1-1                                   AN ACT
 1-2     relating to the franchise tax.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Section 171.052, Tax Code, is amended to read as
 1-5     follows:
 1-6           Sec. 171.052.  CERTAIN CORPORATIONS.  An [A corporation that
 1-7     is an] insurance organization, title insurance company, or title
 1-8     insurance agent authorized to engage in insurance business in this
 1-9     state [company, surety, guaranty, or fidelity company] now required
1-10     to pay [or who pays] an annual tax under Chapter 4 or 9, Insurance
1-11     Code, measured by its [their] gross premium receipts is exempted
1-12     from the franchise tax.  An insurance organization performing
1-13     management or accounting activities in this state on behalf of a
1-14     nonadmitted captive insurance company under Chapter 101, Insurance
1-15     Code, that is required to pay a gross premium receipts tax during a
1-16     tax year is exempted from the franchise tax for that same tax year.
1-17     Farm mutuals, local mutual aid associations, and burial
1-18     associations are not subject to the franchise tax.
1-19           SECTION 2.  Section 171.110, Tax Code, is amended by amending
1-20     Subsection (e) and adding Subsection (k) to read as follows:
1-21           (e)  For purposes of this section, a business loss is any
1-22     negative amount after apportionment and allocation.  The business
1-23     loss shall be carried forward to the year succeeding the loss year
1-24     as a deduction to net taxable earned surplus, then successively to
1-25     the succeeding four taxable years after the loss year or until the
 2-1     loss is exhausted, whichever occurs first, but for not more than
 2-2     five taxable years after the loss year.  Notwithstanding the
 2-3     preceding sentence, a business loss from a tax year that ends
 2-4     before January 1, 1991, may not be used to reduce net taxable
 2-5     earned surplus.  A business loss can be carried forward only by the
 2-6     corporation that incurred the loss and cannot be transferred to or
 2-7     claimed by any other entity, including the survivor of a merger if
 2-8     the loss was incurred by the corporation that did not survive the
 2-9     merger.
2-10           SECTION 3.  Subsection (e), Section 171.110, Tax Code, as
2-11     amended by this Act, is a clarification of existing law and not a
2-12     substantive change in law.
2-13           SECTION 4.  (a)  This Act takes effect September 1, 2001.
2-14           (b)  The change in law made by this Act does not affect taxes
2-15     imposed before the effective date of this Act, and the law in
2-16     effect before the effective date of this Act is continued in effect
2-17     for purposes of the liability for and collection of those taxes.
         _______________________________     _______________________________
             President of the Senate              Speaker of the House
               I hereby certify that S.B. No. 1689 passed the Senate on
         April 30, 2001, by a viva-voce vote; and that the Senate concurred
         in House amendment on May 25, 2001, by a viva-voce vote.
                                             _______________________________
                                                 Secretary of the Senate
               I hereby certify that S.B. No. 1689 passed the House, with
         amendment, on May 21, 2001, by a non-record vote.
                                             _______________________________
                                                Chief Clerk of the House
         Approved:
         _______________________________
                      Date
         _______________________________
                    Governor