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A BILL TO BE ENTITLED
|
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AN ACT
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relating to technical changes to the revised franchise tax. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. The title of Chapter 171, Tax Code, is amended to |
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read as follows: |
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CHAPTER 171. ELECTIVE FRANCHISE TAX |
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SECTION 2. Section 171.0001, Tax Code, as effective January |
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1, 2008, is amended by amending Subdivisions (6), (8), (9), (10), |
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(15), and (17) and adding Subdivisions (11-a) and (13-a) to read as |
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follows: |
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(6) "Client company" means: |
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(A) a person that contracts with a license holder |
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under Chapter 91 [has the meaning assigned by Section 91.001], |
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Labor Code, and is assigned employees by the license holder under |
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that contract; or |
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(B) a client of a temporary employment service, |
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as that term is defined by Section 93.001(2), Labor Code, to whom |
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individuals are assigned for a purpose described by that |
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subdivision. |
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(8) "Controlling interest" means: |
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(A) for a corporation, either more than 50 [80] |
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percent [or more], owned directly or indirectly, of the total |
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combined voting power of all classes of stock of the corporation, or |
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more than 50 [80] percent [or more], owned directly or indirectly, |
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of the beneficial ownership interest in the voting stock of the |
|
corporation; [and] |
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(B) for a partnership, association, trust, or |
|
other entity other than a limited liability company, more than 50 |
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[80] percent [or more], owned directly or indirectly, of the |
|
capital, profits, or beneficial interest in the partnership, |
|
association, trust, or other entity; and |
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(C) for a limited liability company, either more |
|
than 50 percent, owned directly or indirectly, of the total |
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membership interest of the limited liability company or more than |
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50 percent, owned directly or indirectly, of the beneficial |
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ownership interest in the membership interest of the limited |
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liability company. |
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(9) "Internal Revenue Code" means the Internal Revenue |
|
Code of 1986 in effect for the federal tax year beginning on January |
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1, 2007 [2006], not including any changes made by federal law after |
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that date, and any regulations adopted under that code applicable |
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to that period. |
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(10) "Lending institution" means an entity that makes |
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loans and: |
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(A) is regulated by the Federal Reserve Board, |
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the Office of the Comptroller of the Currency, the Federal Deposit |
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Insurance Corporation, the Commodity Futures Trading Commission, |
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the Office of Thrift Supervision, the Texas Department of Banking, |
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the Office of Consumer Credit Commissioner, [the Department of
|
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Savings and Mortgage Lending,] the Credit Union Department, or any |
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comparable regulatory body; |
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(B) is licensed by, registered with, or otherwise |
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regulated by the Department of Savings and Mortgage Lending; |
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(C) is a "broker" or "dealer" as defined by the |
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Securities Exchange Act of 1934 at 15 U.S.C. Section 78c; or |
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(D) provides financing to unrelated parties |
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solely for agricultural production. |
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(11-a) "Natural person" means a human being or the |
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estate of a human being. The term does not include a purely legal |
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entity given recognition as the possessor of rights, privileges, or |
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responsibilities, such as a corporation, limited liability |
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company, partnership, or trust. |
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(13-a) "Security," for purposes of Sections |
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171.1011(g), 171.1011(g-2), and 171.106(f) only, has the meaning |
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assigned by Section 475(c)(2), Internal Revenue Code, and includes |
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instruments described by Sections 475(e)(2)(B), (C), and (D) of |
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that code. |
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(15) "Staff leasing services company" means: |
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(A) a business entity that offers staff leasing |
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services, as that term is defined [has the meaning assigned] by |
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Section 91.001, Labor Code; or |
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(B) a temporary employment service, as that term |
|
is defined by Section 93.001, Labor Code. |
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(17) "Unitary business" means a single economic |
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enterprise that is made up of separate parts of a single entity or |
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of a commonly controlled group of entities that are sufficiently |
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interdependent, integrated, and interrelated through their |
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activities so as to provide a synergy and mutual benefit that |
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produces a sharing or exchange of value among them and a significant |
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flow of value to the separate parts. In determining whether a |
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unitary business exists, the comptroller shall consider any |
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relevant factor, including whether: |
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(A) the activities of the group members[:
|
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[(i)] are in the same general line, such as |
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manufacturing, wholesaling, retailing of tangible personal |
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property, insurance, transportation, or finance; [or] |
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(B) the activities of the group members [(ii)] |
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are steps in a vertically structured enterprise or process, such as |
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the steps involved in the production of natural resources, |
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including exploration, mining, refining, and marketing; or [and] |
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(C) [(B)] the members are functionally |
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integrated through the exercise of strong centralized management, |
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such as authority over purchasing, financing, product line, |
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personnel, and marketing. |
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SECTION 3. Section 171.0002, Tax Code, as effective January |
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1, 2008, is amended to read as follows: |
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Sec. 171.0002. DEFINITION OF TAXABLE ENTITY. (a) Except as |
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otherwise provided by this section, "taxable entity" means a |
