1-1 By: Armbrister S.B. No. 861
1-2 (In the Senate - Filed February 28, 1997; March 5, 1997, read
1-3 first time and referred to Committee on Finance; March 25, 1997,
1-4 reported favorably by the following vote: Yeas 11, Nays 0;
1-5 March 25, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the administration of franchise taxes; imposing
1-9 penalties.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Subdivisions (3) and (5), Subsection (b), Section
1-12 171.001, Tax Code, are amended to read as follows:
1-13 (3) "Corporation" includes:
1-14 (A) a limited liability company, as defined
1-15 under the Texas Limited Liability Company Act; [and]
1-16 (B) a state or federal savings and loan
1-17 association; and
1-18 (C) a banking corporation.
1-19 (5) "Internal Revenue Code" means the Internal Revenue
1-20 Code of 1986 in effect for the federal tax year beginning on or
1-21 after January 1, 1996 [1994], and before January 1, 1997 [1995],
1-22 and any regulations adopted under that code applicable to that
1-23 period.
1-24 SECTION 2. Subsections (b) and (d), Section 171.002, Tax
1-25 Code, are amended to read as follows:
1-26 (b) The amount of franchise tax on each corporation[, except
1-27 as provided in Subsection (d),] is computed by adding the
1-28 following:
1-29 (1) the amount calculated by applying the tax rate
1-30 prescribed by Subsection (a)(1) to the corporation's net taxable
1-31 capital; and
1-32 (2) the difference between:
1-33 (A) the amount calculated by applying the tax
1-34 rate prescribed by Subsection (a)(2) to the corporation's net
1-35 taxable earned surplus; and
1-36 (B) the amount determined under Subdivision (1).
1-37 (d) If the amount of tax computed [under Subsection (b)] for
1-38 a corporation is less than $100, the corporation is not required to
1-39 pay that amount and is not considered to owe any tax for that
1-40 period.
1-41 SECTION 3. Subsection (c), Section 171.063, Tax Code, is
1-42 amended to read as follows:
1-43 (c) A corporation's exemption under Subsection (b) of this
1-44 section is [may be] established by furnishing the comptroller with
1-45 a copy of the Internal Revenue Service's letter of exemption issued
1-46 to the corporation. The copy of the letter must [may] be filed
1-47 with the comptroller within 15 months after the day that is the
1-48 last day of a calendar month and that is nearest to the date of the
1-49 corporation's charter or certificate of authority.
1-50 SECTION 4. Section 171.102, Tax Code, is amended by adding
1-51 Subsection (d) to read as follows:
1-52 (d) This section applies only to the computation of a
1-53 corporation's taxable capital under Section 171.101 of this code.
1-54 SECTION 5. Section 171.103, Tax Code, is amended to read as
1-55 follows:
1-56 Sec. 171.103. DETERMINATION OF GROSS RECEIPTS FROM BUSINESS
1-57 DONE IN THIS STATE FOR TAXABLE CAPITAL. In apportioning taxable
1-58 capital, the gross receipts of a corporation from its business done
1-59 in this state is the sum of the corporation's receipts from:
1-60 (1) each sale of tangible personal property if the
1-61 property is delivered or shipped to a buyer in this state
1-62 regardless of the FOB point or another condition of the sale, and
1-63 each sale of tangible personal property shipped from this state to
1-64 a purchaser in another state in which the seller is not subject to
2-1 taxation;
2-2 (2) each service performed in this state;
2-3 (3) each rental of property situated in this state;
2-4 (4) [each royalty for] the use of a patent, [or]
2-5 copyright, trademark, franchise, or license in this state; [and]
2-6 (5) each sale of real property located in this state,
2-7 including royalties from oil, gas, or other mineral interests; and
2-8 (6) other business done in this state.
2-9 SECTION 6. Subsection (a), Section 171.1032, Tax Code, is
2-10 amended to read as follows:
2-11 (a) Except for the gross receipts of a corporation that are
2-12 subject to the provisions of Section 171.1061, in apportioning
2-13 taxable earned surplus, the gross receipts of a corporation from
2-14 its business done in this state is the sum of the corporation's
2-15 receipts from:
2-16 (1) each sale of tangible personal property if the
2-17 property is delivered or shipped to a buyer in this state
2-18 regardless of the FOB point or another condition of the sale, and
2-19 each sale of tangible personal property shipped from this state to
2-20 a purchaser in another state in which the seller is not subject to
2-21 any tax on, or measured by, net income, without regard to whether
2-22 the tax is imposed;
2-23 (2) each service performed in this state;
2-24 (3) each rental of property situated in this state;
2-25 (4) [each royalty for] the use of a patent, [or]
2-26 copyright, trademark, franchise, or license in this state; [and]
2-27 (5) each sale of real property located in this state,
2-28 including royalties from oil, gas, or other mineral interests; and
2-29 (6) other business done in this state.
