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By: Keffer of Eastland (Senate Sponsor - Ogden) H.B. No. 3
(In the Senate - Received from the House July 7, 2005;
July 7, 2005, read first time and referred to Committee on Finance;
July 8, 2005, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 9, Nays 5; July 8, 2005,
sent to printer.)
COMMITTEE SUBSTITUTE FOR H.B. No. 3 By: Ogden
A BILL TO BE ENTITLED
AN ACT
relating to financing public schools in this state and reducing
property taxes.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. SCHOOL PROPERTY TAX RELIEF
SECTION 1.01. Section 45.003, Education Code, is amended by
amending Subsection (d) and adding Subsections (d-1), (d-2), and
(e) to read as follows:
(d) A proposition submitted to authorize the levy of
maintenance taxes must include the question of whether the
governing board or commissioners court may levy, assess, and
collect annual ad valorem taxes for the further maintenance of
public schools, at a rate not to exceed the rate stated in the
proposition, which may be not more than the sum of:
(1) $1.05 [$1.50] on the $100 valuation of taxable
property in the district; and
(2) $0.15 on the $100 valuation of taxable property in
the district for enrichment, as authorized by an election as
provided by Chapter 42[, stated in the proposition].
(d-1) Notwithstanding Subsection (d), for the following tax
years, a proposition submitted to authorize the levy of maintenance
taxes must include the question of whether the governing board or
commissioners court may levy, assess, and collect annual ad valorem
taxes for the further maintenance of public schools, at a rate not
to exceed the rate stated in the proposition, which may be not more
than the sum of:
(1) for the 2005 tax year:
(A) $1.30 on the $100 valuation of taxable
property in the district; and
(B) $0.15 on the $100 valuation of taxable
property in the district for enrichment, as authorized by an
election as provided by Chapter 42; and
(2) for the 2006, 2007, and 2008 tax years:
(A) $1.11 on the $100 valuation of taxable
property in the district; and
(B) $0.15 on the $100 valuation of taxable
property in the district for enrichment, as authorized by an
election as provided by Chapter 42.
(d-2) Subsection (d-1) and this subsection expire January
1, 2009.
(e) An election held before January 1, 2005, authorizing a
maintenance tax at a rate of at least $1.30 on the $100 valuation of
taxable property in the district is sufficient to authorize a rate
of $1.30 or less for the 2005 tax year. An election held before
January 1, 2006, authorizing a maintenance tax at a rate of at least
$1.11 on the $100 valuation of taxable property in the district is
sufficient to authorize a rate of $1.11 or less for the 2006, 2007,
and 2008 tax years. An election held before January 1, 2009,
authorizing a maintenance tax at a rate of at least $1.05 on the
$100 valuation of taxable property in the district is sufficient to
authorize a rate of $1.05 or less for the 2009 and subsequent tax
years.
SECTION 1.02. (a) The changes in law made by this article
apply to the maintenance and operations tax rate of a school
district beginning with the 2005 tax year.
(b) If before the effective date of this article, the
governing body of a school district adopted an ad valorem tax rate
for the district for the 2005 tax year under the law in effect
immediately before the effective date of this article, and the
adopted ad valorem tax rate included a rate for maintenance and
operations expenses that is greater than the maximum maintenance
and operations tax rate for the 2005 tax year permitted under this
article:
(1) on the effective date of this article, the ad
valorem tax rate adopted for the district is invalidated; and
(2) the governing body shall adopt an ad valorem tax
rate for the 2005 tax year in accordance with the changes in law
made by this article.
(c) If tax bills for the 2005 tax year were sent by the tax
assessor for a school district pursuant to a tax rate invalidated
under Subsection (b)(1) of this section, the tax assessor for the
school district shall prepare and mail a new tax bill for the 2005
tax year to each taxpayer of the district in the manner required by
Chapter 31, Tax Code. If a taxpayer pays the taxes for the 2005 tax
year pursuant to a tax rate invalidated under Subsection (b)(1) of
this section, the school district shall refund any difference
between the tax paid and the tax due at the rate adopted under
Subsection (b)(2) of this section.
(d) If this Act is passed by the legislature without
receiving a vote of two-thirds of all the members elected to each
house, any action taken before the effective date of this article in
preparation for the implementation of the changes in law made by
this article, including adoption of a maintenance and operations
tax rate, by an officer or employee or the governing body of a
school district that the officer, employee, or governing body
determines is necessary or appropriate and that the officer,
employee, or governing body would have been authorized to take had
this article been in effect at the time of the action is validated
as of the effective date of this article. Any public notice
required by Chapter 26, Tax Code, or Chapter 44, Education Code,
given before the effective date of this article that includes an
additional statement that the tax rate for the school district will
be adopted in accordance with the changes in law made by this
article is validated as of the effective date of this article.
ARTICLE 2. FRANCHISE TAX
PART A. CORPORATE OWNERSHIP IN PARTNERSHIPS
SECTION 2A.01. Section 113.001, Tax Code, is amended by
adding Subsection (c) to read as follows:
(c) Any tax, interest, or penalties due to the state under
Chapter 171 by a person who is subject to that tax by application of
Section 171.001(d-1) are additionally secured by a lien on the
person's interest in the partnership doing business in this state
whose activities cause the person to be subject to that tax,
including a general or limited partnership interest that the person
is considered to own under Sections 171.001(e-1) and (f).
SECTION 2A.02. Section 171.001(b), Tax Code, is amended by
adding Subdivisions (6-a) and (6-b) to read as follows:
(6-a) "Partner" includes a beneficiary in a trust.
(6-b) "Partnership" includes a partnership, a joint
venture, and a trust.
SECTION 2A.03. Section 171.001, Tax Code, is amended by
adding Subsections (d-1), (e-1), (f), and (g) to read as follows:
(d-1) For purposes of Subsection (a), a corporation that
"does business in this state" includes a corporation:
(1) holding a partnership interest, including an
interest as an assignee, as a general partner in a general
partnership that is doing business in this state;
(2) holding a partnership interest, including an
interest as an assignee, as a general partner in a limited
partnership that is doing business in this state; or
(3) holding a controlling interest in a partnership,
including an interest as an assignee, as a limited partner in a
limited partnership that is doing business in this state.
(e-1) For purposes of Subsection (d-1), a partner who owns
an interest in an upper tier partnership is considered to be both a
partner in the upper tier partnership and a partner in each lower
tier partnership.
(f) For purposes of Subsection (d-1)(3), a limited partner
is considered to hold a controlling interest if any related party
owns a controlling interest, directly or indirectly, in the
partnership. In this subsection, "controlling interest" and
"related party" have the meanings assigned those terms by Section
171.1001.
(g) If a corporate partner subject to tax under Subsection
(d-1) asserts in a refund claim or a redetermination hearing that
the tax imposed under this chapter violates the United States
Constitution or federal law because of the application of
Subsection (d-1), the franchise tax is imposed on the partnership
doing business in this state for the privilege periods for which the
assertion is made and the franchise tax liability of the
partnership shall be calculated as provided by Sections 171.101(d)
and 171.110(d-3).
SECTION 2A.04. Section 171.101, Tax Code, is amended by
adding Subsection (d) to read as follows:
(d) For purposes of Section 171.001(g), net taxable capital
for a partnership, to the extent the partnership is owned directly
or indirectly by a corporation, is computed by:
(1) adding the partner's contributions and surplus, as
determined under Section 171.109 in the same manner as a
corporation, to determine the partnership's taxable capital;
(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner that the taxable
capital of a corporation is apportioned to this state under Section
171.106(a) or (c), as applicable, to determine the partnership's
apportioned taxable capital; and
(3) subtracting from the amount computed under
Subdivision (2) any other allowable deductions, to determine the
partnership's net taxable capital.
SECTION 2A.05. Section 171.1032(c), Tax Code, is amended to
read as follows:
(c) A corporation shall include in its gross receipts
computed under Subsection (a) the corporation's share of the gross
receipts of each partnership and joint venture in which the
corporation directly or indirectly owns an interest [of which the
corporation is a part] apportioned to this state as though the
corporation directly earned the receipts[, including receipts from
business done with the corporation]. A corporation that owns an
interest in an upper tier partnership is considered to be a partner
in both the upper tier partnership and each lower tier partnership,
and the corporation's share of the gross receipts of each
partnership of which it is a partner is computed and apportioned to
this state as though the corporation directly earned the receipts
at the partnership tier at which the receipts were originally
earned.
SECTION 2A.06. Section 171.1051(d), Tax Code, is amended to
read as follows:
(d) A corporation shall include in its gross receipts
computed under Subsection (a) the corporation's share of the gross
receipts of each partnership and joint venture in which the
corporation directly or indirectly owns an interest [of which the
corporation is a part]. A corporation that owns an interest in an
upper tier partnership is considered to be a partner in both the
upper tier partnership and each lower tier partnership, and the
corporation's share of the gross receipts of each partnership of
which it is a partner is computed as though the corporation directly
earned the receipts at the partnership tier at which the receipts
were originally earned.
SECTION 2A.07. Section 171.110, Tax Code, is amended by
adding Subsections (d-2) and (d-3) to read as follows:
(d-2) In computing net taxable earned surplus, a
corporation shall include the corporation's share of a
partnership's items of income or loss, without regard to whether
the partnership is taxed as a corporation for federal income tax
purposes.
(d-3) For purposes of Section 171.001(g), reportable
federal taxable income for a partnership is the partnership's
income as an entity, to the extent that the partnership is owned
directly or indirectly by a corporation, as determined under rules
adopted by the comptroller using principles similar to the
standards applied to a corporation.
SECTION 2A.08. Section 171.1121, Tax Code, is amended by
adding Subsection (f) to read as follows:
(f) A corporation that owns an interest in an upper tier
partnership is considered to be a partner in both the upper tier
partnership and each lower tier partnership, and the corporation's
share of the gross receipts of each partnership of which it is a
partner is computed and apportioned to this state as though the
corporation directly earned the receipts at the partnership tier at
which the receipts were originally earned.
SECTION 2A.09. This part takes effect November 1, 2005, and
applies to reports originally due on or after that date.
PART B. APPLICATION TO PARTNERSHIPS
SECTION 2B.01. (a) This part takes effect only if a court
enters a final judgment that the tax imposed under Chapter 171, Tax
Code, violates the United States Constitution or federal law
because of the application of Section 171.001(d-1), Tax Code.
(b) This part takes effect on the earlier of the date that
the final judgment under Subsection (a) of this section is upheld on
appeal without any possibility of further appeal or is not appealed
and is no longer subject to appeal, and applies to a report
originally due on or after that date.
SECTION 2B.02. Section 113.001, Tax Code, is amended by
adding Subsection (c-1) to read as follows:
(c-1) Any tax, interest, or penalties due to the state under
Chapter 171 by a person who is subject to that tax by application of
Sections 171.001(a)(3)-(5) are additionally secured by a lien on
the person's interest in the partnership doing business in this
state whose activities cause the person to be subject to that tax.
SECTION 2B.03. Section 171.001(a), Tax Code, is amended to
read as follows:
(a) A franchise tax is imposed on:
(1) each corporation that does business in this state
or that is chartered in this state; [and]
(2) each limited liability company that does business
in this state or that is organized under the laws of this state;
(3) each general partnership that is doing business in
this state to the extent the general partnership, including an
interest as an assignee, is owned directly or indirectly by a
corporation;
(4) each limited partnership that is doing business in
this state to the extent the general partner's interest, including
an interest as an assignee, in the limited partnership is owned
directly or indirectly by a corporation; and
(5) each limited partnership in which a corporate
limited partner owns a controlling interest, including an interest
as an assignee, that is doing business in this state.
SECTION 2B.04. Section 171.001(b)(3), Tax Code, is amended
to read as follows:
(3) "Corporation" includes:
(A) a limited liability company, as defined under
the Texas Limited Liability Company Act;
(B) a savings and loan association; [and]
(C) a banking corporation; and
(D) a partnership.
SECTION 2B.05. Section 171.101, Tax Code, is amended by
adding Subsection (d-1) to read as follows:
(d-1) Net taxable capital for a partnership, to the extent
the partnership is owned directly or indirectly by a corporation,
is computed by:
(1) adding the partner's contributions and surplus, as
determined under Section 171.109 in the same manner as a
corporation, to determine the partnership's taxable capital;
(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner that the taxable
capital of a corporation is apportioned to this state under Section
171.106(a) or (c), as applicable, to determine the partnership's
apportioned taxable capital; and
(3) subtracting from the amount computed under
Subdivision (2) any other allowable deductions, to determine the
partnership's net taxable capital.
