HBA-LJP H.B. 3350 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 3350
By: Keffer
Ways & Means
4/5/2001
Introduced



BACKGROUND AND PURPOSE 

Currently, the franchise tax is partially calculated based on a complex
definition of officers and directors. Removing this definition and placing
a cap on the maximum number of officers and directors whose compensation is
used to calculate the tax could ease the administration and calculation of
the tax.  House Bill 3350 removes the presumption that a person is an
officer and provides a limit on the number of officers and directors whose
compensation is considered in the calculation of the net taxable earned
surplus of a corporation for franchise tax purposes. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 3350 amends the Tax Code to remove provisions regarding the
presumption that a person is an officer and the authorization of a
corporation to rebut that presumption for purposes of computing the net
taxable earned surplus of a corporation.  If the number of officers and
directors exceeds 25, the bill requires that only the compensation paid to
the 25 officers, executive officers if a bank, or directors with the
greatest amount of compensation be added back. 

The bill modifies the definition of "Internal Revenue Code" to update, from
beginning on or after January 1, 1996 and before January 1, 1997 to
beginning on or after January 1, 2000 and before January 2001, the federal
tax year that the Internal Revenue Code of 1986 is in effect. 

EFFECTIVE DATE

January 1, 2002.