By Armbrister S.B. No. 861
75R6019 CBH-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the administration of franchise taxes; imposing
1-3 penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Sections 171.001(b)(3) and (5), Tax Code, are
1-6 amended to read as follows:
1-7 (3) "Corporation" includes:
1-8 (A) a limited liability company, as defined
1-9 under the Texas Limited Liability Company Act; [and]
1-10 (B) a state or federal savings and loan
1-11 association; and
1-12 (C) a banking corporation.
1-13 (5) "Internal Revenue Code" means the Internal Revenue
1-14 Code of 1986 in effect for the federal tax year beginning on or
1-15 after January 1, 1996 [1994], and before January 1, 1997 [1995],
1-16 and any regulations adopted under that code applicable to that
1-17 period.
1-18 SECTION 2. Sections 171.002(b) and (d), Tax Code, are
1-19 amended to read as follows:
1-20 (b) The amount of franchise tax on each corporation[, except
1-21 as provided in Subsection (d),] is computed by adding the
1-22 following:
1-23 (1) the amount calculated by applying the tax rate
1-24 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. Section 171.063(c), Tax Code, is amended to read
2-12 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.
2-24 SECTION 5. Section 171.103, Tax Code, is amended to read as
2-25 follows:
2-26 Sec. 171.103. DETERMINATION OF GROSS RECEIPTS FROM BUSINESS
2-27 DONE IN THIS STATE FOR TAXABLE CAPITAL. In apportioning taxable
3-1 capital, the gross receipts of a corporation from its business done
3-2 in this state is the sum of the corporation's receipts from:
3-3 (1) each sale of tangible personal property if the
3-4 property is delivered or shipped to a buyer in this state
3-5 regardless of the FOB point or another condition of the sale, and
3-6 each sale of tangible personal property shipped from this state to
3-7 a purchaser in another state in which the seller is not subject to
3-8 taxation;
3-9 (2) each service performed in this state;
3-10 (3) each rental of property situated in this state;
3-11 (4) [each royalty for] the use of a patent, [or]
3-12 copyright, trademark, franchise, or license in this state; [and]
3-13 (5) each sale of real property located in this state,
3-14 including royalties from oil, gas, or other mineral interests; and
3-15 (6) other business done in this state.
3-16 SECTION 6. Section 171.1032(a), Tax Code, is amended to read
3-17 as follows:
3-18 (a) Except for the gross receipts of a corporation that are
3-19 subject to the provisions of Section 171.1061, in apportioning
3-20 taxable earned surplus, the gross receipts of a corporation from
3-21 its business done in this state is the sum of the corporation's
3-22 receipts from:
3-23 (1) each sale of tangible personal property if the
3-24 property is delivered or shipped to a buyer in this state
3-25 regardless of the FOB point or another condition of the sale, and
3-26 each sale of tangible personal property shipped from this state to
3-27 a purchaser in another state in which the seller is not subject to
4-1 any tax on, or measured by, net income, without regard to whether
4-2 the tax is imposed;
4-3 (2) each service performed in this state;
4-4 (3) each rental of property situated in this state;
4-5 (4) [each royalty for] the use of a patent, [or]
4-6 copyright, trademark, franchise, or license in this state; [and]
4-7 (5) each sale of real property located in this state,
4-8 including royalties from oil, gas, or other mineral interests; and
4-9 (6) other business done in this state.