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partnership, limited liability partnership, corporation, banking |
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corporation, savings and loan association, limited liability |
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company, business trust, professional association, business |
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association, joint venture, joint stock company, holding company, |
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or other legal entity. The term includes a combined group. A joint |
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venture does not include joint operating or co-ownership |
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arrangements meeting the requirements of Treasury Regulation |
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Section 1.761-2(a)(3) that elect out of federal partnership |
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treatment as provided by Section 761(a), Internal Revenue Code. |
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(b) "Taxable entity" does not include: |
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(1) a sole proprietorship; |
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(2) a general partnership: |
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(A) the direct ownership of which is entirely |
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composed of natural persons; and |
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(B) the liability of which is not limited under a |
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statute of this state or another state, including by registration |
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as a limited liability partnership; |
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(3) a passive entity as defined by Section 171.0003; |
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or |
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(4) an entity that is exempt from taxation under |
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Subchapter B. |
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(c) "Taxable entity" does not include an entity that is: |
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(1) a grantor trust as defined by Sections 671 and |
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7701(a)(30)(E), Internal Revenue Code, all of the grantors and |
|
beneficiaries of which are natural persons or charitable entities |
|
as described in Section 501(c)(3), Internal Revenue Code, excluding |
|
a trust taxable as a business entity pursuant to Treasury |
|
Regulation Section 301.7701-4(b); |
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(2) an estate of a natural person as defined by Section |
|
7701(a)(30)(D), Internal Revenue Code, excluding an estate taxable |
|
as a business entity pursuant to Treasury Regulation Section |
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301.7701-4(b); |
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(3) an escrow; |
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(4) [a family limited partnership that is a passive
|
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entity in which at least 80 percent of the interests are held,
|
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directly or indirectly, by members of the same family, including an
|
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individual's ancestors, lineal descendants, spouse, and brothers
|
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and sisters by the whole or half blood, and the estate of any of
|
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these persons, and that is a limited partnership:
|
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[(A)
formed pursuant to the Texas Revised Limited
|
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Partnership Act (Article 6132a-1, Vernon's Texas Civil Statutes);
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[(B)
formed pursuant to the limited partnership
|
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law of any other state; or
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[(C)
treated as a partnership for federal income
|
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tax purposes;
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[(5)
a passive investment partnership that is a
|
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passive entity and that is:
|
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[(A)
formed pursuant to the Texas Revised Limited
|
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Partnership Act (Article 6132a-1, Vernon's Texas Civil Statutes);
|
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[(B)
formed pursuant to the limited partnership
|
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law of any other state; or
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[(C)
formed pursuant to the limited partnership
|
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laws of any foreign country;
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[(6)
a passive investment partnership that is a
|
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passive entity and is a general partnership;
|
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[(7) a trust that is a passive entity:
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[(A)
that is taxable as a trust under Section
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641, Internal Revenue Code;
|
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[(B)
all of the beneficiaries of which are
|
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natural persons or charitable entities as defined in Section
|
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501(c)(3), Internal Revenue Code;
|
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[(C)
that is not a trust taxable as a business
|
|
entity pursuant to Treasury Regulation Section 301.7701-4(b); and
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[(D)
that is organized as a trust and is
|
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described in Section 7701(a)(30)(E), Internal Revenue Code;
|
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[(8)] a real estate investment trust (REIT) as defined |
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by Section 856, Internal Revenue Code, and its "qualified REIT |
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subsidiary" entities as defined by Section 856(i)(2), Internal |
|
Revenue Code, provided that: |
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(A) a REIT with any amount of its assets in direct |
|
holdings of real estate, other than real estate it occupies for |
|
business purposes, as opposed to holding interests in limited |
|
partnerships or other entities that directly hold the real estate, |
|
is a taxable entity; and |
|
(B) a limited partnership or other entity that |
|
directly holds the real estate as described in Paragraph (A) is not |
|
exempt under this subdivision, without regard to whether a REIT |
|
holds an interest in it; [or] |
|
(5) [(9)] a real estate mortgage investment conduit |
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(REMIC), as defined by Section 860D, Internal Revenue Code; |
|
(6) a nonprofit self-insurance trust created under |
|
Chapter 2212, Insurance Code, or a predecessor statute; |
|
(7) a trust qualified under Section 401(a), Internal |
|
Revenue Code; or |
|
(8) a trust or other entity that is exempt under |
|
Section 501(c)(9), Internal Revenue Code. |
|
(d) An entity that can file as a sole proprietorship for |
|
federal tax purposes is not a sole proprietorship for purposes of |
|
Subsection (b)(1) and is not exempt under that subsection if the |
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entity is formed in a manner under the statutes of this state, [or] |
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another state, or a foreign country that limit the liability of the |
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entity. |
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SECTION 4. Section 171.0003(a), Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
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(a) An entity is a passive entity only if: |
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(1) the entity is a general or limited partnership or a |
|
trust, other than a business trust; |
|
(2) during the period on which margin is based, the |
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entity's federal gross income consists of at least 90 percent of the |
|
following income: |
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(A) dividends, interest, foreign currency |
|
exchange gain, periodic and nonperiodic payments with respect to |
|
notional principal contracts, option premiums, cash settlement or |
|
termination payments with respect to a financial instrument, and |
|
income from a limited liability company; |
|
(B) distributive shares of partnership income to |
|
the extent that those distributive shares of income are greater |
|
than zero; |
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(C) capital gains from the sale of real property, |
|
gains from the sale of commodities traded on a commodities |
|
exchange, and gains from the sale of securities; and |
|
(D) royalties, bonuses, or delay rental income |
|
from mineral properties and income from other nonoperating mineral |
|
interests; and |
|
(3) the entity does not receive more than 10 percent of |
|
its federal gross income from conducting an active trade or |
|
business. |
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SECTION 5. Section 171.0004(e), Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
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(e) For purposes of this section: |
