By: Ellis S.B. No. 1689
A BILL TO BE ENTITLED
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 SECTION 2. Section 171.110, Tax Code, is amended by amending
1-18 Subsection (e) and adding Subsection (k) to read as follows:
1-19 (e) For purposes of this section, a business loss is any
1-20 negative amount after apportionment and allocation. The business
1-21 loss shall be carried forward to the year succeeding the loss year
1-22 as a deduction to net taxable earned surplus, then successively to
1-23 the succeeding four taxable years after the loss year or until the
1-24 loss is exhausted, whichever occurs first, but for not more than
1-25 five taxable years after the loss year. Notwithstanding the
2-1 preceding sentence, a business loss from a tax year that ends
2-2 before January 1, 1991, may not be used to reduce net taxable
2-3 earned surplus. Except as otherwise provided in Subsection (k), a
2-4 business loss can be carried forward only by the corporation that
2-5 incurred the loss and cannot be transferred to or claimed by any
2-6 other entity, including the survivor of a merger if the loss was
2-7 incurred by the corporation that did not survive the merger.
2-8 (k) For reports originally due on or after January 1, 2004,
2-9 a surviving corporation of a merger may claim the business loss of
2-10 the nonsurviving corporation. Such business losses may be carried
2-11 forward not more than five years following the merger or until the
2-12 losses are exhausted.
2-13 SECTION 3. Subsection (e), Section 171.110, Tax Code, as
2-14 amended by this Act, is a clarification of existing law and not a
2-15 substantive change in law.
2-16 SECTION 4. (a) This Act takes effect September 1, 2001,
2-17 except that Subsection (k), Section 171.110, Tax Code, as added by
2-18 this Act shall take effect for reports originally due on or after
2-19 January 1, 2004.
2-20 (b) The change in law made by this Act does not affect taxes
2-21 imposed before the effective date of this Act, and the law in
2-22 effect before the effective date of this Act is continued in effect
2-23 for purposes of the liability for and collection of those taxes.
2-24 COMMITTEE AMENDMENT NO. 1
2-25 Amend S.B. 1689 as follows:
2-26 On page 1, line 16, insert the following after the period:
3-1 Farm mutuals, local mutual aid associations and burial
3-2 associations are not subject to the franchise tax.
3-3 On page 2, line 3, delete "Except as otherwise provided in
3-4 Subsection (k), a" and insert "A".
3-5 On page 2, strike the language on lines 8 through 12.
3-6 On page 2, line 16, insert a period after "2001" and delete
3-7 the language on lines 17 through 19.
3-8 Oliveira