INTRODUCED
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HOUSE COMMITTEE
SUBSTITUTE
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SECTION 1. Section
171.1011(c), Tax Code, is amended to read as follows:
(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 on line 1c, Internal Revenue Service Form 1120;
(ii) the amounts reportable
as income 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
treated as a partnership or as an S corporation 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; and
(C) if the amount
computed under Subsections (c)(1)(A) and (c)(1)(B) totals $20 million or
less, subtracting $1 million;
(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 on line 1c, Internal Revenue Service Form 1065;
(ii) the amounts reportable
as income on lines 4, 6, and 7, Internal Revenue Service Form 1065;
(iii) the amounts reportable
as income on lines 3a and 5 through 11, Internal Revenue Service Form 1065,
Schedule K;
(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
treated as a partnership or as an S corporation 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; and
(C) if the amount
computed under Subsections (c)(2)(A) and (c)(2)(B) totals $20 million or
less, subtracting $1 million; 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), including the
subtraction of $1 million as provided by Subdivision (1)(C) or (2)(C),
determined by rules that the comptroller shall adopt.
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No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
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SECTION 2. Section
171.002(d), Tax Code, is amended to read as follows:
(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 $1 million or the amount determined under Section 171.006 per
12-month period on which margin is based].
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No
equivalent provision.
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No
equivalent provision.
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SECTION 1. Section
171.0001(12), Tax Code, is amended to read as follows:
(12) "Retail
trade" means:
(A) the activities described
in Division G of the 1987 Standard Industrial Classification Manual
published by the federal Office of Management and Budget; [and]
(B) apparel rental
activities classified as Industry 5999 or 7299 of the 1987 Standard
Industrial Classification Manual published by the federal Office of
Management and Budget;
(C) the activities
classified as Industry Group 753 of the 1987 Standard Industrial
Classification Manual published by the federal Office of Management and
Budget; and
(D) rental-purchase
agreement activities regulated by Chapter 92, Business & Commerce Code.
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No
equivalent provision.
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SECTION 2. Section 171.002,
Tax Code, is amended by adding Subsection (c-2) to read as follows:
(c-2) Subsection (c)(2)
does not apply to total revenue from activities in a trade that rents or
leases tangible personal property as described by Industry Group 735 of the
Standard Industrial Classification Manual published by the United States
Department of Labor.
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SECTION 3. Section 171.006,
Tax Code, is amended by amending Subsection (b) and adding Subsection (g)
to read as follows:
(b) Beginning in 2010, on
January 1 of each even-numbered year, the amounts prescribed by Sections 171.1011(c)(1)(C), 171.1011(c)(2)(C),
171.1011(c)(3) [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.
(g) A receipt from
Internet hosting described by Section 151.108(a) is a receipt from business
done in this state only if the customer to whom the service is provided is
located in this state.
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SECTION 3. Section
171.006(b), Tax Code, is amended to read as follows:
(b) Beginning in 2010, on
January 1 of each even-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 9. Section 171.106, Tax Code, is amended by
adding Subsection (g) to read follows:
(g) A receipt from
Internet hosting as defined by Section 151.108(a) is a receipt from
business done in this state only if the customer to whom the service is
provided is located in this state.
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SECTION 4. Section 171.1011,
Tax Code, is amended by amending Subsection (g) and adding Subsection (g-8)
to read as follows:
(g) A taxable entity shall
exclude from its total revenue, to the extent included under Subsection
(c)(1)(A), (c)(2)(A), or (c)(3), only the following flow-through funds that
are mandated by contract to be distributed to other entities:
(1) sales commissions to
nonemployees, including split-fee real estate commissions;
(2) the tax basis as
determined under the Internal Revenue Code of securities underwritten; [and]
(3) subcontracting payments
handled by the taxable entity to provide services, labor, or materials in
connection with the actual or proposed design, construction, remodeling, or
repair of improvements on real property or the location of the boundaries
of real property; and
(4) subcontracting payments made to individuals for services related
to the acquisition or management of petroleum interests or the performance
of title or contract functions related to the exploration, exploitation, or
disposition of petroleum or mineral interests.
