81R1240 CBH-D
By: Paxton H.B. No. 1036
A BILL TO BE ENTITLED
AN ACT
relating to the method of computing the franchise tax and the rates
of the tax.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading of Subchapter A, Chapter 171, Tax
Code, is amended to read as follows:
SUBCHAPTER A. [DEFINITIONS;] TAX IMPOSED
SECTION 2. Sections 171.001, 171.0011, and 171.002, Tax
Code, are amended to read as follows:
Sec. 171.001. TAX IMPOSED. (a) A franchise tax is imposed
on:
(1) each corporation [taxable entity] that does
business in this state or that is chartered [or organized] in this
state; and
(2) each limited liability company that does business
in this state or that is organized under the laws of this state.
(b) In this chapter:
(1) "Banking corporation" means each state, national,
domestic, or foreign bank, whether organized under the laws of this
state, another state, or another country, or under federal law,
including a limited banking association organized under Subtitle A,
Title 3, Finance Code, and each bank organized under Section 25(a),
Federal Reserve Act (12 U.S.C. Sections 611-631) (edge
corporations), but does not include a bank holding company as that
term is defined by Section 2, Bank Holding Company Act of 1956 (12
U.S.C. Section 1841).
(2) "Beginning date" means:
(A) for a corporation chartered in this state,
the date on which the corporation's charter takes effect; and
(B) for a foreign corporation, the date on which
the corporation begins doing business in this state.
(3) "Corporation" includes:
(A) a limited liability company, as defined under
the Texas Limited Liability Company Act;
(B) a savings and loan association; and
(C) a banking corporation.
(4) "Charter" includes a limited liability company's
certificate of organization.
(5) "Internal Revenue Code" means the Internal Revenue
Code of 1986 in effect for the federal tax year beginning on or
after January 1, 1996, and before January 1, 1997, and any
regulations adopted under that code applicable to that period.
(6) "Officer" and "director" include a limited
liability company's directors and managers and a limited banking
association's directors and managers and participants if there are
no directors or managers.
(7) "Savings and loan association" means a savings and
loan association or savings bank, whether organized under the laws
of this state, another state, or another country, or under federal
law.
(8) "Shareholder" includes a limited liability
company's member and a limited banking association's participant.
(c) The tax imposed under this chapter extends to the limits
of the United States Constitution and the federal law adopted under
the United States Constitution.
[(c) The tax imposed under this section or Section 171.0011
is not imposed on an entity if, during the period on which the
report is based, the entity qualifies as a passive entity as defined
by Section 171.0003.]
Sec. 171.0011. ADDITIONAL TAX. (a) An [Except as provided
by Section 171.001(c), an] additional tax is imposed on a
corporation [taxable entity] that for any reason becomes no longer
subject to the earned surplus component of the tax, without regard
to whether the corporation remains subject to the taxable capital
component of the tax [imposed under this chapter].
(b) The additional tax is equal to 2.25 percent of the
corporation's net taxable earned surplus [the appropriate rate
under Section 171.002 of the taxable entity's taxable margin]
computed on the period beginning on the day after the last day for
which the tax imposed on [taxable margin or] net taxable earned
surplus was computed under Section 171.1532 and ending on the date
the corporation [taxable entity] is no longer subject to the earned
surplus component of the tax [imposed under this chapter].
(c) The additional tax imposed and any report required by
the comptroller are due on the 60th day after the date the
corporation [taxable entity] becomes no longer subject to the
earned surplus component of the tax [imposed under this chapter].
(d) Except as otherwise provided by this section, the
provisions of this chapter apply to the tax imposed under this
section.
Sec. 171.002. RATES; COMPUTATION OF TAX. (a) The rates
[Subject to Sections 171.003 and 171.1016 and except as provided by
Subsection (b), the rate] of the franchise tax are:
(1) 0.125 [is one] percent per year of privilege
period of net taxable capital; and
(2) 2.25 percent of net taxable earned surplus
[margin].
(b) The amount of franchise tax on each corporation is
computed by adding the following:
(1) the amount calculated by applying the tax rate
prescribed by Subsection (a)(1) to the corporation's net taxable
capital; and
(2) the difference between:
(A) the amount calculated by applying the tax
rate prescribed by Subsection (a)(2) to the corporation's net
taxable earned surplus; and
(B) the amount determined under Subdivision (1)
[Subject to Sections 171.003 and 171.1016, the rate of the
franchise tax is 0.5 percent of taxable margin for those taxable
entities primarily engaged in retail or wholesale trade].
(c) In making a computation under Subsection (b), an amount
computed under Subsection (b)(1) or (b)(2) that is zero or less is
computed as a zero [A taxable entity is primarily engaged in retail
or wholesale trade only if:
[(1) the total revenue from its activities in retail
or wholesale trade is greater than the total revenue from its
activities in trades other than the retail and wholesale trades;
[(2) except as provided by Subsection (c-1), less than
50 percent of the total revenue from activities in retail or
wholesale trade comes from the sale of products it produces or
products produced by an entity that is part of an affiliated group
to which the taxable entity also belongs; and
[(3) the taxable entity does not provide retail or
wholesale utilities, including telecommunications services,
electricity, or gas].
[(c-1) Subsection (c)(2) does not apply to total revenue
from activities in a retail trade described by Major Group 58 of the
Standard Industrial Classification Manual published by the federal
Office of Management and Budget.]
(d) A corporation [taxable entity] is not required to pay
any tax and is not considered to owe any tax for a period if:
(1) the amount of tax computed for the corporation
[taxable entity] is less than $100 [$1,000]; or
(2) the amount of the corporation's gross receipts:
(A) [taxable entity's total revenue] from its
entire business under Section 171.105 is less than $150,000; and
(B) from its entire business under Section
171.1051, including the amount excepted under Section 171.1051(a),
is less than $150,000 [or equal to $300,000 or the amount determined
under Section 171.006 per 12-month period on which margin is
based].
SECTION 3. Subchapter A, Chapter 171, Tax Code, is amended
by adding Section 171.005 to read as follows:
Sec. 171.005. RATE OF TAX FOR CORPORATION IN PROCESS OF
LIQUIDATION. The franchise tax rate on a corporation in the process
of liquidation, as defined by Section 171.102, is the rate
established by Section 171.002.
SECTION 4. Section 171.052, Tax Code, is amended to read as
follows:
Sec. 171.052. CERTAIN CORPORATIONS. (a) An [Except as
provided by Subsection (c), an] insurance organization, title
insurance company, or title insurance agent authorized to engage in
insurance business in this state now required to pay an annual tax
under Chapter 4 or 9, Insurance Code, measured by its gross premium
receipts is exempted from the franchise tax. A nonadmitted
insurance organization that is required to pay a gross premium
receipts tax during a tax year is exempted from the franchise tax
for that same tax year.
(b) Farm mutuals, local mutual aid associations, and burial
associations are not subject to the franchise tax.
[(c) An entity is subject to the franchise tax for a tax year
in any portion of which the entity is in violation of an order
issued by the Texas Department of Insurance under Section
2254.003(b), Insurance Code, that is final after appeal or that is
no longer subject to appeal.]
