1-1     By:  Ellis                                            S.B. No. 1689
 1-2           (In the Senate - Filed March 9, 2001; March 12, 2001, read
 1-3     first time and referred to Committee on Finance; April 24, 2001,
 1-4     reported favorably by the following vote:  Yeas 10, Nays 0;
 1-5     April 24, 2001, sent to printer.)
 1-6                            A BILL TO BE ENTITLED
 1-7                                   AN ACT
 1-8     relating to the franchise tax.
 1-9           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10           SECTION 1.  Section 171.052, Tax Code, is amended to read as
1-11     follows:
1-12           Sec. 171.052.  CERTAIN CORPORATIONS.  An [A corporation that
1-13     is an] insurance organization, title insurance company, or title
1-14     insurance agent authorized to engage in insurance business in this
1-15     state [company, surety, guaranty, or fidelity company] now required
1-16     to pay [or who pays] an annual tax under Chapter 4 or 9, Insurance
1-17     Code, measured by its [their] gross premium receipts is exempted
1-18     from the franchise tax.  An insurance organization performing
1-19     management or accounting activities in this state on behalf of a
1-20     nonadmitted captive insurance company under Chapter 101, Insurance
1-21     Code, that is required to pay a gross premium receipts tax during a
1-22     tax year is exempted from the franchise tax for that same tax year.
1-23           SECTION 2.  Subsection (e), Section 171.110, Tax Code, is
1-24     amended to read as follows:
1-25           (e)  For purposes of this section, a business loss is any
1-26     negative amount after apportionment and allocation.  The business
1-27     loss shall be carried forward to the year succeeding the loss year
1-28     as a deduction to net taxable earned surplus, then successively to
1-29     the succeeding four taxable years after the loss year or until the
1-30     loss is exhausted, whichever occurs first, but for not more than
1-31     five taxable years after the loss year.  Notwithstanding the
1-32     preceding sentence, a business loss from a tax year that ends
1-33     before January 1, 1991, may not be used to reduce net taxable
1-34     earned surplus.  A business loss can be carried forward only by the
1-35     corporation that incurred the loss and cannot be transferred to or
1-36     claimed by any other entity, including the survivor of a merger if
1-37     the loss was incurred by the corporation that did not survive the
1-38     merger.
1-39           SECTION 3.  Subsection (e), Section 171.110, Tax Code, as
1-40     amended by this Act, is a clarification of existing law and not a
1-41     substantive change in law.
1-42           SECTION 4.  (a)  This Act takes effect September 1, 2001.
1-43           (b)  The change in law made by this Act does not affect taxes
1-44     imposed before the effective date of this Act, and the law in
1-45     effect before the effective date of this Act is continued in effect
1-46     for purposes of the liability for and collection of those taxes.
1-47                                  * * * * *