87R3748 CJC-D
 
  By: Holland H.B. No. 1671
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to an exemption from the franchise tax and certain filing
  fees for certain businesses owned by veterans during an initial
  period of operation in the state.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter A, Chapter 12, Business Organizations
  Code, is amended by adding Section 12.005 to read as follows:
         Sec. 12.005.  FEE WAIVER FOR NEW VETERAN-OWNED BUSINESS.
  The secretary of state shall waive all fees imposed under
  Subchapter D, Chapter 4, for an entity that is a new veteran-owned
  business as defined by Section 171.0005, Tax Code, until the
  earlier of:
               (1)  the fifth anniversary of the date on which the
  entity was formed; or
               (2)  the date the entity ceases to qualify as a new
  veteran-owned business as defined by Section 171.0005, Tax Code.
         SECTION 2.  Section 171.0001(4), Tax Code, is amended to
  read as follows:
               (4)  "Beginning date" means:
                     (A)  except as provided by Paragraph (B):
                           (i)  for a taxable entity chartered or
  organized in this state, the date on which the taxable entity's
  charter or organization takes effect; and
                           (ii) [(B)]  for any other taxable entity,
  the date on which the taxable entity begins doing business in this
  state; or
                     (B)  for a taxable entity that qualifies as a new
  veteran-owned business as defined by Section 171.0005, the earlier
  of:
                           (i)  the fifth anniversary of the date on
  which the taxable entity begins doing business in this state; or
                           (ii)  the date the taxable entity ceases to
  qualify as a new veteran-owned business as defined by Section
  171.0005.
         SECTION 3.  Effective January 1, 2026, Section 171.0001(4),
  Tax Code, is amended to read as follows:
               (4)  "Beginning date" means:
                     (A)  for a taxable entity chartered or organized
  in this state, the date on which the taxable entity's charter or
  organization takes effect; and
                     (B)  for any other taxable entity, the date on
  which the taxable entity begins doing business in this state.
         SECTION 4.  Subchapter A, Chapter 171, Tax Code, is amended
  by adding Section 171.0005 to read as follows:
         Sec. 171.0005.  DEFINITION OF NEW VETERAN-OWNED BUSINESS.
  (a)  A taxable entity is a new veteran-owned business only if the
  taxable entity is a new business in which each owner is a natural
  person who:
               (1)  served in and was honorably discharged from a
  branch of the United States armed forces; and
               (2)  provides verification to the comptroller of the
  person's service and discharge required by Subdivision (1).
         (b)  The Texas Veterans Commission shall provide to a person
  who meets the requirements of Subsection (a)(1) written
  verification of that status in a form required by the comptroller.  
  The comptroller shall adopt rules prescribing the form and content
  of the verification and the manner in which the verification may be
  provided to the comptroller.
         (c)  For purposes of Subsection (a), a new business is a
  taxable entity that:
               (1)  is chartered or organized or otherwise formed in
  this state; and
               (2)  first begins doing business in this state on or
  after January 1, 2022.
         SECTION 5.  Section 171.001, Tax Code, is amended by adding
  Subsection (d) to read as follows:
         (d)  Notwithstanding Subsection (a), the tax imposed under
  this chapter is not imposed on a taxable entity that qualifies as a
  new veteran-owned business as defined by Section 171.0005 until the
  earlier of:
               (1)  the fifth anniversary of the date on which the
  taxable entity begins doing business in this state; or
               (2)  the date the taxable entity ceases to qualify as a
  new veteran-owned business as defined by Section 171.0005.
         SECTION 6.  Section 171.063(g), Tax Code, is amended to read
  as follows:
         (g)  If a corporation's federal tax exemption is withdrawn by
  the Internal Revenue Service for failure of the corporation to
  qualify or maintain its qualification for the exemption, the
  corporation's exemption under this section ends on the effective
  date of that withdrawal by the Internal Revenue Service. The
  effective date of the withdrawal is considered the corporation's
  beginning date for purposes of determining the corporation's
  privilege periods and for all other purposes of this chapter,
  except that if the corporation would have been subject to Section
  171.001(d) in the absence of the federal tax exemption, and the
  effective date of the withdrawal is a date earlier than the date the
  corporation would have become subject to the franchise tax as
  provided by Section 171.001(d), the date the corporation would have
  become subject to the franchise tax under that section is
  considered the corporation's beginning date for those purposes.
         SECTION 7.  Effective January 1, 2026, Section 171.063(g),
  Tax Code, is amended to read as follows:
         (g)  If a corporation's federal tax exemption is withdrawn by
  the Internal Revenue Service for failure of the corporation to
  qualify or maintain its qualification for the exemption, the
  corporation's exemption under this section ends on the effective
  date of that withdrawal by the Internal Revenue Service. The
  effective date of the withdrawal is considered the corporation's
  beginning date for purposes of determining the corporation's
  privilege periods and for all other purposes of this chapter.
         SECTION 8.  Section 171.204, Tax Code, is amended by adding
  Subsection (d) to read as follows:
         (d)  The comptroller may require a taxable entity on which
  the tax imposed under this chapter is not imposed solely because of
  the application of Section 171.001(d) to file an information report
  stating the taxable entity's beginning date as determined under
  Section 171.0001(4)(B) and any other information the comptroller
  determines necessary.  The comptroller may not require the taxable
  entity to report or compute its margin.
         SECTION 9.  Effective January 1, 2026, the following
  provisions are repealed:
               (1)  Section 12.005, Business Organizations Code;
               (2)  Section 171.0005, Tax Code;
               (3)  Section 171.001(d), Tax Code; and
               (4)  Section 171.204(d), Tax Code.
         SECTION 10.  The changes in law made by this Act that take
  effect January 1, 2026, do not apply to a business that first
  qualifies before that date as a new veteran-owned business as
  defined by Section 171.0005, Tax Code, as that section exists
  immediately before that date.  A business that first qualifies
  before January 1, 2026, as a new veteran-owned business is governed
  by the law in effect immediately before that date, and that law is
  continued in effect for that purpose.
         SECTION 11.  Except as otherwise provided by this Act, this
  Act takes effect January 1, 2022.