SECTION 5. The heading of Subchapter C, Chapter 171, Tax
Code, is amended to read as follows:
SUBCHAPTER C. DETERMINATION OF TAXABLE CAPITAL AND TAXABLE EARNED
SURPLUS [MARGIN]; ALLOCATION AND APPORTIONMENT
SECTION 6. Section 171.101, Tax Code, is amended to read as
follows:
Sec. 171.101. DETERMINATION OF NET TAXABLE CAPITAL
[MARGIN]. (a) Except as provided by Subsections (b) and (c), the
net [The] taxable capital [margin] of a corporation [taxable
entity] is computed by:
(1) adding the corporation's stated capital, as
defined by Section 21.002, Business Organizations Code, and the
corporation's surplus, to determine the corporation's taxable
capital [determining the taxable entity's margin, which is the
lesser of:
[(A) 70 percent of the taxable entity's total
revenue from its entire business, as determined under Section
171.1011; or
[(B) an amount computed by:
[(i) determining the taxable entity's total
revenue from its entire business, under Section 171.1011; and
[(ii) subtracting, at the election of the
taxable entity, either:
[(a) cost of goods sold, as determined
under Section 171.1012; or
[(b) compensation, as determined
under Section 171.1013; and
[(iii) subtracting, in addition to any
subtractions made under Subparagraph (ii)(a) or (b), 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];
(2) apportioning the corporation's taxable capital
[taxable entity's margin] to this state as provided by Section
171.106(a), (c), or (d), as applicable, [171.106] to determine the
corporation's [taxable entity's] apportioned taxable capital
[margin]; and
(3) subtracting from the amount computed under
Subdivision (2) any other allowable deductions to determine the
corporation's net [taxable entity's] taxable capital [margin].
(b) The net taxable capital of a limited liability company
is computed by:
(1) adding the company's members' contributions, as
provided for under the Texas Limited Liability Company Act, and
surplus to determine the company's taxable capital;
(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner that the taxable
capital of a corporation is apportioned to this state under Section
171.106(a), (c), or (d), as applicable, to determine the company's
apportioned taxable capital; and
(3) subtracting from the amount computed under
Subdivision (2) any other allowable deductions, to determine the
company's net taxable capital [Notwithstanding Subsection
(a)(1)(B)(ii), a staff leasing services company may subtract only
compensation as determined under Section 171.1013].
(c) The net taxable capital of a savings and loan
association is computed by:
(1) determining the association's net worth; and
(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner that the taxable
capital of a corporation is apportioned to this state under Section
171.106(a) to determine the association's net taxable capital [In
making a computation under this section, an amount that is zero or
less is computed as a zero].
[(d) An election under Subsection (a)(1)(B)(ii) shall be
made by the taxable entity on its annual report and is effective
only for that annual report. A taxable entity shall notify the
comptroller of its election not later than the due date of the
annual report.]
SECTION 7. Subchapter C, Chapter 171, Tax Code, is amended
by adding Section 171.102 to read as follows:
Sec. 171.102. DETERMINATION OF TAXABLE CAPITAL OF
CORPORATION IN PROCESS OF LIQUIDATION. (a) "Corporation in the
process of liquidation" means a corporation that:
(1) adopts and pursues in good faith a plan to marshal
the assets of the corporation, to pay or settle with the
corporation's creditors and debtors, and to apportion the remaining
assets of the corporation among the corporation's stockholders;
(2) adopts the plan by a resolution approved by the
corporation's board of directors and ratified by a majority of the
stockholders of record; and
(3) conducts the liquidation in the manner provided by
the law of this state to dissolve a corporation.
(b) The taxable capital of a corporation in the process of
liquidation is the difference between the amount of the
corporation's stock issued and the amount of the liquidating
dividends paid on the stock.
(c) The president and the secretary of the corporation shall
file an affidavit with the comptroller containing information about
the amount of liquidating dividends paid and a statement that the
corporation is in the process of liquidation. The plan described by
Subsection (a) for the corporation's liquidation must be attached
to and be a part of the affidavit.
(d) This section applies only to the computation of a
corporation's taxable capital under Section 171.101.
SECTION 8. Subchapter C, Chapter 171, Tax Code, is amended
by amending Section 171.103 and adding Sections 171.1032 and
171.104 to read as follows:
Sec. 171.103. DETERMINATION OF GROSS RECEIPTS FROM BUSINESS
DONE IN THIS STATE FOR TAXABLE CAPITAL [MARGIN]. In [(a) Subject
to Section 171.1055, in] apportioning taxable capital [margin], the
gross receipts of a corporation [taxable entity] from its business
done in this state is the sum of the corporation's [taxable
entity's] receipts from:
(1) each sale of tangible personal property if the
property is delivered or shipped to a buyer in this state regardless
of the FOB point or another condition of the sale, and each sale of
tangible personal property shipped from this state to a purchaser
in another state in which the seller is not subject to taxation;
(2) each service performed in this state[, except that
receipts derived from servicing loans secured by real property are
in this state if the real property is located in this state];
(3) each rental of property situated in this state;
(4) the use of a patent, copyright, trademark,
franchise, or license in this state;
(5) each sale of real property located in this state,
including royalties from oil, gas, or other mineral interests; and
(6) other business done in this state.
[(b) A combined group shall include in its gross receipts
computed under Subsection (a) the gross receipts of each taxable
entity that is a member of the combined group and that has a nexus
with this state for the purpose of taxation.
[(c) A taxable entity that is a combined group shall include
in a report filed under Section 171.201 or 171.202, for each member
of the combined group that does not have nexus with this state for
the purpose of taxation:
[(1) the gross receipts computed under Subsection (a);
and
[(2) the gross receipts computed under Subsection (a)
that are subject to taxation in another state under a throwback law
or regulation.
[(d) The information required by Subsection (c) may be used
for informational purposes only. The comptroller shall adopt
rules as necessary to enforce the reporting requirement prescribed
by Subsection (c).]
Sec. 171.1032. DETERMINATION OF GROSS RECEIPTS FROM
BUSINESS DONE IN THIS STATE FOR TAXABLE EARNED SURPLUS. (a) Except
for the gross receipts of a corporation that are subject to Section
171.1061, in apportioning taxable earned surplus, the gross
receipts of a corporation from its business done in this state is
the sum of the corporation's receipts from:
(1) each sale of tangible personal property if the
property is delivered or shipped to a buyer in this state regardless
of the FOB point or another condition of the sale, and each sale of
tangible personal property shipped from this state to a purchaser
in another state in which the seller is not subject to any tax on, or
measured by, net income, without regard to whether the tax is
imposed;
(2) each service performed in this state;
(3) each rental of property situated in this state;
(4) the use of a patent, copyright, trademark,
franchise, or license in this state;
(5) each sale of real property located in this state,
including royalties from oil, gas, or other mineral interests;
(6) each partnership or joint venture to the extent
provided by Subsection (c); and
(7) other business done in this state.
(b) A corporation shall deduct from its gross receipts
computed under Subsection (a) any amount to the extent included
under Subsection (a) because of the application of Section 78 or
Sections 951-964, Internal Revenue Code, any amount excludable
under Section 171.110(k), and dividends received from a subsidiary,
associate, or affiliated corporation that does not transact a
substantial portion of its business or regularly maintain a
substantial portion of its assets in the United States.
(c) A corporation shall include in its gross receipts
computed under Subsection (a) the corporation's share of the gross
receipts of each partnership and joint venture of which the
corporation is a part apportioned to this state as though the
corporation directly earned the receipts, including receipts from
business done with the corporation.
Sec. 171.104. GROSS RECEIPTS FROM BUSINESS DONE IN TEXAS:
DEDUCTION FOR FOOD AND MEDICINE RECEIPTS. A corporation may deduct
from its receipts includable under Section 171.103(1) the amount of
the corporation's receipts from sales of the following items, if
the items are shipped from outside this state and the receipts would
be includable under Section 171.103(1) in the absence of this
section:
(1) food that is exempted from the state sales and use
tax under Section 151.314; and
(2) health care supplies that are exempted from the
state sales and use tax under Section 151.313.
SECTION 9. Subchapter C, Chapter 171, Tax Code, is amended
by amending Section 171.105 and adding Section 171.1051 to read as
follows:
Sec. 171.105. DETERMINATION OF GROSS RECEIPTS FROM ENTIRE
BUSINESS FOR TAXABLE CAPITAL. (a) In apportioning taxable
capital, the gross receipts of a corporation from its entire
business is the sum of the corporation's receipts from:
(1) each sale of the corporation's tangible personal
property;
(2) each service, rental, or royalty; and
(3) other business.