|
(1) the ownership of a royalty interest or a |
|
nonoperating working interest in mineral rights does not constitute |
|
conduct of an active trade or business; [and] |
|
(2) payment of compensation to employees or |
|
independent contractors for financial or legal services reasonably |
|
necessary for the operation of the entity does not constitute |
|
conduct of an active trade or business; and |
|
(3) holding a seat on the board of directors of an |
|
entity does not by itself constitute conduct of an active trade or |
|
business. |
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SECTION 6. Section 171.001, Tax Code, as effective January |
|
1, 2008, is amended to read as follows: |
|
Sec. 171.001. IMPOSITION OF TAX AT ELECTION OF TAXABLE |
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ENTITY; NO LIABILITY FOR CHAPTER 172 FRANCHISE TAX [IMPOSED]. (a) |
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Notwithstanding any other provision of this chapter, [A franchise
|
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tax is imposed on] each taxable entity that does business in this |
|
state or that is chartered or organized in this state may elect to |
|
pay the tax imposed under this chapter instead of the tax imposed |
|
under Chapter 172. |
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(b) A taxable entity that elects to pay the tax imposed |
|
under this chapter is not liable for the tax imposed under Chapter |
|
172. |
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(c) The tax imposed under this chapter extends to the limits |
|
of the United States Constitution and the federal law adopted under |
|
the United States Constitution. |
|
(d) The tax imposed under this section or Section 171.0011 |
|
is not imposed on an entity if, during the period on which the |
|
report is based, the entity qualifies as a passive entity as defined |
|
by Section 171.0003. |
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SECTION 7. Sections 171.0011(a) and (b), Tax Code, as |
|
effective January 1, 2008, are amended to read as follows: |
|
(a) Except as provided by Section 171.001(c) [Subsection
|
|
(e)], an additional tax is imposed on a taxable entity that for any |
|
reason becomes no longer subject to the tax imposed under this |
|
chapter. |
|
(b) The additional tax is equal to the appropriate rate |
|
under Section 171.002 of the taxable entity's taxable margin |
|
computed on the period beginning on the day after the last day for |
|
which the tax imposed on taxable margin or net taxable earned |
|
surplus was computed and ending on the date the taxable entity is no |
|
longer subject to the tax imposed under this chapter. |
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SECTION 8. Sections 171.002(a), (b), (c), and (d), Tax |
|
Code, as effective January 1, 2008, are amended to read as follows: |
|
(a) Subject to Section 171.003 and except as provided by |
|
Subsection (b), the rate of the franchise tax is one percent [per
|
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year of privilege period] of taxable margin. |
|
(b) The rate of the franchise tax is 0.5 percent [per year of
|
|
privilege period] of taxable margin for those taxable entities |
|
primarily engaged in retail or wholesale trade. |
|
(c) A taxable entity is primarily engaged in retail or |
|
wholesale trade only if: |
|
(1) the total revenue from its activities in retail or |
|
wholesale trade is greater than the total revenue from its |
|
activities in trades other than the retail and wholesale trades; |
|
(2) except as provided by Subsection (c-1), less than |
|
50 percent of the total revenue from activities in retail or |
|
wholesale trade comes from the sale of products it produces or |
|
products produced by an entity that is part of an affiliated group |
|
to which the taxable entity also belongs; and |
|
(3) the taxable entity does not provide retail or |
|
wholesale utilities, including telecommunications services, [and] |
|
electricity, or gas. |
|
(d) A taxable entity 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 |
|
is less than $1,000; or |
|
(2) the amount of the taxable entity's total revenue |
|
from its entire business is less than or equal to $300,000 or the |
|
amount determined under Section 171.006 per 12-month period on |
|
which margin is based. |
|
SECTION 9. Subchapter A, Chapter 171, Tax Code, is amended |
|
by adding Section 171.0021 to read as follows: |
|
Sec. 171.0021. DISCOUNTS FROM TAX LIABILITY FOR SMALL |
|
BUSINESSES. (a) A taxable entity is entitled to a discount of the |
|
tax imposed under this chapter that the taxable entity is required |
|
to pay after determining its taxable margin under Section 171.101, |
|
applying the appropriate rate of the tax under Section 171.002(a) |
|
or (b), and subtracting any other allowable credits, as follows: |
|
(1) for a taxable entity for which the total revenue |
|
from its entire business is greater than $300,000 but less than |
|
$400,000, the taxable entity is entitled to a discount of 80 |
|
percent; |
|
(2) for a taxable entity for which the total revenue |
|
from its entire business is equal to or greater than $400,000 but |
|
less than $500,000, the taxable entity is entitled to a discount of |
|
60 percent; |
|
(3) for a taxable entity for which the total revenue |
|
from its entire business is equal to or greater than $500,000 but |
|
less than $700,000, the taxable entity is entitled to a discount of |
|
40 percent; and |
|
(4) for a taxable entity for which the total revenue |
|
from its entire business is equal to or greater than $700,000 but |
|
less than $900,000, the taxable entity is entitled to a discount of |
|
20 percent. |
|
(b) The amounts under Subsection (a) are subject to |
|
adjustment as provided by Section 171.006. |
|
SECTION 10. The heading to Section 171.006, Tax Code, as |
|
effective January 1, 2008, is amended to read as follows: |
|
Sec. 171.006. ADJUSTMENT OF ELIGIBILITY FOR NO TAX DUE, |
|
DISCOUNTS, [EXEMPTION] AND COMPENSATION DEDUCTION. |
|
SECTION 11. Section 171.006(b), Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
|
(b) Beginning in 2010 [2009], on January 1 of each |
|
even-numbered [odd-numbered] year, the amounts prescribed by |
|
Sections 171.002(d)(2), 171.0021, and 171.1013(c) are increased or |
|
decreased by an amount equal to the amount prescribed by those |
|
sections on December 31 of the preceding year multiplied by the |
|
percentage increase or decrease during the preceding state fiscal |
|
biennium in the consumer price index and rounded to the nearest |
|
$10,000. |
|
SECTION 12. Section 171.101(d), Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
|
(d) An election under Subsection (a)(1)(B)(ii) shall be |
|
made by the taxable entity on its annual report and is effective |
|
only for that annual report. A taxable entity shall notify the |
|
comptroller of its election not later than the due date of the |
|
annual [The election may be changed by filing an amended] report. |
|
SECTION 13. Section 171.1011, Tax Code, as effective |
|
January 1, 2008, is amended by amending Subsections (b), (c), (d), |
|
(e), (g-3), (h), (n), and (o) and adding Subsections (g-4) and (t) |
|
to read as follows: |
|
(b) In this section, a reference to an amount reportable as |
|
income [entered] on a line number on an Internal Revenue Service |
|
form is the amount entered to the extent the amount entered complies |
|
with federal income tax law and includes the corresponding amount |
|
entered on a variant of the form, or a subsequent form, with a |
|
different line number to the extent the amount entered complies |
|
with federal income tax law. [The comptroller shall adopt rules as
|
|
necessary to accomplish the legislative intent prescribed by this
|
|
subsection and Subsection (a).] |
|
(c) Except as provided by this section, and subject to |
|
Section 171.1014, for the purpose of computing its taxable margin |
|
under Section 171.101, the total revenue of a taxable entity is: |
|
(1) for a taxable entity treated for federal income |
|
tax purposes as a corporation, an amount computed by: |
|
(A) adding: |
|
(i) the amount reportable as income |
|
[entered] on line 1c, Internal Revenue Service Form 1120; [and] |
|
(ii) the amounts reportable as income |
|
[entered] on lines 4 through 10, Internal Revenue Service Form |
|
1120; and |
|
(iii) any total revenue reported by a lower |
|
tier entity as includable in the taxable entity's total revenue |
|
under Section 171.1015(b); and |
|
(B) subtracting: |
|
(i) bad debt expensed for federal income |
|
tax purposes that corresponds to items of gross receipts included |
|
in Subsection (c)(1)(A) for the current reporting period or a past |
|
reporting period; |
|
(ii) to the extent included in Subsection |
|
(c)(1)(A), foreign royalties and foreign dividends, including |
|
amounts determined under Section 78 or Sections 951-964, Internal |
|
Revenue Code; |
|
(iii) to the extent included in Subsection |
|
(c)(1)(A), net distributive income from a taxable entity |
|
[partnerships and from trusts and limited liability companies] |
|
treated as a partnership or [partnerships for federal income tax
|
|
purposes and net distributive income from limited liability
|
|
companies and corporations treated] as an S corporation |
|
[corporations] for federal income tax purposes; |
|
(iv) allowable deductions from Internal |
|
Revenue Service Form 1120, Schedule C, to the extent the relating |
|
dividend income is included in total revenue; |
|
(v) to the extent included in Subsection |
|
(c)(1)(A), items of income attributable to an entity that is a |
|
disregarded entity for federal income tax purposes; and |
|
(vi) to the extent included in Subsection |
|
(c)(1)(A), other amounts authorized by this section; |
|
(2) for a taxable entity treated for federal income |
|
tax purposes as a partnership, an amount computed by: |
|
(A) adding: |
|
(i) the amount reportable as income |
