79S10239 CBH/DAK/BDH/JD-F
By: Ogden S.B. No. 3
A BILL TO BE ENTITLED
AN ACT
relating to financing public schools in this state and reducing
school property taxes.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. PUBLIC SCHOOL FINANCE
PART A. EDUCATION FUNDING AND SCHOOL PROPERTY TAX RELIEF
SECTION 1A.01. Section 41.002(e), Education Code, is
amended to read as follows:
(e) Notwithstanding Subsection (a), and except as provided
by Subsection (g), in accordance with a determination of the
commissioner, the wealth per student that a school district may
have after exercising an option under Section 41.003(2) or (3) may
not be less than the amount needed to maintain state and local
revenue in an amount equal to state and local revenue per weighted
student for maintenance and operation of the district for the
1992-1993 school year less the district's current year distribution
per weighted student from the available school fund, other than
amounts distributed under Chapter 31, if the district imposes an
effective tax rate for maintenance and operation of the district
equal to the greater of the district's current tax rate or the
maximum maintenance tax rate permitted under Section 45.003 [$1.50
on the $100 valuation of taxable property].
SECTION 1A.02. Section 41.157(d), Education Code, is
amended to read as follows:
(d) Notwithstanding Section 45.003, the consolidated taxing
district may levy, assess, and collect a maintenance tax for the
benefit of the component districts at a rate that exceeds the
maximum maintenance tax rate permitted under Section 45.003 [$1.50
per $100 valuation of taxable property] to the extent necessary to
pay contracted obligations on the lease purchase of permanent
improvements to real property entered into on or before May 12,
1993. The proposition to impose taxes at the necessary rate must be
submitted to the voters in the manner provided by Section 45.003.
SECTION 1A.03. Section 42.252(a), Education Code, is
amended to read as follows:
(a) Each school district's share of the Foundation School
Program is determined by the following formula:
LFA = TR X DPV
where:
"LFA" is the school district's local share;
"TR" is a tax rate which for each hundred dollars of valuation
is an effective tax rate of $0.76 [$0.86]; and
"DPV" is the taxable value of property in the school district
for the preceding tax year determined under Subchapter M, Chapter
403, Government Code.
SECTION 1A.04. Section 42.253, Education Code, is amended
by adding Subsection (e-2) to read as follows:
(e-2) For the 2005-2006 school year, the limit authorized by
Subsection (e) is reduced by $0.20. For the 2006-2007 school year,
the limit authorized by Subsection (e) is reduced by $0.35. This
subsection expires September 1, 2007.
SECTION 1A.05. Section 42.303, Education Code, is amended
to read as follows:
Sec. 42.303. LIMITATION ON [ENRICHMENT] TAX RATE. The
district [enrichment] tax rate ("DTR") under Section 42.302 may not
exceed $0.54 [$0.64] per $100 of valuation, or a greater amount for
any year provided by appropriation.
SECTION 1A.06. Section 45.003, Education Code, is amended
by amending Subsection (d) and adding Subsections (e) and (f) 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, which may be not
more than $1.30 [$1.50] on the $100 valuation of taxable property in
the district, stated in the proposition.
(e) Notwithstanding Subsection (d):
(1) for the 2006 tax year, a school district may not
impose a maintenance tax at a rate that exceeds $1.20 per $100 of
valuation; and
(2) for the 2007 and 2008 tax years, a school district
may not impose a maintenance tax at a rate that exceeds $1.25 per
$100 of valuation.
(f) 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
$1.15 on the $100 valuation of taxable property in the district is
sufficient to authorize a rate of $1.15 or less for the 2006 tax
year. Beginning with the 2007 tax year and subject to Subsection
(e), a district may not exceed a rate of $1.15 unless authorized by
a majority of the qualified voters of the district voting at an
election held for that purpose.
SECTION 1A.07. Sections 45.006(b) and (f), Education Code,
are amended to read as follows:
(b) Notwithstanding Section 45.003, a school district may
levy, assess, and collect maintenance taxes at a rate that exceeds
the maximum maintenance tax rate permitted under Section 45.003
[$1.50 per $100 valuation of taxable property] if:
(1) additional ad valorem taxes are necessary to pay a
debt of the district that:
(A) resulted from the rendition of a judgment
against the district before May 1, 1995;
(B) is greater than $5 million;
(C) decreases a property owner's ad valorem tax
liability;
(D) requires the district to refund to the
property owner the difference between the amount of taxes paid by
the property owner and the amount of taxes for which the property
owner is liable; and
(E) is payable according to the judgment in more
than one of the district's fiscal years; and
(2) the additional taxes are approved by the voters of
the district at an election held for that purpose.
(f) The governing body of a school district that adopts a
tax rate that exceeds the maximum maintenance tax rate permitted
under Section 45.003 [$1.50 per $100 valuation of taxable property]
may set the amount of the exemption from taxation authorized by
Section 11.13(n), Tax Code, at any time before the date the
governing body adopts the district's tax rate for the tax year in
which the election approving the additional taxes is held.
SECTION 1A.08. (a) This part takes effect September 1,
2005.
(b) This part applies beginning with the 2005-2006 school
year.
PART B. [RESERVED]
PART C. REPEALER; TRANSITION; EFFECTIVE DATE
SECTION 1C.01. Effective September 1, 2005, the following
laws are repealed:
(1) Sections 1-3, Chapter 201, Acts of the 78th
Legislature, Regular Session, 2003; and
(2) Section 42.253(e-1), Education Code.
ARTICLE 2. RESTRICTIONS ON PROPERTY
VALUATION AND STATE AID TO
SCHOOL DISTRICTS
SECTION 2.01. Section 11.431(a), Tax Code, is amended to
read as follows:
(a) The chief appraiser shall accept and approve or deny an
application for a residence homestead exemption after the deadline
for filing the application [it] has passed if the application [it]
is filed not later than [one year after] the delinquency date for
the taxes on the homestead.
SECTION 2.02. Section 25.25(c), Tax Code, is amended to
read as follows:
(c) The appraisal review board, on motion of the chief
appraiser or of a property owner, may direct by written order
changes in the appraisal roll for any of the five preceding years if
the property is real property and may direct by written order
changes in the appraisal roll for either or both of the two
preceding years if the property is personal property to correct:
(1) clerical errors that affect a property owner's
liability for a tax imposed in that tax year;
(2) multiple appraisals of a property in that tax
year; or
(3) the inclusion of property that does not exist in
the form or at the location described in the appraisal roll.
SECTION 2.03. Section 42.253(i), Education Code, is amended
to read as follows:
(i) Not later than March 1 each year, the commissioner shall
determine the actual amount of state funds to which each school
district is entitled under the allocation formulas in this chapter
for the current school year and shall compare that amount with the
amount of the warrants issued to each district for that year.
Except as provided by Section 42.257(b), if [If] the amount of the
warrants differs from the amount to which a district is entitled
because of variations in the district's tax rate, student
enrollment, or taxable value of property, the commissioner shall
adjust the district's entitlement for the next fiscal year
accordingly.
SECTION 2.04. Section 42.257(b), Education Code, is amended
to read as follows:
(b) If the district would have received a greater amount
from the foundation school fund for the applicable school year
using the adjusted value, the commissioner shall add the difference
to subsequent distributions to the district from the foundation
school fund. If the final determination is made after the last day
of the state fiscal year corresponding to the tax year for which the
determination is made, the commissioner shall add one-fifth of the
difference to the September payment to the district of the current
year entitlement from the foundation school fund for each of the
next five years. An adjustment does not affect the local fund
assignment of any other district.
SECTION 2.05. Section 42.259(f), Education Code, is amended
to read as follows:
(f) Except as provided by Section 42.257(b) or by Subsection
(c)(8) or (d)(3) of this section, any previously unpaid additional
funds from prior years owed to a district shall be paid to the
district together with the September payment of the current year
entitlement.
SECTION 2.06. Section 403.302(h), Government Code, is
amended to read as follows:
(h) On request of the commissioner of education or a school
district, the comptroller may audit the total taxable value of
property in a school district and may revise the annual study
findings. The request for audit is limited to corrections and
changes in a school district's appraisal roll that occurred after
preliminary certification of the annual study findings by the
comptroller. The [Except as otherwise provided by this subsection,
the] request for audit must be filed with the comptroller not later
than the first [third] anniversary of the date of the final
certification of the annual study findings. [The request for audit
may be filed not later than the first anniversary of the date the
chief appraiser certifies a change to the appraisal roll if the
chief appraiser corrects the appraisal roll under Section 25.25 or
42.41, Tax Code, and the change results in a material reduction in
the total taxable value of property in the school district.] The
comptroller shall certify the findings of the audit to the
commissioner of education.