(b) If a corporation sells an investment or capital asset,
the corporation's gross receipts from its entire business for
taxable capital include only the net gain from the sale.
Sec. 171.1051. DETERMINATION OF GROSS RECEIPTS FROM ENTIRE
BUSINESS FOR TAXABLE EARNED SURPLUS [MARGIN]. (a) Except for the
gross receipts of a corporation that are subject to Section
171.1061 [Subject to Section 171.1055], in apportioning taxable
earned surplus [margin], the gross receipts of a corporation
[taxable entity] from its entire business is the sum of the
corporation's [taxable entity's] receipts from:
(1) each sale of the corporation's [taxable entity's]
tangible personal property;
(2) each service, rental, or royalty; [and]
(3) each partnership and joint venture as provided by
Subsection (d); and
(4) other business.
(b) If a corporation [taxable entity] sells an investment or
capital asset, the corporation's [taxable entity's] gross receipts
from its entire business for taxable earned surplus [margin]
includes only the net gain from the sale.
(c) A corporation shall deduct from its gross receipts
computed under Subsection (a) any amount to the extent included in
Subsection (a) because of the application of Section 78 or Sections
951-964, Internal Revenue Code, any amount excludable under Section
171.110(k), and dividends received from a subsidiary, associate, or
affiliated corporation that does not transact a substantial portion
of its business or regularly maintain a substantial portion of its
assets in the United States.
(d) A corporation shall include in its gross receipts
computed under Subsection (a) the corporation's share of the gross
receipts of each partnership and joint venture of which the
corporation is a part [A combined group shall include in its gross
receipts computed under Subsection (a) the gross receipts of each
taxable entity that is a member of the combined group, without
regard to whether that entity has a nexus with this state for the
purpose of taxation].
SECTION 10. Subchapter C, Chapter 171, Tax Code, is amended
by amending Sections 171.106, 171.107, 171.108, and 171.1121, and
by adding Sections 171.1061, 171.109, 171.110, 171.112, and 171.113
to read as follows:
Sec. 171.106. APPORTIONMENT OF TAXABLE CAPITAL AND TAXABLE
EARNED SURPLUS [MARGIN] TO THIS STATE. (a) Except as provided by
Subsections (c) and (d), a corporation's taxable capital is
apportioned to this state to determine the amount of the tax imposed
under Section 171.002(b)(1) by multiplying the corporation's
taxable capital by a fraction, the numerator of which is the
corporation's gross receipts from business done in this state, as
determined under Section 171.103, and the denominator of which is
the corporation's gross receipts from its entire business, as
determined under Section 171.105.
(b) Except as provided by Subsections (c) and (d) [this
section], a corporation's taxable earned surplus [taxable entity's
margin] is apportioned to this state to determine the amount of tax
imposed under Section 171.002(b)(2) [171.002] by multiplying the
taxable earned surplus [margin] by a fraction, the numerator of
which is the corporation's [taxable entity's] gross receipts from
business done in this state, as determined under Section 171.1032
[171.103], and the denominator of which is the corporation's
[taxable entity's] gross receipts from its entire business, as
determined under Section 171.1051 [171.105].
(c) [(b)] A corporation's taxable capital or earned surplus
[taxable entity's margin] that is derived, directly or indirectly,
from the sale of management, distribution, or administration
services to or on behalf of a regulated investment company,
including a corporation [taxable entity] that includes trustees or
sponsors of employee benefit plans that have accounts in a
regulated investment company, is apportioned to this state to
determine the amount of the tax imposed under Section 171.002 by
multiplying the corporation's [taxable entity's] total taxable
capital or earned surplus [margin] from the sale of services to or
on behalf of a regulated investment company by a fraction, the
numerator of which is the average of the sum of shares owned at the
beginning of the year and the sum of shares owned at the end of the
year by the investment company shareholders who are commercially
domiciled in this state or, if the shareholders are individuals,
are residents of this state, and the denominator of which is the
average of the sum of shares owned at the beginning of the year and
the sum of shares owned at the end of the year by all investment
company shareholders. The corporation shall make a separate
computation to allocate taxable capital and earned surplus. In
this subsection, "regulated investment company" has the meaning
assigned by Section 851(a), Internal Revenue Code.
(d) [(c)] A corporation's taxable capital or taxable earned
surplus [taxable entity's margin] that is derived, directly or
indirectly, from the sale of management, administration, or
investment services to an employee retirement plan is apportioned
to this state to determine the amount of the tax imposed under
Section 171.002 by multiplying the corporation's [taxable entity's]
total taxable capital or earned surplus [margin] from the sale of
services to an employee retirement plan company by a fraction, the
numerator of which is the average of the sum of beneficiaries
domiciled in Texas at the beginning of the year and the sum of
beneficiaries domiciled in Texas at the end of the year, and the
denominator of which is the average of the sum of all beneficiaries
at the beginning of the year and the sum of all beneficiaries at the
end of the year. The corporation shall make a separate computation
to apportion taxable capital and earned surplus. In this section,
"employee retirement plan" means a plan or other arrangement that
is qualified under Section 401(a), Internal Revenue Code, or
satisfies the requirements of Section 403, Internal Revenue Code,
or a government plan described in Section 414(d), Internal Revenue
Code. The term does not include an individual retirement account or
individual retirement annuity within the meaning of Section 408,
Internal Revenue Code.
(e) [(d)] A banking corporation shall exclude from the
numerator of the bank's apportionment factor interest earned on
federal funds and interest earned on securities sold under an
agreement to repurchase that are held in this state in a
correspondent bank that is domiciled in this state. In this
subsection, "correspondent" has the meaning assigned by 12 C.F.R.
Section 206.2(c).
(f) [(e)] Receipts from services that a defense
readjustment project performs in a defense economic readjustment
zone are not receipts from business done in this state.
[(f) Notwithstanding Section 171.1055, if a loan or
security is treated as inventory of the seller for federal income
tax purposes, the gross proceeds of the sale of that loan or
security are considered gross receipts.]
Sec. 171.1061. ALLOCATION OF CERTAIN TAXABLE EARNED SURPLUS
TO THIS STATE. An item of income included in a corporation's
taxable earned surplus, except that portion derived from dividends
and interest, that a state, other than this state, or a country,
other than the United States, cannot tax because the activities
generating that item of income do not have sufficient unitary
connection with the corporation's other activities conducted
within that state or country under the United States Constitution,
is allocated to this state if the corporation's commercial domicile
is in this state. Income that can only be allocated to the state of
commercial domicile because the income has insufficient unitary
connection with any other state or country shall be allocated to
this state or another state or country net of expenses related to
that income. A portion of a corporation's taxable earned surplus
allocated to this state under this section may not be apportioned
under Section 171.110(a)(2).
Sec. 171.107. DEDUCTION OF COST OF SOLAR ENERGY DEVICE FROM
TAXABLE CAPITAL OR TAXABLE EARNED SURPLUS [MARGIN] APPORTIONED TO
THIS STATE. (a) In this section, "solar energy device" means a
system or series of mechanisms designed primarily to provide
heating or cooling or to produce electrical or mechanical power by
collecting and transferring solar-generated energy. The term
includes a mechanical or chemical device that has the ability to
store solar-generated energy for use in heating or cooling or in the
production of power.
(b) A corporation [taxable entity] may deduct from its
apportioned taxable capital the amortized cost of a solar energy
device or from its apportioned taxable earned surplus [margin] 10
percent of the amortized cost of a solar energy device if:
(1) the device is acquired by the corporation [taxable
entity] for heating or cooling or for the production of power;
(2) the device is used in this state by the corporation
[taxable entity]; and
(3) the cost of the device is amortized in accordance
with Subsection (c).
