BILL ANALYSIS |
C.S.H.B. 3388 |
By: Hilderbran |
Ways & Means |
Committee Report (Substituted) |
BACKGROUND AND PURPOSE
Interested parties note that certain taxpayers, including television stations, video stores, and theaters, may use the cost of goods sold deduction in determining their taxable margin under the franchise tax, a deduction which, as it applies to movie producers, television stations, and other companies in the business of distributing films or television programs, may include fees paid for the right to use the programs or movies. Distribution begins with a sale by the manufacturer or producer and ends with the sale or exhibition to the consumer. In the movie industry, there are several distribution channels, and the costs of the right to use movies are steep. This complexity has resulted in confusion regarding the distribution of movies and how related costs are factored into franchise tax liability. C.S.H.B. 3388 seeks to eliminate this confusion by requiring that amounts paid by theaters for the right to exhibit movies be included in the cost of goods sold deduction.
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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. 3388 amends the Tax Code to require the cost of goods sold for a taxable entity that is a movie theater and that elects to subtract cost of goods sold from its taxable margin for purposes of computing franchise tax liability to be the costs in relation to the acquisition, production, exhibition, or use of a film or motion picture, including expenses for the right to use the film or motion picture.
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EFFECTIVE DATE
September 1, 2013.
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COMPARISON OF ORIGINAL AND SUBSTITUTE
While C.S.H.B. 3388 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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