BILL ANALYSIS |
C.S.H.B. 509 |
By: Murphy |
Ways & Means |
Committee Report (Substituted) |
BACKGROUND AND PURPOSE
According to interested parties, the current iteration of the franchise tax was created last decade in order to raise additional revenue necessary to fund reductions of school district property tax rates. The parties contend, however, that repealing the franchise tax would have substantial economic benefits for the entire Texas economy, including reducing the after-tax burden on income derived from capital investments, which provides a powerful incentive for business owners inside Texas to invest in their businesses, making Texas an even more attractive location for firms looking to locate new facilities. C.S.H.B. 509 seeks to phase out the franchise tax.
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RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
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ANALYSIS
C.S.H.B. 509 amends the Tax Code to reduce incrementally the franchise tax rate, the franchise tax rate for those taxable entities primarily engaged in retail or wholesale trade, and the E-Z Computation franchise tax rate, according to the following schedules: · The bill reduces the franchise tax rate from the current rate of one percent of taxable margin to the following rates: o 0.75 percent of taxable margin, effective January 1, 2014 o 0.50 percent of taxable margin, effective January 1, 2015 o 0.25 percent of taxable margin. effective January 1, 2016 · The bill reduces the franchise tax rate for those taxable entities primarily engaged in retail or wholesale trade from the current rate of 0.5 percent of taxable margin to the following rates: o 0.38 percent of taxable margin, effective January 1, 2014 o 0.25 percent of taxable margin, effective January 1, 2015 o 0.13 percent of taxable margin, effective January 1, 2016 · The bill reduces the E-Z Computation franchise tax rate from the current rate of 0.575 percent of apportioned total revenue to the following rates: o 0.43 percent of apportioned total revenue, effective January 1, 2014 o 0.29 percent of apportioned total revenue, effective January 1, 2015 o 0.14 percent of apportioned total revenue, effective January 1, 2016
C.S.H.B. 509 repeals the franchise tax, effective January 1, 2017, and requires a taxable entity subject to the franchise tax imposed on December 31, 2016, to file a final franchise tax return and pay a transitional tax on or before May 15, 2017, that is equal to the franchise tax the taxable entity would have paid in 2017 had the tax not been repealed. The bill establishes that the Tax Code provisions relating to the computation and payment of the franchise tax remain in effect after the repeal for the purposes of computing and paying the transitional tax. The bill clarifies that the franchise tax and provisions relating to enforcement and collection with regard to state taxation continue to apply to audits, deficiencies, redeterminations, and refunds of any franchise tax due or collected, including the transitional tax, until barred by limitations. The bill clarifies that the repeal of the franchise tax does not affect the status of a taxable entity that has had certain sanctions imposed against it, a suit filed against it, or a receiver appointed for it; the ability of the comptroller of public accounts, secretary of state, or attorney general to take action against a taxable entity for actions that took place before the repeal; or the right of a taxable entity to contest a forfeiture, revocation, lawsuit, or appointment of a receiver, all with regard to certain provisions relating to the franchise tax.
C.S.H.B. 509 repeals provisions of law relating to the effective dates for successive changes to the maximum amount of a taxable entity's total revenue that would exempt such an entity from franchise tax liability and repeals provisions relating to discounts from tax liability for small businesses with total business revenue at various ranges below $900,000.
C.S.H.B. 509 repeals the following provisions of law: · 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 · 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 · 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 · Section 171.0021, Tax Code · Section 171.1016(d), Tax Code
Effective January 1, 2017, C.S.H.B. 509 repeals Chapter 171, Tax Code.
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EFFECTIVE DATE
Except as otherwise provided, January 1, 2014.
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COMPARISON OF ORIGINAL AND SUBSTITUTE
While C.S.H.B. 509 may differ from the original in minor or nonsubstantive ways, the following comparison is organized and highlighted in a manner that indicates the substantial differences between the introduced and committee substitute versions of the bill.
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