SECTION 2B.06. Section 171.110, Tax Code, is amended by
adding Subsection (d-4) to read as follows:
(d-4) Reportable federal taxable income for a partnership
is the partnership's income as an entity, to the extent that the
partnership is owned directly or indirectly by a corporation, as
determined under rules adopted by the comptroller using principles
similar to the standards applied to a corporation.
SECTION 2B.07. Subchapter E, Chapter 171, Tax Code, is
amended by adding Section 171.213 to read as follows:
Sec. 171.213. REGISTRATION OF LIMITED PARTNERSHIPS. (a)
Each limited partnership doing business in this state shall file
with the comptroller a disclosure that identifies each of its
limited partners that own at least a 20 percent interest in the
partnership.
(b) The comptroller may adopt rules to implement this
section.
SECTION 2B.08. Subchapter F, Chapter 171, Tax Code, is
amended by adding Section 171.2515 to read as follows:
Sec. 171.2515. FORFEITURE OF RIGHT OF PARTNERSHIP TO
TRANSACT BUSINESS IN THIS STATE. (a) The comptroller may, for the
same reasons and using the same procedures the comptroller uses in
relation to the forfeiture of the corporate privileges of a
corporation, forfeit the right of a partnership subject to a tax
imposed by this chapter to transact business in this state.
(b) The provisions of this subchapter, including Section
171.255, that apply to the forfeiture of corporate privileges apply
to the forfeiture of a partnership's right to transact business in
this state.
SECTION 2B.09. The following provisions of the Tax Code are
repealed:
(1) Section 113.001(c);
(2) Sections 171.001(d-1), (e-1), (f), and (g);
(3) Section 171.101(d);
(4) Section 171.1032(c);
(5) Section 171.1051(d);
(6) Sections 171.110(d-2) and (d-3); and
(7) Section 171.1121(f).
SECTION 2B.10. (a) For a partnership becoming subject to
the franchise tax under this part, income or losses and related
gross receipts occurring before one year before the effective date
of this part may not be considered for purposes of the earned
surplus component or for apportionment purposes for the taxable
capital component.
(b) The comptroller shall adopt rules relating to
establishing the applicable reporting periods for partnerships
becoming subject to the franchise tax under this part.
PART C. ADD-BACK OF CERTAIN PAYMENTS
SECTION 2C.01. Subchapter C, Chapter 171, Tax Code, is
amended by adding Section 171.1001 to read as follows:
Sec. 171.1001. DEFINITIONS. In this subchapter:
(1) "Arm's length" means the standard of conduct under
which unrelated parties having substantially equal bargaining
power, each acting in its own interest, would negotiate or carry out
a particular transaction.
(2) "Control" or "controlling interest" means:
(A) for a corporation, either 50 percent or more,
owned directly or indirectly, of the total combined voting power of
all classes of stock of the corporation, or 50 percent or more,
owned directly or indirectly, of the beneficial ownership interest
in the voting stock of the corporation; and
(B) for a partnership, association, trust, or
other entity, 50 percent or more, owned directly or indirectly, of
the capital, profits, or beneficial interest in the partnership,
association, trust, or other entity.
(3) "Interest payment" means an amount allowable as an
interest deduction under Section 163, Internal Revenue Code.
(4) "Management fee" means a fee for services of a
managerial or administrative nature, including services pertaining
to management, accounts receivable and payable, employee benefit
plans, insurance, legal matters, payroll, data processing,
purchasing, taxes, financial matters, securities, accounting,
reporting, and compliance.
(5) "Related party" means any entity that directly or
indirectly controls, is controlled by, or is under common control
with, the entity subject to the tax imposed under this chapter. The
term includes, but is not limited to, parents, subsidiaries,
pass-through entities, and disregarded entities.
(6) "Royalty payment" means a payment directly
connected to the acquisition, use, maintenance or management,
ownership, sale, exchange, or any other disposition of licenses,
trademarks, copyrights, trade names, trade dress, service marks,
mask works, trade secrets, patents, or any other similar types of
intangible assets as determined by the comptroller.
(7) "Valid business purpose" means one or more
business purposes, other than the avoidance or reduction of taxes,
that alone or in combination constitute the primary motivation for
a business activity or transaction that changes in a meaningful
way, apart from tax effects, the economic position of the entity. A
valid business purpose includes compliance with a regulatory
requirement of:
(A) the federal government;
(B) a state or local government;
(C) a foreign nation; or
(D) an agency or political subdivision of any
entity listed in Paragraphs (A)-(C).
SECTION 2C.02. Section 171.103, Tax Code, is amended to
read as follows:
Sec. 171.103. DETERMINATION OF GROSS RECEIPTS FROM BUSINESS
DONE IN THIS STATE FOR TAXABLE CAPITAL. In apportioning taxable
capital, the gross receipts of a corporation from its business done
in this state is the sum of the corporation's receipts from:
(1) each sale of tangible personal property if the
property is delivered or shipped to a buyer in this state regardless
of the FOB point or another condition of the sale[, and each sale of
tangible personal property shipped from this state to a purchaser
in another state in which the seller is not subject to taxation];
(2) each service performed in this state;
(3) each rental of property situated in this state;
(4) the use of a patent, copyright, trademark,
franchise, or license in this state;
(5) each sale of real property located in this state,
including royalties from oil, gas, or other mineral interests; and
(6) other business done in this state.
SECTION 2C.03. Section 171.1032(a), Tax Code, is amended to
read as follows:
(a) Except for the gross receipts of a corporation that are
subject to the provisions of Section 171.1061, in apportioning
taxable earned surplus, the gross receipts of a corporation from
its business done in this state is the sum of the corporation's
receipts from:
(1) each sale of tangible personal property if the
property is delivered or shipped to a buyer in this state regardless
of the FOB point or another condition of the sale[, and each sale of
tangible personal property shipped from this state to a purchaser
in another state in which the seller is not subject to any tax on, or
measured by, net income, without regard to whether the tax is
imposed];
(2) each service performed in this state;
(3) each rental of property situated in this state;
(4) the use of a patent, copyright, trademark,
franchise, or license in this state;
(5) each sale of real property located in this state,
including royalties from oil, gas, or other mineral interests;
(6) each partnership or joint venture to the extent
provided by Subsection (c); and
(7) other business done in this state.
SECTION 2C.04. Subchapter C, Chapter 171, Tax Code, is
amended by adding Sections 171.1101-171.1103 to read as follows:
Sec. 171.1101. ADD-BACK OF PAYMENTS TO RELATED PARTY.
Except as provided by Section 171.1102, an entity subject to the tax
under this chapter shall add back to reportable federal taxable
income any royalty payments, interest payments, and management fees
made to a related party during the period on which earned surplus is
based to the extent deducted in computing reportable federal
taxable income.
Sec. 171.1102. SAFE HARBORS FOR CERTAIN PAYMENTS AND FEES.
(a) An entity subject to the tax under this chapter is not required
to add back royalty payments to a related party to the extent:
(1) the related party during the period on which
earned surplus is based directly or indirectly paid or incurred the
amount to a person or entity that is not a related party, the
transaction was done for a valid business purpose, and the payments
were made at arm's length; or
(2) the royalty payments are paid or incurred to a
related party organized under the laws of a foreign nation, are
subject to a comprehensive income tax treaty between the foreign
nation and the United States, and are taxed in the foreign nation at
a tax rate equal to or greater than the rate under Section
171.002(a)(2).
(b) An entity subject to the tax under this chapter is not
required to add back interest payments to a related party to the
extent:
(1) the interest is at or below the applicable federal
rate compounded annually for debt instruments under Section
1274(d), Internal Revenue Code, that was in effect at the time of
the agreement;
(2) the related party during the period on which
earned surplus is based directly or indirectly paid or incurred the
amount to a person or entity that is not a related party, the
transaction was done for a valid business purpose, and the payments
were made at arm's length; or
(3) the interest payments are paid or incurred to a
related party organized under the law of a foreign nation, are
subject to a comprehensive income tax tax treaty between the
foreign nation and the United States, and are taxed in the foreign
nation at a rate equal to or greater than the rate under Section
171.002(a)(2).
(c) An entity subject to the tax under this chapter may
deduct payments for royalty, interest, or management fees received
from a related party if the payments are included in the income of
the related party and a tax on the income is paid to this state,
another state or states, or both this state and another state or
states, each of which has a tax rate equal to or greater than the
rate under Section 171.002(a)(2).
(d) An entity subject to the tax under this chapter is not
required to add back a management fee paid to a related party to the
extent that the transaction was done for a valid business purpose
and the fee was paid at arm's length.
Sec. 171.1103. ADJUSTMENT TO INCOME AND EXPENSES BY
COMPTROLLER. (a) The comptroller may distribute, apportion, or
allocate gross income, deductions, credits, or allowances between
or among two or more organizations, trades, or businesses, whether
or not incorporated, whether or not organized in the United States,
and whether or not affiliated, if:
(1) the organizations, trades, or businesses are owned
or controlled directly or indirectly by the same interests; and
(2) the comptroller determines that the distribution,
apportionment, or allocation is necessary to reflect an arm's
length standard, within the meaning of 26 C.F.R. Section 1.482-1,
and to clearly reflect the income of those organizations, trades,
or businesses.
(b) The comptroller shall consider the administrative and
judicial interpretations of Section 482, Internal Revenue Code, in
administering this section.
PART D. TRANSITIONAL PROVISIONS FOR PARTS A, B, AND C
SECTION 2D.01. (a) Subject to other provisions of this
section, Parts A, B, and C of this article apply to reports
originally due on or after the effective date of those parts.
(b) For a corporation becoming subject to the franchise tax
under this article:
(1) income or losses, and related gross receipts,
occurring before January 1, 2005, may not be considered for
purposes of the earned surplus component, or for apportionment
purposes for the taxable capital component;
(2) a corporation subject to the franchise tax on
January 1, 2006, for which January 1, 2006, is not the beginning
date, shall file an annual report due May 15, 2006, based on the
period:
(A) beginning on the later of:
(i) January 1, 2005; or
(ii) the date the corporation was organized
in this state or, if a foreign corporation, the date it began doing
business in this state; and
(B) ending on the date the corporation's last
accounting period ends in 2005 or, if none, on December 31, 2005;
and
(3) a corporation subject to the earned surplus
component of the franchise tax at any time after October 31, 2005,
and before January 1, 2006, but not subject to the earned surplus
component on January 1, 2006, shall file a final report computed on
net taxable earned surplus, for the privilege of doing business at
any time after October 31, 2005, and before January 1, 2006, based
on the period:
(A) beginning on the later of:
(i) January 1, 2005; or
(ii) the date the corporation was organized
in this state or, if a foreign corporation, the date it began doing
business in this state; and
(B) ending on the date the corporation became no
longer subject to the earned surplus component of the tax.
SECTION 2D.02. Parts A, B, and C of this article take
effect, except as provided by those parts, November 1, 2005, and
apply to reports originally due on or after that date.
PART E. REVISED FRANCHISE TAX
SECTION 2E.01. This part takes effect as provided by Section
2E.49 of this part.
SECTION 2E.02. Section 171.001, Tax Code, is amended to
read as follows:
Sec. 171.001. TAX IMPOSED. (a) A franchise tax is imposed
on[:
[(1)] each taxable entity [corporation] that does
business in this state or that is chartered or organized in this
state[; and
[(2) each limited liability company that does business
in this state or that is organized under the laws of this state].
(b) In this chapter:
(1) "Banking corporation" means each state, national,
domestic, or foreign bank, whether organized under the laws of this
state, another state, or another country, or under federal law,
including a limited banking association organized under Subtitle A,
Title 3, Finance Code, and each bank organized under Section 25(a),
Federal Reserve Act (12 U.S.C. Secs. 611-631) (edge corporations),
but does not include a bank holding company as that term is defined
by Section 2, Bank Holding Company Act of 1956 (12 U.S.C. Sec.
1841).
(2) "Beginning date" means:
(A) for a taxable entity [corporation] chartered
or organized in this state, the date on which the taxable entity's
[corporation's] charter or organization takes effect; or [and]
(B) for any other taxable entity [a foreign
corporation], the date on which the taxable entity [corporation]
begins doing business in this state.
(3) "Corporation" includes:
(A) a limited liability company, as defined under
the Texas Limited Liability Company Act;
(B) a savings and loan association; and
(C) a banking corporation.
(4) "Charter" includes a limited liability company's
certificate of organization, a limited partnership's certificate
of limited partnership, and the registration of a limited liability
partnership.
(5) "Internal Revenue Code" means the Internal Revenue
Code of 1986 in effect [for the federal tax year beginning] on [or
after] January 1, 2005, not including any changes made by federal
law after that date [1996, and before January 1, 1997], and any
regulations adopted under that code [applicable to that period].
