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A BILL TO BE ENTITLED
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AN ACT
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relating to the inclusion of gas and electric transmission and |
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distribution costs in the cost of goods sold for purposes of the |
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franchise tax. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Sections 171.1012(c) and (e), Tax Code, are |
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amended to read as follows: |
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(c) The cost of goods sold includes all direct costs of |
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acquiring or producing the goods, including: |
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(1) labor costs; |
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(2) cost of materials that are an integral part of |
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specific property produced; |
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(3) cost of materials that are consumed in the |
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ordinary course of performing production activities; |
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(4) handling costs, including costs attributable to |
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processing, assembling, repackaging, and inbound transportation |
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costs; |
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(5) storage costs, including the costs of carrying, |
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storing, or warehousing property, subject to Subsection (e); |
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(6) depreciation, depletion, and |
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amortization, reported on the federal income tax return on which |
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the report under this chapter is based, to the extent associated |
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with and necessary for the production of goods, including recovery |
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described by Section 197, Internal Revenue Code; |
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(7) the cost of renting or leasing equipment, |
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facilities, or real property directly used for the production of |
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the goods, including pollution control equipment and intangible |
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drilling and dry hole costs; |
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(8) the cost of repairing and maintaining equipment, |
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facilities, or real property directly used for the production of |
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the goods, including pollution control devices; |
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(9) costs attributable to research, experimental, |
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engineering, and design activities directly related to the |
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production of the goods, including all research or experimental |
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expenditures described by Section 174, Internal Revenue Code; |
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(10) geological and geophysical costs incurred to |
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identify and locate property that has the potential to produce |
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minerals; |
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(11) taxes paid in relation to acquiring or producing |
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any material, or taxes paid in relation to services that are a |
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direct cost of production; |
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(12) the cost of producing or acquiring electricity |
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sold; |
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(12-a) transmission or distribution costs relating to: |
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(A) electricity sold by an electric utility, |
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retail electric provider, or power marketer, as those terms are |
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defined by Section 31.002, Utilities Code; or |
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(B) natural gas sold by a gas utility, as that |
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term is defined by Section 101.003 or 121.001, Utilities Code; and |
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(13) a contribution to a partnership in which the |
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taxable entity owns an interest that is used to fund activities, the |
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costs of which would otherwise be treated as cost of goods sold of |
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the partnership, but only to the extent that those costs are related |
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to goods distributed to the taxable entity as goods-in-kind in the |
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ordinary course of production activities rather than being sold. |
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(e) The cost of goods sold does not include the following |
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costs in relation to the taxable entity's goods: |
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(1) the cost of renting or leasing equipment, |
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facilities, or real property that is not used for the production of |
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the goods; |
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(2) selling costs, including employee expenses |
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related to sales; |
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(3) distribution costs, including outbound |
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transportation costs, but not including transmission or |
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distribution costs described by Subsection (c)(12-a); |
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(4) advertising costs; |
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(5) idle facility expense; |
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(6) rehandling costs; |
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(7) bidding costs, which are the costs incurred in the |
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solicitation of contracts ultimately awarded to the taxable entity; |
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(8) unsuccessful bidding costs, which are the costs |
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incurred in the solicitation of contracts not awarded to the |
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taxable entity; |
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(9) interest, including interest on debt incurred or |
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continued during the production period to finance the production of |
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the goods; |
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(10) income taxes, including local, state, federal, |
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and foreign income taxes, and franchise taxes that are assessed on |
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the taxable entity based on income; |
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(11) strike expenses, including costs associated with |
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hiring employees to replace striking personnel, but not including |
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the wages of the replacement personnel, costs of security, and |
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legal fees associated with settling strikes; |
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(12) officers' compensation; |
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(13) costs of operation of a facility that is: |
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(A) located on property owned or leased by the |
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federal government; and |
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(B) managed or operated primarily to house |
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members of the armed forces of the United States; and |
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(14) any compensation paid to an undocumented worker |
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used for the production of goods. As used in this subdivision: |
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(A) "undocumented worker" means a person who is |
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not lawfully entitled to be present and employed in the United |
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States; and |
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(B) "goods" includes the husbandry of animals, |
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the growing and harvesting of crops, and the severance of timber |
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from realty. |
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SECTION 2. This Act applies only to a report originally due |
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on or after the effective date of this Act. |
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SECTION 3. This Act takes effect January 1, 2010. |