SECTION 2.07. (a) The change in law made by this article to
Section 11.431, Tax Code, applies only to an application for a
residence homestead exemption for the 2005 and subsequent tax
years. Section 11.431, Tax Code, as that section existed
immediately before the effective date of this article, applies to
an application for a residence homestead exemption for the 2004 tax
year and is continued in effect for that purpose.
(b) The change in law made by this article to Section 25.25,
Tax Code, does not affect a motion filed under that section before
the effective date of this article.
SECTION 2.08. This article 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 article takes effect November 1, 2005.
[ARTICLE 3. DELETED]
ARTICLE 4. FRANCHISE TAX
SECTION 4.01. Section 171.001(a), Tax Code, is amended to
read as follows:
(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].
SECTION 4.02. Sections 171.001(b)(2), (4), and (5), Tax
Code, are amended to read as follows:
(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.
(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].
SECTION 4.03. Section 171.001, Tax Code, is amended by
adding Subsection (d) to read as follows:
(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 4.04. Subchapter A, Chapter 171, Tax Code, is
amended by amending Sections 171.0011 and 171.002 and adding
Sections 171.0012, 171.0013, 171.0014, 171.003, and 171.004 to read
as follows:
Sec. 171.0011. 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 doing business in
this state for profit.
(b) "Taxable entity" does not include a sole proprietorship
or 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 was formed, created, or organized
before April 30, 2005.
Sec. 171.0012. ELECTION OF RATES. (a) Except as otherwise
provided by this section, a taxable entity shall elect to pay the
tax imposed under this chapter:
(1) in the amounts and at the rate provided by Section
171.002; or
(2) in the amounts and at the alternate rate provided
by Section 171.003.
(b) The election applies to a reporting period and may be
changed from one reporting period to the next.
(c) A taxable entity that is in the business of leasing
employees:
(1) may not elect to pay the tax imposed under this
chapter at the rate provided by Section 171.002 and shall pay the
tax imposed under this chapter at the alternate rate provided by
Section 171.003; and
(2) for the purposes of this chapter, is considered as
having elected to pay the tax imposed under this chapter at the
alternate rate provided by Section 171.003.
Sec. 171.0013. MINIMUM TAX LIABILITY. The minimum tax
liability for a taxable entity under this chapter is an amount equal
to 0.25 percent of the entity's gross receipts from business done in
this state under Section 171.1032, including the amounts excepted
under Section 171.1032(a).
Sec. 171.0014. ADDITIONAL TAX. (a) An additional tax is
imposed on a taxable entity that has elected to pay the tax imposed
by this chapter at the rate provided by Section 171.002 and during
the period in which that election is in effect [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, other than through a valid election to pay the tax imposed
under this chapter at the alternate rate provided by Section
171.003. An additional tax is imposed on a taxable entity that has
elected to pay the tax imposed by this chapter at the alternate rate
provided by Section 171.003 and during the period in which that
election is in effect for any reason becomes no longer subject to
the tax imposed under this chapter.
(b) The additional tax for an entity that has elected to pay
the tax under this chapter at the rate provided by Section 171.002
is equal to 2.5 [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. The additional
tax for an entity that has elected to pay the tax under this chapter
at the alternate rate provided by Section 171.003 is computed as
provided by that section for the period beginning on the day after
the last day for which the tax imposed under this chapter was
computed at the alternate rate provided by Section 171.003 and
ending on the date the taxable entity is no longer subject to 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.
(d) Except as otherwise provided by this section, the
provisions of this chapter apply to the tax imposed under this
section.
Sec. 171.002. RATES; COMPUTATION OF TAX. (a) The franchise
tax for an entity that elects to pay the tax at the rate provided by
this section is the greater of:
(1) the amount of the minimum tax liability of the
taxable entity under Section 171.0013; or
(2) the amount of franchise tax computed at the rates
and in the manner provided by this section.
(a-1) The rates of the franchise tax are, for purposes of
Subsection (a)(2):
(1) 0.25 percent per year of privilege period of net
taxable capital; and
(2) 2.5 [4.5] percent of net taxable earned surplus.
(b) The amount of franchise tax under Subsection (a)(2) 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).
(c) In making a computation under Subsection (b), an amount
computed under Subsection (b)(1) or (b)(2) that is zero or less is
computed as a zero.
Sec. 171.003. ALTERNATE RATE. The franchise tax for an
entity that elects to pay the tax at the alternate rate provided by
this section is the greater of:
(1) the amount of the minimum tax liability of the
taxable entity under Section 171.0013; or
(2) the lesser of:
(A) 1.75 percent of taxable wages for the taxable
entity for the reporting period as determined under Subchapter C-1;
or
(B) $1,500 for each employee for the reporting
period as determined under Subchapter C-1.
Sec. 171.004. EXEMPTION FOR CERTAIN SMALL BUSINESSES.
[(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 $150,000; and
(B) from its entire business under Section
171.1051, including the amount excepted under Section 171.1051(a),
is less than $150,000.
SECTION 4.05. 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 4.06. 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) "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;
(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; and
(C) notwithstanding Paragraphs (A) and (B), for a
passive entity, 20 percent or more, owned directly or indirectly,
of the capital, profits, or beneficial interest in the passive
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 a person, corporation, or
other entity, including an entity that is treated as a pass-through
or disregarded entity for purposes of federal taxation, whether the
person, corporation, or entity is a taxable entity or not, in which
one person, corporation, or entity, or set of related persons,
corporations, or entities, directly or indirectly owns or controls
a controlling interest in another entity.
(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 4.07. Section 171.101, Tax Code, is amended to read
as follows:
Sec. 171.101. DETERMINATION OF NET TAXABLE CAPITAL. The
[(a) 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 4.08. 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 4.09. 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 taxable entity [corporation] shall include in its
gross receipts computed under Subsection (a) the taxable entity's
[corporation's] share of the gross receipts of each entity that is
not a taxable entity [partnership and joint venture] of which the
taxable entity [corporation] is a part apportioned to this state as
though the taxable entity [corporation] directly earned the
receipts, including receipts from business done with the taxable
entity [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 4.10. 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) [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) [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 4.11. 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 4.12. 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 entity that is not a taxable entity
[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 taxable entity [corporation] shall include in its
gross receipts computed under Subsection (a) the taxable entity's
[corporation's] share of the gross receipts of each entity that is
not a taxable entity [partnership and joint venture] of which the
taxable entity [corporation] is a part.
SECTION 4.13. 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 4.14. 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 4.15. 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 4.16. 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 4.17. Section 171.110, Tax Code, is amended by
amending Subsections (a), (d), (e), (f), and (h) and adding
Subsections (d-1), (m), and (n) to read as follows:
(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) [, and] adding 100 percent of compensation as
described by Subsection (m) [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]; and
(D) subtracting the lesser of:
(i) 50 percent of the amount of
compensation added in Paragraph (C); 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;
(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:
(A) the amount paid to provide health benefits to
employees in this state, provided that the total amount may not
exceed the lesser of:
(i) $150,000; or
(ii) 10 percent of the taxable entity's
apportioned taxable earned surplus; and
(B) any allowable deductions and any business
loss that is carried forward to the tax reporting period and
deductible under Subsection (e).
(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.
(h) A taxable entity [corporation] shall report its net
taxable earned surplus based solely on its own financial condition.
Consolidated reporting is prohibited.
(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," "license holder," and "staff leasing
services company" have the meanings assigned by Section 91.001,
Labor Code.
SECTION 4.18. 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.
(a) A taxable entity shall add back to reportable federal taxable
income any payments made to a related party that is a passive entity
as described by Section 171.0011(c) during the period on which
earned surplus is based to the extent deducted in computing
reportable federal taxable income. The safe harbors provided by
Section 171.1102 do not apply to payments under this subsection.
(b) Except as provided by Section 171.1102, a taxable entity
shall add back to reportable federal taxable income any royalty
payments, interest payments, and management fees made to a related
party that is not a passive entity as described by Section
171.0011(c), 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) A taxable entity 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 2.5 percent.
(b) A taxable entity 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; or
(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.
(c) A taxable entity is not required to add back a royalty
payment or an interest payment made to a related party, or a
management fee paid to a related party, if the combined tax paid to
this state, or to this state and one or more other states each of
which has a tax rate equal to or greater than the rate under Section
171.002(a-1)(2), by the taxable entity and the related party
exceeds the tax that would have been paid by the taxable entity if
the royalty payment or interest payment had not been made.
(d) A taxable entity 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 apply the administrative and
judicial interpretations of Section 482, Internal Revenue Code, in
administering this section.
SECTION 4.19. 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 4.20. Sections 171.1121(a)-(d), Tax Code, are
amended to read as follows:
(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.