(c) The amortization of the cost of a solar energy device
must:
(1) be for a period of at least 60 months;
(2) provide for equal monthly amounts [or conform to
federal depreciation schedules];
(3) begin on the month in which the device is placed in
service in this state; and
(4) cover only a period in which the device is in use
in this state.
(d) A corporation [taxable entity] that makes a deduction
under this section shall file with the comptroller an amortization
schedule showing the period in which a deduction is to be made. On
the request of the comptroller, the corporation [taxable entity]
shall file with the comptroller proof of the cost of the solar
energy device or proof of the device's operation in this state.
(e) A corporation may elect to make the deduction authorized
by this section either from apportioned taxable capital or
apportioned taxable earned surplus for each separate regular annual
period. An election for an initial period applies to the second tax
period and to the first regular annual period.
Sec. 171.108. DEDUCTION OF COST OF CLEAN COAL PROJECT FROM
TAXABLE CAPITAL OR TAXABLE EARNED SURPLUS [MARGIN] APPORTIONED TO
THIS STATE. (a) In this section, "clean coal project" has the
meaning assigned by Section 5.001, Water Code.
(b) A corporation [taxable entity] may deduct from its
apportioned taxable capital the amortized cost of equipment or from
its apportioned taxable earned surplus [margin] 10 percent of the
amortized cost of equipment:
(1) that is used in a clean coal project;
(2) that is acquired by the corporation [taxable
entity] for use in generation of electricity, production of process
steam, or industrial production;
(3) that the corporation [taxable entity] uses in this
state; and
(4) the cost of which is amortized in accordance with
Subsection (c).
(c) The amortization of the cost of capital used in a clean
coal project must:
(1) be for a period of at least 60 months;
(2) provide for equal monthly amounts;
(3) begin in the month during which the equipment is
placed in service in this state; and
(4) cover only a period during which the equipment is
used in this state.
(d) A corporation [taxable entity] that makes a deduction
under this section shall file with the comptroller an amortization
schedule showing the period for which the deduction is to be made.
On the request of the comptroller, the corporation [taxable entity]
shall file with the comptroller proof of the cost of the equipment
or proof of the equipment's operation in this state.
(e) A corporation may elect to make the deduction authorized
by this section from apportioned taxable capital or apportioned
taxable earned surplus, but not from both, for each separate
regular annual period. An election for an initial period applies to
the second tax period and to the first regular annual period.
Sec. 171.109. SURPLUS. (a) In this chapter:
(1) "Surplus" means the net assets of a corporation
minus its stated capital. For a limited liability company,
"surplus" means the net assets of the company minus its members'
contributions. Surplus includes unrealized, estimated, or
contingent losses or obligations or any writedown of assets other
than those listed in Subsection (i) net of appropriate income tax
provisions. The definition under this subdivision does not apply
to earned surplus.
(2) "Net assets" means the total assets of a
corporation minus its total debts.
(3) "Debt" means any legally enforceable obligation
measured in a certain amount of money that must be performed or paid
within an ascertainable period or on demand.
(a-1) A legally enforceable obligation that requires the
return of a like-kind property that was borrowed will be considered
debt if it is a liability according to generally accepted
accounting principles and if the return must be made within an
ascertainable period or on demand. The amount that will be
considered debt is the fair market value measured on the last day on
which the report is based as required by Section 171.153. For
purposes of this subsection, "like-kind property" means the same
quantity, quality, and nature or character as the property
borrowed.
(b) Except as otherwise provided by this section, a
corporation must compute its surplus, assets, and debts according
to generally accepted accounting principles. If generally accepted
accounting principles are unsettled or do not specify an accounting
practice for a particular purpose related to the computation of
surplus, assets, or debts, the comptroller by rule may establish
rules to specify the applicable accounting practice for that
purpose.
(c) A corporation whose taxable capital is less than $1
million may report its surplus according to the method used in the
corporation's most recent federal income tax return originally due
on or before the date on which the corporation's franchise tax
report is originally due. In determining if taxable capital is less
than $1 million, the corporation shall apply the methods the
corporation used in computing that federal income tax return unless
another method is required under this chapter.
(d) A corporation shall report its surplus based solely on
its own financial condition. Consolidated reporting of surplus is
prohibited.
(e) Unless Section 171.111 applies due to election under
that section before that section's repeal, a corporation may not
change the accounting methods used to compute its surplus more
often than once every four years without the written consent of the
comptroller. A change in accounting methods is not justified
solely because it results in a reduction of tax liability.
(f) A corporation declaring dividends shall exclude those
dividends from its taxable capital, and a corporation receiving
dividends shall include those dividends in its gross receipts and
taxable capital as of the earlier of:
(1) the date the dividends are declared, if the
dividends are actually paid within one year after the declaration
date; or
(2) the date the dividends are actually paid.
(g) All oil and gas exploration and production activities
conducted by a corporation that reports its surplus according to
generally accepted accounting principles as required or permitted
by this chapter must be reported according to the successful
efforts or the full cost method of accounting.
(h) A parent or investor corporation must use the cost
method of accounting in reporting and calculating the franchise tax
on its investments in subsidiary corporations or other investees.
The retained earnings of a subsidiary corporation or other investee
before acquisition by the parent or investor corporation may not be
excluded from the cost of the subsidiary corporation or investee to
the parent or investor corporation and must be included by the
parent or investor corporation in calculating its surplus.
(i) The following accounts may also be excluded from
surplus, to the extent they are in conformance with generally
accepted accounting principles or the appropriate federal income
tax method, whichever is applicable:
(1) a reserve or allowance for uncollectable accounts;
and
(2) a contra-asset account for depletion,
depreciation, or amortization.
(j) A corporation may not exclude from surplus:
(1) liabilities for compensation and other benefits
provided to employees, other than wages, that are not debt as of the
end of the accounting period on which the taxable capital component
is based, including retirement, medical, insurance,
postretirement, and other similar benefits; and
(2) deferred investment tax credits.
(k) Notwithstanding any other provision in this chapter, a
corporation subject to the tax imposed by this chapter shall use
double entry bookkeeping to account for all transactions that
affect the computation of that tax.
(l) The "first in-first out" and "last in-first out" methods
of accounting are acceptable methods for computing surplus.
(m) A corporation may not use the push-down method of
accounting in computing or reporting its surplus.
(n) A corporation must use the equity method of accounting
when reporting an investment in a partnership or joint venture.
Sec. 171.110. DETERMINATION OF NET TAXABLE EARNED SURPLUS.
(a) The net taxable earned surplus of a corporation is computed by:
(1) determining the corporation's reportable federal
taxable income, subtracting from that amount any amount excludable
under Subsection (k), any amount included in reportable federal
taxable income under Section 78 or Sections 951-964, Internal
Revenue Code, and dividends received from a subsidiary, associate,
or affiliated corporation that does not transact a substantial
portion of its business or regularly maintain a substantial portion
of its assets in the United States, and adding to that amount any
compensation of officers or directors, or if a bank, any
compensation of directors and executive officers, to the extent
excluded in determining federal taxable income to determine the
corporation's taxable earned surplus;
(2) apportioning the corporation's taxable earned
surplus to this state as provided by Section 171.106(b), (c), or
(d), as applicable, to determine the corporation's apportioned
taxable earned surplus;
(3) adding the corporation's taxable earned surplus
allocated to this state as provided by Section 171.1061; and
(4) subtracting from that amount any allowable
deductions and any business loss that is carried forward to the tax
reporting period and deductible under Subsection (e).
(b) Except as provided by Subsection (c), a corporation is
not required to add the compensation of officers or directors as
required by Subsection (a)(1) if the corporation is:
(1) a corporation that has not more than 35
shareholders; or
(2) an S corporation, as that term is defined by
Section 1361, Internal Revenue Code.
