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A BILL TO BE ENTITLED
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AN ACT
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relating to the treatment of certain limited liability companies as |
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passive entities for purposes of the franchise tax. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 171.0003(a), Tax Code, is amended to |
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read as follows: |
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(a) An entity is a passive entity only if: |
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(1) the entity is a general or limited partnership, a |
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limited liability company, or a trust, other than a business trust; |
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(2) during the period on which margin is based, the |
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entity's federal gross income consists of at least 90 percent of the |
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following income: |
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(A) dividends, interest, foreign currency |
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exchange gain, periodic and nonperiodic payments with respect to |
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notional principal contracts, option premiums, cash settlement or |
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termination payments with respect to a financial instrument, and |
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income from a limited liability company; |
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(B) distributive shares of partnership income to |
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the extent that those distributive shares of income are greater |
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than zero; |
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(C) capital gains from the sale of real property, |
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gains from the sale of commodities traded on a commodities |
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exchange, and gains from the sale of securities; and |
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(D) royalties, bonuses, or delay rental income |
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from mineral properties and income from other nonoperating mineral |
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interests; and |
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(3) the entity does not receive more than 10 percent of |
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its federal gross income from conducting an active trade or |
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business. |
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SECTION 2. 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 3. This Act takes effect January 1, 2022. |