|
[entered] on line 1c, Internal Revenue Service Form 1065; |
|
(ii) the amounts reportable as income |
|
[entered] on lines 4, 6, and [through] 7, Internal Revenue Service |
|
Form 1065; [and] |
|
(iii) the amounts reportable as income |
|
[entered] on lines 3a and 5 [2] through 11, Internal Revenue Service |
|
Form 1065, Schedule K; [and] |
|
(iv) the amounts reportable as income on |
|
line 17, Internal Revenue Service Form 8825; |
|
(v) the amounts reportable as income on |
|
line 11, plus line 2 or line 45, Internal Revenue Service Form 1040, |
|
Schedule F; and |
|
(vi) any total revenue reported by a lower |
|
tier entity as includable in the taxable entity's total revenue |
|
under Section 171.1015(b); and |
|
(B) subtracting: |
|
(i) bad debt expensed for federal income |
|
tax purposes that corresponds to items of gross receipts included |
|
in Subsection (c)(2)(A) for the current reporting period or a past |
|
reporting period; |
|
(ii) to the extent included in Subsection |
|
(c)(2)(A), foreign royalties and foreign dividends, including |
|
amounts determined under Section 78 or Sections 951-964, Internal |
|
Revenue Code; |
|
(iii) to the extent included in Subsection |
|
(c)(2)(A), net distributive income from a taxable entity |
|
[partnerships and from trusts and limited liability companies] |
|
treated as a partnership or [partnerships for federal income tax
|
|
purposes and net distributive income from limited liability
|
|
companies and corporations treated] as an S corporation |
|
[corporations] for federal income tax purposes; |
|
(iv) to the extent included in Subsection |
|
(c)(2)(A), items of income attributable to an entity that is a |
|
disregarded entity for federal income tax purposes; and |
|
(v) to the extent included in Subsection |
|
(c)(2)(A), other amounts authorized by this section; or |
|
(3) for a taxable entity other than a taxable entity |
|
treated for federal income tax purposes as a corporation or |
|
partnership, an amount determined in a manner substantially |
|
equivalent to the amount for Subdivision (1) or (2) determined by |
|
rules that the comptroller shall adopt. |
|
(d) Subject to Section 171.1014, a taxable entity |
|
[corporation] that is part of a federal consolidated group shall |
|
compute its total revenue under Subsection (c) as if it had filed a |
|
separate return for federal income tax purposes. |
|
(e) A taxable entity that owns an interest in a passive |
|
entity [that is not included in a group report under Section
|
|
171.1014] shall exclude from [include in] the taxable entity's |
|
total revenue the taxable entity's share of the net income of the |
|
passive entity, but only to the extent the net income of the passive |
|
entity was [not] generated by the margin of any other taxable |
|
entity. |
|
(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) to the extent included under Subsection (c)(1)(A), |
|
(c)(2)(A), or (c)(3), 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) to the extent included under Subsection (c)(1)(A), |
|
(c)(2)(A), or (c)(3), 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. |
|
(g-4) A taxable entity that is a pharmacy cooperative shall |
|
exclude from its total revenue, to the extent included under |
|
Subsection (c)(1)(A), (c)(2)(A), or (c)(3), flow-through funds |
|
from rebates from pharmacy wholesalers that are distributed to the |
|
pharmacy cooperative's shareholders. |
|
(h) If the taxable entity belongs to an affiliated group, |
|
the taxable entity may not exclude payments described by Subsection |
|
(f), (g), (g-1), (g-2), [or] (g-3), or (g-4) that are made to |
|
entities that are members of the affiliated group. |
|
(n) Except as provided by Subsection (o), a taxable entity |
|
that is a health care provider shall exclude from its total |
|
revenue[, to the extent included under Subsection (c)(1)(A),
|
|
(c)(2)(A), or (c)(3)]: |
|
(1) to the extent included under Subsection (c)(1)(A), |
|
(c)(2)(A), or (c)(3), the total amount of payments the health care |
|
provider received: |
|
(A) under the Medicaid program, Medicare |
|
program, Indigent Health Care and Treatment Act (Chapter 61, Health |
|
and Safety Code), and Children's Health Insurance Program (CHIP); |
|
(B) for professional services provided in |
|
relation to a workers' compensation claim under Title 5, Labor |
|
Code; and |
|
(C) for professional services provided to a |
|
beneficiary rendered under the TRICARE military health system; and |
|
(2) the actual cost to the health care provider for any |
|
uncompensated care provided, but only if the provider maintains |
|
records of the uncompensated care for auditing purposes and, if the |
|
provider later receives payment for all or part of that care, the |
|
provider adjusts the amount excluded for the tax year in which the |
|
payment is received. |
|
(o) A health care provider that is a health care institution |
|
shall exclude from its total revenue[, to the extent included under
|
|
Subsection (c)(1)(A), (c)(2)(A), or (c)(3),] 50 percent of the |
|
amounts described by Subsection (n). |
|
(t) The comptroller shall adopt rules as necessary to |
|
accomplish the legislative intent prescribed by this section. |
|
SECTION 14. Section 171.1011(l)(1), Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
|
(1) "Sales commission" means: |
|
(A) any form of compensation paid to a person for |
|
engaging in an act for which a license is required by Chapter 1101, |
|
Occupations Code; or [and] |
|
(B) compensation paid to a sales representative |
|
by a principal in an amount that is based on the amount or level of |
|
certain orders for or sales of the principal's product and that the |
|
principal is required to report on Internal Revenue Service Form |
|
1099-MISC. |
|
SECTION 15. Section 171.1012(a)(3)(A), Tax Code, as |
|
effective January 1, 2008, is amended to read as follows: |
|
(A) "Tangible personal property" means: |
|
(i) personal property that can be seen, |
|
weighed, measured, felt, or touched or that is perceptible to the |
|
senses in any other manner; |
|
(ii) films, sound recordings, videotapes, |
|
live and prerecorded television and radio programs, books, and |
|
other similar property embodying words, ideas, concepts, images, or |
|
sound, without regard to the means or methods of distribution or the |
|
medium in which the property is embodied, [by the creator of the
|
|
property] for which, as costs are incurred in producing the |
|
property, it is intended or is reasonably likely that any |
|
[tangible] medium in which the property is embodied will be |
|
mass-distributed by the creator or any one or more third parties in |
|
a form that is not substantially altered; and |
|
(iii) a computer program, as defined by |
|
Section 151.0031. |
|
SECTION 16. Section 171.1012, Tax Code, as effective |
|
January 1, 2008, is amended by amending Subsections (c), (g), (h), |
|
and (k) and adding Subsection (o) to read as follows: |
|
(c) The cost of goods sold includes all direct costs of |
|
acquiring or producing the goods, including: |
|
(1) labor costs; |
|
(2) cost of materials that are an integral part of |
|
specific property produced; |
|
(3) cost of materials that are consumed in the |
|
ordinary course of performing production activities; |
|
(4) handling costs, including costs attributable to |
|
processing, assembling, repackaging, and inbound transportation |
|
costs; |
|
(5) storage costs, including the costs of carrying, |
|
storing, or warehousing property, subject to Subsection (e); |
|
(6) depreciation, depletion, and amortization, |
|
reported on the federal income tax return on which the report under |
|
this chapter is based, to the extent associated with and necessary |
|
for the production of goods, including recovery described by |
|
Section 197, Internal Revenue Code; |
|
(7) the cost of renting or leasing equipment, |
|
facilities, or real property directly used for the production of |
|
the goods, including pollution control equipment and intangible |
|
drilling and dry hole costs; |
|
(8) the cost of repairing and maintaining equipment, |
|
facilities, or real property directly used for the production of |
|
the goods, including pollution control devices; |
|
(9) costs attributable to research, experimental, |
|
engineering, and design activities directly related to the |
|
production of the goods, including all research or experimental |
|
expenditures described by Section 174, Internal Revenue Code; |
|
(10) geological and geophysical costs incurred to |
|
identify and locate property that has the potential to produce |
|
minerals; |
|
(11) taxes paid in relation to acquiring or producing |
|
any material, or taxes paid in relation to services that are a |
|
direct cost of production; |
|
(12) the cost of producing or acquiring electricity |
|
sold; and |
|
(13) a contribution to a partnership in which the |
|
taxable entity owns an interest that is used to fund activities, the |
|
costs of which would otherwise be treated as cost of goods sold of |
|
the partnership, but only to the extent that those costs are related |
|
to goods distributed to the taxable entity as goods-in-kind in the |
|
ordinary course of production activities rather than being sold. |
|
(g) A taxable entity that is allowed a subtraction by this |
|
section for a cost of goods sold and that is subject to Section |
|
263A, 460, or 471, Internal Revenue Code, may [shall] capitalize |
|
that cost in the same manner and to the same extent that the taxable |
|
entity capitalized that cost on its federal income tax return or may |
|
expense those costs [is required or allowed to capitalize the cost
|
|
under federal law and regulations], except for costs excluded under |
|
Subsection (e), or in accordance with Subsections (c), (d), and |
|
(f). If the taxable entity elects to capitalize costs, it must |
|
capitalize each cost allowed under this section that it capitalized |
|
