81R8545 KLA-D

By: Howard of Fort Bend H.B. No. 3944

A BILL TO BE ENTITLED

AN ACT

relating to an exemption from the franchise tax for certain taxable entities during an initial period of operation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 171.0001(4), Tax Code, is amended to read as follows:

(4) "Beginning date" means:

(A) for a taxable entity chartered or organized in this state, the second anniversary of the date on which the taxable entity's charter or organization takes effect; and

(B) for any other taxable entity, the later of:

(i) the second anniversary of the date on which the taxable entity's charter or organization under the laws of the United States or another state takes effect; or

(ii) the date on which the taxable entity begins doing business in this state.

SECTION 2. Section 171.001, Tax Code, is amended by adding Subsection (d) to read as follows:

(d) Notwithstanding Subsection (a), the tax imposed under this chapter is not imposed on a taxable entity until:

(1) for a taxable entity chartered or organized in this state, the second anniversary of the date the taxable entity's charter or organization takes effect; or

(2) for a taxable entity chartered or organized under the laws of the United States or another state, the later of:

(A) the second anniversary of the date the taxable entity's charter or organization takes effect; or

(B) the date the taxable entity begins doing business in this state.

SECTION 3. Section 171.063(g), Tax Code, is amended to read as follows:

(g) If a corporation's federal tax exemption is withdrawn by the Internal Revenue Service for failure of the corporation to qualify or maintain its qualification for the exemption, the corporation's exemption under this section ends on the effective date of that withdrawal by the Internal Revenue Service. The effective date of the withdrawal is considered the corporation's beginning date for purposes of determining the corporation's privilege periods and for all other purposes of this chapter, except that if the effective date of the withdrawal is a date earlier than the second anniversary of the date the corporation's charter or organization under the laws of this state, another state, or the United States took effect, the second anniversary of that effective date is considered the corporation's beginning date for those purposes.

SECTION 4. Section 171.204, Tax Code, is amended by adding Subsection (d) to read as follows:

(d) The comptroller may require a taxable entity on which the tax imposed under this chapter is not imposed solely because of the application of Section 171.001(d) to file an information report stating the date the taxable entity's charter or organization took effect and the taxable entity's beginning date. The comptroller may require the report to include other information the comptroller determines necessary, except that the comptroller may not require the taxable entity to report or compute its margin.

SECTION 5. (a) The change in law made by this Act applies to a taxable entity doing business in this state before, on, or after the effective date of this Act, regardless of the date the taxable entity's charter or organization takes effect.

(b) A taxable entity on which the tax under Chapter 171, Tax Code, was imposed before the effective date of this Act, but on which the tax is not imposed on the effective date of this Act because of the application of Section 171.001(d), Tax Code, as added by this Act, is not entitled to a refund of or credit for taxes paid under Chapter 171, Tax Code, before the effective date of this Act.

SECTION 6. This Act takes effect January 1, 2010.