(g-8) A taxable entity
that is primarily engaged in the business of transporting aggregates shall
exclude from its total revenue, to the extent included under Subsection
(c)(1)(A), (c)(2)(A), or (c)(3), subcontracting payments made by the
taxable entity to nonemployee agents for the performance of delivery
services on behalf of the taxable entity. In this subsection,
"aggregates" means any commonly recognized construction material
removed or extracted from the earth, including dimension stone, crushed and
broken limestone, crushed and broken granite, other crushed and broken
stone, construction sand and gravel, industrial sand, dirt, soil,
cementitious material, and caliche.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
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SECTION 5. Section 171.1011,
Tax Code, is amended by amending Subsection (g) and adding Subsections
(g-8), (g-9), (g-10), (g-11), (u), (v), (w-1), and (x) to read as follows:
(g) A taxable entity shall
exclude from its total revenue, to the extent included under Subsection
(c)(1)(A), (c)(2)(A), or (c)(3), only the following flow-through funds that
are mandated by contract or subcontract to be distributed to other
entities:
(1) sales commissions to
nonemployees, including split-fee real estate commissions;
(2) the tax basis as
determined under the Internal Revenue Code of securities underwritten; and
(3) subcontracting payments made
under a contract or subcontract entered into [handled] by the
taxable entity to provide services, labor, or materials in connection with
the actual or proposed design, construction, remodeling, remediation,
or repair of improvements on real property or the location of the
boundaries of real property.
(g-8) A taxable entity
that is primarily engaged in the business of transporting aggregates shall
exclude from its total revenue, to the extent included under Subsection
(c)(1)(A), (c)(2)(A), or (c)(3), subcontracting payments made by the
taxable entity to nonemployee agents for the performance of delivery
services on behalf of the taxable entity. In this subsection,
"aggregates" means any commonly recognized construction material
removed or extracted from the earth, including dimension stone, crushed and
broken limestone, crushed and broken granite, other crushed and broken
stone, construction sand and gravel, industrial sand, dirt, soil,
cementitious material, and caliche.
(g-9) A taxable entity
that is a landlord of commercial property shall exclude from its total
revenue, to the extent included under Subsection (c)(1)(A), (2)(A), or (3),
payments, excluding expenses for interest and depreciation and other
expenses not listed in this subsection, received from a tenant of the
property for ad valorem taxes and any tax or excise imposed on rents.
(g-10) A taxable entity
that is primarily engaged in the business of transporting barite shall
exclude from its total revenue, to the extent included under Subsection
(c)(1)(A), (c)(2)(A), or (c)(3), subcontracting payments made by the
taxable entity to nonemployee agents for the performance of transportation
services on behalf of the taxable entity. For purposes of this subsection,
"barite" means barium sulfate (BaSO4), a mineral used as a
weighing agent in oil and gas exploration.
(g-11) A taxable entity
that is primarily engaged in the business of performing landman services
shall exclude from its total revenue, to the extent included under
Subsection (c)(1)(A), (c)(2)(A), or (c)(3), subcontracting payments made by
the taxable entity to nonemployees for the performance of landman services
on behalf of the taxable entity. In this subsection, "landman
services" means:
(1) performing title
searches for the purpose of determining ownership of or curing title
defects related to oil, gas, or other related mineral or petroleum
interests;
(2) negotiating the
acquisition or divestiture of mineral rights for the purpose of the
exploration, development, or production of oil, gas, or other related
mineral or petroleum interests; or
(3) negotiating or
managing the negotiation of contracts or other agreements related to the
ownership of mineral interests for the exploration, exploitation,
disposition, development, or production of oil, gas, or other related
mineral or petroleum interests.
(u) A taxable entity that
is a physician practice shall exclude from its total revenue the actual
cost paid by the taxable entity for a vaccine.
(v) A taxable entity
primarily engaged in the business of transporting commodities by waterways
that does not subtract cost of goods sold in computing its taxable margin
shall exclude from its total revenue direct costs of providing inbound and
outbound transportation services by intrastate or interstate waterways to
the same extent that a taxable entity that sells in the ordinary course of
business real or tangible personal property would be authorized by Section
171.1012 to subtract those costs as costs of goods sold in computing its
taxable margin.
(w-1) A taxable entity
primarily engaged in the business of providing services as an agricultural
aircraft operation, as defined by 14 C.F.R. Section 137.3, shall exclude
from its total revenue the cost of labor, equipment, fuel, and materials
used in providing those services.
(x) A taxable entity that
is registered as a motor carrier under Chapter 643, Transportation Code,
shall exclude from its total revenue, to the extent included under
Subsection (c)(1)(A), (c)(2)(A), or (c)(3), flow-through revenue derived
from taxes and fees.