SECTION 4.21. 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 4.22. Chapter 171, Tax Code, is amended by adding
Subchapter C-1 to read as follows:
SUBCHAPTER C-1. TAXABLE WAGES
Sec. 171.131. TAXABLE WAGES. (a) In this subchapter:
(1) "Employee" means an employee described by
Section 171.133 or 171.134.
(2) "Wages" means:
(A) wages as defined under Subchapter F,
Chapter 201, Labor Code, paid by a taxable entity and includes the
amounts excluded by Sections 201.082(1) and (9), Labor Code; and
(B) wages, to the extent not covered by
Paragraph (A), described under Section 171.132.
(b) The taxable wages of a taxable entity are the total
amount of wages paid by the entity to all of the entity's employees
during the reporting period as provided by Section 171.1533.
Sec. 171.132. LOCATION OF SERVICE. (a) Wages include wages
for a service performed in this state or in and outside this state
if:
(1) the service is localized in this state; or
(2) the service is not localized in any state and some
of the service is performed in this state and:
(A) the base of operations is in this state, or
there is no base of operations but the service is directed or
controlled from this state; or
(B) the base of operations or place from which
the service is directed or controlled is not in a state in which a
part of the service is performed, and the residence of the person
who performs the service is in this state.
(b) Wages include wages for a service performed anywhere in
the United States, including service performed entirely outside
this state, if:
(1) the service is not localized in a state;
(2) the service is performed by an individual who is
one of a class of employees who are required to travel outside this
state in performance of their duties; and
(3) the individual's base of operations is in this
state or, if there is no base of operations, the individual's
service is directed or controlled from this state.
(c) Wages include wages for a service performed outside the
United States by a citizen of the United States.
(d) For the purposes of this section, service is localized
in a state if the service is performed entirely within the state or
the service performed outside the state is incidental to the
service performed in the state. In this section, a service that is
"incidental" includes a service that is temporary or that consists
of isolated transactions.
Sec. 171.133. FULL-TIME AND PART-TIME EMPLOYEES. (a) In
this section, "contribution" has the meaning assigned by Section
201.011, Labor Code.
(b) An individual is an employee if the taxable entity pays
or is required to pay a contribution for a reporting period without
regard to whether:
(1) the individual is a full-time or part-time
employee; or
(2) the wages paid were for the entire reporting
period or a portion of the reporting period.
Sec. 171.134. DETERMINATION OF WHETHER CERTAIN INDIVIDUALS
ARE EMPLOYEES. An individual is an employee of a taxable entity as
provided by this section, without regard to whether the taxable
entity pays a contribution, as that term is defined by Section
171.133, for the individual, if the individual provides services in
this state to the taxable entity for compensation and the taxable
entity has a right to direct and control how the individual performs
the services for which the individual is provided compensation,
indicated by factors that include:
(1) whether the individual is subject to the taxable
entity's instructions about when, where, and how to work;
(2) whether the individual is trained to perform
services in a particular manner;
(3) the extent to which the individual has
unreimbursed business expenses;
(4) the extent to which the individual has a
significant investment in the facilities the individual uses in
performing the services;
(5) the extent to which the individual makes the
individual's services available to the relevant market by
advertising, by maintaining a visible business location, or
otherwise;
(6) the extent to which the individual can realize a
profit or loss;
(7) the manner in which the individual is paid by the
taxable entity;
(8) whether a written contract between the individual
and the taxable entity provides that the individual is or is not an
employee;
(9) whether the taxable entity provides the individual
with employee-type benefits, including insurance, a pension plan,
vacation pay, or sick pay;
(10) whether the relationship between the individual
and the taxable entity is considered permanent or for a limited
period; and
(11) the extent to which services performed by the
individual are a key aspect of the affairs of the taxable entity.
SECTION 4.23. 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 4.24. 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 4.25. 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 4.26. 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 4.27. Subchapter D, Chapter 171, Tax Code, is
amended by adding Section 171.1533 to read as follows:
Sec. 171.1533. WAGES ON WHICH TAX ON TAXABLE WAGES IS BASED.
(a) The tax covering the privilege periods included on the initial
report, as required by Section 171.153, is based on the taxable
wages paid by the taxable entity during the period beginning on the
taxable entity'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), 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 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 taxable wages paid by the taxable entity during the period
beginning with the day after the last date on which taxable wages 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 4.28. 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 4.29. 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) a statement declaring the entity's election of
rate required under Section 171.0012; and
(5) 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 Subsection (a) of
Section 171.152.
SECTION 4.30. 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 on both the rate provided by Section 171.002 and the
alternate rate provided by Section 171.003;
(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) a statement declaring the entity's election of
rate under Section 171.0012 for the reporting period; and
(5) 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 4.31. Section 171.202(d), Tax Code, is amended to
read as follows:
(d) In the case of a taxpayer whose previous return was its
initial report, the optional payment provided under Subsection
(c)(2)(B) or (e)(2)(B) must be equal to the greatest [greater] of:
(1) an amount produced by multiplying the net taxable
capital, as reported on the initial report filed on or before May
14, by the rate of tax in Section 171.002(a-1)(1) [171.002(a)(1)]
that is effective January 1 of the year in which the report is due;
[or]
(2) an amount produced by multiplying the net taxable
earned surplus, as reported on the initial report filed on or before
May 14, by the rate of tax in Section 171.002(a-1)(2)
[171.002(a)(2)] that is effective January 1 of the year in which the
report is due; or
(3) an amount produced by multiplying taxable wages,
as reported on the initial report filed on or before May 14, by the
rate of tax in Section 171.003 that is effective January 1 of the
year in which the report is due.
SECTION 4.32. 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 4.33. 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 171.004(2) [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 4.34. 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 4.35. 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 4.36. 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 4.37. 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 4.38. 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 4.39. Subchapter E, Chapter 171, Tax Code, is
amended by adding Section 171.213 to read as follows:
Sec. 171.213. ACCESS TO TEXAS WORKFORCE COMMISSION REPORTS.
The comptroller shall have full access to reports filed by a taxable
entity on wages paid with the Texas Workforce Commission.
SECTION 4.40. The heading to Subchapter F, Chapter 171, Tax
Code, is amended to read as follows:
SUBCHAPTER F. FORFEITURE OF CORPORATE AND BUSINESS PRIVILEGES
SECTION 4.41. 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 4.42. 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 4.43. 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 4.44. 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 4.45. 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 4.46. 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 4.47. Subchapter H, Chapter 171, Tax Code, is
amended by adding Sections 171.364-171.366 to read as follows:
Sec. 171.364. TAX NOT DEDUCTED FROM WAGES. A taxable entity
may not deduct the tax imposed under this chapter from any wages of
the taxable entity's employees.
Sec. 171.365. CRIMINAL PENALTY. (a) A person who violates
Section 171.364 commits an offense.
(b) An offense under this section is a Class A misdemeanor.
Sec. 171.366. CIVIL PENALTY. (a) A person who violates
Section 171.364 is liable to the state for a civil penalty not to
exceed $500 for each violation. Each day a violation continues may
be considered a separate violation for purposes of a civil penalty
assessment.
(b) On request of the comptroller, the attorney general
shall file suit to collect a penalty under this section.
SECTION 4.48. 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 4.49. 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 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 4.50. 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 4.51. Sections 171.110(b), (c), (g), (i), and (j),
Tax Code, are repealed.
SECTION 4.52. (a) Subject to other provisions of this
section, this article applies to reports originally due on or after
the effective date of this article.
(b) For an entity 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) an entity 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 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 2005 or, if none, on December 31, 2005;
and
(3) an entity 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 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 article, 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
article, 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 article, considered a continuation of the prior
partnership.
SECTION 4.53. If a credit under Chapter 171, Tax Code, as
amended by this article, 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 4.54. (a) This section applies to a suit brought by
an entity subject to the tax under Chapter 171, Tax Code, as amended
by this article, 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.
(d) If a final judgment upheld on appeal or no longer
subject to appeal finds that the tax imposed under Chapter 171, Tax
Code, is unconstitutional because of the requirements of Section
24, Article VIII, Texas Constitution, all taxable entities, other
than a corporation or limited liability company, shall pay the tax
at the rate provided by Section 171.003.
SECTION 4.55. This article takes effect November 1, 2005,
and applies to reports originally due on or after that date.
ARTICLE 5. SALES AND USE TAXES
PART A. STATE SALES AND USE TAX
SECTION 5A.01. Section 151.051(b), Tax Code, is amended to
read as follows:
(b) The sales tax rate is 6.5 [6 1/4] percent of the sales
price of the taxable item sold.
SECTION 5A.01A. (a) 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.
(b) This section takes effect on the first anniversary of
the date Section 5A.01 of this Act takes effect.