(6) "Officer" and "director" include a limited
liability company's directors and managers and a limited banking
association's directors and managers and participants if there are
no directors or managers.
(7) "Savings and loan association" means a savings and
loan association or savings bank, whether organized under the laws
of this state, another state, or another country, or under federal
law.
(8) "Shareholder" includes a limited liability
company's member and a limited banking association's participant.
(c) The tax imposed under this chapter extends to the limits
of the United States Constitution and the federal law adopted under
the United States constitution.
(d) On or before November 1 of each even-numbered year, the
comptroller shall submit proposed legislation to update the
definition of "Internal Revenue Code" in Subsection (b) to:
(1) the governor;
(2) the lieutenant governor;
(3) the speaker of the house of representatives;
(4) the chair of the Senate Committee on Finance; and
(5) the chair of the House Committee on Ways and Means.
SECTION 2E.03. Sections 171.0011(a), (b), and (c), Tax
Code, are amended to read as follows:
(a) An additional tax is imposed on a taxable entity
[corporation] that for any reason becomes no longer subject to the
earned surplus component of the tax, without regard to whether the
taxable entity [corporation] remains subject to the taxable capital
component of the tax.
(b) The additional tax is equal to 4.25 [4.5] percent of the
taxable entity's [corporation's] net taxable earned surplus
computed on the period beginning on the day after the last day for
which the tax imposed on net taxable earned surplus was computed
under Section 171.1532 and ending on the date the taxable entity
[corporation] is no longer subject to the earned surplus component
of the tax.
(c) The additional tax imposed and any report required by
the comptroller are due on the 60th day after the date the taxable
entity [corporation] becomes no longer subject to the earned
surplus component of the tax.
SECTION 2E.04. Subchapter A, Chapter 171, Tax Code, is
amended by adding Section 171.0013 to read as follows:
Sec. 171.0013. TAXABLE ENTITY. (a) Except as provided by
Subsection (b), "taxable entity" means a general partnership,
limited partnership, limited liability partnership, corporation,
banking corporation, savings and loan association, limited
liability company, trust, business trust, professional
association, business association, joint venture, joint stock
company, holding company, or other legal entity.
(b) "Taxable entity" does not include:
(1) a sole proprietorship; or
(2) a passive entity as described by Subsection (c).
(c) An entity is a passive entity only if:
(1) the entity is a limited partnership or a trust,
other than a business trust;
(2) the entity makes no payments of wages or other
compensation to employees or independent contractors, other than
for accounting or legal services reasonably necessary for the
operation of the entity;
(3) during the period on which earned surplus is
based, the entity receives at least 90 percent of its income from
one or more of the following:
(A) interest;
(B) dividends;
(C) real property rents;
(D) gains from the sale of real property and
securities, other than a sale of securities of an entity that
constitutes a controlling interest held by the selling entity and
its related parties; or
(E) mineral royalties and other nonoperating
mineral interests;
(4) the income described in Subdivision (3) comes only
from assets acquired and held for investment purposes; and
(5) the entity is not engaged in the active conduct of
a trade or business.
(d) For purposes of Subsection (c), an entity is engaged in
the active conduct of a trade or business if:
(1) the entity:
(A) performs activities that include one or more
active operations that form a part of the process of earning income
or profit; and
(B) performs active management and operational
functions; or
(2) assets held by the entity are used in the active
trade or business of one or more related entities.
(e) For purposes of Subsection (d)(1), activities performed
by an entity include activities performed by persons outside the
entity, including independent contractors, to the extent the
persons perform the activities on behalf of the entity and those
activities constitute all or part of the entity's trade or
business.
SECTION 2E.05. Sections 171.002(a), (b), and (d), Tax Code,
are amended to read as follows:
(a) The rates of the franchise tax are:
(1) 0.25 percent per year of privilege period of net
taxable capital; and
(2) 4.25 [4.5] percent of net taxable earned surplus.
(b) The amount of franchise tax on each taxable entity
[corporation] is computed by adding the following:
(1) the amount calculated by applying the tax rate
prescribed by Subsection (a)(1) to the taxable entity's
[corporation's] net taxable capital; and
(2) the difference between:
(A) the amount calculated by applying the tax
rate prescribed by Subsection (a)(2) to the taxable entity's
[corporation's] net taxable earned surplus; and
(B) the amount determined under Subdivision (1).
(d) A taxable entity [corporation] is not required to pay
any tax and is not considered to owe any tax for a period if:
(1) the amount of tax computed for the taxable entity
[corporation] is less than $100; or
(2) the amount of the taxable entity's [corporation's]
gross receipts:
(A) from its entire business under Section
171.105 is less than:
(i) for a taxable entity other than a
general partnership, $150,000; and
(ii) for a general partnership, $300,000;
and
(B) from its entire business under Section
171.1051, including the amount excepted under Section 171.1051(a),
is less than:
(i) for a taxable entity other than a
general partnership, $150,000; and
(ii) for a general partnership, $300,000.
SECTION 2E.06. Subchapter B, Chapter 171, Tax Code, is
amended by adding Section 171.088 to read as follows:
Sec. 171.088. EXEMPTION--NONCORPORATE TAXABLE ENTITY
ELIGIBLE FOR CERTAIN EXEMPTIONS. A taxable entity that is not a
corporation but that, because of its activities, would qualify for
a specific exemption under this subchapter if it were a corporation
qualifies for the exemption and is exempt from the tax in the same
manner and under the same conditions as a corporation.
SECTION 2E.07. Section 171.101, Tax Code, is amended to
read as follows:
Sec. 171.101. DETERMINATION OF NET TAXABLE CAPITAL. (a)
The [Except as provided by Subsections (b) and (c), the] net
taxable capital of a taxable entity [corporation] is computed by:
(1) [adding the corporation's stated capital, as
defined by Article 1.02, Texas Business Corporation Act, and the
corporation's surplus, to determine the corporation's taxable
capital;
[(2)] apportioning the taxable entity's surplus
[corporation's taxable capital] to this state as provided by
Section 171.106(a) or (c), as applicable, to determine the taxable
entity's [corporation's] apportioned taxable capital; and
(2) [(3)] subtracting from the amount computed under
Subdivision (1) [(2)] any other allowable deductions to determine
the taxable entity's [corporation's] net taxable capital.
[(b) The net taxable capital of a limited liability company
is computed by:
[(1) adding the company's members' contributions, as
provided for under the Texas Limited Liability Company Act, and
surplus to determine the company's taxable capital;
[(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner that the taxable
capital of a corporation is apportioned to this state under Section
171.106(a) or (c), as applicable, to determine the company's
apportioned taxable capital; and
[(3) subtracting from the amount computed under
Subdivision (2) any other allowable deductions, to determine the
company's net taxable capital.
[(c) The net taxable capital of a savings and loan
association is computed by:
[(1) determining the association's net worth; and
[(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner that the taxable
capital of a corporation is apportioned to this state under Section
171.106(a) to determine the association's net taxable capital.]
SECTION 2E.08. Section 171.103, Tax Code, is amended to
read as follows:
Sec. 171.103. DETERMINATION OF GROSS RECEIPTS FROM BUSINESS
DONE IN THIS STATE FOR TAXABLE CAPITAL. (a) In apportioning
taxable capital, the gross receipts of a taxable entity
[corporation] from its business done in this state is the sum of the
taxable entity's [corporation's] receipts from:
(1) each sale of tangible personal property if the
property is delivered or shipped to a buyer in this state regardless
of the FOB point or another condition of the sale[, and each sale of
tangible personal property shipped from this state to a purchaser
in another state in which the seller is not subject to taxation];
(2) each service performed in this state;
(3) each rental of property situated in this state;
(4) the use of a patent, copyright, trademark,
franchise, or license in this state;
(5) each sale of real property located in this state,
including royalties from oil, gas, or other mineral interests; and
(6) other business done in this state.
(b) If related parties which are wholly owned subsidiaries
of the same ultimate parent have collectively as of May 1, 2005,
made an investment of at least $100 million in a new manufacturing
capital improvement project located in this state for which the
total capital investment for real and personal property will be in
excess of $400 million and tangible personal property is sold from
one related party to another and ultimately resold to an unrelated
party in the normal course of business in the form or condition in
which it is acquired or as an attachment to other tangible personal
property, then the buyer or purchaser for purposes of Subsection
(a)(1) is deemed to be the first unrelated purchaser to whom the
tangible personal property is resold.
SECTION 2E.09. Section 171.1032, Tax Code, is amended to
read as follows:
Sec. 171.1032. DETERMINATION OF GROSS RECEIPTS FROM
BUSINESS DONE IN THIS STATE FOR TAXABLE EARNED SURPLUS. (a) Except
for the gross receipts of a taxable entity [corporation] that are
subject to the provisions of Section 171.1061, in apportioning
taxable earned surplus, the gross receipts of a taxable entity
[corporation] from its business done in this state is the sum of the
taxable entity's [corporation's] receipts from:
(1) each sale of tangible personal property if the
property is delivered or shipped to a buyer in this state regardless
of the FOB point or another condition of the sale[, and each sale of
tangible personal property shipped from this state to a purchaser
in another state in which the seller is not subject to any tax on, or
measured by, net income, without regard to whether the tax is
imposed];
(2) each service performed in this state;
(3) each rental of property situated in this state;
(4) the use of a patent, copyright, trademark,
franchise, or license in this state;
(5) each sale of real property located in this state,
including royalties from oil, gas, or other mineral interests;
(6) each partnership or joint venture to the extent
provided by Subsection (c); and
(7) other business done in this state.
(b) A taxable entity [corporation] shall deduct from its
gross receipts computed under Subsection (a) any amount to the
extent included under Subsection (a) because of the application of
Section 78 or Sections 951-964, Internal Revenue Code, any amount
excludable under Section 171.110(k), and dividends received from a
subsidiary, associate, or affiliated entity [corporation] that
does not transact a substantial portion of its business or
regularly maintain a substantial portion of its assets in the
United States.
[(c) A corporation shall include in its gross receipts
computed under Subsection (a) the corporation's share of the gross
receipts of each partnership and joint venture of which the
corporation is a part apportioned to this state as though the
corporation directly earned the receipts, including receipts from
business done with the corporation.]
(d) If related parties which are wholly owned subsidiaries
of the same ultimate parent have collectively as of May 1, 2005,
made an investment of at least $100 million in a new manufacturing
capital improvement project located in this state for which the
total capital investment is budgeted to be in excess of $400 million
and tangible personal property is sold from one related party to
another and ultimately resold to an unrelated party in the normal
course of business in the form or condition in which it is acquired
or as an attachment to other tangible personal property, then the
buyer or purchaser for purposes of Subsection (a)(1) is deemed to be
the first unrelated purchaser to whom the tangible personal
property is resold.
SECTION 2E.10. Section 171.104, Tax Code, is amended to
read as follows:
Sec. 171.104. GROSS RECEIPTS FROM BUSINESS DONE IN TEXAS:
DEDUCTION FOR FOOD AND MEDICINE RECEIPTS. A taxable entity
[corporation] may deduct from its receipts includable under Section
171.103(a)(1) [171.103(1) of this code] the amount of the taxable
entity's [corporation's] receipts from sales of the following
items, if the items are shipped from outside this state and the
receipts would be includable under Section 171.103(a)(1)
[171.103(1) of this code] in the absence of this section:
(1) food that is exempted from the Limited Sales,
Excise, and Use Tax Act by Section 151.314(a) [of this code]; and
(2) health care supplies that are exempted from the
Limited Sales, Excise, and Use Tax Act by Section 151.313 [of this
code].
SECTION 2E.11. Section 171.105, Tax Code, is amended to
read as follows:
Sec. 171.105. DETERMINATION OF GROSS RECEIPTS FROM ENTIRE
BUSINESS FOR TAXABLE CAPITAL. (a) In apportioning taxable
capital, the gross receipts of a taxable entity [corporation] from
its entire business is the sum of the taxable entity's
[corporation's] receipts from:
(1) each sale of the taxable entity's [corporation's]
tangible personal property;
(2) each service, rental, or royalty; and
(3) other business.
(b) If a taxable entity [corporation] sells an investment or
capital asset, the taxable entity's [corporation's] gross receipts
from its entire business for taxable capital include only the net
gain from the sale.
SECTION 2E.12. Section 171.1051, Tax Code, is amended to
read as follows:
Sec. 171.1051. DETERMINATION OF GROSS RECEIPTS FROM ENTIRE
BUSINESS FOR TAXABLE EARNED SURPLUS. (a) Except for the gross
receipts of a taxable entity [corporation] that are subject to the
provisions of Section 171.1061, in apportioning taxable earned
surplus, the gross receipts of a taxable entity [corporation] from
its entire business is the sum of the taxable entity's
[corporation's] receipts from:
(1) each sale of the taxable entity's [corporation's]
tangible personal property;
(2) each service, rental, or royalty;
(3) each partnership and joint venture as provided by
Subsection (d); and
(4) other business.