(c) A subsidiary corporation may not claim the exclusion
under Subsection (b) if it has a parent corporation that does not
qualify for the exclusion. For purposes of this subsection, a
corporation qualifies as a parent if it ultimately controls the
subsidiary, even if the control arises through a series or group of
other subsidiaries or entities. Control is presumed if a parent
corporation directly or indirectly owns, controls, or holds a
majority of the outstanding voting stock of a corporation or
ownership interests in another entity.
(d) A corporation's reportable federal taxable income is
the corporation's federal taxable income after Schedule C special
deductions and before net operating loss deductions as computed
under the Internal Revenue Code, except that an S corporation's
reportable federal taxable income is the amount of the income
reportable to the Internal Revenue Service as taxable to the
corporation's shareholders.
(e) For purposes of this section, a business loss is any
negative amount after apportionment and allocation. The business
loss shall be carried forward to the year succeeding the loss year
as a deduction to net taxable earned surplus, then successively to
the succeeding four taxable years after the loss year or until the
loss is exhausted, whichever occurs first, but for not more than
five taxable years after the loss year. A business loss can be
carried forward only by the corporation that incurred the loss and
cannot be transferred to or claimed by any other entity, including
the survivor of a merger if the loss was incurred by the corporation
that did not survive the merger.
(f) A corporation may use either the "first in-first out" or
"last in-first out" method of accounting to compute its net taxable
earned surplus, but only to the extent that the corporation used
that method on its most recent federal income tax report originally
due on or before the date on which the corporation's franchise tax
report is originally due.
(g) For purposes of this section, an approved employee stock
ownership plan controlling a minority interest and voted through a
single trustee shall be considered one shareholder.
(h) A corporation shall report its net taxable earned
surplus based solely on its own financial condition. Consolidated
reporting is prohibited.
(i) For purposes of this section, any person designated as
an officer is presumed to be an officer if that person:
(1) holds an office created by the board of directors
or under the corporate charter or bylaws; and
(2) has legal authority to bind the corporation with
third parties by executing contracts or other legal documents.
(j) A corporation may rebut the presumption described in
Subsection (i) that a person is an officer if it conclusively shows,
through the person's job description or other documentation, that
the person does not participate or have authority to participate in
significant policymaking aspects of the corporate operations.
(k) Dividends and interest received from federal
obligations are not included in earned surplus or gross receipts
for earned surplus purposes.
(l) In this section:
(1) "Federal obligations" means:
(A) stocks and other direct obligations of, and
obligations unconditionally guaranteed by, the United States
government and United States government agencies; and
(B) direct obligations of a United States
government-sponsored agency.
(2) "Obligation" means any bond, debenture, security,
mortgage-backed security, pass-through certificate, or other
evidence of indebtedness of the issuing entity. The term does not
include a deposit, a repurchase agreement, a loan, a lease, a
participation in a loan or pool of loans, a loan collateralized by
an obligation of a United States government agency, or a loan
guaranteed by a United States government agency.
(3) "United States government" means any department or
ministry of the federal government, including a federal reserve
bank. The term does not include a state or local government, a
commercial enterprise owned wholly or partly by the United States
government, or a local governmental entity or commercial enterprise
whose obligations are guaranteed by the United States government.
(4) "United States government agency" means an
instrumentality of the United States government whose obligations
are fully and explicitly guaranteed as to the timely payment of
principal and interest by the full faith and credit of the United
States government. The term includes the Government National
Mortgage Association, the Department of Veterans Affairs, the
Federal Housing Administration, the Farmers Home Administration,
the Export-Import Bank of the United States, the Overseas Private
Investment Corporation, the Commodity Credit Corporation, the
Small Business Administration, and any successor agency.
(5) "United States government-sponsored agency" means
an agency originally established or chartered by the United States
government to serve public purposes specified by the United States
Congress but whose obligations are not explicitly guaranteed by the
full faith and credit of the United States government. The term
includes the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, the Farm Credit System, the Federal
Home Loan Bank System, the Student Loan Marketing Association, and
any successor agency.
Sec. 171.112. GROSS RECEIPTS FOR TAXABLE CAPITAL. (a) For
purposes of this section, "gross receipts" means all revenues that
would be recognized annually under a generally accepted accounting
principles method of accounting, without deduction for the cost of
property sold, materials used, labor performed, or other costs
incurred, unless otherwise specifically provided in this chapter.
(b) Except as otherwise provided by this section, a
corporation must compute gross receipts in accordance with
generally accepted accounting principles. If generally accepted
accounting principles are unsettled or do not specify an accounting
practice for a particular purpose related to the computation of
gross receipts, the comptroller by rule may establish rules to
specify the applicable accounting practice.
(c) A corporation whose taxable capital is less than $1
million may report its gross receipts according to the method used
in the corporation's most recent federal income tax return
originally due on or before the date on which the corporation's
franchise tax report is originally due. In determining if taxable
capital is less than $1 million, the corporation shall apply the
methods the corporation used in computing that federal income tax
return unless another method is required under this chapter.
(d) A corporation shall report its gross receipts based
solely on its own financial condition. Consolidated reporting is
prohibited.
(e) Unless Section 171.111 applies due to an election under
that section before that section's repeal, a corporation may not
change its accounting methods used to calculate gross receipts more
often than once every four years without the express written
consent of the comptroller. A change in accounting methods is not
justified solely because it results in a reduction of tax
liability.
(f) Notwithstanding any other provision in this chapter, a
corporation subject to the tax imposed by this chapter shall use
double entry bookkeeping to account for all transactions that
affect the computation of that tax.
(g) Chapter 141 does not apply to this chapter.
(h) Except as otherwise provided by this section, a
corporation shall use the same accounting methods to apportion its
taxable capital as it used to compute its taxable capital.
Sec. 171.1121. GROSS RECEIPTS FOR TAXABLE EARNED SURPLUS
[MARGIN]. (a) For purposes of this section, "gross receipts" means
all revenues reportable by a corporation [taxable entity] on its
federal tax return, without deduction for the cost of property
sold, materials used, labor performed, or other costs incurred,
unless otherwise specifically provided in this chapter. "Gross
receipts" does not include revenues that are not included in
taxable earned surplus. For example, Schedule C special deductions
and any amounts subtracted from reportable federal taxable income
under Section 171.110(a)(1) are not included in taxable earned
surplus and therefore are not considered gross receipts.
(b) Except as otherwise provided by this section, a
corporation [taxable entity] shall use the same accounting methods
to apportion taxable earned surplus [margin] as used in computing
reportable federal taxable income [margin].
(c) A corporation shall report its gross receipts based
solely on its own financial condition. Consolidated reporting is
prohibited.
(d) Unless Section 171.111 applies due to an election under
that section before that section's repeal, a corporation [A taxable
entity] may not change its accounting methods used to calculate
gross receipts more often than once every four years without the
express written consent of the comptroller. A change in accounting
methods is not justified solely because it results in a reduction of
tax liability.
(e) A corporation's share of a partnership's gross receipts
that is included in the corporation's federal taxable income must
be used in computing the corporation's gross receipts under this
section. Unless otherwise provided by this chapter, a corporation
may not deduct costs incurred from the corporation's share of a
partnership's gross receipts. The gross receipts must be
apportioned as though the corporation directly earned them.
Sec. 171.113. ALTERNATE METHOD OF DETERMINING TAXABLE
CAPITAL AND GROSS RECEIPTS FOR CERTAIN CORPORATIONS. (a) This
section applies only to:
(1) a corporation organized as a close corporation
under Part 12, Texas Business Corporation Act, that has not more
than 35 shareholders;
(2) a foreign corporation organized under the close
corporation law of another state that has not more than 35
shareholders; and
(3) an S corporation as that term is defined by Section
1361, Internal Revenue Code.
(b) A corporation to which this section applies may elect to
compute its surplus, assets, debts, and gross receipts according to
the method the corporation uses to report its federal income tax
instead of as provided by Sections 171.109(b) and (g) and Section
171.112(b). This section does not affect the application of the
other subsections of Sections 171.109 and 171.112 and other
provisions of this chapter to a corporation making the election.
