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A BILL TO BE ENTITLED
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AN ACT
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relating to the application of the franchise tax to a combined |
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group. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 171.101(a), Tax Code, as effective |
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January 1, 2008, is amended to read as follows: |
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(a) The taxable margin of a taxable entity is computed by: |
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(1) determining the taxable entity's margin, which is |
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the lesser of: |
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(A) 70 percent of the taxable entity's total |
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revenue from its entire business, as determined under Section |
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171.1011; or |
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(B) an amount computed by: |
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(i) determining the taxable entity's total |
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revenue from its entire business, under Section 171.1011 and |
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subject to Section 171.1014; |
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(ii) subtracting, at the election of the |
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taxable entity and subject to Section 171.1014, either: |
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(a) cost of goods sold, as determined |
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under Section 171.1012; or |
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(b) compensation, as determined under |
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Section 171.1013; and |
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(iii) subtracting, in addition to any |
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subtractions made under Subparagraph (ii)(a) or (b), compensation, |
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as determined under Section 171.1013, paid to an individual during |
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the period the individual is serving on active duty as a member of |
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the armed forces of the United States if the individual is a |
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resident of this state at the time the individual is ordered to |
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active duty and the cost of training a replacement for the |
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individual; |
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(2) apportioning the taxable entity's margin to this |
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state as provided by Section 171.106 to determine the taxable |
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entity's apportioned margin; and |
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(3) subtracting from the amount computed under |
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Subdivision (2) any other allowable deductions to determine the |
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taxable entity's taxable margin. |
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SECTION 2. Section 171.1014, Tax Code, as effective January |
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1, 2008, is amended by amending Subsections (c), (d), (e), and (f) |
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and adding Subsections (d-1) and (d-2) to read as follows: |
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(c) For purposes of Section 171.101, a combined group shall |
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determine its total revenue by: |
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(1) determining: |
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(A) for each member of the combined group who |
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elects under Subsection (d-1) not to subtract either cost of goods |
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sold or compensation, an amount equal to 70 percent of the member's |
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total revenue from its entire business, as determined under Section |
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171.1011 as if the member were an individual taxable entity; and |
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(B) for the other members of the combined group, |
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the total revenue of each of those [its] members as provided by |
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Section 171.1011 as if the member were an individual taxable |
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entity; |
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(2) adding the total revenues of the members |
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determined under Subdivision (1) together; and |
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(3) subtracting, to the extent included under Section |
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171.1011(c)(1)(A), (c)(2)(A), or (c)(3), items of total revenue |
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received from a member of the combined group. |
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(d) Except as provided by Subsection (d-1), for [For] |
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purposes of Section 171.101, a combined group shall make an |
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election to subtract either cost of goods sold or compensation that |
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applies to all of its members. |
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(d-1) A combined group may allow a member of the combined |
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group to elect not to subtract either cost of goods sold or |
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compensation for purposes of Section 171.101, but instead to have |
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the member's total revenue determined under Subsection (c)(1)(A). |
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(d-2) Regardless of the election under Subsection (d) or |
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(d-1), the taxable margin of the combined group may not exceed 70 |
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percent of the combined group's total revenue from its entire |
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business, as provided by Section 171.101(a)(1)(A). |
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(e) Subject to Subsection (d-1), for [For] purposes of |
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Section 171.101, a combined group that elects to subtract costs of |
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goods sold shall determine that amount by: |
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(1) determining, as provided by Section 171.1012, the |
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cost of goods sold for each of its members that does not make the |
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election under Subsection (d-1) [as provided by Section 171.1012] |
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as if the member were an individual taxable entity; |
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(2) adding the amounts of cost of goods sold |
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determined under Subdivision (1) together; and |
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(3) subtracting from the amount determined under |
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Subdivision (2) any cost of goods sold amounts paid from one member |
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of the combined group to another member of the combined group, but |
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only to the extent the corresponding item of total revenue was |
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subtracted under Subsection (c)(3). |
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(f) For purposes of Section 171.101, a combined group that |
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elects to subtract compensation shall determine that amount by: |
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(1) determining, as provided by Section 171.1013, the |
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compensation for each of its members that does not make the election |
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under Subsection (d-1) [as provided by Section 171.1013] as if each |
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member were an individual taxable entity; |
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(2) adding the amounts of compensation determined |
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under Subdivision (1) together; and |
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(3) subtracting from the amount determined under |
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Subdivision (2) any compensation amounts paid from one member of |
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the combined group to another member of the combined group, but only |
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to the extent the corresponding item of total revenue was |
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subtracted under Subsection (c)(3). |
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SECTION 3. This Act applies only to a report originally due |
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on or after the effective date of this Act. |
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SECTION 4. This Act takes effect September 1, 2008. |