(b) If a taxable entity [corporation] sells an investment or
capital asset, the taxable entity's [corporation's] gross receipts
from its entire business for taxable earned surplus includes only
the net gain from the sale.
(c) A taxable entity [corporation] shall deduct from its
gross receipts computed under Subsection (a) any amount to the
extent included in Subsection (a) because of the application of
Section 78 or Sections 951-964, Internal Revenue Code, any amount
excludable under Section 171.110(k), and dividends received from a
subsidiary, associate, or affiliated entity [corporation] that
does not transact a substantial portion of its business or
regularly maintain a substantial portion of its assets in the
United States.
[(d) A corporation shall include in its gross receipts
computed under Subsection (a) the corporation's share of the gross
receipts of each partnership and joint venture of which the
corporation is a part.]
SECTION 2E.13. Sections 171.106(a)-(d), Tax Code, are
amended to read as follows:
(a) Except as provided by Subsections (c) and (d), a taxable
entity's [corporation's] taxable capital is apportioned to this
state to determine the amount of the tax imposed under Section
171.002(b)(1) by multiplying the taxable entity's [corporation's]
taxable capital by a fraction, the numerator of which is the taxable
entity's [corporation's] gross receipts from business done in this
state, as determined under Section 171.103, and the denominator of
which is the taxable entity's [corporation's] gross receipts from
its entire business, as determined under Section 171.105.
(b) Except as provided by Subsections (c) and (d), a taxable
entity's [corporation's] taxable earned surplus is apportioned to
this state to determine the amount of tax imposed under Section
171.002(b)(2) by multiplying the taxable earned surplus by a
fraction, the numerator of which is the taxable entity's
[corporation's] gross receipts from business done in this state, as
determined under Section 171.1032, and the denominator of which is
the taxable entity's [corporation's] gross receipts from its entire
business, as determined under Section 171.1051.
(c) A taxable entity's [corporation's] taxable capital or
earned surplus that is derived, directly or indirectly, from the
sale of management, distribution, or administration services to or
on behalf of a regulated investment company, including a taxable
entity [corporation] that includes trustees or sponsors of employee
benefit plans that have accounts in a regulated investment company,
is apportioned to this state to determine the amount of the tax
imposed under Section 171.002 by multiplying the taxable entity's
[corporation's] total taxable capital or earned surplus from the
sale of services to or on behalf of a regulated investment company
by a fraction, the numerator of which is the average of the sum of
shares owned at the beginning of the year and the sum of shares
owned at the end of the year by the investment company shareholders
who are commercially domiciled in this state or, if the
shareholders are individuals, are residents of this state, and the
denominator of which is the average of the sum of shares owned at
the beginning of the year and the sum of shares owned at the end of
the year by all investment company shareholders. The taxable
entity [corporation] shall make a separate computation to allocate
taxable capital and earned surplus. In this subsection, "regulated
investment company" has the meaning assigned by Section 851(a),
Internal Revenue Code.
(d) A taxable entity's [corporation's] taxable capital or
taxable earned surplus that is derived, directly or indirectly,
from the sale of management, administration, or investment services
to an employee retirement plan is apportioned to this state to
determine the amount of the tax imposed under Section 171.002 by
multiplying the taxable entity's [corporation's] total taxable
capital or earned surplus from the sale of services to an employee
retirement plan company by a fraction, the numerator of which is the
average of the sum of beneficiaries domiciled in Texas at the
beginning of the year and the sum of beneficiaries domiciled in
Texas at the end of the year, and the denominator of which is the
average of the sum of all beneficiaries at the beginning of the year
and the sum of all beneficiaries at the end of the year. The taxable
entity [corporation] shall make a separate computation to apportion
taxable capital and earned surplus. In this section, "employee
retirement plan" means a plan or other arrangement that is
qualified under Section 401(a), Internal Revenue Code, or satisfies
the requirements of Section 403, Internal Revenue Code, or a
government plan described in Section 414(d), Internal Revenue Code.
The term does not include an individual retirement account or
individual retirement annuity within the meaning of Section 408,
Internal Revenue Code.
SECTION 2E.14. Section 171.1061, Tax Code, is amended to
read as follows:
Sec. 171.1061. ALLOCATION OF CERTAIN TAXABLE EARNED SURPLUS
TO THIS STATE. An item of income included in a taxable entity's
[corporation's] taxable earned surplus, except that portion
derived from dividends and interest, that a state, other than this
state, or a country, other than the United States, cannot tax
because the activities generating that item of income do not have
sufficient unitary connection with the taxable entity's
[corporation's] other activities conducted within that state or
country under the United States Constitution, is allocated to this
state if the taxable entity's [corporation's] commercial domicile
is in this state. Income that can only be allocated to the state of
commercial domicile because the income has insufficient unitary
connection with any other state or country shall be allocated to
this state or another state or country net of expenses related to
that income. A portion of a taxable entity's [corporation's]
taxable earned surplus allocated to this state under this section
may not be apportioned under Section 171.110(a)(2).
SECTION 2E.15. Sections 171.107(b), (d), and (e), Tax Code,
are amended to read as follows:
(b) A taxable entity [corporation] may deduct from its
apportioned taxable capital the amortized cost of a solar energy
device or from its apportioned taxable earned surplus 10 percent of
the amortized cost of a solar energy device if:
(1) the device is acquired by the taxable entity
[corporation] for heating or cooling or for the production of
power;
(2) the device is used in this state by the taxable
entity [corporation]; and
(3) the cost of the device is amortized in accordance
with Subsection (c) [of this section].
(d) A taxable entity [corporation] that makes a deduction
under this section shall file with the comptroller an amortization
schedule showing the period in which a deduction is to be made. On
the request of the comptroller, the taxable entity [corporation]
shall file with the comptroller proof of the cost of the solar
energy device or proof of the device's operation in this state.
(e) A taxable entity [corporation] may elect to make the
deduction authorized by this section either from apportioned
taxable capital or apportioned taxable earned surplus for each
separate regular annual period. An election for an initial period
applies to the second tax period and to the first regular annual
period.
SECTION 2E.16. Sections 171.108(b), (d), and (e), Tax Code,
as added by Section 4, H.B. No. 2201, Acts of the 79th Legislature,
Regular Session, 2005, are amended to read as follows:
(b) A taxable entity [corporation] may deduct from its
apportioned taxable capital the amortized cost of equipment or from
its apportioned taxable earned surplus 10 percent of the amortized
cost of equipment:
(1) that is used in a clean coal project;
(2) that is acquired by the taxable entity
[corporation] for use in generation of electricity, production of
process steam, or industrial production;
(3) that the taxable entity [corporation] uses in this
state; and
(4) the cost of which is amortized in accordance with
Subsection (c).
(d) A taxable entity [corporation] that makes a deduction
under this section shall file with the comptroller an amortization
schedule showing the period for which the deduction is to be made.
On the request of the comptroller, the taxable entity [corporation]
shall file with the comptroller proof of the cost of the equipment
or proof of the equipment's operation in this state.
(e) A taxable entity [corporation] may elect to make the
deduction authorized by this section from apportioned taxable
capital or apportioned taxable earned surplus, but not from both,
for each separate regular annual period. An election for an initial
period applies to the second tax period and to the first regular
annual period.
SECTION 2E.17. Section 171.109, Tax Code, is amended by
amending Subsections (a), (b)-(f), (h), (j), (k), (m), and (n), by
reenacting and amending Subsection (g), as amended by Chapters 801
and 1198, Acts of the 71st Legislature, Regular Session, 1989, and
by adding Subsections (a-2) and (o) to read as follows:
(a) In this chapter:
(1) "Surplus" or "taxable capital" means the net
assets of a taxable entity [corporation minus its stated capital.
For a limited liability company, "surplus" means the net assets of
the company minus its members' contributions]. Surplus includes
unrealized, estimated, or contingent losses or obligations or any
writedown of assets other than those listed in Subsection (i) [of
this section] net of appropriate income tax provisions. The
definition under this subdivision does not apply to earned surplus.
(2) "Net assets" means the total assets of a taxable
entity [corporation] minus its total debts.
(3) "Debt" means any legally enforceable obligation
measured in a certain amount of money which must be performed or
paid within an ascertainable period of time or on demand.
(a-2) In this section, "distribution" includes a dividend.
(b) Except as otherwise provided in this section, a taxable
entity [corporation] must compute its surplus, assets, and debts
according to generally accepted accounting principles. If
generally accepted accounting principles are unsettled or do not
specify an accounting practice for a particular purpose related to
the computation of surplus, assets, or debts, the comptroller by
rule may establish rules to specify the applicable accounting
practice for that purpose.
(c) A taxable entity [corporation] whose taxable capital is
less than $1 million may report its surplus according to the method
used in the taxable entity's [corporation's] most recent federal
income tax return originally due on or before the date on which the
taxable entity's [corporation's] franchise tax report is originally
due. In determining if taxable capital is less than $1 million, the
taxable entity [corporation] shall apply the methods the taxable
entity [corporation] used in computing that federal income tax
return unless another method is required under this chapter.
(d) A taxable entity [corporation] shall report its surplus
based solely on its own financial condition. Consolidated
reporting of surplus is prohibited.
(e) A taxable entity [Unless the provisions of Section
171.111 apply due to an election under that section, a corporation]
may not change the accounting methods used to compute its surplus
more often than once every four years without the written consent of
the comptroller. A change in accounting methods is not justified
solely because it results in a reduction of tax liability.
(f) A taxable entity making a distribution [corporation
declaring dividends] shall exclude the distribution [those
dividends] from its taxable capital, and a taxable entity
[corporation] receiving a distribution [dividends] shall include
the distribution [those dividends] in its gross receipts and
taxable capital as of the earlier of:
(1) the date the distribution is [dividends are]
declared, if the distribution is [dividends are] actually paid in
cash or property other than a note payable within one year after the
declaration date; or
(2) the date the distribution is [dividends are]
actually paid in cash or property other than a note payable.
(g) All oil and gas exploration and production activities
conducted by a taxable entity [corporation] that reports its
surplus according to generally accepted accounting principles as
required or permitted by this chapter must be reported according to
the successful efforts or the full cost method of accounting.
(h) A parent or investor taxable entity [corporation] must
use the cost method of accounting in reporting and calculating the
franchise tax on its investments in subsidiary taxable entities
[corporations] or other investees. The retained earnings of a
subsidiary taxable entity [corporation] or other investee before
acquisition by the parent or investor taxable entity [corporation]
may not be excluded from the cost of the subsidiary taxable entity
[corporation] or investee to the parent or investor taxable entity
[corporation] and must be included by the parent or investor
taxable entity [corporation] in calculating its surplus.
(j) A taxable entity [corporation] may not exclude from
surplus:
(1) liabilities for compensation and other benefits
provided to employees, other than wages, that are not debt as of the
end of the accounting period on which the taxable capital component
is based, including retirement, medical, insurance,
postretirement, and other similar benefits; and
(2) deferred investment tax credits.
(k) Notwithstanding any other provision in this chapter, a
taxable entity [corporation] subject to the tax imposed by this
chapter shall use double entry bookkeeping to account for all
transactions that affect the computation of that tax.
(m) A taxable entity [corporation] may not use the push-down
method of accounting in computing or reporting its surplus.
(n) A taxable entity [corporation] must use the equity
method of accounting when reporting an investment in an entity that
is not a taxable entity [a partnership or joint venture].
(o) Notwithstanding any other subsection in this section,
there shall be excluded from the taxable capital of a parent or
investor taxable entity the direct or indirect investment by that
parent or investor taxable entity in the capital of one or more
other taxable entities in which that parent or investor taxable
entity has a "controlling interest" as that term is defined in
Section 171.1001.
SECTION 2E.18. Section 171.110, Tax Code, is amended to
read as follows:
Sec. 171.110. DETERMINATION OF NET TAXABLE EARNED SURPLUS.