on its federal income tax return. If the taxable entity later |
|
elects to begin expensing a cost that may be allowed under this |
|
section as a cost of goods sold, the entity may not deduct any cost |
|
in ending inventory from a previous report. If the taxable entity |
|
elects to expense a cost of goods sold that may be allowed under |
|
this section, a cost incurred before the first day of the period on |
|
which the report is based may not be subtracted as a cost of goods |
|
sold. If the taxable entity elects to expense a cost of goods sold |
|
and later elects to capitalize that cost of goods sold, a cost |
|
expensed on a previous report may not be capitalized. |
|
(h) A taxable entity shall determine its cost of goods sold, |
|
except as otherwise provided by this section, in accordance with |
|
the methods used on the federal income tax return on which the |
|
report under this chapter is based [permitted by federal statutes
|
|
and regulations]. This subsection does not affect the type or |
|
category of cost of goods sold that may be subtracted under this |
|
section. |
|
(k) Notwithstanding any other provision of this section, if |
|
the taxable entity is a lending institution that offers loans to the |
|
public and elects to subtract cost of goods sold, the entity, other |
|
than an entity primarily engaged in an activity described by |
|
category 5932 of the 1987 Standard Industrial Classification Manual |
|
published by the federal Office of Management and Budget, may |
|
subtract as a cost of goods sold an amount equal to interest |
|
expense. For purposes of this subsection, an entity engaged in |
|
lending to unrelated parties solely for agricultural production |
|
offers loans to the public. |
|
(o) If a taxable entity, including a taxable entity with |
|
respect to which cost of goods sold is determined pursuant to |
|
Section 171.1014(e)(1), whose principal business activity is film |
|
or television production or broadcasting or the distribution of |
|
tangible personal property described by Subsection (a)(3)(A)(ii), |
|
or any combination of these activities, elects to subtract cost of |
|
goods sold, the cost of goods sold for the taxable entity shall be |
|
the costs described in this section in relation to the property and |
|
include depreciation, amortization, and other expenses directly |
|
related to the acquisition, production, or use of the property, |
|
including expenses for the right to broadcast or use the property. |
|
SECTION 17. Section 171.1013, Tax Code, as effective |
|
January 1, 2008, is amended by amending Subsections (a), (b), and |
|
(c) and adding Subsection (b-1) to read as follows: |
|
(a) Except as otherwise provided by this section, "wages and |
|
cash compensation" means the amount entered in the Medicare wages |
|
and tips box of Internal Revenue Service Form W-2 or any subsequent |
|
form with a different number or designation that substantially |
|
provides the same information. The term also includes, to the |
|
extent not included above: |
|
(1) net distributive income from a taxable entity |
|
treated as a partnership [partnerships and from trusts and limited
|
|
liability companies treated as partnerships] for federal income tax |
|
purposes, but only if the person receiving the distribution is a |
|
natural person; |
|
(2) net distributive income from limited liability |
|
companies and corporations treated as S corporations for federal |
|
income tax purposes, but only if the person receiving the |
|
distribution is a natural person; [and] |
|
(3) stock awards and stock options deducted for |
|
federal income tax purposes; and |
|
(4) net distributive income from a limited liability |
|
company treated as a sole proprietorship for federal income tax |
|
purposes, but only if the person receiving the distribution is a |
|
natural person. |
|
(b) Subject to Section 171.1014, a taxable entity that |
|
elects to subtract compensation for the purpose of computing its |
|
taxable margin under Section 171.101 may subtract an amount equal |
|
to: |
|
(1) subject to the limitation in Subsection (c), all |
|
wages and cash compensation paid by the taxable entity to its |
|
officers, directors, owners, partners, and employees; and |
|
(2) the cost of all benefits, to the extent deductible |
|
for federal income tax purposes, the taxable entity provides to its |
|
officers, directors, owners, partners, and employees, including |
|
workers' compensation benefits, health care, employer |
|
contributions made to employees' health savings accounts, and |
|
retirement [to the extent deductible for federal income tax
|
|
purposes]. |
|
(b-1) This subsection applies to a taxable entity that is a |
|
small employer, as that term is defined by Section 1501.002, |
|
Insurance Code, and that has not provided health care benefits to |
|
any of its employees in the calendar year preceding the beginning |
|
date of its reporting period. Subject to Section 171.1014, a |
|
taxable entity to which this subsection applies that elects to |
|
subtract compensation for the purpose of computing its taxable |
|
margin under Section 171.101 may subtract health care benefits as |
|
provided under Subsection (b) and may also subtract: |
|
(1) for the first 12-month period on which margin is |
|
based and in which the taxable entity provides health care benefits |
|
to all of its employees, an additional amount equal to 50 percent of |
|
the cost of health care benefits provided to its employees for that |
|
period; and |
|
(2) for the second 12-month period on which margin is |
|
based and in which the taxable entity provides health care benefits |
|
to all of its employees, an additional amount equal to 25 percent of |
|
the cost of health care benefits provided to its employees for that |
|
period. |
|
(c) Notwithstanding the actual amount of wages and cash |
|
compensation paid by a taxable entity to its officers, directors, |
|
owners, partners, and employees, a taxable entity may not include |
|
more than $300,000, or the amount determined under Section 171.006, |
|
per 12-month period on which margin is based, for any person in the |
|
amount of wages and cash compensation it determines under this |
|
section [Section 171.101]. If a person is paid by more than one |
|
entity of a combined group, the combined group may not subtract in |
|
relation to that person a total of more than $300,000, or the amount |
|
determined under Section 171.006, per 12-month period on which |
|
margin is based. |
|
SECTION 18. Section 171.1014, Tax Code, as effective |
|
January 1, 2008, is amended by amending Subsections (b), (d), and |
|
(f) and adding Subsections (d-1), (h), and (i) to read as follows: |
|
(b) The combined group is a single taxable entity for |
|
purposes of the application of the tax imposed under this chapter, |
|
including Section 171.002(d). |
|
(d) For purposes of Section 171.101, a combined group shall |
|
make an election to subtract either cost of goods sold or |
|
compensation that applies to all of its members. Regardless of the |
|
election, the taxable margin of the combined group may not exceed 70 |
|
percent of the combined group's total revenue from its entire |
|
business, as provided by Section 171.101(a)(1)(A). |
|
(d-1) A member of a combined group may claim as cost of goods |
|
sold those costs that qualify under Section 171.1012 if the goods |
|
for which the costs are incurred are owned by another member of the |
|
combined group. |
|
(f) For purposes of Section 171.101, a combined group that |
|
elects to subtract compensation shall determine that amount by: |
|
(1) determining the compensation for each of its |
|
members as provided by Section 171.1013 as if each member were an |
|
individual taxable entity, subject to the limitation prescribed by |
|
Section 171.1013(c); |
|
(2) adding the amounts of compensation determined |
|
under Subdivision (1) together; and |
|
(3) subtracting from the amount determined under |
|
Subdivision (2) any compensation amounts paid from one member of |
|
the combined group to another member of the combined group, but only |
|
to the extent the corresponding item of total revenue was |
|
subtracted under Subsection (c)(3). |
|
(h) Each taxable entity that is part of a combined group |
|
report shall, for purposes of determining margin and apportionment, |
|
include its activities for the same period used by the combined |
|
group. |
|
(i) Each member of the combined group shall be jointly and |
|
severally liable for the tax of the combined group. |
|
SECTION 19. Section 171.1015, Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
|
Sec. 171.1015. REPORTING FOR CERTAIN PARTNERSHIPS IN TIERED |
|
PARTNERSHIP ARRANGEMENT. (a) In this section, "tiered partnership |
|
arrangement" means an ownership structure in which any [all] of the |
|
interests in one taxable entity treated as a partnership or |
|
[partnership, trust, or limited liability company that is treated
|
|
for federal income taxes as a partnership or a limited liability
|
|
company treated as] an S corporation for federal income tax |
|
purposes (a "lower tier entity" [an "upper tier partnership"]) are |
|
owned by one or more other taxable entities (an "upper [a "lower] |
|
tier entity"). A tiered partnership arrangement may have two or |
|
more tiers. |
|
(b) In addition to the tax it is required to pay under this |
|
chapter on its own taxable margin, a taxable entity that is an upper |
|
[a lower] tier entity may include, for purposes of calculating its |
|
own taxable margin, the total revenue [pay the tax on the taxable
|
|
margin] of a lower tier entity [higher tier partnership] if the |
|
lower tier entity [higher tier partnership] submits a report to the |
|
comptroller showing the amount of total revenue [taxable margin] |
|
that each upper [lower] tier entity that owns it should include |
|
within the upper [lower] tier entity's own taxable margin |
|
calculation, according to the ownership [profits] interest of the |
