsection (b), Section
1-5 171.001, Tax Code, are amended to read as follows:
1-6 (3) "Corporation" includes:
1-7 (A) a limited liability company, as defined
1-8 under the Texas Limited Liability Company Act; [and]
1-9 (B) a state or federal savings and loan
1-10 association; and
1-11 (C) a banking corporation.
1-12 (5) "Internal Revenue Code" means the Internal Revenue
1-13 Code of 1986 in effect for the federal tax year beginning on or
1-14 after January 1, 1996 [1994], and before January 1, 1997 [1995],
1-15 and any regulations adopted under that code applicable to that
1-16 period.
1-17 SECTION 2. Subsections (b) and (d), Section 171.002, Tax
1-18 Code, are amended to read as follows:
1-19 (b) The amount of franchise tax on each corporation[, except
1-20 as provided in Subsection (d),] is computed by adding the
1-21 following:
1-22 (1) the amount calculated by applying the tax rate
1-23 prescribed by Subsection (a)(1) to the corporation's net taxable
2-1 capital; and
2-2 (2) the difference between:
2-3 (A) the amount calculated by applying the tax
2-4 rate prescribed by Subsection (a)(2) to the corporation's net
2-5 taxable earned surplus; and
2-6 (B) the amount determined under Subdivision (1).
2-7 (d) If the amount of tax computed [under Subsection (b)] for
2-8 a corporation is less than $100, the corporation is not required to
2-9 pay that amount and is not considered to owe any tax for that
2-10 period.
2-11 SECTION 3. Subsection (c), Section 171.063, Tax Code, is
2-12 amended to read as follows:
2-13 (c) A corporation's exemption under Subsection (b) of this
2-14 section is [may be] established by furnishing the comptroller with
2-15 a copy of the Internal Revenue Service's letter of exemption issued
2-16 to the corporation. The copy of the letter must [may] be filed
2-17 with the comptroller within 15 months after the day that is the
2-18 last day of a calendar month and that is nearest to the date of the
2-19 corporation's charter or certificate of authority.
2-20 SECTION 4. Section 171.102, Tax Code, is amended by adding
2-21 Subsection (d) to read as follows:
2-22 (d) This section applies only to the computation of a
2-23 corporation's taxable capital under Section 171.101 of this code.
2-24 SECTION 5. Section 171.103, Tax Code, is amended to read as
2-25 follows:
3-1 Sec. 171.103. DETERMINATION OF GROSS RECEIPTS FROM BUSINESS
3-2 DONE IN THIS STATE FOR TAXABLE CAPITAL. In apportioning taxable
3-3 capital, the gross receipts of a corporation from its business done
3-4 in this state is the sum of the corporation's receipts from:
3-5 (1) each sale of tangible personal property if the
3-6 property is delivered or shipped to a buyer in this state
3-7 regardless of the FOB point or another condition of the sale, and
3-8 each sale of tangible personal property shipped from this state to
3-9 a purchaser in another state in which the seller is not subject to
3-10 taxation;
3-11 (2) each service performed in this state;
3-12 (3) each rental of property situated in this state;
3-13 (4) [each royalty for] the use of a patent, [or]
3-14 copyright, trademark, franchise, or license in this state; [and]
3-15 (5) each sale of real property located in this state,
3-16 including royalties from oil, gas, or other mineral interests; and
3-17 (6) other business done in this state.
3-18 SECTION 6. Subsection (a), Section 171.1032, Tax Code, is
3-19 amended to read as follows:
3-20 (a) Except for the gross receipts of a corporation that are
3-21 subject to the provisions of Section 171.1061, in apportioning
3-22 taxable earned surplus, the gross receipts of a corporation from
3-23 its business done in this state is the sum of the corporation's
3-24 receipts from:
3-25 (1) each sale of tangible personal property if the
4-1 property is delivered or shipped to a buyer in this state
4-2 regardless of the FOB point or another condition of the sale, and
4-3 each sale of tangible personal property shipped from this state to
4-4 a purchaser in another state in which the seller is not subject to
4-5 any tax on, or measured by, net income, without regard to whether
4-6 the tax is imposed;
4-7 (2) each service performed in this state;
4-8 (3) each rental of property situated in this state;
4-9 (4) [each royalty for] the use of a patent, [or]
4-10 copyright, trademark, franchise, or license in this state; [and]
4-11 (5) each sale of real property located in this state,
4-12 including royalties from oil, gas, or other mineral interests; and
4-13 (6) other business done in this state.
