80R4738 DAK-D
 
  By: Smithee H.B. No. 2638
 
 
 
   
 
 
A BILL TO BE ENTITLED
AN ACT
relating to the exclusion from total revenue in computing the
franchise tax of certain funds, reimbursements, and expenses
related to certain legal services.
       BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
       SECTION 1.  Section 171.1011(g-3), Tax Code, as effective
January 1, 2008, is amended to read as follows:
       (g-3)  A taxable entity that provides legal services shall
exclude from its total revenue, to the extent included under
Subsection (c)(1)(A), (c)(2)(A), or (c)(3):
             (1)  the following flow-through funds that are mandated
by law, contract, or fiduciary duty to be distributed to the
claimant by the claimant's attorney or to other entities on behalf
of a claimant by the claimant's attorney:
                   (A)  damages due the claimant;
                   (B)  funds subject to a lien or other contractual
obligation arising out of the representation, other than fees owed
to the attorney;
                   (C)  funds subject to a subrogation interest or
other third-party contractual claim; and
                   (D)  fees paid an attorney in the matter who is not
a member, partner, shareholder, or employee of the taxable entity;
             (2)  reimbursement of the taxable entity's expenses
incurred in prosecuting a claimant's matter that are specific to
the matter and that are not general operating expenses; and
             (3)  [the actual out-of-pocket expenses of the
attorney, not to exceed] $500 per pro bono services case handled by
the attorney, [of providing pro bono legal services to a person,]
but only if the attorney maintains records of the pro bono services
for auditing purposes in accordance with the manner in which those
services are reported to the State Bar of Texas.
       SECTION 2.  Section 171.1011(p)(4-b), Tax Code, as effective
January 1, 2008, is repealed.
       SECTION 3.  This Act applies only to a report originally due
on or after the effective date of this Act.
       SECTION 4.  This Act takes effect January 1, 2008.