SECTION 5A.02. Section 151.326(a), Tax Code, is amended to
read as follows:
(a) The sale of an article of clothing or footwear designed
to be worn on or about the human body is exempted from the taxes
imposed by this chapter if:
(1) the sales price of the article is less than $100;
and
(2) the sale takes place during:
(A) a period beginning at 12:01 a.m. on the first
Friday in August and ending at 12 midnight on the following Sunday;
or
(B) a period beginning at 12:01 a.m. on the first
Friday in December and ending at 12 midnight on the following
Sunday.
SECTION 5A.03. Subchapter H, Chapter 151, Tax Code, is
amended by adding Section 151.327 to read as follows:
Sec. 151.327. SCHOOL SUPPLIES BEFORE START OF SCHOOL. (a)
The sale or storage, use, or other consumption of a school supply,
including a backpack, is exempted from the taxes imposed by this
chapter if the school supply is purchased:
(1) for use by a student in a class in a public or
private elementary or secondary school;
(2) during the period described by Section
151.326(a)(2); and
(3) for a sales price of less than $100 per item.
(b) The comptroller shall adopt rules specifying the school
supplies that are exempt from taxation under this section.
(c) The exemption provided by this section does not apply to
the purchase of a textbook.
SECTION 5A.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 $100
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 5A.05. 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 of those taxes.
SECTION 5A.06. 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 November 1, 2005.
PART B. MOTOR VEHICLE SALES AND USE TAX
SECTION 5B.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 5B.02. Section 152.021(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.5 [6 1/4] percent of the total
consideration.
SECTION 5B.02A. (a) 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.
(b) This section takes effect on the first anniversary of
the date Section 5B.02 of this Act takes effect.
SECTION 5B.03. Section 152.022(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.5 [6 1/4] percent of the total
consideration.
SECTION 5B.03A. (a) 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.
(b) This section takes effect on the first anniversary of
the date Section 5B.03 of this Act takes effect.
SECTION 5B.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 6.5
[6 1/4] percent of the gross rental receipts from the rental of a
rented motor vehicle for longer than 30 days.
SECTION 5B.04A. (a) 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.
(b) This section takes effect on the first anniversary of
the date Section 5B.04 of this Act takes effect.
SECTION 5B.05. Section 152.028(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.5 [6 1/4] percent of the total
consideration.
SECTION 5B.05A. (a) 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.
(b) This section takes effect on the first anniversary of
the date Section 5B.05 of this Act takes effect.
SECTION 5B.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 5B.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 5B.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 5B.09. (a) Except as provided by this part and
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 November 1, 2005.
(b) Section 152.0412, Tax Code, as added by this part, takes
effect November 1, 2005.
PART C. BOAT AND MOTOR BOAT SALES AND USE TAX
SECTION 5C.01. Section 160.021(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.5 [6 1/4] percent of the total
consideration.
SECTION 5C.01A. (a) 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.
(b) This section takes effect on the first anniversary of
the date Section 5C.01 of this Act takes effect.
SECTION 5C.02. Section 160.022(b), Tax Code, is amended to
read as follows:
(b) The tax rate is 6.5 [6 1/4] percent of the total
consideration.
SECTION 5C.02A. (a) 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.
(b) This section takes effect on the first anniversary of
the date Section 5C.02 of this Act takes effect.
SECTION 5C.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 November 1, 2005.
PART D. MOTOR FUELS TAX
SECTION 5D.01. Section 162.503, Tax Code, is amended to
read as follows:
Sec. 162.503. ALLOCATION OF GASOLINE TAX. (a) Except as
provided by Subsection (b), on [On] or before the fifth workday
after the end of each month, the comptroller, after making all
deductions for refund purposes and for the amounts allocated under
Sections 162.502 and 162.5025, shall allocate the net remainder of
the taxes collected under Subchapter B as follows:
(1) one-fourth of the tax shall be deposited to the
credit of the available school fund;
(2) one-half of the tax shall be deposited to the
credit of the state highway fund for the construction and
maintenance of the state road system under existing law; and
(3) from the remaining one-fourth of the tax the
comptroller shall:
(A) deposit to the credit of the county and road
district highway fund all the remaining tax receipts until a total
of $7,300,000 has been credited to the fund each fiscal year; and
(B) after the amount required to be deposited to
the county and road district highway fund has been deposited,
deposit to the credit of the state highway fund the remainder of the
one-fourth of the tax, the amount to be provided on the basis of
allocations made each month of the fiscal year, which sum shall be
used by the Texas Department of Transportation for the
construction, improvement, and maintenance of farm-to-market
roads.
(b) During the months of June, July, and August of each
odd-numbered year, the comptroller may not make the allocations to
the state highway fund and county and road district highway fund
otherwise required by Subsections (a)(2) and (3). After September
5 and before September 11 of that year, the comptroller shall
allocate and deposit to the state highway fund the total amount of
revenue that would have been otherwise allocated and deposited to
that fund during those months.
SECTION 5D.02. Section 162.504, Tax Code, is amended to
read as follows:
Sec. 162.504. ALLOCATION OF DIESEL FUEL TAX. (a) Except as
provided by Subsection (b), on [On] or before the fifth workday
after the end of each month, the comptroller, after making
deductions for refund purposes, for the administration and
enforcement of this chapter, and for the amounts allocated under
Section 162.5025, shall allocate the remainder of the taxes
collected under Subchapter C as follows:
(1) one-fourth of the taxes shall be deposited to the
credit of the available school fund; and
(2) three-fourths of the taxes shall be deposited to
the credit of the state highway fund.
(b) During the months of June, July, and August of each
odd-numbered year, the comptroller may not make the allocation to
the state highway fund otherwise required by Subsection (a)(2).
After September 5 and before September 11 of that year, the
comptroller shall allocate and deposit to the state highway fund
the total amount of revenue that would have been otherwise
allocated to that fund during those months.
SECTION 5D.03. Section 162.505, Tax Code, is amended to
read as follows:
Sec. 162.505. ALLOCATION OF LIQUEFIED GAS TAX. (a) Except
as provided by Subsection (b), on [On] or before the fifth workday
after the end of each month, the comptroller, after making
deductions for refund purposes and for the administration and
enforcement of this chapter, shall allocate the remainder of the
taxes collected under Subchapter D as follows:
(1) one-fourth of the taxes shall be deposited to the
credit of the available school fund; and
(2) three-fourths of the taxes shall be deposited to
the credit of the state highway fund.
(b) During the months of June, July, and August of each
odd-numbered year, the comptroller may not make the allocation to
the state highway fund otherwise required by Subsection (a)(2).
After September 5 and before September 11 of that year, the
comptroller shall allocate and deposit to the state highway fund
the total amount of revenue that would have been otherwise
allocated to that fund during those months.
SECTION 5D.04. This part takes effect August 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 November 1, 2005.
PART E. HOTEL OCCUPANCY TAXES
SECTION 5E.01. Section 156.001, Tax Code, is amended to
read as follows:
Sec. 156.001. DEFINITION. In this chapter, "hotel" means a
building in which members of the public obtain sleeping
accommodations for consideration. The term includes a hotel,
motel, tourist home, tourist house, tourist court, lodging house,
inn, rooming house, or bed and breakfast. The term does not
include:
(1) a hospital, sanitarium, or nursing home; [or]
(2) a dormitory or other housing facility owned or
leased and operated by an institution of higher education or a
private or independent institution of higher education as those
terms are defined by Section 61.003, Education Code, used by the
institution for the purpose of providing sleeping accommodations
for persons engaged in an educational program or activity at the
institution; or
(3) that part of an apartment or condominium building
that consists of unfurnished dwelling units that are leased to
tenants, as defined by Section 92.001, Property Code.
SECTION 5E.02. Section 351.002(c), Tax Code, is amended to
read as follows:
(c) The tax does not apply to a person who has the right to
use or possess a room in a hotel for at least 30 consecutive days, so
long as there is no interruption of payment for that period [is a
permanent resident under Section 156.101 of this code].
SECTION 5E.03. Section 352.001(1), Tax Code, is amended to
read as follows:
(1) "Hotel" has the meaning assigned by Section
156.001 [156.001(1)].
SECTION 5E.04. Section 352.002(c), Tax Code, is amended to
read as follows:
(c) The tax does not apply to a person who has the right to
use or possess a room in a hotel for at least 30 consecutive days, so
long as there is no interruption of payment for that period [is a
permanent resident under Section 156.101 of this code].
SECTION 5E.05. Section 156.101, Tax Code, is repealed.
SECTION 5E.06. 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 January 1, 2006.