4-10 SECTION 7. Section 171.106(c), Tax Code, is amended to read
4-11 as follows:
4-12 (c) A corporation's taxable capital or earned surplus that
4-13 is derived, directly or indirectly, from the sale of management,
4-14 distribution, or administration services to or on behalf of a
4-15 regulated investment company, including a corporation that includes
4-16 trustees or sponsors of employee benefit plans that have accounts
4-17 in a regulated investment company, is apportioned to this state to
4-18 determine the amount of the tax imposed under Section 171.002 by
4-19 multiplying the corporation's total taxable capital or earned
4-20 surplus from the sale of services to or on behalf of a regulated
4-21 investment company by a fraction, the numerator of which is the
4-22 average of the sum of shares owned at the beginning of the year and
4-23 the sum of shares owned at the end of the year by the investment
4-24 company shareholders who are commercially domiciled in this state,
4-25 or if the shareholders are individuals, are residents of this
4-26 state, and the denominator of which is the average of the sum of
4-27 shares owned at the beginning of the year and the sum of shares
5-1 owned at the end of the year by all investment company
5-2 shareholders. The corporation shall make a separate computation to
5-3 allocate taxable capital and earned surplus. In this subsection,
5-4 "regulated investment company" has the meaning assigned by Section
5-5 851(a), Internal Revenue Code.
5-6 SECTION 8. Section 171.109(d), Tax Code, is amended to read
5-7 as follows:
5-8 (d) A corporation shall report its surplus based solely on
5-9 its own financial condition. Consolidated reporting of [the]
5-10 surplus [of related corporations] is prohibited.
5-11 SECTION 9. Section 171.110, Tax Code, is amended by adding
5-12 Subsection (h) to read as follows:
5-13 (h) A corporation shall report its net taxable earned
5-14 surplus based solely on its own financial condition. Consolidated
5-15 reporting is prohibited.
5-16 SECTION 10. Section 171.112(d), Tax Code, is amended to read
5-17 as follows:
5-18 (d) A corporation shall report its gross receipts based
5-19 solely on its own financial condition. Consolidated reporting [of
5-20 related corporations] is prohibited.
5-21 SECTION 11. Section 171.1121(c), Tax Code, is amended to
5-22 read as follows:
5-23 (c) A corporation shall report its gross receipts based
5-24 solely on its own financial condition. Consolidated reporting [of
5-25 related corporations] is prohibited.
5-26 SECTION 12. Section 171.202, Tax Code, is amended by
5-27 amending Subsections (c)-(e) and adding Subsection (i) to read as
6-1 follows:
6-2 (c) The comptroller shall grant an extension of time to a
6-3 corporation that is not required by rule to make its tax payments
6-4 by electronic funds transfer for the filing of a report required by
6-5 this section to any date on or before the next November 15, if a
6-6 corporation:
6-7 (1) requests the extension, on or before May 15, on a
6-8 form provided by the comptroller; and
6-9 (2) remits with the request:
6-10 (A) not less than 90 percent of the amount of
6-11 tax reported as due on the report filed on or before November 15;
6-12 or
6-13 (B) 100 percent of the tax reported as due for
6-14 [paid in] the previous calendar year on the report due in the
6-15 previous calendar year and filed on or before May 14.
6-16 (d) In the case of a taxpayer whose previous return was its
6-17 initial report, the optional payment provided under Subsection
6-18 (c)(2)(B) or (e)(2)(B) must be equal to the greater of:
6-19 (1) an amount produced by multiplying the net taxable
6-20 capital, as reported [required to be shown] on the initial report
6-21 filed on or before May 14, by the rate of tax in Section
6-22 171.002(a)(1) that [which] is effective January 1 of the year in
6-23 which the report is due; or
6-24 (2) an [the] amount produced by multiplying the [paid
6-25 on] net taxable earned surplus, as reported [required] on the
6-26 initial report filed on or before May 14, by the rate of tax in
6-27 Section 171.002(a)(2) that is effective January 1 of the year in
7-1 which the report is due.
7-2 (e) The comptroller shall grant an extension of time for the
7-3 filing of a report required by this section by a corporation
7-4 required by rule to make its tax payments by electronic funds
7-5 transfer to any date on or before the next August 15, if the
7-6 corporation:
7-7 (1) requests the extension, on or before May 15, on a
7-8 form provided by the comptroller; and
7-9 (2) remits with the request:
7-10 (A) not less than 90 percent of the amount of
7-11 tax reported as due on the report filed on or before August 15; or
7-12 (B) 100 percent of the tax reported as due for
7-13 [paid in] the previous calendar year on the report due in the
7-14 previous calendar year and filed on or before May 14.