|
upper [lower] tier entity. [An upper tier partnership is not
|
|
required to pay tax under this chapter on any taxable margin
|
|
reported under this section.] |
|
(c) This section does not apply to that percentage of the |
|
total revenue [taxable margin] attributable to an upper [a lower] |
|
tier entity by a lower tier entity [an upper tier partnership] if |
|
the upper [lower] tier entity is not subject to the tax under this |
|
chapter. In this case, the lower tier entity [higher tier
|
|
partnership] is liable for the tax on its taxable margin. |
|
(d) Section 171.002(d) does not apply to an upper tier |
|
entity if, before the attribution of any total revenue by a lower |
|
tier entity to an upper tier entity under this section, the lower |
|
tier entity does not meet the criteria of Section 171.002(d)(1) or |
|
(d)(2). |
|
(e) The comptroller shall adopt rules to administer this |
|
section. |
|
SECTION 20. Section 171.103, Tax Code, as effective January |
|
1, 2008, is amended by adding Subsection (c) to read as follows: |
|
(c) For informational purposes only, a combined group shall |
|
include in a report filed under Section 171.201 or 171.202 |
|
financial information relating to the gross receipts computed under |
|
Subsection (a) of each taxable entity that is a member of the |
|
combined group and that does not have a nexus with this state for |
|
the purpose of taxation. A combined group is subject to a penalty |
|
in the amount of $10,000 for each member of the combined group for |
|
which the combined group fails to report the financial information |
|
required by this subsection or underreports the financial |
|
information by 25 percent or more. |
|
SECTION 21. Section 171.1055(b), Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
|
(b) In apportioning margin, receipts derived from |
|
transactions between individual members of a combined group that |
|
are excluded under Section 171.1014(c)(3) may not be included in |
|
the receipts of the taxable entity from its business done in this |
|
state as determined under Section 171.103, except that receipts |
|
ultimately derived from the sale of tangible personal property |
|
between individual members of a combined group where one member |
|
party to the transaction does not have nexus in this state shall be |
|
included in the receipts of the taxable entity from its business |
|
done in this state as determined under Section 171.103 to the extent |
|
that the member of the combined group that does not have nexus in |
|
this state resells the tangible personal property without |
|
substantial modification to a purchaser in this state. "Receipts |
|
ultimately derived from the sale" means the amount paid for the |
|
tangible personal property by the third party purchaser. |
|
SECTION 22. Section 171.106, Tax Code, as effective January |
|
1, 2008, is amended by adding Subsection (f) to read as follows: |
|
(f) Notwithstanding Section 171.1055, if a loan or security |
|
is treated as inventory of the seller for federal income tax |
|
purposes, the gross proceeds of the sale of that loan or security |
|
are considered gross receipts. |
|
SECTION 23. Section 171.111, Tax Code, as effective January |
|
1, 2008, is amended to read as follows: |
|
Sec. 171.111. TEMPORARY CREDIT ON TAXABLE MARGIN. (a) On |
|
the first report originally due under this chapter on or after |
|
January 1, 2008, [Not later than March 1, 2007,] a taxable entity |
|
must [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 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, 2008 [2007], until the taxable entity revokes the |
|
election or this section expires, whichever is earlier. A taxable |
|
entity may claim the credit for not more than 20 consecutive |
|
privilege periods beginning with the first report originally due |
|
under this chapter on or after January 1, 2008 [2007]. A taxable |
|
entity 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 of the business loss |
|
carryforwards of the taxable entity under Section 171.110(e), as |
|
that section applied to annual reports originally due before |
|
January 1, 2008, that were not exhausted on a report originally due |
|
under this chapter before January 1, 2008[, 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 purpose of computing the
|
|
amount of the taxable entity's other net deferred tax items, any
|
|
credit carryforward allowed under this chapter 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 taxable entity's taxable year ending in
|
|
2006]; |
|
(2) [apportioning the amount determined under
|
|
Subdivision (1) to this state in the same manner taxable margin is
|
|
apportioned under Section 171.106 on the first report due on or
|
|
after January 1, 2007;
|
|
[(3)] multiplying the amount determined under |
|
Subdivision (1) [(2)] by: |
|
(A) 2.25 [10] percent for reports originally due |
|
on or after January 1, 2008, and before January 1, 2018; and |
|
(B) 7.75 percent for reports originally due on or |
|
after January 1, 2018, and before September 1, 2027; and |
|
(3) [(4)] multiplying the amount determined under |
|
Subdivision (2) [(3)] by 4.5 percent [the tax rate prescribed by
|
|
Section 171.002(a)(2)]. |
|
(c) [A taxable entity that notifies the comptroller of its
|
|
intent to preserve its 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 submit, with each [in the] annual |
|
report [for each succeeding privilege period] in which the taxable |
|
entity is eligible to take a credit, information relating to the |
|
amount determined under Subsection (b)(1). The taxable entity |
|
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 is eligible. |
|
(d) A credit that a taxable entity is entitled to under this |
|
section may [does] not be conveyed [convey], [and may not be] |
|
assigned, or transferred[, in relation to a transaction in which
|
|
the taxable entity is purchased by another entity]. A taxable |
|
entity loses the right to claim the credit if the entity changes |
|
combined groups after June 30, 2007. |
|
(d-1) A taxable entity, other than a combined group, may not |
|
claim the credit under this section unless the taxable entity was, |
|
on May 1, 2006, subject to the tax imposed by this chapter as this |
|
chapter existed on that date. A taxable entity that is a combined |
|
group may claim the credit for each member entity that was, on May |
|
1, 2006, subject to the tax imposed by this chapter as this chapter |
|
existed on that date and shall compute the amount of the credit for |
|
that member as provided by this section. |
|
(d-2) The amount of credit claimed, including any unused |
|
credit carried forward, may not exceed the amount of franchise tax |
|
due for the report. Unused credits may not be carried forward to |
|
reports originally due on or after September 1, 2027. |
|
(e) This section expires September 1, 2027 [2026]. |
|
SECTION 24. Section 171.1121(b), Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
|
(b) Except as otherwise provided by this section, a taxable |
|
entity shall use the same accounting methods to apportion margin as |
|
used in computing margin [reportable federal taxable income]. |
|
SECTION 25. Section 171.1532(b), Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
|
(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 during the period beginning |
|
with the day after the last date upon which taxable margin or 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 26. Section 171.201(a), Tax Code, as effective |
|
January 1, 2008, is amended to read as follows: |
|
(a) Except as provided by Section 171.2022, a taxable entity |
|
on which the franchise tax is imposed shall file an initial report |
|
with the comptroller containing: |
|
(1) financial information of the taxable entity |
|
necessary to compute the tax under this chapter [showing the
|
|
financial condition of the taxable entity 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]; |
|
(2) the name and address of: |
|
(A) each officer, director, and manager of the |
|
taxable entity; |
|
(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 designated under Section 171.354; and |
|
(4) other information required by the comptroller. |
|
SECTION 27. Sections 171.203(a), (b), (d), and (e), Tax |
|
Code, as effective January 1, 2008, are amended to read as follows: |
|
(a) A corporation or limited liability company on which the |
|
franchise tax is imposed, regardless of whether the corporation or |
|
limited liability company is required to pay any tax, shall file a |
|
report with the comptroller containing: |
|
(1) the name of each corporation or limited liability |
|
company in which the corporation or limited liability company |
|
filing the report owns a 10 percent or greater interest and the |
|
percentage owned by the corporation or limited liability company; |
|
(2) the name of each corporation or limited liability |
|
company that owns a 10 percent or greater interest in the |
|
corporation or limited liability company filing the report; |
|
(3) the name, title, and mailing address of each |
|
person who is an officer or director of the corporation or limited |
|
liability company on the date the report is filed and the expiration |
|
date of each person's term as an officer or director, if any; |
|
(4) the name and address of the agent of the |
|
corporation or limited liability company designated under Section |
|
171.354; and |
|
(5) the address of the corporation's or limited |
|
liability company's principal office and principal place of |
|
business. |
|
(b) The corporation or limited liability company shall file |
|
the report once a year on a form prescribed by the comptroller. |
|
(d) The corporation or limited liability company shall send |
|
a copy of the report to each person named in the report under |
|
Subsection (a)(3) who is not currently employed by the corporation |
|
or limited liability company or a related corporation or limited |
|