ARTICLE 6. TAX ON TOBACCO PRODUCTS AND ALCOHOL
PART A. CIGARETTE AND TOBACCO PRODUCTS
SECTION 6A.01. Section 154.021(b), Tax Code, is amended to
read as follows:
(b) The tax rates are:
(1) $58 [$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 6A.02. Section 155.021(b), Tax Code, is amended to
read as follows:
(b) The tax rates are:
(1) 1.25 cents [one cent] per 10 or fraction of 10 on
cigars weighing three pounds or less per thousand;
(2) $9.375 [$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) $13.75 [$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) $18.75 [$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 6A.03. Section 155.0211(b), Tax Code, is amended to
read as follows:
(b) The tax rate for tobacco products other than cigars is
44.02 [35.213] percent of the manufacturer's list price, exclusive
of any trade discount, special discount, or deal.
SECTION 6A.04. 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 November 1, 2005.
PART B. ALCOHOL TAXES
SECTION 6B.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 $3
[$2.40] per gallon.
(b) The minimum tax imposed on packages of distilled spirits
containing two ounces or less is 6.25 [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 15.25 cents [$0.122].
SECTION 6B.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 25.5 [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 51 [40.8] cents
per gallon.
(c) A tax is imposed on artificially carbonated and natural
sparkling vinous liquor at the rate of 64.5 [51.6] cents per gallon.
SECTION 6B.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 24.75 cents
[$0.198] per gallon.
SECTION 6B.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 $7.50 [six dollars] per barrel.
SECTION 6B.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 17.5 [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 6B.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 November 1, 2005.
ARTICLE 7. TRANSFERRING CERTAIN TOBACCO SETTLEMENT PROCEEDS INTO
DEDICATED GENERAL REVENUE ACCOUNTS
SECTION 7.01. Subchapter G, Chapter 403, Government Code,
is amended by adding Sections 403.109 and 403.1091-403.1093 to read
as follows:
Sec. 403.109. SECONDARY HEALTH ACCOUNT FOR HIGHER
EDUCATION. (a) In this section:
(1) "Earnings account" means the account described by
Subsection (d).
(2) "Secondary account" means the secondary health
account for higher education.
(b) The secondary account and the earnings account are
dedicated accounts in the general revenue fund.
(c) The secondary account consists of:
(1) money transferred to the account at the direction
of the legislature; and
(2) donations to the account.
(d) The earnings account consists of the earnings received
from investment of the assets in the secondary account. The
comptroller shall periodically transfer those earnings from the
secondary account to the earnings account.
(e) Money in the secondary account may be used only for a
purpose described by Subsection (d) or (f).
(f) The comptroller shall manage and invest assets in the
secondary account in authorized investments under Section 404.024.
Any expenses incurred by the comptroller in managing and investing
assets in the secondary account shall be paid from the account.
(g) Money in the earnings account may be appropriated only
for a purpose specified in and subject to any conditions and
reporting requirements prescribed by Subchapter A, Chapter 63,
Education Code, for the use of money from the permanent health fund
for higher education.
(h) An institution of higher education that has accepted a
gift under former Subchapter I, Chapter 51, Education Code, that
was conditioned on the institution's receipt of state matching
funds from the eminent scholars fund may use money the institution
receives under this section to provide the state matching funds and
treat the money as if it were a distribution to the institution from
the eminent scholars fund for purposes of the former Subchapter I.
(i) An institution of higher education that receives a
distribution from the earnings account shall include in the report
required by Section 63.004, Education Code:
(1) the total amount of money the institution received
from the account;
(2) the purpose for which the money was used; and
(3) any other information required by the Legislative
Budget Board.
(j) Section 404.071 does not apply to the secondary account
or the earnings account.
Sec. 403.1091. SECONDARY ACCOUNTS FOR EACH INSTITUTION OF
HIGHER EDUCATION. (a) In this section:
(1) "Earnings account" means an account described by
Subsection (e).
(2) "Secondary account" means the secondary accounts
described by Subsection (b).
(b) In addition to the permanent endowment funds created by
Section 63.101, Education Code, there is a secondary account for
the benefit of each institution of higher education or group of
related components of an institution of higher education listed in
Section 63.101(a), Education Code.
(c) Each secondary account and earnings account is a
dedicated account in the general revenue fund.
(d) A secondary account consists of:
(1) money transferred to the account at the direction
of the legislature; and
(2) donations to the account.
(e) An earnings account for an institution or group of
related components of an institution consists of the earnings
received from investment of the assets in the corresponding
secondary account for the institution or group of components. The
comptroller shall periodically transfer those earnings from the
secondary account to the earnings account.
(f) Money in a secondary account may be used only for a
purpose described by Subsection (e) or (g).
(g) The comptroller shall manage and invest assets in a
secondary account in authorized investments under Section 404.024.
Any expenses incurred by the comptroller in managing and investing
assets in a secondary account shall be paid from the account.
(h) Money in an earnings account may be appropriated only
for a purpose specified in and subject to any conditions and
reporting requirements prescribed by Subchapter B, Chapter 63,
Education Code, for the use of money from the corresponding
permanent endowment fund established by that subchapter.
(i) An institution of higher education that has accepted a
gift under former Subchapter I, Chapter 51, Education Code, that
was conditioned on the institution's receipt of state matching
funds from the eminent scholars fund may use money the institution
receives under this section to provide the state matching funds and
treat the money as if it were a distribution to the institution from
the eminent scholars fund for purposes of the former Subchapter I.
(j) An institution of higher education that receives an
appropriation from an earnings account shall include in the report
required by Section 63.103, Education Code:
(1) the total amount of money the institution received
from the account;
(2) the purpose for which the money was used; and
(3) any other information required by the Legislative
Budget Board.
(k) Section 404.071 does not apply to a secondary account or
an earnings account.
Sec. 403.1092. SECONDARY ACCOUNT FOR HIGHER EDUCATION
NURSING, ALLIED HEALTH, AND OTHER HEALTH-RELATED PROGRAMS. (a) In
this section:
(1) "Earnings account" means the account described by
Subsection (d).
(2) "Secondary account" means the secondary account
for higher education nursing, allied health, and other
health-related programs.
(b) The secondary account and the earnings account are
dedicated accounts in the general revenue fund.
(c) The secondary account consists of:
(1) money transferred to the account at the direction
of the legislature; and
(2) donations to the account.
(d) The earnings account consists of the earnings received
from investment of the assets in the secondary account. The
comptroller shall periodically transfer those earnings from the
secondary account to the earnings account.
(e) Money in the secondary account may be used only for a
purpose described by Subsection (d) or (f).
(f) The comptroller shall manage and invest assets in the
secondary account in authorized investments under Section 404.024.
Any expenses incurred by the comptroller in managing and investing
assets in the secondary account shall be paid from the account.
(g) Money in the earnings account may be appropriated only
for a purpose specified in and subject to any conditions and
reporting requirements prescribed by Subchapter C, Chapter 63,
Education Code, for the use of money from the permanent fund for
higher education nursing, allied health, and other health-related
programs.
(h) The Texas Higher Education Coordinating Board shall
include in the report required by Section 63.203, Education Code:
(1) the name of each institution that received a grant
from the earnings account;
(2) the purpose for which the grant was used; and
(3) any additional information required by the
Legislative Budget Board.
(i) Section 404.071 does not apply to the secondary account
or the earnings account.
Sec. 403.1093. SECONDARY ACCOUNT FOR MINORITY HEALTH
RESEARCH AND EDUCATION. (a) In this section:
(1) "Earnings account" means the account described by
Subsection (d).
(2) "Secondary account" means the secondary account
for minority health research and education.
(b) The secondary account and the earnings account are
dedicated accounts in the general revenue fund.
(c) The secondary account consists of:
(1) money transferred to the account at the direction
of the legislature; and
(2) donations to the account.
(d) The earnings account consists of the earnings received
from investment of the assets in the secondary account. The
comptroller shall periodically transfer those earnings from the
secondary account to the earnings account.
(e) Money in the secondary account may be used only for a
purpose described by Subsection (d) or (f).
(f) The comptroller shall manage and invest assets in the
secondary account in authorized investments under Section 404.024.
Any expenses incurred by the comptroller in managing and investing
assets in the secondary account shall be paid from the account.
(g) Money in the earnings account may be appropriated only
to the Texas Higher Education Coordinating Board for the purpose of
providing grants as specified by Section 63.302(c), Education Code,
for money from the permanent fund for minority health research and
education.
(h) The Texas Higher Education Coordinating Board shall
report regarding the money received under this section in the
manner required by Section 63.302(f), Education Code, and shall
include in the report:
(1) the total amount distributed under this section;
(2) the name of each institution that received a
grant;
(3) the purpose of each grant, including a description
of any partnership formed; and
(4) any additional information required by the
Legislative Budget Board.
