SRC-EPT, TBR S.B. 1689 77(R)BILL ANALYSIS


Senate Research CenterS.B. 1689
By: Ellis, Rodney
Finance
6/27/2001
Enrolled


DIGEST AND PURPOSE 

A corporation that is an insurance company, surety, guaranty, or fidelity
company required to pay or who pays an annual tax measured by their gross
receipts is exempted from the franchise tax.  However, there is no
provision that exempts from the franchise tax an insurance organization
performing management or accounting activities in this state on behalf of a
nonadmitted captive insurance company. In addition, current law is not
clear as to which corporation may claim a business loss in a merger of two
corporations.  S.B. 1689 exempts from the franchise tax certain insurance
organizations, title insurance companies, or title insurance agents and
authorizes the surviving corporation of a merger to claim the business loss
of the nonsurviving corporation. 

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a
state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 171.052, Tax Code, to provide that an insurance
organization, title insurance company, or title insurance agent authorized
to engage in insurance business in this state now required to pay an annual
tax under Chapter 4 or 9, Insurance Code, measured by its gross premium
receipts is exempted from the franchise tax.  Provides that an insurance
organization performing management or accounting activities in this state
on behalf of a nonadmitted captive insurance company under Chapter 101,
Insurance Code, that is required to pay a gross premium receipts tax during
a tax year is exempted from the franchise tax for that same tax year.
Provides that farm mutuals, local mutual aid associations, and burial
associations are not subject to the franchise tax. 

SECTION 2.  Amends Section 171.110,Tax Code, to provide that a business
loss can be carried forward only by the corporation that incurred the loss
and cannot be transferred to or claimed by any other entity, including the
survivor of a merger if the loss was incurred by the corporation that did
not survive the merger. 

SECTION 3.  Provides that Subsection (e), Section 171.110, Tax Code, as
amended by this Act, is a clarification of existing law and not a
substantive change in law. 

SECTION 4.  (a)  Effective date: September 1, 2001.

(b)  Makes application of this Act prospective.