4-14 SECTION 7. Subsection (c), Section 171.106, Tax Code, is
4-15 amended to read as follows:
4-16 (c) A corporation's taxable capital or earned surplus that
4-17 is derived, directly or indirectly, from the sale of management,
4-18 distribution, or administration services to or on behalf of a
4-19 regulated investment company, including a corporation that includes
4-20 trustees or sponsors of employee benefit plans that have accounts
4-21 in a regulated investment company, is apportioned to this state to
4-22 determine the amount of the tax imposed under Section 171.002 by
4-23 multiplying the corporation's total taxable capital or earned
4-24 surplus from the sale of services to or on behalf of a regulated
4-25 investment company by a fraction, the numerator of which is the
5-1 average of the sum of shares owned at the beginning of the year and
5-2 the sum of shares owned at the end of the year by the investment
5-3 company shareholders who are commercially domiciled in this state
5-4 or, if the shareholders are individuals, are residents of this
5-5 state and the denominator of which is the average of the sum of
5-6 shares owned at the beginning of the year and the sum of shares
5-7 owned at the end of the year by all investment company
5-8 shareholders. The corporation shall make a separate computation to
5-9 allocate taxable capital and earned surplus. In this subsection,
5-10 "regulated investment company" has the meaning assigned by Section
5-11 851(a), Internal Revenue Code.
5-12 SECTION 8. Subsection (d), Section 171.109, Tax Code, is
5-13 amended to read as follows:
5-14 (d) A corporation shall report its surplus based solely on
5-15 its own financial condition. Consolidated reporting of [the]
5-16 surplus [of related corporations] is prohibited.
5-17 SECTION 9. Section 171.110, Tax Code, is amended by adding
5-18 Subsection (h) to read as follows:
5-19 (h) A corporation shall report its net taxable earned
5-20 surplus based solely on its own financial condition. Consolidated
5-21 reporting is prohibited.
5-22 SECTION 10. Subsection (d), Section 171.112, Tax Code, is
5-23 amended to read as follows:
5-24 (d) A corporation shall report its gross receipts based
5-25 solely on its own financial condition. Consolidated reporting [of
6-1 related corporations] is prohibited.
6-2 SECTION 11. Subsection (c), Section 171.1121, Tax Code, is
6-3 amended to read as follows:
6-4 (c) A corporation shall report its gross receipts based
6-5 solely on its own financial condition. Consolidated reporting [of
6-6 related corporations] is prohibited.
6-7 SECTION 12. Section 171.202, Tax Code, is amended by
6-8 amending Subsections (c), (d), and (e) and adding Subsection (i) to
6-9 read as follows:
6-10 (c) The comptroller shall grant an extension of time to a
6-11 corporation that is not required by rule to make its tax payments
6-12 by electronic funds transfer for the filing of a report required by
6-13 this section to any date on or before the next November 15, if a
6-14 corporation:
6-15 (1) requests the extension, on or before May 15, on a
6-16 form provided by the comptroller; and
6-17 (2) remits with the request:
6-18 (A) not less than 90 percent of the amount of
6-19 tax reported as due on the report filed on or before November 15;
6-20 or
6-21 (B) 100 percent of the tax reported as due for
6-22 [paid in] the previous calendar year on the report due in the
6-23 previous calendar year and filed on or before May 14.
6-24 (d) In the case of a taxpayer whose previous return was its
6-25 initial report, the optional payment provided under Subsection
7-1 (c)(2)(B) or (e)(2)(B) must be equal to the greater of:
7-2 (1) an amount produced by multiplying the net taxable
7-3 capital, as reported [required to be shown] on the initial report
7-4 filed on or before May 14, by the rate of tax in Section
7-5 171.002(a)(1) that [which] is effective January 1 of the year in
7-6 which the report is due; or
7-7 (2) an [the] amount produced by multiplying the [paid
7-8 on] net taxable earned surplus, as reported [required] on the
7-9 initial report filed on or before May 14, by the rate of tax in
7-10 Section 171.002(a)(2) that is effective January 1 of the year in
7-11 which the report is due.
