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A BILL TO BE ENTITLED
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AN ACT
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relating to the computation of the franchise tax, including certain |
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exclusions from the tax. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 171.0001(12), Tax Code, is amended to |
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read as follows: |
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(12) "Retail trade" means: |
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(A) the activities described in Division G of the |
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1987 Standard Industrial Classification Manual published by the |
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federal Office of Management and Budget; [and] |
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(B) apparel rental activities classified as |
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Industry 5999 or 7299 of the 1987 Standard Industrial |
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Classification Manual published by the federal Office of Management |
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and Budget; |
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(C) the activities classified as Industry Group |
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753 of the 1987 Standard Industrial Classification Manual published |
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by the federal Office of Management and Budget; and |
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(D) rental-purchase agreement activities |
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regulated by Chapter 92, Business & Commerce Code. |
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SECTION 2. Section 171.002, Tax Code, is amended by adding |
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Subsection (c-2) to read as follows: |
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(c-2) Subsection (c)(2) does not apply to total revenue from |
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activities in a trade that rents or leases tangible personal |
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property as described by Industry Group 735 of the Standard |
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Industrial Classification Manual published by the United States |
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Department of Labor. |
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SECTION 3. Section 171.006(b), Tax Code, is amended to read |
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as follows: |
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(b) Beginning in 2010, on January 1 of each even-numbered |
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year, the amounts prescribed by Sections 171.002(d)(2) [,
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171.0021,] and 171.1013(c) are increased or decreased by an amount |
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equal to the amount prescribed by those sections on December 31 of |
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the preceding year multiplied by the percentage increase or |
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decrease during the preceding state fiscal biennium in the consumer |
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price index and rounded to the nearest $10,000. |
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SECTION 4. Section 171.101(a), Tax Code, is amended to read |
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as follows: |
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(a) The taxable margin of a taxable entity is computed by: |
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(1) determining the taxable entity's margin, which is |
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the lesser of: |
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(A) 65 percent [70 percent] of the taxable |
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entity's total revenue from its entire business, as determined |
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under Section 171.1011; or |
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(B) an amount computed by: |
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(i) determining the taxable entity's total |
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revenue from its entire business, under Section 171.1011; |
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(ii) subtracting, at the election of the |
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taxable entity, either: |
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(a) cost of goods sold, as determined |
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under Section 171.1012; or |
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(b) compensation, as determined under |
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Section 171.1013; and |
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(iii) subtracting, in addition to any |
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subtractions made under Subparagraph (ii)(a) or (b), compensation, |
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as determined under Section 171.1013, paid to an individual during |
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the period the individual is serving on active duty as a member of |
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the armed forces of the United States if the individual is a |
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resident of this state at the time the individual is ordered to |
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active duty and the cost of training a replacement for the |
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individual; |
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(2) apportioning the taxable entity's margin to this |
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state as provided by Section 171.106 to determine the taxable |
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entity's apportioned margin; and |
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(3) subtracting from the amount computed under |
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Subdivision (2) any other allowable deductions to determine the |
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taxable entity's taxable margin. |
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SECTION 5. Section 171.1011, Tax Code, is amended by |
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amending Subsection (g) and adding Subsections (g-8), (g-9), |
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(g-10), (g-11), (u), (v), (w-1), and (x) to read as follows: |
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(g) A taxable entity shall exclude from its total revenue, |
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to the extent included under Subsection (c)(1)(A), (c)(2)(A), or |
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(c)(3), only the following flow-through funds that are mandated by |
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contract or subcontract to be distributed to other entities: |
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(1) sales commissions to nonemployees, including |
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split-fee real estate commissions; |
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(2) the tax basis as determined under the Internal |
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Revenue Code of securities underwritten; and |
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(3) subcontracting payments made under a contract or |
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subcontract entered into [handled] by the taxable entity to provide |
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services, labor, or materials in connection with the actual or |
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proposed design, construction, remodeling, remediation, or repair |
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of improvements on real property or the location of the boundaries |
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of real property. |
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(g-8) A taxable entity that is primarily engaged in the |
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business of transporting aggregates shall exclude from its total |
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revenue, to the extent included under Subsection (c)(1)(A), |
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(c)(2)(A), or (c)(3), subcontracting payments made by the taxable |
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entity to nonemployee agents for the performance of delivery |
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services on behalf of the taxable entity. In this subsection, |
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"aggregates" means any commonly recognized construction material |
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removed or extracted from the earth, including dimension stone, |
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crushed and broken limestone, crushed and broken granite, other |
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crushed and broken stone, construction sand and gravel, industrial |
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sand, dirt, soil, cementitious material, and caliche. |
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(g-9) A taxable entity that is a landlord of commercial |
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property shall exclude from its total revenue, to the extent |
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included under Subsection (c)(1)(A), (2)(A), or (3), payments, |
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excluding expenses for interest and depreciation and other expenses |
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not listed in this subsection, received from a tenant of the |
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property for ad valorem taxes and any tax or excise imposed on |
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rents. |
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(g-10) A taxable entity that is primarily engaged in the |
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business of transporting barite shall exclude from its total |
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revenue, to the extent included under Subsection (c)(1)(A), |
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(c)(2)(A), or (c)(3), subcontracting payments made by the taxable |
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entity to nonemployee agents for the performance of transportation |
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services on behalf of the taxable entity. For purposes of this |
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subsection, "barite" means barium sulfate (BaSO4), a mineral used |
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as a weighing agent in oil and gas exploration. |
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(g-11) A taxable entity that is primarily engaged in the |