(a) The net taxable earned surplus of a taxable entity
[corporation] is computed by:
(1) determining the taxable entity's [corporation's]
reportable federal taxable income and making the following
adjustments:
(A) for a corporation, subtracting [from that
amount] any amount excludable under Subsection (k) and[,] any
amount included in reportable federal taxable income under Section
78 or Sections 951-964, Internal Revenue Code;
(B) for a corporation, subtracting [, and]
dividends received from a subsidiary, associate, or affiliated
taxable entity [corporation] that does not transact a substantial
portion of its business or regularly maintain a substantial portion
of its assets in the United States;
(C) adding compensation as described by
Subsection (m); and
(D) subtracting the lesser of:
(i) 90 percent of compensation as described
by Subsection (m); or
(ii) $30,000 for each full-time employee
and a fractional amount of $30,000 for each part-time employee
proportionate to the extent of the part-time employee's employment
under rules the comptroller shall develop and adopt [, and adding to
that amount any compensation of officers or directors, or if a bank,
any compensation of directors and executive officers, to the extent
excluded in determining federal taxable income to determine the
corporation's taxable earned surplus];
(2) apportioning the taxable entity's [corporation's]
taxable earned surplus to this state as provided by Section
171.106(b) or (c), as applicable, to determine the taxable entity's
[corporation's] apportioned taxable earned surplus;
(3) adding the taxable entity's [corporation's]
taxable earned surplus allocated to this state as provided by
Section 171.1061; and
(4) subtracting from that amount any allowable
deductions and any business loss that is carried forward to the tax
reporting period and deductible under Subsection (e).
[(b) Except as provided by Subsection (c), a corporation is
not required to add the compensation of officers or directors as
required by Subsection (a)(1) if the corporation is:
[(1) a corporation that has not more than 35
shareholders; or
[(2) an S corporation, as that term is defined by
Section 1361, Internal Revenue Code.
[(c) A subsidiary corporation may not claim the exclusion
under Subsection (b) if it has a parent corporation that does not
qualify for the exclusion. For purposes of this subsection, a
corporation qualifies as a parent if it ultimately controls the
subsidiary, even if the control arises through a series or group of
other subsidiaries or entities. Control is presumed if a parent
corporation directly or indirectly owns, controls, or holds a
majority of the outstanding voting stock of a corporation or
ownership interests in another entity.]
(d) A corporation's reportable federal taxable income is
the corporation's federal taxable income under Subsection (a)(1)
after Schedule C special deductions and before net operating loss
deductions as computed under the Internal Revenue Code, except that
an S corporation's reportable federal taxable income is the amount
of the income reportable to the Internal Revenue Service as taxable
to the corporation's shareholders. Reportable federal taxable
income for a partnership is the partnership's income as an entity as
determined under rules adopted by the comptroller using principles
similar to the standards applied to a corporation. Reportable
federal taxable income for an entity other than a corporation or
partnership is determined under rules adopted by the comptroller
using principles similar to the standards applied to a corporation.
(d-1) A real estate investment trust may, in determining its
reportable federal taxable income for the purpose of this section,
deduct dividends paid to shareholders. In this subsection, a real
estate investment trust is an entity that complies with Sections
856-860, Internal Revenue Code.
(e) For purposes of this section, a business loss is any
negative amount of earned surplus after apportionment and
allocation. The business loss shall be carried forward to the year
succeeding the loss year as a deduction to net taxable earned
surplus, then successively to the succeeding four taxable years
after the loss year or until the loss is exhausted, whichever occurs
first, but for not more than five taxable years after the loss year.
Notwithstanding the preceding sentence, a business loss from a tax
year that ends before January 1, 1991, may not be used to reduce net
taxable earned surplus. A business loss can be carried forward only
by the taxable entity [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 taxable
entity [corporation] that did not survive the merger.
(f) A taxable entity [corporation] may use either the "first
in-first out" or "last in-first out" method of accounting to
compute its net taxable earned surplus, but only to the extent that
the taxable entity [corporation] used that method on its most
recent federal income tax report originally due on or before the
date on which the taxable entity's [corporation's] franchise tax
report is originally due.
[(g) For purposes of this section, an approved Employee
Stock Ownership Plan controlling a minority interest and voted
through a single trustee shall be considered one shareholder.]
(h) A taxable entity [corporation] shall report its net
taxable earned surplus based solely on its own financial condition.
Consolidated reporting is prohibited.
[(i) For purposes of this section, any person designated as
an officer is presumed to be an officer if that person:
[(1) holds an office created by the board of directors
or under the corporate charter or bylaws; and
[(2) has legal authority to bind the corporation with
third parties by executing contracts or other legal documents.
[(j) A corporation may rebut the presumption described in
Subsection (i) that a person is an officer if it conclusively shows,
through the person's job description or other documentation, that
the person does not participate or have authority to participate in
significant policy making aspects of the corporate operations.]
(k) Dividends and interest received from federal
obligations are not included in earned surplus or gross receipts
for earned surplus purposes.
(l) In this section:
(1) "Federal obligations" means:
(A) stocks and other direct obligations of, and
obligations unconditionally guaranteed by, the United States
government and United States government agencies; and
(B) direct obligations of a United States
government-sponsored agency.
(2) "Obligation" means any bond, debenture, security,
mortgage-backed security, pass-through certificate, or other
evidence of indebtedness of the issuing entity. The term does not
include a deposit, a repurchase agreement, a loan, a lease, a
participation in a loan or pool of loans, a loan collateralized by
an obligation of a United States government agency, or a loan
guaranteed by a United States government agency.
(3) "United States government" means any department or
ministry of the federal government, including a federal reserve
bank. The term does not include a state or local government, a
commercial enterprise owned wholly or partly by the United States
government, or a local governmental entity or commercial enterprise
whose obligations are guaranteed by the United States government.
(4) "United States government agency" means an
instrumentality of the United States government whose obligations
are fully and explicitly guaranteed as to the timely payment of
principal and interest by the full faith and credit of the United
States government. The term includes the Government National
Mortgage Association, the Department of Veterans Affairs, the
Federal Housing Administration, the Farmers Home Administration,
the Export-Import Bank, the Overseas Private Investment
Corporation, the Commodity Credit Corporation, the Small Business
Administration, and any successor agency.
(5) "United States government-sponsored agency" means
an agency originally established or chartered by the United States
government to serve public purposes specified by the United States
Congress but whose obligations are not explicitly guaranteed by the
full faith and credit of the United States government. The term
includes the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, the Farm Credit System, the Federal
Home Loan Bank System, the Student Loan Marketing Association, and
any successor agency.
(m) For purposes of this section, compensation for a taxable
entity is the amount the taxable entity entered as total payments in
Part 1, line 1, of the federal Internal Revenue Service Form 940 or
940-EZ, Employer's Annual Federal Unemployment (FUTA) Tax Return,
and guaranteed payments to partners, during the period on which
earned surplus is based, except that:
(1) for a taxable entity that is a client company of a
staff leasing services company, compensation is the amount the
client company entered as total payments in Part 1, line 1, of Form
940 or 940-EZ, plus payments by the staff leasing services company
to assigned employees of the client company; and
(2) for a taxable entity that is a staff leasing
services company, compensation is the amount the staff leasing
services company entered as total payments in Part 1, line 1, of
Form 940 or 940-EZ, minus payments by the staff leasing services
company to assigned employees of a client company.
(n) For purposes of this section, the terms "assigned
employee," "client company," and "staff leasing services company"
have the meanings assigned by Section 91.001, Labor Code.
SECTION 2E.19. Sections 171.112(b)-(f) and (h), Tax Code,
are amended to read as follows:
(b) Except as otherwise provided in this section, a taxable
entity [corporation] must compute gross receipts in accordance with
generally accepted accounting principles. If generally accepted
accounting principles are unsettled or do not specify an accounting
practice for a particular purpose related to the computation of
gross receipts, the comptroller by rule may establish rules to
specify the applicable accounting practice.
(c) A taxable entity [corporation] whose taxable capital is
less than $1 million may report its gross receipts according to the
method used in the taxable entity's [corporation's] most recent
federal income tax return originally due on or before the date on
which the taxable entity's [corporation's] franchise tax report is
originally due. In determining if taxable capital is less than $1
million, the taxable entity [corporation] shall apply the methods
the taxable entity [corporation] used in computing that federal
income tax return unless another method is required under this
chapter.
(d) A taxable entity [corporation] shall report its gross
receipts based solely on its own financial condition. Consolidated
reporting is prohibited.
(e) Unless the provisions of Section 171.111 apply due to an
election under that section, a taxable entity [corporation] may not
change its accounting methods used to calculate gross receipts more
often than once every four years without the express written
consent of the comptroller. A change in accounting methods is not
justified solely because it results in a reduction of tax
liability.
(f) Notwithstanding any other provision in this chapter, a
taxable entity [corporation] subject to the tax imposed by this
chapter shall use double entry bookkeeping to account for all
transactions that affect the computation of that tax.
(h) Except as otherwise provided by this section, a taxable
entity [corporation] shall use the same accounting methods to
apportion its taxable capital as it used to compute its taxable
capital.
SECTION 2E.20. Section 171.1121, Tax Code, is amended to
read as follows:
Sec. 171.1121. GROSS RECEIPTS FOR TAXABLE EARNED SURPLUS.
(a) For purposes of this section, "gross receipts" means all
revenues reportable by a taxable entity [corporation] on its
federal tax return, without deduction for the cost of property
sold, materials used, labor performed, or other costs incurred,
unless otherwise specifically provided in this chapter. "Gross
receipts" does not include revenues that are not included in
taxable earned surplus. For example, Schedule C special deductions
and any amounts subtracted from reportable federal taxable income
under Section 171.110(a)(1) are not included in taxable earned
surplus and therefore are not considered gross receipts.
(b) Except as otherwise provided by this section, a taxable
entity [corporation] shall use the same accounting methods to
apportion taxable earned surplus as used in computing reportable
federal taxable income.
(c) A taxable entity [corporation] shall report its gross
receipts based solely on its own financial condition. Consolidated
reporting is prohibited.
(d) Unless the provisions of Section 171.111 apply due to an
election under that section, a taxable entity [corporation] may not
change its accounting methods used to calculate gross receipts more
often than once every four years without the express written
consent of the comptroller. A change in accounting methods is not
justified solely because it results in a reduction of tax
liability.
(e) A corporation's share of a partnership's gross receipts
that is included in the corporation's federal taxable income must
be used in computing the corporation's gross receipts under this
section. Unless otherwise provided by this chapter, a corporation
may not deduct costs incurred from the corporation's share of a
partnership's gross receipts. The gross receipts must be
apportioned as though the corporation directly earned them.
SECTION 2E.21. Section 171.113, Tax Code, is amended to
read as follows:
Sec. 171.113. ALTERNATE METHOD OF DETERMINING TAXABLE
CAPITAL AND GROSS RECEIPTS FOR CERTAIN TAXABLE ENTITIES
[CORPORATIONS]. (a) This section applies only to:
(1) a corporation organized as a close corporation
under Part 12, Texas Business Corporation Act, that has not more
than 35 shareholders;
(2) a foreign corporation organized under the close
corporation law of another state that has not more than 35
shareholders; [and]
(3) an S corporation as that term is defined by Section
1361, Internal Revenue Code of 1986 (26 U.S.C. Section 1361); and
(4) a taxable entity other than a corporation that has
35 or fewer owners.
(b) A taxable entity [corporation] to which this section
applies may elect to compute its surplus, assets, debts, and gross
receipts according to the method the taxable entity [corporation]
uses to report its federal income tax instead of as provided by
Sections 171.109(b) and (g) and Section 171.112(b). This section
does not affect the application of the other subsections of
Sections 171.109 and 171.112 and other provisions of this chapter
to a taxable entity [corporation] making the election.
(c) The comptroller may adopt rules as necessary to specify
the reporting requirements for taxable entities [corporations] to
which this section applies.
(d) This section does not apply to a subsidiary of a taxable
entity [corporation] unless it applies to the parent [corporation]
of the subsidiary.
(e) The election under Subsection (b) becomes effective
when written notice of the election is received by the comptroller
from the taxable entity [corporation]. An election under
Subsection (b) must be postmarked not later than the due date for
the electing taxable entity's [corporation's] franchise tax report
to which the election applies.
SECTION 2E.22. Section 171.151, Tax Code, is amended to
read as follows:
Sec. 171.151. PRIVILEGE PERIOD COVERED BY TAX. The
franchise tax shall be paid for each of the following:
(1) an initial period beginning on the taxable
entity's [corporation's] beginning date and ending on the day
before the first anniversary of the beginning date;
(2) a second period beginning on the first anniversary
of the beginning date and ending on December 31 following that date;
and
(3) after the initial and second periods have expired,
a regular annual period beginning each year on January 1 and ending
the following December 31.
SECTION 2E.23. Section 171.152(c), Tax Code, is amended to
read as follows:
(c) Payment of the tax covering the regular annual period is
due May 15, of each year after the beginning of the regular annual
period. However, if the first anniversary of the taxable entity's
[corporation's] beginning date is after October 3 and before
January 1, the payment of the tax covering the first regular annual
period is due on the same date as the tax covering the initial
period.