(c) The comptroller may adopt rules as necessary to specify
the reporting requirements for corporations to which this section
applies.
(d) This section does not apply to a subsidiary corporation
unless it applies to the parent corporation of the subsidiary.
(e) The election under Subsection (b) becomes effective
when written notice of the election is received by the comptroller
from the corporation. An election under Subsection (b) must be
postmarked not later than the due date for the electing
corporation's franchise tax report to which the election applies.
SECTION 11. Subchapter D, Chapter 171, Tax Code, is amended
to read as follows:
SUBCHAPTER D. PAYMENT OF TAX
Sec. 171.151. PRIVILEGE PERIOD COVERED BY TAX. The
franchise tax shall be paid for each of the following:
(1) an initial period beginning on the corporation's
[taxable entity's] beginning date and ending on the day before the
first anniversary of the beginning date;
(2) a second period beginning on the first anniversary
of the beginning date and ending on December 31 following that date;
and
(3) after the initial and second periods have expired,
a regular annual period beginning each year on January 1 and ending
the following December 31.
Sec. 171.152. DATE ON WHICH PAYMENT IS DUE. (a) Payment of
the tax covering the initial period is due within 90 days after the
date that the initial period ends or, if applicable, within 91 days
after the date of the merger.
(b) Payment of the tax covering the second period is due on
the same date as the tax covering the initial period.
(c) Payment of the tax covering the regular annual period is
due May 15, of each year after the beginning of the regular annual
period. However, if the first anniversary of the corporation's
[taxable entity's] beginning date is after October 3 and before
January 1, the payment of the tax covering the first regular annual
period is due on the same date as the tax covering the initial
period.
Sec. 171.153. BUSINESS ON WHICH TAX ON NET TAXABLE CAPITAL
IS BASED. (a) The tax covering the initial period is reported on
the initial report and is based on the business done by the
corporation during the period beginning on the corporation's
beginning date and:
(1) ending on the last accounting period ending date
that is at least six months after the beginning date and at least 60
days before the original due date of the initial report;
(2) if there is no such period ending date in
Subdivision (1), then ending on the day that is the last day of a
calendar month and that is nearest to the end of the corporation's
first year of business; or
(3) ending on the day after the merger occurs, for the
survivor of a merger that occurs after the ending date prescribed by
Subdivision (1) or (2), whichever is applicable, and before January
1, of the year an initial report is due by the survivor.
(b) The tax covering the second period is reported on the
initial report and is based on the same business on which the tax
covering the initial period is based and is to be prorated based on
the length of the second period.
(c) The tax covering the regular annual period is based on
the business done by the corporation during its last accounting
period that ends in the year before the year in which the tax is due.
If a corporation is the survivor of a merger that occurs between the
end of its last accounting period in the year before the report year
and January 1 of the report year, the tax will be based on the
financial condition of the surviving corporation for the 12-month
period ending on the day after the merger. However, if the first
anniversary of the corporation's beginning date is after October 3
and before January 1, the tax covering the first regular annual
period is based on the same business on which the tax covering the
initial period is based and is reported on the initial report.
Sec. 171.1531. CREDIT FOR SURVIVOR OF MERGER. (a) "Credit
period" means the period from the date of the merger or the date the
survivor was required to pay franchise tax, whichever is later,
through the end of the privilege period for which tax was actually
paid by the nonsurvivors.
(b) The survivor of a merger is entitled to a credit against
the tax computed on its net taxable capital under Section
171.002(b)(1) in the amount of the franchise tax computed on net
taxable capital paid by the nonsurvivors for the credit period,
provided the tax computed on net taxable capital paid by the
survivor for the credit period is based on the survivor's financial
condition after the merger. Only a survivor that is subject to the
franchise tax is entitled to the merger credit. The merger credit
shall be allocated among survivors based on net taxable capital
reported, and as provided by Section 171.153.
(c) The credit will be limited to the lesser of the amount of
tax on net taxable capital paid for the credit period by the
survivor or by the nonsurvivors.
Sec. 171.1532. BUSINESS ON WHICH TAX ON NET TAXABLE EARNED
SURPLUS [MARGIN] IS BASED. (a) The tax covering the privilege
periods included on the initial report, as required by Section
171.153, is based on the business done by the corporation [taxable
entity] during the period beginning on the corporation's [taxable
entity's] beginning date and:
(1) ending on the last accounting period ending date
that is at least 60 days before the original due date of the initial
report; or
(2) if there is no such period ending date in
Subdivision (1), then ending on the day that is the last day of a
calendar month and that is nearest to the end of the corporation's
[taxable entity's] first year of business.
(b) The tax covering the regular annual period, other than a
regular annual period included on the initial report, is based on
the business done by the corporation [taxable entity] during the
period beginning with the day after the last date upon which
[taxable margin or] net taxable earned surplus on a previous report
was based and ending with its last accounting period ending date for
federal income tax purposes in the year before the year in which the
report is originally due.
Sec. 171.154. PAYMENT TO COMPTROLLER. A corporation
[taxable entity] on which a tax is imposed by this chapter shall pay
the tax to the comptroller.
Sec. 171.158. PAYMENT BY FOREIGN CORPORATION [TAXABLE
ENTITY] BEFORE WITHDRAWAL FROM STATE. (a) Except as provided by
Subsection (b), a foreign corporation [taxable entity] holding a
[registration or] certificate of authority to do business in this
state may withdraw from doing business in this state by filing a
certificate of withdrawal with the secretary of state. The
secretary of state shall file the certificate of withdrawal as
provided by law.
(b) The foreign corporation [taxable entity] may not
withdraw from doing business in this state unless it has paid,
before filing the certificate of withdrawal, any tax or penalty
imposed by this chapter on the corporation [taxable entity].
SECTION 12. Sections 171.201, 171.202, 171.2022, 171.203,
171.204, 171.205, 171.206, 171.207, 171.208, 171.209, 171.211, and
171.212, Tax Code, are amended to read as follows:
Sec. 171.201. INITIAL REPORT. (a) Except as provided by
Section 171.2022, a corporation [taxable entity] on which the
franchise tax is imposed shall file an initial report with the
comptroller containing:
(1) [financial] information showing the financial
condition of the corporation on the day that is the last day of a
calendar month and that is nearest to the end of the corporation's
first year of business [of the taxable entity necessary to compute
the tax under this chapter];
(2) the name and address of[:
[(A)] each officer[,] and director[, and
manager] of the corporation [taxable entity;
[(B) for a limited partnership, each general
partner;
[(C) for a general partnership or limited
liability partnership, each managing partner or, if there is not a
managing partner, each partner; or
[(D) for a trust, each trustee];
(3) the name and address of the agent of the
corporation [taxable entity] designated under Section 171.354; and
(4) other information required by the comptroller.
(b) The corporation [taxable entity] shall file the report
on or before the date the payment is due under Section 171.152(a).
Sec. 171.202. ANNUAL REPORT. (a) Except as provided by
Section 171.2022, a corporation [taxable entity] on which the
franchise tax is imposed shall file an annual report with the
comptroller containing:
(1) financial information of the corporation [taxable
entity] necessary to compute the tax under this chapter;
(2) the name and address of each officer and director
of the corporation [taxable entity];
(3) the name and address of the agent of the
corporation [taxable entity] designated under Section 171.354; and
(4) other information required by the comptroller.
(b) The corporation [taxable entity] shall file the report
before May 16 of each year after the beginning of the regular annual
period. The report shall be filed on forms supplied by the
comptroller.
(c) The comptroller shall grant an extension of time to a
corporation [taxable entity] that is not required by rule to make
its tax payments by electronic funds transfer for the filing of a
report required by this section to any date on or before the next
November 15, if a corporation [taxable entity]:
(1) requests the extension, on or before May 15, on a
form provided by the comptroller; and
(2) remits with the request:
(A) not less than 90 percent of the amount of tax
reported as due on the report filed on or before November 15; or
(B) 100 percent of the tax reported as due for the
previous calendar year on the report due in the previous calendar
year and filed on or before May 14.