(i) Section 404.071 does not apply to the secondary account
or the earnings account.
SECTION 7.02. Section 403.1069, Government Code, is amended
to read as follows:
Sec. 403.1069. REPORTING REQUIREMENT. The Department of
State Health Services [department] shall provide a report to the
Legislative Budget Board on the permanent funds established under
this subchapter from which the department may receive an
appropriation of the available earnings [to the Legislative Budget
Board] no later than November 1 of each year. The report shall
include the total amount of money distributed from each fund, the
purpose for which the money was used, and any additional
information that may be requested by the Legislative Budget Board.
SECTION 7.03. (a) On November 1, 2006, all amounts held in
the following funds shall be transferred, in the estimated amount
listed, to the accounts established under Sections 403.109,
403.1091, 403.1092, and 403.1093, Government Code, as added by this
Act, as specified by this section: Fund Number Fund Name Amount
0810 Permanent Health Fund for
Higher Education $376,600,000
0811 Permanent Endowment Fund for Health Related Institutions -
University of Texas Health
Science Center at San Antonio $215,200,000
0812 Permanent Endowment Fund for
Health Related Institutions -
University of Texas M.D.
Anderson Cancer Center $107,600,000
0813 Permanent Endowment Fund for
Health Related Institutions -
University of Texas
Southwestern Medical
Center at Dallas $53,800,000
0814 Permanent Endowment Fund for
Health Related Institutions -
University of Texas Medical
Branch at Galveston $26,900,000
0815 Permanent Endowment Fund for
Health Related Institutions -
University of Texas Health
Science Center at Houston $26,900,000
0816 Permanent Endowment Fund for
Health Related Institutions -
University of Texas Health
Science Center at Tyler $26,900,000
0817 Permanent Endowment Fund for
Health Related Institutions -
University of Texas at El Paso $26,900,000
0818 Permanent Endowment Fund for
Health Related Institutions -
Texas A&M University Health
Science Center $25,600,000
0819 Permanent Endowment Fund for
Health Related Institutions -
University of North Texas
Health Science Center at
Fort Worth $25,400,000
0820 Permanent Endowment Fund for
Health Related Institutions -
Components of Texas Tech
University Health Science
Center in El Paso $26,500,000
0821 Permanent Endowment Fund for
Health Related Institutions -
Components of Texas Tech
University Health Science
Center other than El Paso $26,500,000
0822 Permanent Endowment Fund for
Health Related Institutions -
University of Texas Regional
Academic Health Center $21,500,000
0823 Permanent Endowment Fund for
Health Related Institutions -
Baylor College of Medicine $24,400,000
0824 Permanent Fund for Higher
Education Nursing, Allied
Health and Other Health
Related Programs $44,000,000
0825 Permanent Fund for Minority
Health Research and Education $24,400,000
Informational Total: $1,079,100,000
(b) Amounts transferred from the Permanent Health Fund for
Higher Education shall be deposited to the credit of the secondary
health account for higher education established under Section
403.109, Government Code, as added by this Act.
(c) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - University of Texas Health
Science Center at San Antonio shall be deposited to the credit of
the secondary account established for the benefit of The University
of Texas Health Science Center at San Antonio under Section
403.1091, Government Code, as added by this Act.
(d) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - University of Texas M. D.
Anderson Cancer Center shall be deposited to the credit of the
secondary account established for the benefit of The University of
Texas M. D. Anderson Cancer Center under Section 403.1091,
Government Code, as added by this Act.
(e) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - University of Texas Southwestern
Medical Center at Dallas shall be deposited to the credit of the
secondary account established for the benefit of The University of
Texas Southwestern Medical Center at Dallas under Section 403.1091,
Government Code, as added by this Act.
(f) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - University of Texas Medical
Branch at Galveston shall be deposited to the credit of the
secondary account established for the benefit of The University of
Texas Medical Branch at Galveston under Section 403.1091,
Government Code, as added by this Act.
(g) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - University of Texas Health
Science Center at Houston shall be deposited to the credit of the
secondary account established for the benefit of The University of
Texas Health Science Center at Houston under Section 403.1091,
Government Code, as added by this Act.
(h) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - University of Texas Health
Science Center at Tyler shall be deposited to the credit of the
secondary account established for the benefit of The University of
Texas Health Science Center at Tyler under Section 403.1091,
Government Code, as added by this Act.
(i) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - University of Texas at El Paso
shall be deposited to the credit of the secondary account
established for the benefit of The University of Texas at El Paso
under Section 403.1091, Government Code, as added by this Act.
(j) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - Texas A&M University Health
Science Center shall be deposited to the credit of the secondary
account established for the benefit of The Texas A&M University
Health Science Center under Section 403.1091, Government Code, as
added by this Act.
(k) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - University of North Texas Health
Science Center at Fort Worth shall be deposited to the credit of the
secondary account established for the benefit of the University of
North Texas Health Science Center at Fort Worth under Section
403.1091, Government Code, as added by this Act.
(l) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - Components of Texas Tech
University Health Sciences Center in El Paso shall be deposited to
the credit of the secondary account established for the benefit of
the components of Texas Tech University Health Sciences Center in
El Paso under Section 403.1091, Government Code, as added by this
Act.
(m) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - Components of Texas Tech
University Health Sciences Center other than El Paso shall be
deposited to the credit of the secondary account established for
the benefit of the components of Texas Tech University Health
Sciences Center other than El Paso under Section 403.1091,
Government Code, as added by this Act.
(n) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - University of Texas Regional
Academic Health Center shall be deposited to the credit of the
secondary account established for the benefit of The University of
Texas Regional Academic Health Center under Section 403.1091,
Government Code, as added by this Act.
(o) Amounts transferred from the Permanent Endowment Fund
for Health Related Institutions - Baylor College of Medicine shall
be deposited to the credit of the secondary account established for
the benefit of Baylor College of Medicine under Section 403.1091,
Government Code, as added by this Act.
(p) Amounts transferred from the Permanent Fund for Higher
Education Nursing, Allied Health, and Other Health Related Programs
shall be deposited to the credit of the secondary account for higher
education nursing, allied health, and other health-related
programs established under Section 403.1092, Government Code, as
added by this Act.
(q) Amounts transferred from the Permanent Fund for
Minority Health Research and Education shall be deposited to the
credit of the secondary account for minority health research and
education established under Section 403.1093, Government Code, as
added by this Act.
SECTION 7.04. (a) The transfers to accounts in the general
revenue fund made by this article may not result in a reduction in
the amount available for distribution from those accounts, and the
same amount that would have been distributed from the permanent
funds but for the transfers made by this article shall be
appropriated and distributed from the applicable accounts created
by this article. If the earnings from the secondary account that
are transferred to the earnings account are inadequate to make a
distribution of the same amount that would have been distributed
from the permanent funds, to the extent that the difference is
solely the result of an investment policy other than total return,
the comptroller shall transfer the difference to the applicable
earnings account from the unobligated portion of general revenue.
(b) The comptroller of public accounts shall determine the
amount of any loss to the Permanent Health Fund for Higher Education
and other funds administered by The University of Texas System as a
result of the transfer to general revenue under this article. On
August 31, 2007, the comptroller shall transfer from general
revenue to the applicable secondary account created by this Act, an
amount equal to the amount of the loss. In determining the amount
of the loss, the comptroller shall consider the difference in the
rate of return on investment of that secondary account and the rate
of return over the preceding three years on investment of the
Permanent University Fund.
(c) Notwithstanding any other provision of this article,
the total of distributions under sections (a) and (b) from the
accounts created by this article, plus transfers under Subsection
(b) of this section, may not exceed $65 million for any fiscal year.
SECTION 7.05. This article takes effect November 1, 2005.
ARTICLE 8. CHARITABLE BINGO
SECTION 8.01. Section 2001.002, Occupations Code, is
amended by amending Subdivision (5) and adding Subdivisions (9-a),
(9-b), (9-c), (20-a), (20-b), and (26-a) to read as follows:
(5) "Bingo equipment" means equipment used, made, or
sold for the purpose of use in bingo. The term:
(A) includes:
(i) a machine or other device from which
balls or other items are withdrawn to determine the letters and
numbers or other symbols to be called;
(ii) an electronic or mechanical
cardminding device;
(iii) a pull-tab dispenser;
(iv) a bingo card;
(v) a bingo ball; [and]
(vi) an electronic monitoring terminal;
(vii) a site controller; and
(viii) any other device commonly used in
the direct operation of a bingo game; and
(B) does not include:
(i) a bingo game set commonly manufactured
and sold as a child's game for a retail price of $20 or less unless
the set or a part of the set is used in bingo subject to regulation
under this chapter; or
(ii) a commonly available component part of
bingo equipment such as a light bulb or fuse.