SECTION 2E.24. Sections 171.153(a) and (c), Tax Code, are
amended to read as follows:
(a) The tax covering the initial period is reported on the
initial report and is based on the business done by the taxable
entity [corporation] during the period beginning on the taxable
entity's [corporation's] beginning date and:
(1) ending on the last accounting period ending date
that is at least six months after the beginning date and at least 60
days before the original due date of the initial report; or
(2) if there is no such period ending date in
Subdivision (1) [of this subsection], then ending on the day that is
the last day of a calendar month and that is nearest to the end of
the taxable entity's [corporation's] first year of business; or
(3) ending on the day after the merger occurs, for the
survivor of a merger which occurs after the day on which the tax is
based in Subdivision (1) or [Subdivision] (2), whichever is
applicable, [of Subsection (a)] and before January 1, of the year an
initial report is due by the survivor.
(c) The tax covering the regular annual period is based on
the business done by the taxable entity [corporation] during its
last accounting period that ends in the year before the year in
which the tax is due; unless a taxable entity [corporation] is the
survivor of a merger which occurs between the end of its last
accounting period in the year before the report year and January 1
of the report year, in which case the tax will be based on the
financial condition of the surviving taxable entity [corporation]
for the 12-month period ending on the day after the merger.
However, if the first anniversary of the taxable entity's
[corporation's] beginning date is after October 3 and before
January 1, the tax covering the first regular annual period is based
on the same business on which the tax covering the initial period is
based and is reported on the initial report.
SECTION 2E.25. Section 171.1532, Tax Code, is amended to
read as follows:
Sec. 171.1532. BUSINESS ON WHICH TAX ON NET TAXABLE EARNED
SURPLUS IS BASED. (a) The tax covering the privilege periods
included on the initial report, as required by Section 171.153, is
based on the business done by the taxable entity [corporation]
during the period beginning on the taxable entity's [corporation's]
beginning date and:
(1) ending on the last accounting period ending date
that is at least 60 days before the original due date of the initial
report; or
(2) if there is no such period ending date in
Subdivision (1) [of this subsection], then ending on the day that is
the last day of a calendar month and that is nearest to the end of
the taxable entity's [corporation's] first year of business.
(b) The tax covering the regular annual period, other than a
regular annual period included on the initial report, is based on
the business done by the taxable entity [corporation] during the
period beginning with the day after the last date upon which net
taxable earned surplus on a previous report was based and ending
with its last accounting period ending date for federal income tax
purposes in the year before the year in which the report is
originally due.
SECTION 2E.26. Section 171.154, Tax Code, is amended to
read as follows:
Sec. 171.154. PAYMENT TO COMPTROLLER. A taxable entity
[corporation] on which a tax is imposed by this chapter shall pay
the tax to the comptroller.
SECTION 2E.27. Section 171.201, Tax Code, is amended to
read as follows:
Sec. 171.201. INITIAL REPORT. (a) Except as provided by
Section 171.2022, a taxable entity [corporation] on which the
franchise tax is imposed shall file an initial report with the
comptroller containing:
(1) information showing the financial condition of the
taxable entity [corporation] on the day that is the last day of a
calendar month and that is nearest to the end of the taxable
entity's [corporation's] first year of business;
(2) the name and address of:
(A) each officer, [and] director, and manager of
the taxable entity [corporation];
(B) for a limited partnership, each general
partner;
(C) for a general partnership or limited
liability partnership, each managing partner or, if there is not a
managing partner, each partner; or
(D) for a trust, each trustee;
(3) the name and address of the agent of the taxable
entity [corporation] designated under Section 171.354; and
(4) other information required by the comptroller.
(b) The taxable entity [corporation] shall file the report
on or before the date the payment is due under Section 171.152(a)
[Subsection (a) of Section 171.152].
SECTION 2E.28. Sections 171.202(a)-(c), (e), (f), and (i),
Tax Code, are amended to read as follows:
(a) Except as provided by Section 171.2022, a taxable entity
[corporation] on which the franchise tax is imposed shall file an
annual report with the comptroller containing:
(1) financial and other information of the taxable
entity [corporation] necessary to compute the tax under this
chapter;
(2) the name and address of each officer and director
of the taxable entity [corporation];
(3) the name and address of the agent of the taxable
entity [corporation] designated under Section 171.354; and
(4) other information required by the comptroller.
(b) The taxable entity [corporation] shall file the report
before May 16 of each year after the beginning of the regular annual
period. The report shall be filed on forms supplied by the
comptroller.
(c) The comptroller shall grant an extension of time to a
taxable entity [corporation] that is not required by rule to make
its tax payments by electronic funds transfer for the filing of a
report required by this section to any date on or before the next
November 15, if a taxable entity [corporation]:
(1) requests the extension, on or before May 15, on a
form provided by the comptroller; and
(2) remits with the request:
(A) not less than 90 percent of the amount of tax
reported as due on the report filed on or before November 15; or
(B) 100 percent of the tax reported as due for the
previous calendar year on the report due in the previous calendar
year and filed on or before May 14.
(e) The comptroller shall grant an extension of time for the
filing of a report required by this section by a taxable entity
[corporation] required by rule to make its tax payments by
electronic funds transfer to any date on or before the next August
15, if the taxable entity [corporation]:
(1) requests the extension, on or before May 15, on a
form provided by the comptroller; and
(2) remits with the request:
(A) not less than 90 percent of the amount of tax
reported as due on the report filed on or before August 15; or
(B) 100 percent of the tax reported as due for the
previous calendar year on the report due in the previous calendar
year and filed on or before May 14.
(f) The comptroller shall grant an extension of time to a
taxable entity [corporation] required by rule to make its tax
payments by electronic funds transfer for the filing of a report due
on or before August 15 to any date on or before the next November 15,
if the taxable entity [corporation]:
(1) requests the extension, on or before August 15, on
a form provided by the comptroller; and
(2) remits with the request the difference between the
amount remitted under Subsection (e) and 100 percent of the amount
of tax reported as due on the report filed on or before November 15.
(i) If a taxable entity [corporation] requesting an
extension under Subsection (c) or (e) does not file the report due
in the previous calendar year on or before May 14, the taxable
entity [corporation] may not receive an extension under Subsection
(c) or (e) unless the taxable entity [corporation] complies with
Subsection (c)(2)(A) or (e)(2)(A), as appropriate.
SECTION 2E.29. Section 171.2022, Tax Code, is amended to
read as follows:
Sec. 171.2022. EXEMPTION FROM REPORTING REQUIREMENTS. A
taxable entity [corporation] that does not owe any tax under this
chapter for any period is not required to file a report under
Section 171.201 or[,] 171.202[, or 171.2021]. The exemption
applies only to a period for which no tax is due.
SECTION 2E.30. Section 171.204, Tax Code, is amended to
read as follows:
Sec. 171.204. INFORMATION REPORT. (a) Except as provided
by Subsection (b), to determine eligibility for the exemption
provided by Section 171.2022, or to determine the amount of the
franchise tax or the correctness of a franchise tax report, the
comptroller may require [an officer of] a taxable entity
[corporation] that may be subject to the tax imposed under this
chapter to file an information report with the comptroller stating
the amount of the taxable entity's [corporation's] taxable capital
and earned surplus, or any other information the comptroller may
request.
(b) The comptroller may require a taxable entity [an officer
of a corporation] that does not owe any tax because of the
application of Section 171.002(d)(2) to file an abbreviated
information report with the comptroller stating the amount of the
taxable entity's [corporation's] gross receipts from its entire
business. The comptroller may not require a taxable entity
[corporation] described by this subsection to file an information
report that requires the taxable entity [corporation] to report or
compute its earned surplus or taxable capital.
SECTION 2E.31. Section 171.205, Tax Code, is amended to
read as follows:
Sec. 171.205. ADDITIONAL INFORMATION REQUIRED BY
COMPTROLLER. The comptroller may require a taxable entity
[corporation] on which the franchise tax is imposed to furnish to
the comptroller information from the taxable entity's
[corporation's] books and records that has not been filed
previously and that is necessary for the comptroller to determine
the amount of the tax.
SECTION 2E.32. Section 171.206, Tax Code, is amended to
read as follows:
Sec. 171.206. CONFIDENTIAL INFORMATION. Except as provided
by Section 171.207 [of this code], the following information is
confidential and may not be made open to public inspection:
(1) information that is obtained from a record or
other instrument that is required by this chapter to be filed with
the comptroller; or
(2) information, including information about the
business affairs, operations, profits, losses, or expenditures of a
taxable entity [corporation], obtained by an examination of the
books and records, officers, partners, trustees, agents, or
employees of a taxable entity [corporation] on which a tax is
imposed by this chapter.
SECTION 2E.33. Section 171.208, Tax Code, is amended to
read as follows:
Sec. 171.208. PROHIBITION OF DISCLOSURE OF INFORMATION. A
person, including a state officer or employee or an owner [a
shareholder] of a taxable entity [corporation], who has access to a
report filed under this chapter may not make known in a manner not
permitted by law the amount or source of the taxable entity's
[corporation's] income, profits, losses, expenditures, or other
information in the report relating to the financial condition of
the taxable entity [corporation].
SECTION 2E.34. Section 171.209, Tax Code, is amended to
read as follows:
Sec. 171.209. RIGHT OF OWNER [SHAREHOLDER] TO EXAMINE OR
RECEIVE REPORTS. If an owner [a person owning at least one share of
outstanding stock] of a taxable entity [corporation] on whom the
franchise tax is imposed presents evidence of the ownership to the
comptroller, the person is entitled to examine or receive a copy of
an initial or annual report that is filed under Section 171.201 or
171.202 [of this code] and that relates to the taxable entity
[corporation].
SECTION 2E.35. Section 171.211, Tax Code, is amended to
read as follows:
Sec. 171.211. EXAMINATION OF [CORPORATE] RECORDS. To
determine the franchise tax liability of a taxable entity
[corporation], the comptroller may investigate or examine the
records of the taxable entity [corporation].
SECTION 2E.36. The heading to Subchapter F, Chapter 171,
Tax Code, is amended to read as follows:
SUBCHAPTER F. FORFEITURE OF CORPORATE
AND BUSINESS PRIVILEGES
SECTION 2E.37. Subchapter F, Chapter 171, Tax Code, is
amended by adding Section 171.2516 to read as follows:
Sec. 171.2516. FORFEITURE OF RIGHT OF PARTNERSHIP TO
TRANSACT BUSINESS IN THIS STATE. (a) The comptroller may, for the
same reasons and using the same procedures the comptroller uses in
relation to the forfeiture of the corporate privileges of a
corporation, forfeit the right of a partnership subject to a tax
imposed by this chapter to transact business in this state.
(b) The provisions of this subchapter, including Section
171.255, that apply to the forfeiture of corporate privileges apply
to the forfeiture of a partnership's right to transact business in
this state.
SECTION 2E.38. Section 171.351, Tax Code, is amended to
read as follows:
Sec. 171.351. VENUE OF SUIT TO ENFORCE CHAPTER. Venue of a
civil suit against a taxable entity [corporation] to enforce this
chapter is either in a county where the taxable entity's
[corporation's] principal office is located according to its
charter or certificate of authority or in Travis County.
SECTION 2E.39. Section 171.353, Tax Code, is amended to
read as follows:
Sec. 171.353. APPOINTMENT OF RECEIVER. If a court forfeits
a taxable entity's [corporation's] charter or certificate of
authority, the court may appoint a receiver for the taxable entity
[corporation] and may administer the receivership under the laws
relating to receiverships.
SECTION 2E.40. Section 171.354, Tax Code, is amended to
read as follows:
Sec. 171.354. AGENT FOR SERVICE OF PROCESS. Each taxable
entity [corporation] on which a tax is imposed by this chapter shall
designate a resident of this state as the taxable entity's
[corporation's] agent for the service of process.
SECTION 2E.41. Sections 171.362(a), (d), and (e), Tax Code,
are amended to read as follows:
(a) If a taxable entity [corporation] on which a tax is
imposed by this chapter fails to pay the tax when it is due and
payable or fails to file a report required by this chapter when it
is due, the taxable entity [corporation] is liable for a penalty of
five percent of the amount of the tax due.
(d) If a taxable entity [corporation] electing to remit
under [Paragraph (A) of Subdivision (2) of Subsection (c) of]
Section 171.202(c)(2)(A) [171.202 of this code] remits less than
the amount required, the penalties imposed by this section and the
interest imposed under Section 111.060 [of this code] are assessed
against the difference between the amount required to be remitted
under [Paragraph (A) of Subdivision (2) of Subsection (c) of]
Section 171.202(c)(2)(A) [171.202] and the amount actually
remitted on or before May 15.
(e) If a taxable entity [corporation] remits the entire
amount required by [Subsection (c) of] Section 171.202(c) [171.202
of this code], no penalties will be imposed against the amount
remitted on or before November 15.
