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A BILL TO BE ENTITLED
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AN ACT
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relating to entities subject to the franchise tax. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subsection (c), Section 171.0002, Tax Code, as |
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effective January 1, 2008, is amended to read as follows: |
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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 |
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beneficiaries of which are natural persons or charitable entities |
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as described in Section 501(c)(3), Internal Revenue Code, excluding |
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a trust taxable as a business entity pursuant to Treasury |
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Regulation Section 301.7701-4(b); |
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(2) an estate of a natural person as defined by Section |
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7701(a)(30)(D), Internal Revenue Code, excluding an estate taxable |
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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 passive |
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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 passive |
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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 641, |
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Internal Revenue Code; |
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(B) all of the beneficiaries of which are natural |
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persons or charitable entities as defined in Section 501(c)(3), |
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Internal Revenue Code; |
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(C) that is not a trust taxable as a business |
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entity pursuant to Treasury Regulation Section 301.7701-4(b); and |
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(D) that is organized as a trust and is described |
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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 |
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Revenue Code, provided that: |
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(A) a REIT with any amount of its assets in direct |
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holdings of real estate, other than real estate it occupies for |
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business purposes, as opposed to holding interests in limited |
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partnerships or other entities that directly hold the real estate, |
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is a taxable entity; and |
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(B) a limited partnership or other entity that |
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directly holds the real estate as described in Paragraph (A) is not |
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exempt under this subdivision, without regard to whether a REIT |
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holds an interest in it; [or] |
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(9) a real estate mortgage investment conduit (REMIC), |
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as defined by Section 860D, Internal Revenue Code; or |
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(10) a trust or other entity, including an entity |
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owned by the trust or other entity, that is described by Section |
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501(c)(9), Internal Revenue Code, or whose exclusive purpose is to |
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provide pension, health, disability, or other benefits to the |
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employees of one or more employers. |
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SECTION 2. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2007. |