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business of performing landman services shall exclude from its |
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total revenue, to the extent included under Subsection (c)(1)(A), |
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(c)(2)(A), or (c)(3), subcontracting payments made by the taxable |
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entity to nonemployees for the performance of landman services on |
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behalf of the taxable entity. In this subsection, "landman |
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services" means: |
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(1) performing title searches for the purpose of |
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determining ownership of or curing title defects related to oil, |
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gas, or other related mineral or petroleum interests; |
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(2) negotiating the acquisition or divestiture of |
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mineral rights for the purpose of the exploration, development, or |
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production of oil, gas, or other related mineral or petroleum |
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interests; or |
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(3) negotiating or managing the negotiation of |
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contracts or other agreements related to the ownership of mineral |
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interests for the exploration, exploitation, disposition, |
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development, or production of oil, gas, or other related mineral or |
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petroleum interests. |
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(u) A taxable entity that is a physician practice shall |
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exclude from its total revenue the actual cost paid by the taxable |
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entity for a vaccine. |
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(v) A taxable entity primarily engaged in the business of |
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transporting commodities by waterways that does not subtract cost |
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of goods sold in computing its taxable margin shall exclude from its |
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total revenue direct costs of providing inbound and outbound |
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transportation services by intrastate or interstate waterways to |
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the same extent that a taxable entity that sells in the ordinary |
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course of business real or tangible personal property would be |
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authorized by Section 171.1012 to subtract those costs as costs of |
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goods sold in computing its taxable margin. |
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(w-1) A taxable entity primarily engaged in the business of |
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providing services as an agricultural aircraft operation, as |
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defined by 14 C.F.R. Section 137.3, shall exclude from its total |
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revenue the cost of labor, equipment, fuel, and materials used in |
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providing those services. |
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(x) A taxable entity that is registered as a motor carrier |
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under Chapter 643, Transportation Code, shall exclude from its |
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total revenue, to the extent included under Subsection (c)(1)(A), |
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(c)(2)(A), or (c)(3), flow-through revenue derived from taxes and |
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fees. |
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SECTION 6. Section 171.1011(p), Tax Code, is amended by |
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amending Subdivision (4-a) and adding Subdivisions (4-b) and (8) to |
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read as follows: |
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(4-a) "Physician practice" means an entity that: |
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(A) is owned entirely by one or more individuals |
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licensed to practice medicine in this state under Subtitle B, Title |
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3, Occupations Code; and |
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(B) offers services, the provision of which is |
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considered practicing medicine as defined by Section |
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151.002(a)(13), Occupations Code. |
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(4-b) "Pro bono services" means the direct provision |
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of legal services to the poor, without an expectation of |
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compensation. |
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(8) "Vaccine" means a preparation or suspension of |
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dead, live attenuated, or live fully virulent viruses or bacteria, |
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or of antigenic proteins derived from them, used to prevent, |
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ameliorate, or treat an infectious disease. |
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SECTION 7. Section 171.1012, Tax Code, is amended by adding |
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Subsection (q) to read as follows: |
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(q) Notwithstanding Subsection (i) or any other provision |
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of this section, a taxable entity that is primarily engaged in the |
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business of harvesting trees for wood may subtract as cost of goods |
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sold the direct costs of acquiring or producing the timber for the |
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wood that are specified by this subsection or otherwise described |
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by this section, regardless of whether the taxable entity owns the |
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land from which the trees are harvested, the harvested timber, or |
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the wood resulting from the harvested timber. For purposes of this |
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subsection, direct costs include costs of: |
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(1) moving harvesting equipment; |
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(2) severing timber; |
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(3) transporting timber to and from a mill or |
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designated delivery point; |
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(4) obtaining, using, storing, or maintaining |
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equipment necessary for an activity described by Subdivision (1), |
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(2), or (3); and |
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(5) other supplies, labor, freight, and fuel necessary |
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for an activity described by Subdivision (1), (2), or (3). |
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SECTION 8. Section 171.1014(d), Tax Code, is amended to |
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read as follows: |
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(d) For purposes of Section 171.101, a combined group shall |
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make an election to subtract either cost of goods sold or |
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compensation that applies to all of its members. Regardless of the |
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election, the taxable margin of the combined group may not exceed 65 |
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percent [70 percent] of the combined group's total revenue from its |
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entire business, as provided by Section 171.101(a)(1)(A). |
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SECTION 9. Section 171.106, Tax Code, is amended by adding |
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Subsection (g) to read follows: |
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(g) A receipt from Internet hosting as defined by Section |
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151.108(a) is a receipt from business done in this state only if the |
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customer to whom the service is provided is located in this state. |
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SECTION 10. Sections 171.0021 and 171.1016(d), Tax Code, |
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are repealed. |
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SECTION 11. Section 1(c), Chapter 286 (H.B. 4765), Acts of |
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the 81st Legislature, Regular Session, 2009, as amended by Section |
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37.01, Chapter 4 (S.B. 1), Acts of the 82nd Legislature, 1st Called |
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Session, 2011, is repealed. |
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SECTION 12. Section 2, Chapter 286 (H.B. 4765), Acts of the |
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81st Legislature, Regular Session, 2009, as amended by Section |
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37.02, Chapter 4 (S.B. 1), Acts of the 82nd Legislature, 1st Called |
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Session, 2011, and which amended former Subsection (d), Section |
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171.002, Tax Code, is repealed. |
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SECTION 13. Section 3, Chapter 286 (H.B. 4765), Acts of the |
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81st Legislature, Regular Session, 2009, as amended by Section |
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37.03, Chapter 4 (S.B. 1), Acts of the 82nd Legislature, 1st Called |
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Session, 2011, and which amended former Subsection (a), Section |
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171.0021, Tax Code, is repealed. |
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SECTION 14. 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 15. This Act takes effect January 1, 2014. |