liability company listed in Subsection (a)(1) or (2). An officer or |
|
director of the corporation or limited liability company or another |
|
authorized person must sign the report under a certification that: |
|
(1) all information contained in the report is true |
|
and correct to the best of the person's knowledge; and |
|
(2) a copy of the report has been mailed to each person |
|
identified in this subsection on the date the return is filed. |
|
(e) If a person's name is included in a report under |
|
Subsection (a)(3) and the person is not an officer or director of |
|
the corporation or limited liability company on the date the report |
|
is filed, the person may file with the comptroller a sworn statement |
|
disclaiming the person's status as shown on the report. The |
|
comptroller shall maintain a record of statements filed under this |
|
subsection and shall make that information available on request |
|
using the same procedures the comptroller uses for other requests |
|
for public information. |
|
SECTION 28. Section 171.204, Tax Code, as effective January |
|
1, 2008, is amended by adding Subsection (c) to read as follows: |
|
(c) The comptroller may require any entity to file |
|
information as necessary to verify that the entity is not subject to |
|
the tax imposed under this chapter. |
|
SECTION 29. Subchapter E, Chapter 171, Tax Code, is amended |
|
by adding Section 171.2125 to read as follows: |
|
Sec. 171.2125. CALCULATING COST OF GOODS OR COMPENSATION IN |
|
STAFF LEASING ARRANGEMENTS. In calculating cost of goods sold or |
|
compensation, a taxable entity that is a client company of a staff |
|
leasing services company shall rely on information provided by the |
|
staff leasing services company on a form promulgated by the |
|
comptroller or an invoice. |
|
SECTION 30. Subchapter E, Chapter 171, Tax Code, is amended |
|
by adding Section 171.214 to read as follows: |
|
Sec. 171.214. SMALL BUSINESS TAX ADVISORY COMMITTEE. (a) |
|
The Small Business Tax Advisory Committee will conduct an annual |
|
study of the effects of the tax levied under this chapter on small |
|
businesses in the state. The study must take into consideration: |
|
(1) job growth or loss attributable to the franchise |
|
tax; |
|
(2) the impact of the franchise tax on wages; |
|
(3) the number of businesses that ceased to operate |
|
due to the franchise tax, if any; |
|
(4) the number of businesses that changed business |
|
organization to avoid payment of the franchise tax, if any; |
|
(5) the number of businesses that relocated their |
|
operations, headquarters, or other facilities due to the franchise |
|
tax, if any; and |
|
(6) any other items presented by the comptroller. |
|
(b) The comptroller shall chair the Small Business Tax |
|
Advisory Committee and shall appoint: |
|
(1) at the direction of the speaker of the house, one |
|
member of the house of representatives; |
|
(2) at the direction of the lieutenant governor, one |
|
member of the senate; |
|
(3) at least one certified public accountant; and |
|
(4) at least three small business owners. |
|
(c) The comptroller, by rule, shall establish procedures |
|
for the functions of the advisory committee, including a report to |
|
be issued to the speaker of the house of representatives, the |
|
lieutenant governor, and the governor not later than January 1, |
|
2009. |
|
SECTION 31. Subchapter G, Chapter 171, Tax Code, is amended |
|
by adding Sections 171.3015 and 171.3125 to read as follows: |
|
Sec. 171.3015. FORFEITURE OF CERTIFICATE OR REGISTRATION OF |
|
TAXABLE ENTITY. The comptroller may, for the same reasons and using |
|
the same procedures the comptroller uses in relation to the |
|
forfeiture of a corporation's charter or certificate of authority, |
|
forfeit the certificate or registration of a taxable entity. |
|
Sec. 171.3125. REVIVAL OF CERTIFICATE OR REGISTRATION OF |
|
TAXABLE ENTITY AFTER FORFEITURE BY SECRETARY OF STATE. (a) The |
|
secretary of state may, using the same procedures the secretary |
|
uses in relation to the revival of a corporation's charter or |
|
certificate, revive the certificate or registration of a taxable |
|
entity. |
|
(b) The secretary of state may adopt rules to implement this |
|
section. |
|
SECTION 32. Section 171.309, Tax Code, is amended to read as |
|
follows: |
|
Sec. 171.309. FORFEITURE BY SECRETARY OF STATE. The |
|
secretary of state may forfeit the charter, [or] certificate, or |
|
registration of a taxable entity [of authority of a corporation] |
|
if: |
|
(1) the secretary receives the comptroller's |
|
certification under Section 171.302 [of this code]; and |
|
(2) the taxable entity [corporation] does not revive |
|
its forfeited [corporate] privileges within 120 days after the date |
|
that the [corporate] privileges were forfeited[; and
|
|
[(3)
the corporation does not have assets from which a
|
|
judgment for any tax, penalty, or court costs imposed by this
|
|
chapter may be satisfied]. |
|
SECTION 33. Subchapter H, Chapter 171, Tax Code, is amended |
|
by adding Section 171.356 to read as follows: |
|
Sec. 171.356. BILLING OR INVOICING THE TAX AS A FEE, CHARGE, |
|
REIMBURSEMENT, OR OTHER ITEM. (a) A taxable entity may not include |
|
in a bill or invoice a fee, charge, reimbursement, or other item |
|
that the taxable entity represents is for the purpose of full or |
|
partial payment or reimbursement of the tax under this chapter |
|
unless: |
|
(1) the fee, charge, reimbursement, or other item |
|
directly corresponds to and may not exceed the amount of the tax the |
|
taxable entity paid under this chapter before the date the bill or |
|
invoice was issued or presented; and |
|
(2) the taxable entity includes on the bill or invoice |
|
the following statement, prominently displayed in relation to the |
|
fee, charge, reimbursement, or other item: "Texas state law does |
|
not require (name of taxable entity) to collect this charge." |
|
(b) A taxable entity that collects a fee, charge, |
|
reimbursement, or other item in a manner that violates Subsection |
|
(a): |
|
(1) holds the entire amount collected in trust for the |
|
benefit of this state; and |
|
(2) is liable to this state for the entire amount |
|
collected plus any accrued penalties and interest on the amount |
|
collected. |
|
(c) The payment by a third party of a fee, charge, |
|
reimbursement, or other item collected in a manner that violates |
|
Subsection (a) is considered to be a voluntary payment of tax by |
|
that person and the amount remitted by the taxable entity under |
|
Subsection (b) is in addition to the amount otherwise owed and |
|
payable by the taxable entity under this chapter. |
|
(d) This section does not apply to a bill or invoice under a |
|
contract for the lease of real property. |
|
SECTION 34. Section 17, Chapter 1, Acts of the 79th |
|
Legislature, 3rd Called Session, 2006, is amended to read as |
|
follows: |
|
Sec. 17. [(a)
The repeal of Section 171.111, Tax Code, by
|
|
this Act does not affect a credit that accrued under that section
|
|
before the effective date of this Act.
|
|
[(b)] A corporation that has any unused credits established |
|
[accrued] before the effective date of this Act under Section |
|
171.111, Tax Code, may claim those unused credits on or with the tax |
|
report for the period in which the credits were established |
|
[accrued], and the former law under which the corporation |
|
established [accrued] the credits is continued in effect for |
|
purposes of determining the amount of the credits the corporation |
|
may claim and the manner in which the corporation may claim the |
|
credits. |
|
SECTION 35. Sections 18(b) through (f), Chapter 1, Acts of |
|
the 79th Legislature, 3rd Called Session, 2006, are amended to read |
|
as follows: |
|
(b) This section does not affect a credit authorized by a |
|
provision listed in Subsection (a) of this section that was |
|
established [accrued] under Chapter 171, Tax Code, before the |
|
effective date of this Act or a credit that continues to accrue |
|
under Section 19 of this Act. |
|
(c) A corporation that has any unused credits established |
|
[accrued] before the effective date of this Act under a provision |
|
other than Subchapter O, P, or Q, Chapter 171, Tax Code, may claim |
|
those unused credits on or with the tax report for the period in |
|
which the credits were established [accrued], and the former law |
|
under which the corporation established [accrued] the credits is |
|
continued in effect for purposes of determining the amount of the |
|
credits the corporation may claim and the manner in which the |
|
corporation may claim the credits. |
|
(d) A corporation that has any unused credits established |
|
[accrued] before the effective date of this Act under Subchapter O, |
|
Chapter 171, Tax Code, may claim those unused credits on or with the |
|
tax report for the period in which the credit was established |
|
[accrued]. However, if the corporation was allowed to carry |
|
forward unused credits under that subchapter, the corporation may |
|
continue to apply those credits on or with each consecutive report |
|
until the earlier of the date the credit would have expired under |
|
the terms of Subchapter O, Chapter 171, Tax Code, had it continued |
|
in existence, or December 31, 2027, and the former law under which |
|
the corporation established [accrued] the credits is continued in |
|
effect for purposes of determining the amount of the credits the |
|
corporation may claim and the manner in which the corporation may |
|
claim the credits. |
|
(e) A corporation that has any unused credits established |
|
[accrued] before the effective date of this Act under Subchapter P, |
|
Chapter 171, Tax Code, may claim those unused credits on or with the |
|
tax report for the period in which the credit was established |
|
[accrued]. However, if the corporation was allowed to carry |
|
forward unused credits under that subchapter, the corporation may |
|