SECTION 2E.42. Sections 171.363(a) and (b), Tax Code, are
amended to read as follows:
(a) A taxable entity [corporation] commits an offense if the
taxable entity [corporation] is subject to the provisions of this
chapter and the taxable entity [corporation] wilfully:
(1) fails to file a report;
(2) fails to keep books and records as required by this
chapter;
(3) files a fraudulent report;
(4) violates any rule of the comptroller for the
administration and enforcement of the provisions of this chapter;
or
(5) attempts in any other manner to evade or defeat any
tax imposed by this chapter or the payment of the tax.
(b) A person commits an offense if the person is an
accountant or an agent for or an officer or employee of a taxable
entity [corporation] and the person knowingly enters or provides
false information on any report, return, or other document filed by
the taxable entity [corporation] under this chapter.
SECTION 2E.43. Section 171.401, Tax Code, is amended to
read as follows:
Sec. 171.401. REVENUE DEPOSITED IN FOUNDATION SCHOOL
[GENERAL REVENUE] FUND. The revenue from the tax imposed by this
chapter [on corporations] shall be deposited to the credit of the
foundation school [general revenue] fund.
SECTION 2E.44. Chapter 171, Tax Code, is amended by adding
Subchapter V to read as follows:
SUBCHAPTER V. TAX CREDIT FOR CERTAIN PHYSICIANS
Sec. 171.901. DEFINITION. In this subchapter, "physician"
means:
(1) an individual licensed to practice medicine in
this state;
(2) a professional association organized under the
Texas Professional Association Act (Article 1528f, Vernon's Texas
Civil Statutes);
(3) an approved nonprofit health corporation
certified under Chapter 162, Occupations Code; or
(4) another person wholly owned by physicians and
engaged in the practice of medicine as permitted by Subtitle B,
Title 3, Occupations Code.
Sec. 171.902. QUALIFICATION. (a) A physician, dentist,
optometrist, or podiatrist that participates in the Medicaid
program or the Children's Health Insurance Program (CHIP) as a
provider of health care services is entitled to a credit in the
amount provided by Subsection (b) against the taxes imposed under
this chapter for the period on which earned surplus is based.
(b) The amount of credit is equal to 20 percent of the total
amount of payments the physician, dentist, optometrist, or
podiatrist received from payments under the Medicaid or Children's
Health Insurance Program (CHIP) during the period on which earned
surplus is based that can be verified, if necessary.
Sec. 171.903. LIMITATIONS. A physician, dentist,
optometrist, or podiatrist may not receive a credit in an amount
that exceeds the amount of the tax or assessment due after applying
any other credits.
Sec. 171.904. RULES. The comptroller shall adopt rules to
implement this subchapter. The Health and Human Services
Commission shall assist the comptroller in the formulation and
adoption of the rules.
SECTION 2E.45. Chapter 171, Tax Code, is amended by adding
Subchapter W to read as follows:
SUBCHAPTER W. APPLICATION OF REFUNDS AND CREDITS TO NONCORPORATE
TAXABLE ENTITIES
Sec. 171.921. APPLICATION OF REFUNDS AND CREDITS TO
NONCORPORATE TAXABLE ENTITIES. A taxable entity that is not a
corporation but that, because of its activities, would qualify for
a specific refund or credit under this chapter if it were a
corporation qualifies for the refund or credit in the same manner
and under the same conditions as a corporation.
SECTION 2E.46. The following provisions of the Tax Code are
repealed:
(1) Section 113.001(c);
(2) Section 113.001(c-1);
(3) Sections 171.001(d-1), (e-1), and (f)-(g);
(4) Section 171.110(d-2);
(5) Section 171.110(d-3);
(6) Section 171.110(d-4);
(7) Section 171.1121(f);
(8) Section 171.213; and
(9) Section 171.2515.
SECTION 2E.47. If a credit under Chapter 171, Tax Code, as
amended by this part, is found by a court in a final judgment upheld
on appeal or no longer subject to appeal to be unconstitutional, the
credit is disallowed for all entities on or after the date the final
judgment was entered by the court and an entity is not entitled to
and may not apply for the credit on or after that date for any
reporting period beginning before, on, or after that date.
SECTION 2E.48. (a) This section applies to a suit brought
by an entity subject to the tax under Chapter 171, Tax Code, as
amended by this part, contending that the imposition of the tax on
the entity is unconstitutional.
(b) The suit must be brought in a district court in Travis
County.
(c) The judgment of the district court may be reviewed only
by direct appeal to the supreme court filed on or before the 15th
day after the date the district court enters its judgment. The
district court shall try the suit and the supreme court shall hear
any appeal relating to the suit as expeditiously as possible.
SECTION 2E.49. (a) Subject to other provisions of this
section, this part applies to reports originally due on or after the
effective date of this part.
(b) For an entity becoming subject to the franchise tax
under this part:
(1) income or losses, and related gross receipts,
occurring before January 1, 2006, may not be considered for
purposes of the earned surplus component, or for apportionment
purposes for the taxable capital component;
(2) an entity subject to the franchise tax on January
1, 2007, for which January 1, 2007, is not the beginning date, shall
file an annual report due May 15, 2007, based on the period:
(A) beginning on the later of:
(i) January 1, 2006; or
(ii) the date the entity was organized in
this state or, if a foreign entity, the date it began doing business
in this state; and
(B) ending on the date the entity's last
accounting period ends in 2006 or, if none, on December 31, 2006;
and
(3) an entity subject to the earned surplus component
of the franchise tax at any time after January 1, 2006, and before
January 1, 2007, but not subject to the earned surplus component on
January 1, 2007, shall file a final report computed on net taxable
earned surplus, for the privilege of doing business at any time
after January 1, 2006, and before January 1, 2007, based on the
period:
(A) beginning on the later of:
(i) January 1, 2006; or
(ii) the date the entity was organized in
this state or, if a foreign entity, the date it began doing business
in this state; and
(B) ending on the date the entity became no
longer subject to the earned surplus component of the tax.
(c) For purposes of this part, an existing partnership is
considered as continuing if it is not terminated.
(d) A partnership is considered terminated only if no part
of any business, financial operation, or venture of the partnership
continues to be carried on by any of its partners in a partnership.
(e) For a merger or consolidation of two or more
partnerships, the resulting partnership is, for purposes of this
part, considered the continuation of any merging or consolidating
partnership whose members own an interest of more than 50 percent in
the capital and profits of the resulting partnership.
(f) For a division of a partnership into two or more
partnerships, the resulting partnerships, other than any resulting
partnership the members of which had an interest of 50 percent or
less in the capital and profits of the prior partnership, are, for
purposes of this part, considered a continuation of the prior
partnership.
ARTICLE 3. SALES AND USE TAXES
PART A. STATE SALES AND USE TAX
SECTION 3A.01. Section 151.0031, Tax Code, is amended to
read as follows:
Sec. 151.0031. "COMPUTER PROGRAM." "Computer program"
means a series of instructions that are coded for acceptance or use
by a computer system and that are designed to permit the computer
system to process data and provide results and information. The
series of instructions may be contained in or on magnetic tapes,
punched cards, printed instructions, or other tangible or
electronic media. For purposes of this chapter, the term includes a
computer program created or developed exclusively for a client who
retains all rights to the program.
SECTION 3A.02. Section 151.051(b), Tax Code, is amended to
read as follows:
(b) The sales tax rate is 6.75 [6 1/4] percent of the sales
price of the taxable item sold.
SECTION 3A.03. Section 151.0101(a), Tax Code, is amended to
read as follows:
(a) "Taxable services" means:
(1) amusement services;
(2) cable television services;
(3) personal services;
(4) motor vehicle parking and storage services;
(5) the repair, remodeling, maintenance, and
restoration of tangible personal property, except:
(A) aircraft;
(B) a ship, boat, or other vessel, other than:
(i) a taxable boat or motor as defined by
Section 160.001;
(ii) a sports fishing boat; or
(iii) any other vessel used for pleasure;
and
(C) the repair, maintenance, and restoration of a
motor vehicle; [and
[(D) the repair, maintenance, creation, and
restoration of a computer program, including its development and
modification, not sold by the person performing the repair,
maintenance, creation, or restoration service;]
(6) telecommunications services;
(7) credit reporting services;
(8) debt collection services;
(9) insurance services;
(10) information services;
(11) real property services;
(12) data processing services;
(13) real property repair and remodeling;
(14) security services;
(15) telephone answering services;
(16) Internet access service; and
(17) a sale by a transmission and distribution
utility, as defined in Section 31.002, Utilities Code, of
transmission or delivery of service directly to an electricity
end-use customer whose consumption of electricity is subject to
taxation under this chapter.
SECTION 3A.04. (a) Subchapter I, Chapter 151, Tax Code, is
amended by adding Section 151.433 to read as follows:
Sec. 151.433. TAX REIMBURSEMENT FOR FINANCIAL ASSISTANCE
AND FOOD STAMP RECIPIENTS. (a) This section applies to a person
who:
(1) receives financial assistance under Chapter 31,
Human Resources Code, or nutritional assistance under Chapter 33,
Human Resources Code, through the use of an electronic benefits
transfer system; or
(2) is eligible to receive financial assistance under
Chapter 31, Human Resources Code, through the use of an electronic
benefits transfer system, but to whom that financial assistance is
not paid because a sanction is applied against the person under
Section 31.0032, Human Resources Code.
(b) The comptroller and the executive commissioner of the
Health and Human Services Commission by joint rule shall establish
a program to reimburse a person to which this section applies for 20
percent of the estimated tax the person will pay under this chapter
during a state fiscal year.
(c) Not later than August 15 of each year, using available
statistical data, the comptroller by rule shall estimate the amount
of taxes a person to which this section applies will pay under this
chapter during the next state fiscal year. In estimating that
amount, the comptroller shall consider:
(1) the amount of the individual's federal adjusted
gross income, as defined by federal law;
(2) the number of dependents the individual has for
federal income tax purposes; and
(3) any other information the comptroller considers
appropriate.
(d) Based on the estimations made under Subsection (c), the
comptroller shall develop and adopt a table specifying by income
bracket and number of dependents:
(1) the estimated amount of taxes persons to which
this section applies will pay under this chapter during the next
state fiscal year; and
(2) the amount of reimbursement the persons are
eligible to receive under Subsection (b).
(e) The comptroller shall provide the table to the executive
commissioner of the Health and Human Services Commission as soon as
possible after the date the table is adopted. Using the table, the
executive commissioner shall provide to each person to which this
section applies reimbursement in the form of:
(1) additional monthly state money payments if the
person is receiving financial assistance under Chapter 31, Human
Resources Code; or
(2) additional monthly nutritional assistance if the
person is not receiving financial assistance under Chapter 31,
Human Resources Code, but is receiving nutritional assistance under
Chapter 33, Human Resources Code.
(f) Reimbursement provided under Subsection (e) must be
made available to the person using the electronic benefits transfer
system through which the person is receiving the financial or
nutritional assistance. Except as provided by Subsection (g), the
amount of the monthly reimbursement is equal to one-twelfth of the
amount determined under Subsection (d)(2).
(g) Notwithstanding any other law, the total amount of
reimbursements provided under this section may not exceed $75
million each state fiscal year. The comptroller and the executive
commissioner of the Health and Human Services Commission shall take
any necessary action to ensure that this limit is not exceeded,
including:
(1) decreasing the percentage of reimbursement of
taxes paid under this chapter for which a person is otherwise
eligible;
(2) decreasing the amounts of the monthly state money
payments or monthly nutritional assistance on a pro rata basis or by
a specific amount; or
(3) suspending the reimbursements.
(h) Notwithstanding any other law, a person described by
Subsection (a)(2) is entitled to reimbursement provided under this
section to the same extent the person would be entitled to that
reimbursement if a sanction were not applied against the person
under Section 31.0032, Human Resources Code.
(b) Subchapter B, Chapter 31, Human Resources Code, is
amended by adding Section 31.0321 to read as follows:
Sec. 31.0321. EXCLUSION OF CERTAIN TAX REIMBURSEMENTS. The
Health and Human Services Commission may not consider any
reimbursement of estimated taxes to which a person may be entitled
under Section 151.433, Tax Code, in determining:
(1) whether the person meets household income and
resource requirements for financial assistance under this chapter;
or
(2) the amount of financial assistance granted to the
person under this chapter for the support of dependent children.
(c) Chapter 33, Human Resources Code, is amended by adding
Section 33.028 to read as follows:
Sec. 33.028. EXCLUSION OF CERTAIN TAX REIMBURSEMENTS. To
the extent permitted by federal law, the Health and Human Services
Commission may not consider any reimbursement of estimated taxes to
which a person may be entitled under Section 151.433, Tax Code, in
determining whether the person meets the household income and
resource requirements for eligibility for food stamps.