2-30 SECTION 7. Subsection (c), Section 171.106, Tax Code, is
2-31 amended to read as follows:
2-32 (c) A corporation's taxable capital or earned surplus that
2-33 is derived, directly or indirectly, from the sale of management,
2-34 distribution, or administration services to or on behalf of a
2-35 regulated investment company, including a corporation that includes
2-36 trustees or sponsors of employee benefit plans that have accounts
2-37 in a regulated investment company, is apportioned to this state to
2-38 determine the amount of the tax imposed under Section 171.002 by
2-39 multiplying the corporation's total taxable capital or earned
2-40 surplus from the sale of services to or on behalf of a regulated
2-41 investment company by a fraction, the numerator of which is the
2-42 average of the sum of shares owned at the beginning of the year and
2-43 the sum of shares owned at the end of the year by the investment
2-44 company shareholders who are commercially domiciled in this state
2-45 or, if the shareholders are individuals, are residents of this
2-46 state and the denominator of which is the average of the sum of
2-47 shares owned at the beginning of the year and the sum of shares
2-48 owned at the end of the year by all investment company
2-49 shareholders. The corporation shall make a separate computation to
2-50 allocate taxable capital and earned surplus. In this subsection,
2-51 "regulated investment company" has the meaning assigned by Section
2-52 851(a), Internal Revenue Code.
2-53 SECTION 8. Subsection (d), Section 171.109, Tax Code, is
2-54 amended to read as follows:
2-55 (d) A corporation shall report its surplus based solely on
2-56 its own financial condition. Consolidated reporting of [the]
2-57 surplus [of related corporations] is prohibited.
2-58 SECTION 9. Section 171.110, Tax Code, is amended by adding
2-59 Subsection (h) to read as follows:
2-60 (h) A corporation shall report its net taxable earned
2-61 surplus based solely on its own financial condition. Consolidated
2-62 reporting is prohibited.
2-63 SECTION 10. Subsection (d), Section 171.112, Tax Code, is
2-64 amended to read as follows:
2-65 (d) A corporation shall report its gross receipts based
2-66 solely on its own financial condition. Consolidated reporting [of
2-67 related corporations] is prohibited.
2-68 SECTION 11. Subsection (c), Section 171.1121, Tax Code, is
2-69 amended to read as follows:
3-1 (c) A corporation shall report its gross receipts based
3-2 solely on its own financial condition. Consolidated reporting [of
3-3 related corporations] is prohibited.
3-4 SECTION 12. Section 171.202, Tax Code, is amended by
3-5 amending Subsections (c), (d), and (e) and adding Subsection (i) to
3-6 read as follows:
3-7 (c) The comptroller shall grant an extension of time to a
3-8 corporation that is not required by rule to make its tax payments
3-9 by electronic funds transfer for the filing of a report required by
3-10 this section to any date on or before the next November 15, if a
3-11 corporation:
3-12 (1) requests the extension, on or before May 15, on a
3-13 form provided by the comptroller; and
3-14 (2) remits with the request:
3-15 (A) not less than 90 percent of the amount of
3-16 tax reported as due on the report filed on or before November 15;
3-17 or
3-18 (B) 100 percent of the tax reported as due for
3-19 [paid in] the previous calendar year on the report due in the
3-20 previous calendar year and filed on or before May 14.
3-21 (d) In the case of a taxpayer whose previous return was its
3-22 initial report, the optional payment provided under Subsection
3-23 (c)(2)(B) or (e)(2)(B) must be equal to the greater of:
3-24 (1) an amount produced by multiplying the net taxable
3-25 capital, as reported [required to be shown] on the initial report
3-26 filed on or before May 14, by the rate of tax in Section
3-27 171.002(a)(1) that [which] is effective January 1 of the year in
3-28 which the report is due; or
3-29 (2) an [the] amount produced by multiplying the [paid
3-30 on] net taxable earned surplus, as reported [required] on the
3-31 initial report filed on or before May 14, by the rate of tax in
3-32 Section 171.002(a)(2) that is effective January 1 of the year in
3-33 which the report is due.