(d) In the case of a taxpayer whose previous return was its
initial report, the optional payment provided under Subsection
(c)(2)(B) or (e)(2)(B) must be equal to the greater of:
(1) an amount produced by multiplying the net taxable
capital [margin], as reported on the initial report filed on or
before May 14, by the rate of tax in Section 171.002(a)(1) [171.002]
that is effective January 1 of the year in which the report is due;
or
(2) an amount produced by multiplying the net taxable
earned surplus, as reported on the initial report filed on or before
May 14, by the rate of tax in Section 171.002(a)(2) that is
effective January 1 of the year in which the report is due.
(e) The comptroller shall grant an extension of time for the
filing of a report required by this section by a corporation
[taxable entity] required by rule to make its tax payments by
electronic funds transfer to any date on or before the next August
15, if the corporation [taxable entity]:
(1) requests the extension, on or before May 15, on a
form provided by the comptroller; and
(2) remits with the request:
(A) not less than 90 percent of the amount of tax
reported as due on the report filed on or before August 15; or
(B) 100 percent of the tax reported as due for the
previous calendar year on the report due in the previous calendar
year and filed on or before May 14.
(f) The comptroller shall grant an extension of time to a
corporation [taxable entity] required by rule to make its tax
payments by electronic funds transfer for the filing of a report due
on or before August 15 to any date on or before the next November 15,
if the corporation [taxable entity]:
(1) requests the extension, on or before August 15, on
a form provided by the comptroller; and
(2) remits with the request the difference between the
amount remitted under Subsection (e) and 100 percent of the amount
of tax reported as due on the report filed on or before November 15.
(h) If the sum of the amounts paid under Subsections (e)(2)
and (f)(2) is at least 99 percent of the amount reported as due on
the report filed on or before November 15, penalties for
underpayment with respect to the amount paid under Subsection
(f)(2) are waived.
(i) If a corporation [taxable entity] requesting an
extension under Subsection (c) or (e) does not file the report due
in the previous calendar year on or before May 14, the corporation
[taxable entity] may not receive an extension under Subsection (c)
or (e) unless the corporation [taxable entity] complies with
Subsection (c)(2)(A) or (e)(2)(A), as appropriate.
Sec. 171.2022. EXEMPTION FROM REPORTING REQUIREMENTS. A
corporation [taxable entity] that does not owe any tax under this
chapter for any period is not required to file a report under
Section 171.201 or 171.202. The exemption applies only to a period
for which no tax is due.
Sec. 171.203. PUBLIC INFORMATION REPORT. (a) A
corporation [or limited liability company] on which the franchise
tax is imposed, regardless of whether the corporation [or limited
liability company] is required to pay any tax, shall file a report
with the comptroller containing:
(1) the name of each corporation [or limited liability
company] in which the corporation [or limited liability company]
filing the report owns a 10 percent or greater interest and the
percentage owned by the corporation [or limited liability company];
(2) the name of each corporation [or limited liability
company] that owns a 10 percent or greater interest in the
corporation [or limited liability company] filing the report;
(3) the name, title, and mailing address of each
person who is an officer or director of the corporation [or limited
liability company] on the date the report is filed and the
expiration date of each person's term as an officer or director, if
any;
(4) the name and address of the agent of the
corporation [or limited liability company] designated under
Section 171.354; and
(5) the address of the corporation's [or limited
liability company's] principal office and principal place of
business.
(b) The corporation [or limited liability company] shall
file the report once a year on a form prescribed by the comptroller.
(c) The comptroller shall forward the report to the
secretary of state.
(d) The corporation [or limited liability company] shall
send a copy of the report to each person named in the report under
Subsection (a)(3) who is not currently employed by the corporation
[or limited liability company] or a related corporation [or limited
liability company] listed in Subsection (a)(1) or (2). An officer
or director of the corporation [or limited liability company] or
another authorized person must sign the report under a
certification that:
(1) all information contained in the report is true
and correct to the best of the person's knowledge; and
(2) a copy of the report has been mailed to each person
identified in this subsection on the date the return is filed.
(e) If a person's name is included in a report under
Subsection (a)(3) and the person is not an officer or director of
the corporation [or limited liability company] on the date the
report is filed, the person may file with the comptroller a sworn
statement disclaiming the person's status as shown on the report.
The comptroller shall maintain a record of statements filed under
this subsection and shall make that information available on
request using the same procedures the comptroller uses for other
requests for public information.
(f) A public information report that is filed
electronically complies with the signature and certification
requirements prescribed by Subsection (d).
Sec. 171.204. INFORMATION REPORT. (a) Except as provided
by Subsection (b), to determine eligibility for the exemption
provided by Section 171.2022, or to determine the amount of the
franchise tax or the correctness of a franchise tax report, the
comptroller may require an officer of a corporation [taxable
entity] that may be subject to the tax imposed under this chapter to
file an information report with the comptroller stating the amount
of the corporation's taxable capital and earned surplus [taxable
entity's margin], or any other information the comptroller may
request [that is necessary to make a determination under this
subsection].
(b) The comptroller may require an officer of a corporation
[taxable entity] that does not owe any tax because of the
application of Section 171.002(d)(2) to file an abbreviated
information report with the comptroller stating the amount of the
corporation's gross receipts [taxable entity's total revenue] from
its entire business. The comptroller may not require a corporation
[taxable entity] described by this subsection to file an
information report that requires the corporation [taxable entity]
to report or compute its earned surplus or taxable capital [margin.
[(c) The comptroller may require any entity to file
information as necessary to verify that the entity is not subject to
the tax imposed under this chapter].
Sec. 171.205. ADDITIONAL INFORMATION REQUIRED BY
COMPTROLLER. The comptroller may require a corporation [taxable
entity] on which the franchise tax is imposed to furnish to the
comptroller information from the corporation's [taxable entity's]
books and records that has not been filed previously and that is
necessary for the comptroller to determine the amount of the tax.
Sec. 171.206. CONFIDENTIAL INFORMATION. Except as provided
by Section 171.207, the following information is confidential and
may not be made open to public inspection:
(1) information that is obtained from a record or
other instrument that is required by this chapter to be filed with
the comptroller; or
(2) information, including information about the
business affairs, operations, profits, losses, [cost of goods sold,
compensation,] or expenditures of a corporation [taxable entity],
obtained by an examination of the books and records, officers,
[partners, trustees, agents,] or employees of a corporation
[taxable entity] on which a tax is imposed by this chapter.
Sec. 171.207. INFORMATION NOT CONFIDENTIAL. The following
information is not confidential and shall be made open to public
inspection:
(1) information contained in a document filed under
this chapter with a county clerk as notice of a tax lien; and
(2) information contained in a report required by
Section 171.203 [or 171.2035].
Sec. 171.208. PROHIBITION OF DISCLOSURE OF INFORMATION. A
person, including a state officer or employee or a shareholder [an
owner] of a corporation [taxable entity], who has access to a report
filed under this chapter may not make known in a manner not
permitted by law the amount or source of the corporation's [taxable
entity's] income, profits, losses, expenditures, [cost of goods
sold, compensation,] or other information in the report relating to
the financial condition of the corporation [taxable entity].
Sec. 171.209. RIGHT OF SHAREHOLDER [OWNER] TO EXAMINE OR
RECEIVE REPORTS. If a person owning at least one share of
outstanding stock [an owner] of a corporation [taxable entity] on
whom the franchise tax is imposed presents evidence of the
ownership to the comptroller, the person is entitled to examine or
receive a copy of an initial or annual report that is filed under
Section 171.201 or 171.202 and that relates to the corporation
[taxable entity].