(d) If before implementing any provision of this section a
state agency determines that a waiver or authorization from a
federal agency is necessary for implementation of that provision,
the agency affected by the provision shall request the waiver or
authorization and may delay implementing that provision until the
waiver or authorization is granted.
SECTION 3A.05. There are exempted from the taxes imposed by
Chapter 151, Tax Code, as amended by this Act, the receipts from the
sale, use, storage, rental, or other consumption in this state of
services that became subject to the taxes because of the terms of
this part and that are the subject of a written contract or bid
entered into on or before July 1, 2005. The exemption provided by
this section expires July 1, 2007.
SECTION 3A.06. The change in law made by this part does not
affect tax liability accruing before the effective date of this
part. That liability continues in effect as if this part had not
been enacted, and the former law is continued in effect for the
collection of taxes due and for civil and criminal enforcement of
the liability for those taxes.
SECTION 3A.07. (a) Except as otherwise provided by this
part, this part takes effect September 1, 2005, if this Act receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for effect on that date,
this part takes effect on the first day of the first month that
begins on or after the 91st day after the last day of the
legislative session.
(b) Section 151.051(b), Tax Code, as amended by this part,
takes effect October 1, 2005, if this Act receives a vote of
two-thirds of all the members elected to each house, as provided by
Section 39, Article III, Texas Constitution. If this Act does not
receive the vote necessary for effect on that date, this part takes
effect on the first day of the first calendar quarter that begins on
or after the 91st day after the last day of the legislative session.
PART B. MOTOR VEHICLE SALES AND USE TAX
SECTION 3B.01. Section 152.002, Tax Code, is amended by
adding Subsection (f) to read as follows:
(f) Notwithstanding Subsection (a), the total consideration
of a used motor vehicle is the amount on which the tax is computed as
provided by Section 152.0412.
SECTION 3B.02. Section 152.021(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.75 [6 1/4] percent of the total
consideration.
SECTION 3B.03. Section 152.022(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.75 [6 1/4] percent of the total
consideration.
SECTION 3B.04. Section 152.026(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 10 percent of the gross rental receipts
from the rental of a rented motor vehicle for 30 days or less and
6.75 [6 1/4] percent of the gross rental receipts from the rental of
a rented motor vehicle for longer than 30 days.
SECTION 3B.05. Section 152.028(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.75 [6 1/4] percent of the total
consideration.
SECTION 3B.06. Section 152.041(a), Tax Code, is amended to
read as follows:
(a) The tax assessor-collector of the county in which an
application for registration or for a Texas certificate of title is
made shall collect taxes imposed by this chapter, subject to
Section 152.0412, unless another person is required by this chapter
to collect the taxes.
SECTION 3B.07. Subchapter C, Chapter 152, Tax Code, is
amended by adding Section 152.0412 to read as follows:
Sec. 152.0412. STANDARD PRESUMPTIVE VALUE; USE BY TAX
ASSESSOR-COLLECTOR. (a) In this section, "standard presumptive
value" means the average retail value of a motor vehicle as
determined by the Texas Department of Transportation, based on a
nationally recognized motor vehicle industry reporting service.
(b) If the amount paid for a motor vehicle subject to the tax
imposed by this chapter is equal to or greater than the standard
presumptive value of the vehicle, a county tax assessor-collector
shall compute the tax on the amount paid.
(c) If the amount paid for a motor vehicle subject to the tax
imposed by this chapter is less than the standard presumptive value
of the vehicle, a county tax assessor-collector shall compute the
tax on the standard presumptive value unless the purchaser
establishes the retail value of the vehicle as provided by
Subsection (d).
(d) A county tax assessor-collector shall compute the tax
imposed by this chapter on the retail value of a motor vehicle if:
(1) the retail value is shown on an appraisal
certified by an adjuster licensed under Chapter 4101, Insurance
Code, or by a motor vehicle dealer operating under Subchapter B,
Chapter 503, Transportation Code;
(2) the appraisal is on a form prescribed by the
comptroller for that purpose; and
(3) the purchaser of the vehicle obtains the appraisal
not later than the 20th day after the date of purchase.
(e) On request, a motor vehicle dealer operating under
Subchapter B, Chapter 503, Transportation Code, shall provide a
certified appraisal of the retail value of a motor vehicle. The
comptroller by rule shall establish a fee that a dealer may charge
for providing the certified appraisal. The county tax
assessor-collector shall retain a copy of a certified appraisal
received under this section for a period prescribed by the
comptroller.
(f) The Texas Department of Transportation shall maintain
information on the standard presumptive values of motor vehicles as
part of the department's registration and title system. The
department shall update the information at least quarterly each
calendar year.
(g) This section does not apply to a transaction described
by Section 152.024 or 152.025.
SECTION 3B.08. Not later than November 1, 2005, the Texas
Department of Transportation shall:
(1) establish standard presumptive values for motor
vehicles as provided by Section 152.0412, Tax Code, as added by this
part;
(2) modify the department's registration and title
system as needed to include that information and administer that
section; and
(3) make that information available through the system
to all county tax assessor-collectors.
SECTION 3B.09. (a) Except as provided by Subsection (b) of
this section, this part takes effect September 1, 2005, if this Act
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for effect on that
date, this part takes effect on the first day of the first month
that begins on or after the 91st day after the last day of the
legislative session.
(b) Section 152.0412, Tax Code, as added by this part, takes
effect November 1, 2005.
PART C. BOAT AND BOAT MOTOR SALES AND USE TAX
SECTION 3C.01. Section 160.021(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.75 [6 1/4] percent of the total
consideration.
SECTION 3C.02. Section 160.022(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.75 [6 1/4] percent of the total
consideration.
SECTION 3C.03. This part takes effect September 1, 2005, if
this Act receives a vote of two-thirds of all the members elected to
each house, as provided by Section 39, Article III, Texas
Constitution. If this Act does not receive the vote necessary for
effect on that date, this part takes effect on the first day of the
first month that begins on or after the 91st day after the last day
of the legislative session.
ARTICLE 4. TAX ON TOBACCO PRODUCTS AND ALCOHOL
PART A. CIGARETTE AND TOBACCO PRODUCTS
SECTION 4A.01. Section 154.021(b), Tax Code, is amended to
read as follows:
(b) The tax rates are:
(1) $50.50 [$20.50] per thousand on cigarettes
weighing three pounds or less per thousand; and
(2) the rate provided by Subdivision (1) plus $2.10
per thousand on cigarettes weighing more than three pounds per
thousand.
SECTION 4A.01A. Effective September 1, 2007, Section
154.021(b), Tax Code, is amended to read as follows:
(b) The tax rates are:
(1) $70.50 [$20.50] per thousand on cigarettes
weighing three pounds or less per thousand; and
(2) the rate provided by Subdivision (1) plus $2.10
per thousand on cigarettes weighing more than three pounds per
thousand.
SECTION 4A.02. Section 155.021(b), Tax Code, is amended to
read as follows:
(b) The tax rates are:
(1) 1.14 cents [one cent] per 10 or fraction of 10 on
cigars weighing three pounds or less per thousand;
(2) $8.52 [$7.50] per thousand on cigars that:
(A) weigh more than three pounds per thousand;
and
(B) sell at factory list price, exclusive of any
trade discount, special discount, or deal, for 3.3 cents or less
each;
(3) $12.50 [$11] per thousand on cigars that:
(A) weigh more than three pounds per thousand;
(B) sell at factory list price, exclusive of any
trade discount, special discount, or deal, for more than 3.3 cents
each; and
(C) contain no substantial amount of nontobacco
ingredients; and
(4) $17.04 [$15] per thousand on cigars that:
(A) weigh more than three pounds per thousand;
(B) sell at factory list price, exclusive of any
trade discount, special discount, or deal, for more than 3.3 cents
each; and
(C) contain a substantial amount of nontobacco
ingredients.
SECTION 4A.03. Section 155.0211(b), Tax Code, is amended to
read as follows:
(b) The tax rate for tobacco products other than cigars is
40 [35.213] percent of the manufacturer's list price, exclusive of
any trade discount, special discount, or deal.
SECTION 4A.04. Except as otherwise provided by this part,
this part takes effect September 1, 2005, if this Act receives a
vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for effect on that date,
this part takes effect on the first day of the first month that
begins on or after the 91st day after the last day of the
legislative session.
PART B. ALCOHOL TAXES
SECTION 4B.01. Section 201.03, Alcoholic Beverage Code, is
amended to read as follows:
Sec. 201.03. TAX ON DISTILLED SPIRITS. (a) A tax is
imposed on the first sale of distilled spirits at the rate of $2.88
[$2.40] per gallon.
(b) The minimum tax imposed on packages of distilled spirits
containing two ounces or less is six [five] cents per package.
(c) Should packages containing less than one-half pint but
more than two ounces ever be legalized in this state, the minimum
tax imposed on each of these packages is 14.64 cents [$0.122].
SECTION 4B.02. Section 201.04, Alcoholic Beverage Code, is
amended to read as follows:
Sec. 201.04. TAX ON VINOUS LIQUOR. (a) A tax is imposed on
the first sale of vinous liquor that does not contain over 14
percent of alcohol by volume at the rate of 24.48 [20.4] cents per
gallon.
(b) A tax is imposed on vinous liquor that contains more
than 14 percent of alcohol by volume at the rate of 48.96 [40.8]
cents per gallon.
(c) A tax is imposed on artificially carbonated and natural
sparkling vinous liquor at the rate of 61.92 [51.6] cents per
gallon.
SECTION 4B.03. Section 201.42, Alcoholic Beverage Code, is
amended to read as follows:
Sec. 201.42. TAX ON ALE AND MALT LIQUOR. A tax is imposed on
the first sale of ale and malt liquor at the rate of 23.76 cents
[$0.198] per gallon.
SECTION 4B.04. Section 203.01, Alcoholic Beverage Code, is
amended to read as follows:
Sec. 203.01. TAX ON BEER. A tax is imposed on the first sale
of beer manufactured in this state or imported into this state at
the rate of $7.20 [six dollars] per barrel.
SECTION 4B.05. Section 183.021, Tax Code, is amended to
read as follows:
Sec. 183.021. TAX IMPOSED ON MIXED BEVERAGES. A tax at the
rate of 16.8 [14] percent is imposed on the gross receipts of a
permittee received from the sale, preparation, or service of mixed
beverages or from the sale, preparation, or service of ice or
nonalcoholic beverages that are sold, prepared, or served for the
purpose of being mixed with an alcoholic beverage and consumed on
the premises of the permittee.
SECTION 4B.06. This part takes effect September 1, 2005, if
this Act receives a vote of two-thirds of all the members elected to
each house, as provided by Section 39, Article III, Texas
Constitution. If this Act does not receive the vote necessary for
effect on that date, this part takes effect on the first day of the
first month that begins on or after the 91st day after the last day
of the legislative session.
ARTICLE 5. STATEWIDE REFERENDUM
SECTION 5.01. (a) At the general election to be held on
November 8, 2005, the voters shall be permitted to vote in a
referendum as provided by this article.
(b) The ballot shall be printed to provide for voting for or
against the proposition: "Imposition of the franchise tax on all
business entities, other than sole proprietorships, at a rate of
4.25 percent of earned surplus to provide for an additional 19-cent
reduction in the maximum school district maintenance and operations
property tax rate, beginning in tax year 2006."
(c) The proposition shall be printed on the ballot beneath
the proposed constitutional amendments under the heading:
"Referendum Proposition."
SECTION 5.02. (a) Notice of the election shall be given in
the same manner that notice of proposed constitutional amendments
is given.
(b) Returns of the votes cast on the proposition shall be
prepared and canvassed in the same manner as the returns on proposed
constitutional amendments.
SECTION 5.03. (a) It is the intention of the legislature
that, although a referendum on matters of statewide importance is
rarely conducted, the will of the people in relation to this
particular issue should be honored.
(b) If a majority of the votes cast in the referendum oppose
the proposition, Part E of Article 2 of this Act does not take
effect.
(c) If a majority of the votes cast in the referendum favor
the proposition, Part E of Article 2 of this Act takes effect
January 1, 2007.
ARTICLE 6. EFFECTIVE DATE
SECTION 6.01. (a) Except as provided by Subsection (b) of
this section, this Act takes effect September 1, 2005, if this Act
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for effect on that
date, this Act takes effect on the first day of the first month that
begins on or after the 91st day after the last day of the
legislative session.
(b) If a section, part, or article of this bill provides a
different effective date than provided by Subsection (a) of this
section, that section, part, or article takes effect according to
its terms.
* * * * *