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SECTION 5. Section 171.1014,
Tax Code, is amended by amending Subsection (c) and adding Subsections (j)
and (k) to read as follows:
(c) For purposes of Section
171.101, a combined group shall determine its total revenue by:
(1) determining the total
revenue of each of its members as provided by Section 171.1011 as if the
member were an individual taxable entity, except that only one member of
the combined group may subtract $1 million under Section 171.1011(c)(1)(C),
(c)(2)(C), or (c)(3);
(2) adding the total
revenues of the members determined under Subdivision (1) together; and
(3) subtracting, to the
extent included under Section 171.1011(c)(1)(A), (c)(2)(A), or (c)(3),
items of total revenue received from a member of the combined group.
(j) Notwithstanding any
other provision of this chapter and except as provided by Subsection (k), a
nonqualified affiliate that would, except as otherwise provided by this
subsection, be included in a combined group with a qualified affiliate may
not be included in such combined group if:
(1) more than 50 percent
of the threshold amount is from activities in retail or wholesale trade;
(2) less than 50 percent
of the threshold amount is from the sale of products produced by any entity
that is included in an affiliated group with such qualified affiliate; and
(3) less than 5 percent
of the threshold amount is from providing retail or wholesale electric
utilities.
(k) For purposes of
Subsection (j):
(1) "nonqualified
affiliate" means an individual taxable entity that provides retail or
wholesale electric utilities;
(2) "qualified
affiliate" means an individual taxable entity that does not provide
retail or wholesale electric utilities; and
(3) "threshold
amount" means the total revenue determined under Subsection (c),
provided that Subsection (j) has no effect on the determination of total
revenue.
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No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
No
equivalent provision.
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SECTION 6. Section
171.1015(d), Tax Code, is amended to read as follows:
(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)
[171.002(d)(1) or (d)(2)].
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No
equivalent provision.
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SECTION 7. Sections
171.1016(a) and (b), Tax Code, are amended to read as follows:
(a) Notwithstanding any
other provision of this chapter, a taxable entity whose total revenue from
its entire business is not more than $20 [$10] million may
elect to pay the tax imposed under this chapter in the amount computed and
at the rate provided by this section rather than in the amount computed and
at the tax rate provided by Section 171.002.
(b) The amount of the tax
for which a taxable entity that elects to pay the tax as provided by this
section is liable 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 0.48 [0.575]
percent.
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No
equivalent provision.
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SECTION 8. (a) Section 1(c),
Chapter 286 (H.B. 4765), Acts of the 81st Legislature, Regular Session,
2009, as amended by Section 37.01, Chapter 4 (S.B. 1), Acts of the 82nd
Legislature, 1st Called Session, 2011, is repealed.
(b)
This section takes effect September 1, 2013.
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SECTION 11. Section 1(c),
Chapter 286 (H.B. 4765), Acts of the 81st Legislature, Regular Session,
2009, as amended by Section 37.01, Chapter 4 (S.B. 1), Acts of the 82nd
Legislature, 1st Called Session, 2011, is repealed.
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SECTION 9. (a) Section 2,
Chapter 286 (H.B. 4765), Acts of the 81st Legislature, Regular Session,
2009, as amended by Section 37.02, Chapter 4 (S.B. 1), Acts of the 82nd
Legislature, 1st Called Session, 2011, and which amended former Subsection
(d), Section 171.002, Tax Code, is repealed.
(b)
This section takes effect September 1, 2013.
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SECTION 12. Section 2,
Chapter 286 (H.B. 4765), Acts of the 81st Legislature, Regular Session,
2009, as amended by Section 37.02, Chapter 4 (S.B. 1), Acts of the 82nd
Legislature, 1st Called Session, 2011, and which amended former Subsection
(d), Section 171.002, Tax Code, is repealed.
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SECTION 10. (a) Section 3,
Chapter 286 (H.B. 4765), Acts of the 81st Legislature, Regular Session,
2009, as amended by Section 37.03, Chapter 4 (S.B. 1), Acts of the 82nd
Legislature, 1st Called Session, 2011, and which amended former Subsection
(a), Section 171.0021, Tax Code, is repealed.
(b)
This section takes effect September 1, 2013.
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SECTION 13. Section 3,
Chapter 286 (H.B. 4765), Acts of the 81st Legislature, Regular Session,
2009, as amended by Section 37.03, Chapter 4 (S.B. 1), Acts of the 82nd
Legislature, 1st Called Session, 2011, and which amended former Subsection
(a), Section 171.0021, Tax Code, is repealed.
