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79S31061 KLA-D
By: Paxton H.B. No. 155
A BILL TO BE ENTITLED
AN ACT
relating to the application, computation, and rates of the
franchise tax.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 171.001(b)(3), Tax Code, is amended to
read as follows:
(3) "Corporation" includes:
(A) a limited liability company, as defined under
the Texas Limited Liability Company Act;
(B) a savings and loan association; [and]
(C) a banking corporation; and
(D) any other entity:
(i) that is operated for profit;
(ii) that is operating, organized, or
registered under the laws of this state in a manner that provides
liability limitations for a person who holds an ownership interest
in the entity, including a partner's interest in a partnership; and
(iii) in which any ownership interest is
held by an entity other than a natural person, without regard to
whether the person that is not a natural person is located in this
state or is in any other manner doing business in this state.
SECTION 2. Section 171.001, Tax Code, is amended by adding
Subsection (d) to read as follows:
(d) For purposes of Subsection (a), a corporation does
business in this state if the corporation is a foreign corporation
and is:
(1) holding a partnership interest, including an
interest as an assignee, as a general partner in a general
partnership that is doing business in this state;
(2) holding a partnership interest, including an
interest as an assignee, as a general partner in a limited
partnership that is doing business in this state; or
(3) holding a partnership interest, including an
interest as an assignee, as a limited partner in a limited
partnership that is doing business in this state.
SECTION 3. Sections 171.002(a) and (d), Tax Code, are
amended to read as follows:
(a) Subject to Subsection (d), the [The] rates of the
franchise tax are:
(1) 0.125 [0.25] percent per year of privilege period
of net taxable capital; and
(2) 2.25 [4.5] percent of net taxable earned surplus.
(d) A corporation is subject to a minimum tax of $50 [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 corporation is
less than $50 [$100]; or
(2) the amount of the 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. Section 171.1032(c), Tax Code, is amended to
read as follows:
(c) A corporation shall include in its gross receipts
computed under Subsection (a) the corporation's share of the gross
receipts of each partnership and joint venture of which the
corporation is a part, whether as a partner in the partnership or
joint venture doing business in this state or as a partner in a
partnership or joint venture that itself is a partner in any
additional partnership or joint venture doing business in this
state, apportioned to this state as though the corporation directly
earned the receipts, including receipts from business done with the
corporation.
SECTION 5. Section 171.110, Tax Code, is amended by adding
Subsections (m) and (n) to read as follows:
(m) Notwithstanding any other provision of this chapter, in
determining net taxable earned surplus, payments to related
entities for the following purposes are disallowed:
(1) intellectual property;
(2) interest charges; or
(3) management fees.
(n) For the purpose of Subsection (m), the comptroller has
the same power as the Internal Revenue Service under Section 482,
Internal Revenue Code of 1986.
SECTION 6. (a) Subject to other provisions of this section,
this Act applies to reports originally due on or after the effective
date of this Act.
(b) For a corporation becoming subject to the franchise tax
for the first time under this Act:
(1) income or losses, and related gross receipts,
occurring before January 1, 2006, may not be considered for
purposes of the earned surplus component, or for apportionment
purposes for the taxable capital component;
(2) a corporation subject to the franchise tax on
January 1, 2007, for which January 1, 2007, is not the beginning
date, shall file an annual report due May 15, 2007, based on the
period:
(A) beginning on the later of:
(i) January 1, 2006; or
(ii) the date the corporation was organized
in this state or, if a foreign corporation, the date it began doing
business in this state; and
(B) ending on the date the corporation's last
accounting period ends in 2006 or, if none, on December 31, 2006;
and
(3) a corporation subject to the earned surplus
component of the franchise tax at any time after August 31, 2006,
and before January 1, 2007, but not subject to the earned surplus
component on January 1, 2007, shall file a final report computed on
net taxable earned surplus, for the privilege of doing business at
any time after August 31, 2006, and before January 1, 2007, based on
the period:
(A) beginning on the later of:
(i) January 1, 2006; or
(ii) the date the corporation was organized
in this state or, if a foreign corporation, the date it began doing
business in this state; and
(B) ending on the date the corporation became no
longer subject to the earned surplus component of the tax.
SECTION 7. This Act takes effect September 1, 2006.