(9-a) "Electronic monitoring terminal" means a
computer or other electronic terminal with input capabilities and
touch screen or other video monitors that may be used to play
electronic pull-tab bingo. The term includes a portable, upright,
or tabletop terminal.
(9-b) "Electronic pull-tab bingo" means an electronic
version of pull-tab bingo that is played on a card-minding device or
electronic monitoring terminal using electronic pull-tab bingo
tickets.
(9-c) "Electronic pull-tab bingo ticket" means an
electronic ticket used in electronic pull-tab bingo that is issued
from a finite deal of tickets in which some of the tickets have been
designated in advance as winning tickets.
(20-a) "Player account card" means a plastic, magnetic
stripe, paper, or smart card that may be used to:
(A) enable or track the play of bingo games;
(B) track and record customer account data,
including electronic credits purchased, played, won, or otherwise
available for participating in bingo games; or
(C) redeem credits purchased, played, or won
through a cashier or other point-of-sale station or redemption
system.
(20-b) "Point-of-sale station" includes a cashier or a
terminal that accepts or dispenses player account cards, debit
cards, or cash.
(26-a) "Site controller" means computer hardware or
software that:
(A) stores and distributes electronic pull-tab
bingo tickets for display on electronic monitoring terminals or
card-minding devices; and
(B) is located on the premises of a licensed
authorized organization.
SECTION 8.02. Section 2001.054, Occupations Code, is
amended to read as follows:
Sec. 2001.054. RULEMAKING AUTHORITY. (a) The commission
may adopt rules to enforce and administer this chapter.
(b) The commission has broad authority to adopt rules to
administer and ensure compliance with Sections 2001.409(b) and
2001.4091-2001.4094.
SECTION 8.03. Sections 2001.407(b), (d), and (f),
Occupations Code, are amended to read as follows:
(b) A licensed distributor may not furnish by sale, lease,
or otherwise, bingo equipment or supplies to a person other than a
licensed authorized organization, another licensed distributor, or
a person authorized to conduct bingo under Section 2001.551(b)(3)
or (4). A sale or lease of bingo equipment or supplies authorized
by this section must be made on terms requiring immediate payment or
payment not later than the 30th day after the date of actual
delivery.
(d) A licensed authorized organization may lease or
purchase bingo equipment or supplies [electronic or mechanical
card-minding devices, pull-tab dispensers, bingo machines,
consoles, blowers, and flash boards] directly from a licensed
distributor.
(f) With the prior written consent of the commission, a
licensed authorized organization may make an occasional sale of
bingo equipment or supplies [cards or of a used bingo flash board or
blower] to another licensed authorized organization.
SECTION 8.04. Section 2001.408, Occupations Code, is
amended to read as follows:
Sec. 2001.408. OTHER METHODS FOR PLAYING BINGO. (a)
Subject to the commission's rules, bingo may be played using a
pull-tab bingo ticket or an electronic pull-tab bingo ticket.
(b) All prize limitations and exemptions applicable to
pull-tab bingo under Section 2001.420 are also applicable to
electronic pull-tab bingo.
SECTION 8.05. Section 2001.409, Occupations Code, is
amended by amending Subsection (a) and by adding Subsection (b) to
read as follows:
(a) A person may use a card-minding device:
(1) to account for credits purchased, played, or won
by playing electronic bingo games authorized by this chapter;
(2) to display and exchange credits described by
Subdivision (1) for electronic bingo cards or electronic pull-tab
bingo tickets that may be played by the person during a bingo
occasion;
(3) to read a player account card;
(4) for purchasing, marketing, and playing electronic
bingo games authorized by this chapter; and
(5) to display graphics and animation that correspond
to or represent, in an entertaining manner, the outcome of an
approved electronic pull-tab bingo ticket or game.
(b) The display of graphics and animation used to correspond
to, display, or represent the outcome of an approved electronic
pull-tab bingo ticket or electronic bingo card may not be the basis
of a requirement that a card-minding device that has previously
been approved for the play of electronic pull-tab bingo be retested
or reapproved. [A person may not use a card-minding device:
[(1) to generate or determine the random letters,
numbers, or other symbols used in playing the bingo card played with
the device's assistance;
[(2) as a receptacle for the deposit of tokens or money
in payment for playing the bingo card played with the device's
assistance; or
[(3) as a dispenser for the payment of a bingo prize,
including coins, paper currency, or a thing of value for the bingo
card played with the device's assistance.]
SECTION 8.06. Subchapter I, Chapter 2001, Occupations Code,
is amended by adding Sections 2001.4091-2001.4094 to read as
follows:
Sec. 2001.4091. SITE CONTROLLERS. (a) A site controller
may be used to:
(1) create, shuffle, store, and configure electronic
pull-tab bingo tickets;
(2) distribute electronic pull-tab bingo tickets to
electronic monitoring terminals or card-minding devices;
(3) account for, through a means that may include a
player account card, electronic credits purchased, played, or won
by playing electronic bingo games authorized by this chapter;
(4) exchange credits described by Subdivision (3) for
electronic bingo cards or electronic pull-tab bingo tickets that
may be played by a person during a bingo occasion; or
(5) play electronic bingo games authorized by this
chapter.
(b) The creation or distribution of electronic pull-tab
bingo tickets or electronic bingo cards by or through a site
controller or other method may not be the basis of a requirement
that a preapproved site controller be retested or reapproved.
(c) A person who sells or supplies a site controller or
other equipment used to play electronic pull-tab bingo is not
required to hold a system service provider license, and the
functions performed by a site controller or other equipment related
to electronic pull-tab bingo may not be construed as the provision
of automated bingo services governed by Subchapter F.
(d) A site controller used for electronic pull-tab bingo
must be manufactured in accordance with the standards provided by
this chapter and is subject to testing by the commission or by an
independent testing facility reasonably acceptable to the
commission.
(e) The commission may inspect a site controller.
(f) The manufacturer of a site controller shall maintain a
central communications system or facility to provide the commission
with the ability to review and audit electronic pull-tab bingo
sales data.
(g) A site controller must provide a physical and electronic
means, by use of a password or other method specified by commission
rule, for securing:
(1) electronic pull-tab bingo tickets created,
shuffled, stored, and configured by the site controller; and
(2) accounting system data.
(h) Nothing in this chapter requires the use of a site
controller to play electronic pull-tab bingo or prohibits the use
of other means of creating, shuffling, storing, configuring, or
distributing electronic pull-tab bingo tickets.
Sec. 2001.4092. ELECTRONIC MONITORING TERMINALS. (a) A
person may use an electronic monitoring terminal:
(1) to insert or read a player account card;
(2) to display or exchange credits purchased, won, or
otherwise available for play of electronic bingo games authorized
by this chapter; or
(3) as a device capable of purchasing, marketing, and
playing electronic bingo games authorized by this chapter.
(b) Nothing in this chapter prohibits an electronic
monitoring terminal from generating or creating graphics and
animation to correspond to, display, or represent, in an
entertaining manner, the outcome of an approved electronic pull-tab
bingo ticket or electronic bingo cards. The generation or creation
of the graphics and animation may not be the basis of a requirement
that a preapproved electronic monitoring terminal be retested or
reapproved.
Sec. 2001.4093. USE OF CARD-MINDING DEVICES OR ELECTRONIC
MONITORING TERMINALS IN ELECTRONIC BINGO. (a) A card-minding
device, site controller, or an electronic monitoring terminal used
for electronic pull-tab bingo:
(1) must be manufactured in accordance with the
standards provided under this chapter;
(2) is subject to testing by the commission or by an
independent testing facility reasonably acceptable to the
commission; and
(3) must be approved by the commission prior to use.
All requests for an approval of bingo equipment under this section,
that are received within 30 days after the date of adoption of a
rule establishing the standards for such approval and that satisfy
all requirements applicable to such equipment, shall be approved on
the same date, which shall be no later than 120 days after the date
of adoption of such standards. Similar deadlines may be
established for future approvals of new card-minding devices, site
controllers, or electronic monitoring terminals.
(b) The commission may audit data relating to the sale,
exchange, inventory, or play of electronic pull-tab bingo tickets.
(c) The commission may inspect a card-minding device or
electronic monitoring terminal.
Sec. 2001.4094. AUDIT AND COMPLIANCE OF ELECTRONIC PULL-TAB
BINGO. (a) The commission may adopt rules governing:
(1) the central communications system or facility
required to be maintained by the manufacturer of a site controller
to provide the commission with the ability to review and audit
electronic pull-tab bingo sales data;
(2) the recording and reporting of:
(A) revenue generated from the play of electronic
pull-tab bingo;
(B) all stored but unplayed electronic pull-tab
bingo tickets or prizes; and
(C) all electronic pull-tab bingo tickets played
and total prizes awarded;
(3) if a player account card is used, the recording and
tracking of player account information, including electronic
credits purchased, played, won, or otherwise available for play for
electronic bingo games authorized by this chapter and electronic
credits redeemed for cash; and
(4) the retention of data necessary for audit
compliance under this chapter, including a requirement that the
data be retained electronically for one year.