3-34 (e) The comptroller shall grant an extension of time for the
3-35 filing of a report required by this section by a corporation
3-36 required by rule to make its tax payments by electronic funds
3-37 transfer to any date on or before the next August 15, if the
3-38 corporation:
3-39 (1) requests the extension, on or before May 15, on a
3-40 form provided by the comptroller; and
3-41 (2) remits with the request:
3-42 (A) not less than 90 percent of the amount of
3-43 tax reported as due on the report filed on or before August 15; or
3-44 (B) 100 percent of the tax reported as due for
3-45 [paid in] the previous calendar year on the report due in the
3-46 previous calendar year and filed on or before May 14.
3-47 (i) If a corporation requesting an extension under
3-48 Subsection (c) or (e) does not file the report due in the previous
3-49 calendar year on or before May 14, the corporation may not receive
3-50 an extension under Subsection (c) or (e) unless the corporation
3-51 complies with Subsection (c)(2)(A) or (e)(2)(A), as appropriate.
3-52 SECTION 13. Subsection (d), Section 171.203, Tax Code, is
3-53 amended to read as follows:
3-54 (d) The corporation shall send a copy of the report to each
3-55 person named in the report under Subsection (a)(3) who is not
3-56 currently employed by the corporation or a related corporation
3-57 listed in Subsection (a)(1) or (2). An officer or director of the
3-58 corporation or another authorized person must sign the report under
3-59 a certification that:
3-60 (1) all information contained in the report is true
3-61 and correct to the best of the person's [officer's] knowledge; and
3-62 (2) a copy of the report has been mailed to each
3-63 person identified in this subsection on the date the return is
3-64 filed.
3-65 SECTION 14. Subchapter E, Chapter 171, Tax Code, is amended
3-66 by adding Section 171.212 to read as follows:
3-67 Sec. 171.212. REPORT OF CHANGES TO FEDERAL INCOME TAX
3-68 RETURN. (a) A corporation must file an amended report under this
3-69 chapter if:
4-1 (1) the corporation's net taxable earned surplus is
4-2 changed as the result of an audit or other adjustment by the
4-3 Internal Revenue Service or another competent authority; or
4-4 (2) the corporation files an amended federal income
4-5 tax return or other return that changes the corporation's net
4-6 taxable earned surplus.
4-7 (b) The corporation shall file the amended report under
4-8 Subsection (a)(1) not later than the 120th day after the date the
4-9 revenue agent's report or other adjustment is final. For purposes
4-10 of this subsection, a revenue agent's report or other adjustment is
4-11 final on the date on which all administrative appeals with the
4-12 Internal Revenue Service or other competent authority have been
4-13 exhausted or waived.
4-14 (c) The corporation shall file the amended report under
4-15 Subsection (a)(2) not later than the 120th day after the date the
4-16 corporation files the amended federal income tax return or other
4-17 return. For purposes of this subsection, a corporation is
4-18 considered to have filed an amended federal income tax return if
4-19 the corporation is a member of an affiliated group during a period
4-20 in which an amended consolidated federal income tax report is
4-21 filed.
4-22 (d) If a corporation fails to comply with this section, the
4-23 corporation is liable for a penalty of 10 percent of the tax that
4-24 should have been reported under this section and that had not
4-25 previously been reported to the comptroller. The penalty
4-26 prescribed by this subsection is in addition to any other penalty
4-27 provided by law.
4-28 SECTION 15. (a) Except as provided by Subsection (b) of
4-29 this section, this Act takes effect January 1, 1998, and applies to
4-30 a report or return originally due on or after that date.
4-31 (b) Section 171.212, Tax Code, as added by this Act, takes
4-32 effect on the earliest date that it may take effect under Section
4-33 39, Article III, Texas Constitution.
4-34 SECTION 16. The legislature intends that each change in law
4-35 made to the following sections of the Tax Code by this Act be
4-36 considered as a clarification of existing law and not imply that
4-37 the existing law may be construed as inconsistent with the law as
4-38 amended by this Act:
4-39 (1) 171.001(b)(3);
4-40 (2) 171.103(5);
4-41 (3) 171.1032(a)(5);
4-42 (4) 171.106(c);
4-43 (5) 171.109(d);
4-44 (6) 171.110;
4-45 (7) 171.112(d); and
4-46 (8) 171.1121(c).
4-47 SECTION 17. The importance of this legislation and the
4-48 crowded condition of the calendars in both houses create an
4-49 emergency and an imperative public necessity that the
4-50 constitutional rule requiring bills to be read on three several
4-51 days in each house be suspended, and this rule is hereby suspended,
4-52 and that this Act take effect and be in force according to its
4-53 terms, and it is so enacted.
4-54 * * * * *