Sec. 171.211. EXAMINATION OF CORPORATE RECORDS. To
determine the franchise tax liability of a corporation [taxable
entity], the comptroller may investigate or examine the records of
the corporation [taxable entity].
Sec. 171.212. REPORT OF CHANGES TO FEDERAL INCOME TAX
RETURN. (a) A corporation [taxable entity] must file an amended
report under this chapter if:
(1) the corporation's net [taxable entity's] taxable
earned surplus [margin] is changed as the result of an audit or
other adjustment by the Internal Revenue Service or another
competent authority; or
(2) the corporation [taxable entity] files an amended
federal income tax return or other return that changes the
corporation's net [taxable entity's] taxable earned surplus
[margin].
(b) The corporation [taxable entity] shall file the amended
report under Subsection (a)(1) not later than the 120th day after
the date the revenue agent's report or other adjustment is final.
For purposes of this subsection, a revenue agent's report or other
adjustment is final on the date on which all administrative appeals
with the Internal Revenue Service or other competent authority have
been exhausted or waived.
(c) The corporation [taxable entity] shall file the amended
report under Subsection (a)(2) not later than the 120th day after
the date the corporation [taxable entity] files the amended federal
income tax return or other return. For purposes of this subsection,
a corporation [taxable entity] is considered to have filed an
amended federal income tax return if the corporation [taxable
entity] is a member of an affiliated group during a period in which
an amended consolidated federal income tax report is filed.
(d) If a corporation [taxable entity] fails to comply with
this section, the corporation [taxable entity] is liable for a
penalty of 10 percent of the tax that should have been reported
under this section and that had not previously been reported to the
comptroller. The penalty prescribed by this subsection is in
addition to any other penalty provided by law.
SECTION 13. Section 171.309, Tax Code, is amended to read as
follows:
Sec. 171.309. FORFEITURE BY SECRETARY OF STATE. The
secretary of state may forfeit the charter or [,] certificate of
authority [, or registration] of a corporation [taxable entity] if:
(1) the secretary receives the comptroller's
certification under Section 171.302; [and]
(2) the corporation [taxable entity] does not revive
its forfeited corporate privileges within 120 days after the date
that the corporate privileges were forfeited; and
(3) the corporation does not have assets from which a
judgment for any tax, penalty, or court costs imposed by this
chapter may be satisfied.
SECTION 14. The heading to Subchapter F, Chapter 171, Tax
Code, is amended to read as follows:
SUBCHAPTER F. FORFEITURE OF CORPORATE [AND BUSINESS] PRIVILEGES
SECTION 15. Sections 171.351, 171.353, and 171.354, Tax
Code, are amended to read as follows:
Sec. 171.351. VENUE OF SUIT TO ENFORCE CHAPTER. Venue of a
civil suit against a corporation [taxable entity] to enforce this
chapter is either in a county where the corporation's [taxable
entity's] principal office is located according to its charter or
certificate of authority or in Travis County.
Sec. 171.353. APPOINTMENT OF RECEIVER. If a court forfeits
a corporation's [taxable entity's] charter or certificate of
authority, the court may appoint a receiver for the corporation
[taxable entity] and may administer the receivership under the laws
relating to receiverships.
Sec. 171.354. AGENT FOR SERVICE OF PROCESS. Each
corporation [taxable entity] on which a tax is imposed by this
chapter shall designate a resident of this state as the
corporation's [taxable entity's] agent for the service of process.
SECTION 16. Sections 171.362(a), (d), and (e), Tax Code,
are amended to read as follows:
(a) If a corporation [taxable entity] on which a tax is
imposed by this chapter fails to pay the tax when it is due and
payable or fails to file a report required by this chapter when it
is due, the corporation [taxable entity] is liable for a penalty of
five percent of the amount of the tax due.
(d) If a corporation [taxable entity] electing to remit
under Section 171.202(c)(2)(A) remits less than the amount
required, the penalties imposed by this section and the interest
imposed under Section 111.060 are assessed against the difference
between the amount required to be remitted under Section
171.202(c)(2)(A) and the amount actually remitted on or before May
15.
(e) If a corporation [taxable entity] remits the entire
amount required by Section 171.202(c), no penalties will be imposed
against the amount remitted on or before November 15.
SECTION 17. Sections 171.363(a) and (b), Tax Code, are
amended to read as follows:
(a) A corporation [taxable entity] commits an offense if the
corporation [taxable entity] is subject to the provisions of this
chapter and the corporation [taxable entity] wilfully:
(1) fails to file a report;
(2) fails to keep books and records as required by this
chapter;
(3) files a fraudulent report;
(4) violates any rule of the comptroller for the
administration and enforcement of the provisions of this chapter;
or
(5) attempts in any other manner to evade or defeat any
tax imposed by this chapter or the payment of the tax.
(b) A person commits an offense if the person is an
accountant or an agent for or an officer or employee of a
corporation [taxable entity] and the person knowingly enters or
provides false information on any report, return, or other document
filed by the corporation [taxable entity] under this chapter.
SECTION 18. Section 171.401, Tax Code, is amended to read as
follows:
Sec. 171.401. REVENUE DEPOSITED IN GENERAL REVENUE FUND.
The revenue from the tax imposed by this chapter on corporations
shall be deposited to the credit of the general revenue fund.
SECTION 19. Sections 313.024(a) and (b), Tax Code, are
amended to read as follows:
(a) This subchapter and Subchapters C and D apply only to
property owned by a corporation or limited liability company [an
entity] to which Chapter 171 applies.
(b) To be eligible for a limitation on appraised value under
this subchapter, the corporation or limited liability company
[entity] must use the property in connection with:
(1) manufacturing;
(2) research and development;
(3) a clean coal project, as defined by Section 5.001,
Water Code;
(4) an advanced clean energy project, as defined by
Section 382.003, Health and Safety Code;
(5) renewable energy electric generation;
(6) electric power generation using integrated
gasification combined cycle technology; or
(7) nuclear electric power generation.
SECTION 20. The following statutes are repealed:
(1) Section 171.0001, Tax Code;
(2) Section 171.0002, Tax Code;
(3) Section 171.0003, Tax Code;
(4) Section 171.0004, Tax Code;
(5) Section 171.0021, Tax Code;
(6) Section 171.003, Tax Code;
(7) Section 171.006, Tax Code;
(8) Section 171.088, Tax Code;
(9) Section 171.1011, Tax Code;
(10) Section 171.1012, Tax Code;
(11) Section 171.1013, Tax Code;
(12) Section 171.1014, Tax Code;
(13) Section 171.1015, Tax Code;
(14) Section 171.1016, Tax Code;
(15) Section 171.1055, Tax Code;
(16) Section 171.111, Tax Code;
(17) Section 171.2125, Tax Code;
(18) Section 171.214, Tax Code;
(19) Section 171.2515, Tax Code;
(20) Section 171.3015, Tax Code;
(21) Section 171.3125, Tax Code; and
(22) Section 171.4011, Tax Code.
SECTION 21. (a) The repeal of Section 171.111, Tax Code, by
this Act does not affect a credit that was established under that
section before the effective date of this Act.
(b) A corporation that has any unused credits established
before the effective date of this Act under Section 171.111, Tax
Code, may claim those unused credits on or with the tax report for
the period in which the credits were established, and the former law
under which the corporation established the credits is continued in
effect for purposes of determining the amount of the credits the
corporation may claim and the manner in which the corporation may
claim the credits.
SECTION 22. (a) This Act applies only to a report
originally due on or after the effective date of this Act.
(b) The change in law made by this Act does not affect the
obligation for or the payment, computation, and collection of the
franchise tax for a report originally due before the effective date
of this Act. The obligation for and the payment, computation, and
collection of the franchise tax for a report originally due before
the effective date of this Act is governed by the law in effect on
the date the report was originally due and that law is continued in
effect for those purposes.
SECTION 23. This Act takes effect January 1, 2010.