7-15 (i) If a corporation requesting an extension under
7-16 Subsection (c) or (e) does not file the report due in the previous
7-17 calendar year on or before May 14, the corporation may not receive
7-18 an extension under Subsection (c) or (e) unless the corporation
7-19 complies with Subsection (c)(2)(A) or (e)(2)(A), as appropriate.
7-20 SECTION 13. Section 171.203(d), Tax Code, is amended to read
7-21 as follows:
7-22 (d) The corporation shall send a copy of the report to each
7-23 person named in the report under Subsection (a)(3) who is not
7-24 currently employed by the corporation or a related corporation
7-25 listed in Subsection (a)(1) or (2). An officer or director of the
7-26 corporation or another authorized person must sign the report under
7-27 a certification that:
8-1 (1) all information contained in the report is true
8-2 and correct to the best of the person's [officer's] knowledge; and
8-3 (2) a copy of the report has been mailed to each
8-4 person identified in this subsection on the date the return is
8-5 filed.
8-6 SECTION 14. Subchapter E, Chapter 171, Tax Code, is amended
8-7 by adding Section 171.212 to read as follows:
8-8 Sec. 171.212. REPORT OF CHANGES TO FEDERAL INCOME TAX
8-9 RETURN. (a) A corporation must file an amended report under this
8-10 chapter if:
8-11 (1) the corporation's net taxable earned surplus is
8-12 changed as the result of an audit or other adjustment by the
8-13 Internal Revenue Service or another competent authority; or
8-14 (2) the corporation files an amended federal income
8-15 tax return or other return that changes the corporation's net
8-16 taxable earned surplus.
8-17 (b) The corporation shall file the amended report under
8-18 Subsection (a)(1) not later than the 120th day after the date the
8-19 revenue agent's report or other adjustment is final. For purposes
8-20 of this subsection, a revenue agent's report or other adjustment is
8-21 final on the date on which all administrative appeals with the
8-22 Internal Revenue Service or other competent authority have been
8-23 exhausted or waived.
8-24 (c) The corporation shall file the amended report under
8-25 Subsection (a)(2) not later than the 120th day after the date the
8-26 corporation files the amended federal income tax return or other
8-27 return. For purposes of this subsection, a corporation is
9-1 considered to have filed an amended federal income tax return if
9-2 the corporation is a member of an affiliated group during a period
9-3 in which an amended consolidated federal income tax report is
9-4 filed.
9-5 (d) If a corporation fails to comply with this section, the
9-6 corporation is liable for a penalty of 10 percent of the tax that
9-7 should have been reported under this section and that had not
9-8 previously been reported to the comptroller. The penalty
9-9 prescribed by this subsection is in addition to any other penalty
9-10 provided by law.
9-11 SECTION 15. (a) Except as provided by Subsection (b) of
9-12 this section, this Act takes effect January 1, 1998, and applies to
9-13 a report or return originally due on or after that date.
9-14 (b) Section 171.212, Tax Code, as added by this Act, takes
9-15 effect on the earliest date that it may take effect under Section
9-16 39, Article III, Texas Constitution.
9-17 SECTION 16. The legislature intends that each change in law
9-18 made to the following sections of the Tax Code by this Act be
9-19 considered as a clarification of existing law and not imply that
9-20 the existing law may be construed as inconsistent with the law as
9-21 amended by this Act:
9-22 (1) 171.001(b)(3);
9-23 (2) 171.103(5);
9-24 (3) 171.1032(a)(5);
9-25 (4) 171.106(c);
9-26 (5) 171.109(d);
9-27 (6) 171.110;
10-1 (7) 171.112(d); and
10-2 (8) 171.1121(c).
10-3 SECTION 17. The importance of this legislation and the
10-4 crowded condition of the calendars in both houses create an
10-5 emergency and an imperative public necessity that the
10-6 constitutional rule requiring bills to be read on three several
10-7 days in each house be suspended, and this rule is hereby suspended,
10-8 and that this Act take effect and be in force according to its
10-9 terms, and it is so enacted.