continue to apply those credits on or with each consecutive report |
|
until the earlier of the date the credit would have expired under |
|
the terms of Subchapter P, Chapter 171, Tax Code, had it continued |
|
in existence, or December 31, 2012, and the former law under which |
|
the corporation established [accrued] the credits is continued in |
|
effect for purposes of determining the amount of the credits the |
|
corporation may claim and the manner in which the corporation may |
|
claim the credits. |
|
(f) A corporation that has any unused credits established |
|
[accrued] before the effective date of this Act under Subchapter Q, |
|
Chapter 171, Tax Code, may claim those unused credits on or with the |
|
tax report for the period in which the credit was established |
|
[accrued]. However, if the corporation was allowed to carry |
|
forward unused credits under that subchapter, the corporation may |
|
continue to apply those credits on or with each consecutive report |
|
until the earlier of the date the credit would have expired under |
|
the terms of Subchapter Q, Chapter 171, Tax Code, had it continued |
|
in existence, or December 31, 2012, and the former law under which |
|
the corporation established [accrued] the credits is continued in |
|
effect for purposes of determining the amount of the credits the |
|
corporation may claim and the manner in which the corporation may |
|
claim the credits. |
|
SECTION 36. (a) Section 22, Chapter 1, Acts of the 79th |
|
Legislature, 3rd Called Session, 2006, is amended by amending |
|
Subsection (b) and adding Subsections (b-1), (b-2), and (g) to read |
|
as follows: |
|
(b) For an entity becoming subject to the franchise tax |
|
under this Act: |
|
(1) margin or gross receipts occurring before June 1, |
|
2006, may not be considered for purposes of determining taxable |
|
margin or for apportionment purposes; and |
|
(2) an entity subject to the franchise tax on January |
|
1, 2008, that was not previously subject to the tax and for which |
|
January 1, 2008, is not the beginning date, shall file an annual |
|
report due May 15, 2008, based on the period: |
|
(A) if the entity has an accounting period that |
|
ends on or after January 1, 2007, and before June 1, 2007: |
|
(i) beginning on the later of: |
|
(a) June 1, 2006; or |
|
(b) the date the entity was organized |
|
in this state or, if a foreign entity, the date it began doing |
|
business in this state; and |
|
(ii) ending on the date that accounting |
|
period ends in 2007; |
|
(B) if the entity has an accounting period that |
|
ends on or after June 1, 2007, and before December 31, 2007: |
|
(i) beginning on the date that accounting |
|
period begins; and |
|
(ii) ending on the date that accounting |
|
period ends in 2007; and |
|
(C) if the entity has an accounting period that |
|
ends on December 31, 2007, or if the entity does not have an |
|
accounting period that ends in 2007: |
|
(i) beginning on the later of: |
|
(a) January 1, 2007; or |
|
(b) the date the entity was organized |
|
in the state or, if a foreign entity, the date it began doing |
|
business in this state; and |
|
(ii) ending on December 31, 2007[; and
|
|
[(3)
an entity subject to the franchise tax as it
|
|
existed before the effective date of this Act at any time after
|
|
December 31, 2006, and before January 1, 2008, but not subject to
|
|
the franchise tax on January 1, 2008, shall file a final report for
|
|
the privilege of doing business at any time after June 30, 2007, and
|
|
before January 1, 2008, based on the period:
|
|
[(A) beginning on the later of:
|
|
[(i) January 1, 2007; 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 franchise tax]. |
|
(b-1) This subsection applies to an entity that: |
|
(1) is not doing business in this state on January 1, |
|
2008; |
|
(2) would be subject to the franchise tax as amended by |
|
this Act if it were doing business in this state on or after January |
|
1, 2008, but would not have been subject to the franchise tax as it |
|
existed before being amended by this Act; and |
|
(3) was doing business in this state at any time after |
|
June 30, 2007, and before January 1, 2008. |
|
(b-2) An entity to which Subsection (b-1) applies shall, for |
|
the privilege of doing business in this state at any time after June |
|
30, 2007, and before January 1, 2008, file a final report and pay an |
|
additional tax equal to the appropriate rate under Section 171.002, |
|
Tax Code, as amended by this Act, of the entity's taxable margin |
|
based on the period: |
|
(1) beginning on the later of: |
|
(A) January 1, 2007; or |
|
(B) the date the entity was organized in this |
|
state or, if a foreign entity, the date it began doing business in |
|
this state; and |
|
(2) ending on the date the entity became no longer |
|
subject to the tax. |
|
(g) Except as provided by Subsections (b-1) and (b-2) of |
|
this section, an entity becoming subject to the franchise tax under |
|
this Act that is part of a combined group report shall, for purposes |
|
of determining margin and apportionment, include its activity for |
|
the same period used by the combined group. |
|
(b) This section takes effect immediately 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 immediate |
|
effect, this section takes effect September 1, 2007. |
|
SECTION 37. Sections 23(b) and (f), Chapter 1, Acts of the |
|
79th Legislature, 3rd Called Session, 2006, are amended to read as |
|
follows: |
|
(b) The information report required under this section must |
|
contain the same information that an entity required to file the |
|
report would have submitted in its report due to the comptroller in |
|
2006 under Chapter 171, Tax Code, if the changes made by this Act to |
|
Chapter 171, Tax Code, had been in effect January 1, 2006. The |
|
information report shall also contain the total of maintenance and |
|
operations school property taxes paid by the entity to school |
|
districts in Texas in the 2005 [, 2006, and 2007] tax year [years]. |
|
The comptroller shall provide the forms and instructions to the |
|
entities required to file a report under this section. |
|
(f) The comptroller: |
|
(1) shall identify the entities described by |
|
Subsection (d) of this section; |
|
(2) shall prepare all forms and instructions required |
|
for those entities to file their information reports as required by |
|
this section; |
|
(3) shall provide those forms and instructions to |
|
those entities on or after November 15, 2006, but before December 2, |
|
2006; |
|
(4) shall require the entities to submit their |
|
information reports on or before February 15, 2007[, and February
|
|
15, 2008]; |
|
(5) may not grant any extensions for filing the |
|
information reports; and |
|
(6) shall report to the governor, the lieutenant |
|
governor, and the members of the legislature, on or before April 1, |
|
2007, [and April 1, 2008,] the results of the information reports, |
|
stating the amount of revenue generated by the tax under Chapter |
|
171, Tax Code, [in each year,] the amount that would have been |
|
generated from the entities submitting information reports under |
|
this section if the changes made by this Act to Chapter 171, Tax |
|
Code, had been in effect January 1, 2006, and the school maintenance |
|
and operations property taxes paid by the entities in the 2005 [,
|
|
2006, and 2007] tax year [years]. |
|
SECTION 38. Subtitle F, Title 2, Tax Code, is amended by |
|
adding Chapter 172 to read as follows: |
|
CHAPTER 172. FRANCHISE TAX |
|
Sec. 172.001. DEFINITIONS; REFERENCES IN OTHER LAW. (a) |
|
Unless otherwise provided by this chapter, the terms used in this |
|
chapter have the same meaning as the terms used in Chapter 171. |
|
(b) A reference in other law to the franchise tax means, as |
|
appropriate, the tax imposed under this chapter or the tax imposed |
|
under Chapter 171 by an entity that elects to pay that tax. |
|
Sec. 172.002. TAX IMPOSED. (a) A franchise tax is imposed |
|
on each taxable entity that does business in this state or that is |
|
chartered or organized in this state. |
|
(b) The tax imposed under this chapter extends to the limits |
|
of the United States Constitution and the federal law adopted under |
|
the United States Constitution. |
|
(c) A taxable entity that elects to pay the elective |
|
franchise tax under Chapter 171 is not liable for the tax imposed |
|
under this chapter. |
|
Sec. 172.003. AMOUNT OF TAX. The amount of the tax imposed |
|
by this chapter on a taxable entity is computed by: |
|
(1) determining the taxable entity's total revenue |
|
from its entire business, as determined under Section 171.1011; |
|
(2) apportioning the amount computed under |
|
Subdivision (1) to this state, as provided by Section 171.106, to |
|
determine the taxable entity's apportioned total revenue; and |
|
(3) multiplying the amount computed under Subdivision |
|
(2) by the rate of 0.675 percent. |
|
Sec. 172.004. PAYMENT. A taxable entity that pays the tax |
|
imposed by this chapter shall pay the tax to the comptroller in the |
|
same manner provided for the elective franchise tax under Chapter |
|
171. |
|
Sec. 172.005. COLLECTION, ADMINISTRATION, AND ENFORCEMENT. |
|
The comptroller shall collect, administer, and enforce the tax |
|
under this chapter in the same manner as the comptroller collects, |
|
administers, and enforces the elective franchise tax under Chapter |
|
171. |
|
SECTION 39. The following provisions of the Tax Code are |
|
repealed: |
|
(1) Section 171.0011(e), as effective January 1, 2008; |
|
(2) Section 171.1011(p)(4-b), as effective January 1, |
|
2008; |
|
(3) Section 171.1014(g), as effective January 1, 2008; |
|
and |
|
(4) Section 171.2035, as effective January 1, 2008. |
|
SECTION 40. This Act applies only to a report originally due |
|
on or after the effective date of this Act. |
|
SECTION 41. Except as otherwise provided by this Act, this |
|
Act takes effect January 1, 2008. |
|
|
|
* * * * * |