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A BILL TO BE ENTITLED
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AN ACT
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relating to the determination of ownership of goods for the purpose |
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of deducting the cost of goods sold under the franchise tax. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 171.1012(i), Tax Code, is amended to |
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read as follows: |
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(i) A taxable entity may make a subtraction under this |
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section in relation to the cost of goods sold only if that entity |
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owns the goods. The determination of whether a taxable entity is |
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an owner is based on all of the facts and circumstances, including |
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the various benefits and burdens of ownership vested with the |
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taxable entity. A taxable entity furnishing labor or materials to |
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a project for the construction, improvement, remodeling, repair, or |
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industrial maintenance (as the term "maintenance" is defined in 34 |
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T.A.C. Section 3.357) of real property is considered to be an owner |
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of that labor or materials and may include the costs, as allowed by |
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this section, in the computation of cost of goods sold. Solely for |
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purposes of this section, a taxable entity shall be treated as the |
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owner of goods being manufactured or produced by the entity under a |
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contract with the federal government, including any subcontracts |
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that support a contract with the federal government, |
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notwithstanding that the Federal Acquisition Regulation may |
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require that title or risk of loss with respect to those goods be |
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transferred to the federal government before the manufacture or |
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production of those goods is complete. A taxable entity is |
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considered the owner of goods sold for purposes of this section if |
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as a result of selling the goods the entity reports gross revenue |
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and a separate cost of sales on the entity's financial statements, |
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regardless of whether the entity at any point has legal title to the |
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goods. |
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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. |