86R2088 BEF-D
 
  By: Taylor S.B. No. 1081
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to a deduction under the franchise tax for certain
  contracts with the federal government.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  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)  the amount provided by this paragraph, which
  is the lesser of:
                           (i)  70 percent of the taxable entity's total
  revenue from its entire business, as determined under Section
  171.1011; or
                           (ii)  an amount equal to the taxable entity's
  total revenue from its entire business as determined under Section
  171.1011 minus $1 million; or
                     (B)  an amount computed by determining the taxable
  entity's total revenue from its entire business under Section
  171.1011 and subtracting the greater of:
                           (i)  $1 million; or
                           (ii)  an amount equal to the sum of:
                                 (a)  at the election of the taxable
  entity, either:
                                       (1)  cost of goods sold, as
  determined under Section 171.1012; or
                                       (2)  compensation, as determined
  under Section 171.1013; [and]
                                 (b)  any 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; and
                                 (c)  any costs not already subtracted
  under Sub-subparagraph (a) that are properly allowable under the
  Federal Acquisition Regulation (48 C.F.R. Chapter 1), or a
  successor regulation, for contracts, or subcontracts supporting
  those contracts, for the sale of goods or services to the federal
  government by a taxable entity that is a party to at least one
  contract subject to the requirements of 48 C.F.R. Chapter 2;
               (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.
         SECTION 2.  This Act applies only to a report originally due
  on or after January 1, 2020.
         SECTION 3.  This Act takes effect January 1, 2020.