7-12 (e) The comptroller shall grant an extension of time for the
7-13 filing of a report required by this section by a corporation
7-14 required by rule to make its tax payments by electronic funds
7-15 transfer to any date on or before the next August 15, if the
7-16 corporation:
7-17 (1) requests the extension, on or before May 15, on a
7-18 form provided by the comptroller; and
7-19 (2) remits with the request:
7-20 (A) not less than 90 percent of the amount of
7-21 tax reported as due on the report filed on or before August 15; or
7-22 (B) 100 percent of the tax reported as due for
7-23 [paid in] the previous calendar year on the report due in the
7-24 previous calendar year and filed on or before May 14.
7-25 (i) If a corporation requesting an extension under
8-1 Subsection (c) or (e) does not file the report due in the previous
8-2 calendar year on or before May 14, the corporation may not receive
8-3 an extension under Subsection (c) or (e) unless the corporation
8-4 complies with Subsection (c)(2)(A) or (e)(2)(A), as appropriate.
8-5 SECTION 13. Subsection (d), Section 171.203, Tax Code, is
8-6 amended to read as follows:
8-7 (d) The corporation shall send a copy of the report to each
8-8 person named in the report under Subsection (a)(3) who is not
8-9 currently employed by the corporation or a related corporation
8-10 listed in Subsection (a)(1) or (2). An officer or director of the
8-11 corporation or another authorized person must sign the report under
8-12 a certification that:
8-13 (1) all information contained in the report is true
8-14 and correct to the best of the person's [officer's] knowledge; and
8-15 (2) a copy of the report has been mailed to each
8-16 person identified in this subsection on the date the return is
8-17 filed.
8-18 SECTION 14. Subchapter E, Chapter 171, Tax Code, is amended
8-19 by adding Section 171.212 to read as follows:
8-20 Sec. 171.212. REPORT OF CHANGES TO FEDERAL INCOME TAX
8-21 RETURN. (a) A corporation must file an amended report under this
8-22 chapter if:
8-23 (1) the corporation's net taxable earned surplus is
8-24 changed as the result of an audit or other adjustment by the
8-25 Internal Revenue Service or another competent authority; or
9-1 (2) the corporation files an amended federal income
9-2 tax return or other return that changes the corporation's net
9-3 taxable earned surplus.
9-4 (b) The corporation shall file the amended report under
9-5 Subsection (a)(1) not later than the 120th day after the date the
9-6 revenue agent's report or other adjustment is final. For purposes
9-7 of this subsection, a revenue agent's report or other adjustment is
9-8 final on the date on which all administrative appeals with the
9-9 Internal Revenue Service or other competent authority have been
9-10 exhausted or waived.
9-11 (c) The corporation shall file the amended report under
9-12 Subsection (a)(2) not later than the 120th day after the date the
9-13 corporation files the amended federal income tax return or other
9-14 return. For purposes of this subsection, a corporation is
9-15 considered to have filed an amended federal income tax return if
9-16 the corporation is a member of an affiliated group during a period
9-17 in which an amended consolidated federal income tax report is
9-18 filed.
9-19 (d) If a corporation fails to comply with this section, the
9-20 corporation is liable for a penalty of 10 percent of the tax that
9-21 should have been reported under this section and that had not
9-22 previously been reported to the comptroller. The penalty
9-23 prescribed by this subsection is in addition to any other penalty
9-24 provided by law.
9-25 SECTION 15. (a) Except as provided by Subsection (b) of
10-1 this section, this Act takes effect January 1, 1998, and applies to
10-2 a report or return originally due on or after that date.
10-3 (b) Section 171.212, Tax Code, as added by this Act, takes
10-4 effect on the earliest date that it may take effect under Section
10-5 39, Article III, Texas Constitution.
10-6 SECTION 16. The legislature intends that each change in law
10-7 made to the following sections of the Tax Code by this Act be
10-8 considered as a clarification of existing law and not imply that
10-9 the existing law may be construed as inconsistent with the law as
10-10 amended by this Act:
10-11 (1) 171.001(b)(3);
10-12 (2) 171.103(5);
10-13 (3) 171.1032(a)(5);
10-14 (4) 171.106(c);
10-15 (5) 171.109(d);
10-16 (6) 171.110;
10-17 (7) 171.112(d); and
10-18 (8) 171.1121(c).
10-19 SECTION 17. The importance of this legislation and the
10-20 crowded condition of the calendars in both houses create an
10-21 emergency and an imperative public necessity that the
10-22 constitutional rule requiring bills to be read on three several
10-23 days in each house be suspended, and this rule is hereby suspended,
10-24 and that this Act take effect and be in force according to its
10-25 terms, and it is so enacted.