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SECTION 11. (a) The
comptroller of public accounts shall conduct a comprehensive study of
alternative methods of taxing business entities that would generate
approximately the same revenue as the franchise tax.
(b) In conducting the study,
the comptroller shall assume that:
(1) the alternative method
of tax is imposed on all taxable entities subject to the current franchise
tax; and
(2) the alternative method
of tax is imposed on all taxable entities at the same rate.
(c) The comptroller of
public accounts shall submit a report to the legislature regarding the
results of the study conducted under this section not later than January 1,
2015.
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No
equivalent provision.
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No
equivalent provision.
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SECTION 4. Section
171.101(a), Tax Code, is amended to read as follows:
(a) The taxable margin of a
taxable entity is computed by:
(1) determining the taxable
entity's margin, which is the lesser of:
(A) 65 percent [70
percent] of the taxable entity's total revenue from its entire
business, as determined under Section 171.1011; or
(B) an amount computed by:
(i) determining the taxable
entity's total revenue from its entire business, under Section 171.1011;
(ii) subtracting, at the
election of the taxable entity, either:
(a) cost of goods sold, as
determined under Section 171.1012; or
(b) compensation, as
determined under Section 171.1013; and
(iii) subtracting, in
addition to any subtractions made under Subparagraph (ii)(a) or (b),
compensation, as determined under Section 171.1013, paid to an individual
during the period the individual is serving on active duty as a member of
the armed forces of the United States if the individual is a resident of
this state at the time the individual is ordered to active duty and the
cost of training a replacement for the individual;
(2) apportioning the taxable
entity's margin to this state as provided by Section 171.106 to determine
the taxable entity's apportioned margin; and
(3) subtracting from the
amount computed under Subdivision (2) any other allowable deductions to
determine the taxable entity's taxable margin.
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No
equivalent provision.
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SECTION 6. Section 171.1011(p),
Tax Code, is amended by amending Subdivision (4-a) and adding Subdivisions
(4-b) and (8) to read as follows:
(4-a) "Physician
practice" means an entity that:
(A) is owned entirely by
one or more individuals licensed to practice medicine in this state under
Subtitle B, Title 3, Occupations Code; and
(B) offers services, the
provision of which is considered practicing medicine as defined by Section
151.002(a)(13), Occupations Code.
(4-b) "Pro bono
services" means the direct provision of legal services to the poor,
without an expectation of compensation.
(8) "Vaccine"
means a preparation or suspension of dead, live attenuated, or live fully
virulent viruses or bacteria, or of antigenic proteins derived from them,
used to prevent, ameliorate, or treat an infectious disease.
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No
equivalent provision.
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SECTION 7. Section 171.1012,
Tax Code, is amended by adding Subsection (q) to read as follows:
(q) Notwithstanding
Subsection (i) or any other provision of this section, a taxable entity
that is primarily engaged in the business of harvesting trees for wood may
subtract as cost of goods sold the direct costs of acquiring or producing
the timber for the wood that are specified by this subsection or otherwise
described by this section, regardless of whether the taxable entity owns
the land from which the trees are harvested, the harvested timber, or the
wood resulting from the harvested timber. For purposes of this subsection,
direct costs include costs of:
(1) moving harvesting
equipment;
(2) severing timber;
(3) transporting timber
to and from a mill or designated delivery point;
(4) obtaining, using,
storing, or maintaining equipment necessary for an activity described by
Subdivision (1), (2), or (3); and
(5) other supplies,
labor, freight, and fuel necessary for an activity described by Subdivision
(1), (2), or (3).
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No
equivalent provision.
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SECTION 8. Section
171.1014(d), Tax Code, is amended to read as follows:
(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 65
percent [70 percent] of the combined group's total revenue from
its entire business, as provided by Section 171.101(a)(1)(A).
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SECTION 12. Sections
171.0021, 171.1016(d), and 171.204(b),
Tax Code, are repealed.
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SECTION 10. Sections
171.0021 and 171.1016(d), Tax Code, are repealed.
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SECTION 13. This Act applies
only to a report originally due on or after January 1, 2014.
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SECTION 14. Substantially
the same as introduced.
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SECTION 14. Except as otherwise provided by this Act,
this Act takes effect January 1, 2014.
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SECTION 15. This Act takes
effect January 1, 2014.
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