Floor Packet Page No. 77                                                    



	

Amend Section 3 of CSHB 3 beginning at line 27 on page 58 by 

deleting current Section 171.111 and inserting new Section 171.111, 

as follows:

	Sec. 171.111.  TEMPORARY CREDIT ON TAXABLE MARGIN. [NET 

TAXABLE EARNED SURPLUS.]  (a)  Not later than March 1, 2007, a 

taxable entity [1992, a corporation] may notify the comptroller in 

writing of its intent to preserve its right to take a credit in an 

amount allowed by this section on the tax due on taxable margin.  

The taxable entity [net taxable earned surplus.  The comptroller 

may not grant an extension. The corporation] may thereafter elect 

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

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

2007, [1992,] until the taxable entity [corporation] revokes the 

election or this section expires, whichever is earlier. A taxable 

entity [corporation] may claim the credit for not more than 20 

consecutive privilege periods beginning with the first report due 

under this chapter after January 1, 2007. [1992.] A taxable entity 

[corporation] may make only one election under this section and the 

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

entity.

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

period is computed by:

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

taxable entity's accounting year ending in 2006, of the difference 

between (i) the taxable entity's deductible temporary differences 

and net operating loss carryforwards, net of related valuation 

allowance amounts, shown on the taxable entity's books and records 

on the last day of its taxable year ending in 2006, and (ii) the 

taxable entity's taxable temporary differences as shown on those 

books and records on that date. The amount of other net deferred tax 

items may be less than zero. For the purposes of computing the 

amount of the taxable entity's other net deferred tax items, any 

credit carryforward allowed under Chapter, 171, Tax Code shall be 

excluded from the amount of deductible temporary differences to the 

extent such credit carryforward amount, net of any related 

valuation allowance amount, is otherwise included in the taxable 

entity's deductible temporary differences, net of related 

valuation allowance amounts, shown on the taxable entity's books 

and records on the last day of the entity's taxable year ending in 

2006;

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

corporation's accounting year ending in 1991, that is the 

difference between the basis used for financial accounting purposes 

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

liability that at some future date will reverse;]

		(2)  apportioning the amount determined under 

Subdivision (1) to this state in the same manner taxable margin 

[earned surplus] is apportioned under Section 171.106, [171.106(b) 

or (e), as applicable,] on the first report due on or after January 

1, 2007; and [1992;]

		(3)  multiplying the amount determined under 

Subdivision (2) by the tax rate prescribed by Section 

171.002(a)(2). [by five percent; and]

		[(4) multiplying the amount determined under 

Subdivision (3) by the tax rate prescribed by Section 

171.002(a)(2).]

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

corporation may not consider differences that result from deferred 

investment tax credits, allowances for funds used during 

construction, or any other timing difference for which a deferred 

tax liability is not required under generally accepted accounting 

principles.]

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

corporation must, for purposes of computing its taxable capital 

under this chapter, use the same accounting methods under generally 

accepted accounting principles to account for the assets and 

liabilities that determine the amount of the credit that the 

corporation uses to compute the credit.  Notwithstanding Section 

171.109(c), if a corporation changes an accounting method for an 

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

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

election is automatically revoked.]

		(c) [(e)] A taxable entity [corporation] that notifies 

the comptroller of its intent to preserve it's right to take a 

credit allowed by this section shall submit with its notice of 

intent a statement of the amount determined under Subsection 

(b)(1). The comptroller may request that the taxable entity 

[corporation] submit in the annual report for each succeeding 

privilege period in which the taxable entity [corporation] is 

eligible to take a credit information relating to the amount 

determined under Subsection (b)(1). The taxable entity 

[corporation] shall submit in the form and content the comptroller 

requires any information relating to the assets and liabilities 

that determine the amount of the credit, the amount determined 

under Subsection (b)(1), or any other matter relevant to the 

computation of the credit for which the taxable entity 

[corporation] is eligible.

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

forward or backward or used to create a business loss carryover 

under Section 171.110.]

	[(g) A corporation may not use a credit allowed under this 

section in connection with the computation of the corporation's tax 

on net taxable capital.]

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

additional tax is imposed on each corporation during each year the 

corporation takes the credit allowed under this section. The 

additional tax is equal to 0.2 percent of the corporation's net 

taxable capital per year of privilege period.]

	(d) [(i)] This section expires September 1, 2026. [2012.]