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Amend CSHB 3 by adding the following new section and 

renumbering subsequent sections appropriately:

	SECTION ____.  Subchapter C, Chapter 171, Tax Code, is 

amended by adding Section 171.114 to read as follows:

	Sec. 171.114.  TEMPORARY CREDIT ON NET TAXABLE EARNED 

SURPLUS BEGINNING 2006.  (a)  Not later than March 1, 2006, a 

taxable entity may  notify the comptroller in writing of its intent 

to preserve its right to take a credit in an amount allowed by this 

section on the tax due on net taxable earned surplus.  The 

comptroller may not grant an extension.  The taxable entity may 

thereafter elect





to claim the credit for the current year and future years at or 

before the original due date of any report due after January 1, 

2006, until the taxable entity revokes the election or this section 

expires, whichever is earlier.  A taxable entity may claim the 

credit for not more than 20 consecutive privilege periods beginning 

with the first report due under this chapter after January 1, 2006.  

A taxable entity may make only one election under this section and 

the election may not be conveyed, assigned, or transferred to 

another entity.

	(b)  The credit allowed under this section for any privilege 

period is computed by:

		(1)  determining the amount, as of the end of the 

taxable entity's accounting year ending in 2005, that is the 

difference between the basis used for financial accounting purposes 

and the basis used for federal income tax purposes of an asset or a 

liability that at some future date will reverse;

		(2)  apportioning the amount determined under 

Subdivision (1) to this state in the same manner earned surplus is 

apportioned under Section 171.106, on the first report due on or 

after January 1, 2006;

		(3)  multiplying the amount determined under 

Subdivision (2) by five percent; and

		(4)  multiplying the amount determined under 

Subdivision (3) by the tax rate prescribed by 

Section 171.002(a)(2).

	(c)  In computing the amount under Subsection (b)(1), the 

taxable entity may not consider differences that result from 

deferred investment tax credits, allowances for funds used during 

construction, or any other timing difference for which a deferred 

tax liability is not required under generally accepted accounting 

principles.

	(d)  After making the election under Subsection (a) the 

taxable entity must, for purposes of computing its taxable capital 

under this chapter, use the same accounting methods under generally 

accepted accounting principles to account for the assets and 

liabilities that determine the amount of the credit that the 

taxable entity uses to compute the credit.  Notwithstanding Section 

171.109(e), if a taxable entity changes an accounting method for an 

asset or liability that determines, in whole or in part, the amount 

of the credit during the period the election is in effect, the 

election is automatically revoked.

	(e)  A taxable entity that notifies the comptroller of its 

intent to preserve its right to take a credit allowed by this 

section shall submit with its notice of intent a statement of the 

amount determined under Subsection (b)(1).  The comptroller may 

request that the taxable entity submit in the annual report for each 

succeeding privilege period in which the taxable entity is eligible 

to take a credit information relating to the amount determined 

under Subsection (b)(1).  The taxable entity shall submit in the 

form and content the comptroller requires any information relating 

to the assets and liabilities that determine the amount of the 

credit, the amount determined under Subsection (b)(1), or any other 

matter relevant to the computation of the credit for which the 

taxable entity is eligible.

	(f)  A credit allowed under this section may not be carried 

forward or backward or used to create a business loss carryover 

under Section 171.110.

	(g)  A taxable entity may not use a credit allowed under this 

section in connection with the computation of the taxable entity's 

tax on net taxable capital.



	(h)  In addition to the tax imposed by Section 171.002, an 

additional tax is imposed on each taxable entity during each year 

the taxable entity takes the credit allowed under this section.  The 

additional tax is equal to 0.1 percent of the taxable entity's net 

taxable capital per year of privilege period.

	(i)  This section expires September 1, 2026.