(b) The commission may investigate a violation or alleged
violation of this chapter.
SECTION 8.07. Subchapter I, Chapter 2001, Occupations Code,
is amended by adding Sections 2001.421 and 2001.422 to read as
follows:
Sec. 2001.421. PRIZE FEE, PAYOUT PERCENTAGE, AND REVENUE
DEDICATION FOR ELECTRONIC PULL-TAB BINGO. (a) A licensed
authorized organization shall collect from a person who wins an
electronic pull-tab bingo prize of more than $5 a fee in the amount
of five percent of the amount or value of the prize and shall remit a
fee in the amount of five percent for all prizes awarded as a result
of an electronic pull-tab bingo game.
(b) The prize payout percentage for an electronic pull-tab
bingo game may not be less than the prize payout percentage
established for a paper pull-tab bingo game.
(c) The revenue received by the state from the fee imposed
by Subsection (a) shall be used to finance the public primary and
secondary schools of this state or to reduce public school property
taxes, or both, as provided by the General Appropriations Act or
other law.
Sec. 2001.422. NO EXCLUSIVE VENDOR FOR ELECTRONIC PULL-TAB
BINGO. The commission may not require that electronic pull-tab
bingo be provided by a single vendor.
SECTION 8.08. Subchapter I, Chapter 2001, Occupations Code,
is amended by adding Section 2001.423 to read as follows:
Sec. 2001.423. In addition to the other provisions
contained in this chapter, electronic pull-tab bingo may be allowed
only under the following circumstances:
(1) at a location authorized by the commission as of
January 1, 2005, that is owned by a governmental agency where bingo
is conducted;
(2) at a location that was owned by a licensed
authorized organization where bingo was authorized to be conducted
on January 1, 2005; and
(3) under a license held by a licensed commercial
lessor whose license was in effect as of January 1, 2005, and whose
license has been in effect continuously since that date.
SECTION 8.09. The legislature finds and declares the
following:
(1) In light of the state's need to reduce school
property taxes and finance the public schools, the Texas Lottery
Commission must be authorized to commence implementation and
authorization of electronic pull-tab bingo games in accordance with
changes to Chapter 2001, Occupations Code, as amended by this
article, at the earliest possible date, consistent with legislative
directive.
(2) The implementation of electronic pull-tab bingo
described as authorized by Chapter 2001, Occupations Code, as
amended by this article, may require significant time, including
analysis and testing of electronic monitoring terminals,
electronic pull-tab bingo tickets, site controllers, point-of-sale
stations, and card-minding devices in order to establish the
electronic pull-tab bingo system.
(3) The state's need for school finance reform and to
reduce property taxes constitutes an imminent peril to the public
welfare, requiring the adoption of rules and authorization for the
Texas Lottery Commission to conduct certain pre-implementation
activities related to regulating electronic pull-tab bingo to
ensure:
(A) that the increase in state revenue from the
prize fees derived from the conduct of electronic pull-tab bingo
games is realized as soon as possible to further the public interest
in reforming the public school finance system and property tax
reduction; and
(B) that bingo is fairly conducted and the
proceeds derived from bingo are used for an authorized purpose and
to promote and ensure the integrity, security, honesty, and
fairness of the electronic pull-tab bingo system.
(4) In order to commence operation of electronic
pull-tab bingo, as authorized by the amendments in this article to
Chapter 2001, Occupations Code, the Texas Lottery Commission may
conduct limited pre-implementation acts as necessary to ensure the
prompt approval of the electronic pull-tab bingo equipment after
the effective date of this article.
(5) Before the effective date of the changes made in
this article to Chapter 2001, Occupations Code, the Texas Lottery
Commission may request and receive information related to
applications for licensing and testing of electronic pull-tab bingo
components as authorized under Chapter 2001, Occupations Code, as
amended by this article.
SECTION 8.10. The Texas Lottery Commission may expend money
from the commission's appropriations for the 2006-2007 biennium for
purposes of conducting pre-implementation activities to implement
the changes made by this article in Subchapter I, Chapter 2001,
Occupations Code, including the development and approval of forms
for applications for licensing and testing of electronic pull-tab
bingo equipment authorized under Chapter 2001, Occupations Code, as
amended by this article.
SECTION 8.11. (a) Not later than December 1, 2005, the
Texas Lottery Commission shall adopt rules necessary to implement
the changes in law made to Chapter 2001, Occupations Code, by this
article.
(b) Notwithstanding any other law, the following provisions
apply to the procedures for adoption of the rules required by
Subsection (a):
(1) The commission shall give at least 15 days' notice
of its intention to adopt a rule before it adopts the rule pursuant
to this section.
(2) A rule adopted pursuant to this section takes
effect on the date it is filed in the office of the secretary of
state.
(3) The commission shall notify all holders of a
manufacturer's license of the adoption of a rule pursuant to this
section within 10 days of adoption.
(4) To the extent the provisions of this section are
inconsistent with Subchapter B, Chapter 2001, Government Code, this
section prevails.
ARTICLE 9. EFFECTS OF IMPLEMENTATION; EFFECTIVE DATE
SECTION 9.01. SPECIAL REPORT ON EFFECTS OF CERTAIN TAX
POLICIES ON PERSONAL INCOME AND BUSINESSES. (a) The comptroller of
public accounts shall prepare a report that provides a
comprehensive analysis of the effects of tax policies adopted by
the 79th Legislature, 1st Called Session, on the personal income of
residents of this state and on businesses in this state. Not later
than October 15, 2006, the comptroller shall submit the report to
the governor, lieutenant governor, speaker of the house of
representatives, and each other member of the legislature.
(b) The report required under Subsection (a) of this section
must include at least the following information with respect to
business taxes enacted or significantly reformed by the 79th
Legislature, 1st Called Session:
(1) the total amount of the tax revenue collected from
businesses between the effective date of this Act and the date of
the report;
(2) a profile of the businesses that paid the taxes by:
(A) the number of employees;
(B) the two-digit standard industrial
classification; and
(C) for the period described by Subdivision (1)
of this subsection:
(i) the total amount of wages paid and,
reported separately, the total amount of taxable wages paid;
(ii) the total amount of profits made and,
reported separately, the total amount of taxable profits made;
(iii) the total amount of taxes paid; and
(iv) any credits used to reduce tax
liability;
(3) the percentage of the taxes that were paid by
businesses with fewer than 100 employees;
(4) an estimate of the number and wages of workers not
covered by the taxes; and
(5) an estimate of the number, two-digit standard
industrial classification, and profits of, and an estimate of the
wages paid by, businesses not covered by the taxes.
(c) The report required under Subsection (a) of this section
must also include at least the following:
(1) with respect to major legislation enacted by the
79th Legislature, 1st Called Session, a tax incidence analysis,
categorized by industry sector and family income level, of the
effects of:
(A) any reduction in school district tax rates;
(B) any changes in business taxation;
(C) any changes in property taxation;
(D) any increase in the rate of the sales tax on
the sales tax base as compared to the sales tax base that existed on
January 1, 2005;
(E) any repeal of a sales tax exemption or
exclusion;
(F) any increase in the rate of the motor vehicle
sales and use tax;
(G) any increase in the rate of the boat and boat
motor sales and use tax;
(H) any tax imposed on the sale of discretionary
food and drink items;
(I) any increase in rate of the cigarette, cigar,
or tobacco products tax; and
(J) any other changes in major state taxes; and
(2) with respect to residents of this state who
itemize deductions on their federal income tax returns, an
analysis, categorized by income level, of:
(A) the amount of state sales taxes deducted from
those persons' federal income taxes; and
(B) the difference between the federal income tax
deductions for property taxes paid that were claimed by those
persons before property tax rate reductions were enacted by the
79th Legislature, 1st Called Session, and the federal income tax
deductions for property taxes paid that were claimed by those
persons after those reductions were enacted.
(d) Not later than October 15, 2008, the comptroller of
public accounts shall:
(1) update the information contained in the report
submitted under this section; and
(2) submit the updated report to the persons listed in
Subsection (a) of this section.
SECTION 9.02. (a) Except as provided by Subsections (b) and
(c) 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 November 1, 2005.
(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.
(c) This Act takes effect only if ____ Bill No. __, Acts of
the 79th Legislature, 1st Called Session, 2005, becomes law. If
that bill does not become law, this Act has no effect.