81R9666 CBH-D
By: King of Parker H.B. No. 2485
A BILL TO BE ENTITLED
AN ACT
relating to the inclusion of gas and electric transmission and
distribution costs in the cost of goods sold for purposes of the
franchise tax.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sections 171.1012(c) and (e), Tax Code, are
amended to read as follows:
(c) The cost of goods sold includes all direct costs of
acquiring or producing the goods, including:
(1) labor costs;
(2) cost of materials that are an integral part of
specific property produced;
(3) cost of materials that are consumed in the
ordinary course of performing production activities;
(4) handling costs, including costs attributable to
processing, assembling, repackaging, and inbound transportation
costs;
(5) storage costs, including the costs of carrying,
storing, or warehousing property, subject to Subsection (e);
(6) depreciation, depletion, and
amortization, reported on the federal income tax return on which
the report under this chapter is based, to the extent associated
with and necessary for the production of goods, including recovery
described by Section 197, Internal Revenue Code;
(7) the cost of renting or leasing equipment,
facilities, or real property directly used for the production of
the goods, including pollution control equipment and intangible
drilling and dry hole costs;
(8) the cost of repairing and maintaining equipment,
facilities, or real property directly used for the production of
the goods, including pollution control devices;
(9) costs attributable to research, experimental,
engineering, and design activities directly related to the
production of the goods, including all research or experimental
expenditures described by Section 174, Internal Revenue Code;
(10) geological and geophysical costs incurred to
identify and locate property that has the potential to produce
minerals;
(11) taxes paid in relation to acquiring or producing
any material, or taxes paid in relation to services that are a
direct cost of production;
(12) the cost of producing or acquiring electricity
sold;
(12-a) transmission or distribution costs relating to:
(A) electricity sold by an electric utility,
retail electric provider, or power marketer, as those terms are
defined by Section 31.002, Utilities Code; or
(B) natural gas sold by a gas utility, as that
term is defined by Section 101.003 or 121.001, Utilities Code; and
(13) a contribution to a partnership in which the
taxable entity owns an interest that is used to fund activities, the
costs of which would otherwise be treated as cost of goods sold of
the partnership, but only to the extent that those costs are related
to goods distributed to the taxable entity as goods-in-kind in the
ordinary course of production activities rather than being sold.
(e) The cost of goods sold does not include the following
costs in relation to the taxable entity's goods:
(1) the cost of renting or leasing equipment,
facilities, or real property that is not used for the production of
the goods;
(2) selling costs, including employee expenses
related to sales;
(3) distribution costs, including outbound
transportation costs, but not including transmission or
distribution costs described by Subsection (c)(12-a);
(4) advertising costs;
(5) idle facility expense;
(6) rehandling costs;
(7) bidding costs, which are the costs incurred in the
solicitation of contracts ultimately awarded to the taxable entity;
(8) unsuccessful bidding costs, which are the costs
incurred in the solicitation of contracts not awarded to the
taxable entity;
(9) interest, including interest on debt incurred or
continued during the production period to finance the production of
the goods;
(10) income taxes, including local, state, federal,
and foreign income taxes, and franchise taxes that are assessed on
the taxable entity based on income;
(11) strike expenses, including costs associated with
hiring employees to replace striking personnel, but not including
the wages of the replacement personnel, costs of security, and
legal fees associated with settling strikes;
(12) officers' compensation;
(13) costs of operation of a facility that is:
(A) located on property owned or leased by the
federal government; and
(B) managed or operated primarily to house
members of the armed forces of the United States; and
(14) any compensation paid to an undocumented worker
used for the production of goods. As used in this subdivision:
(A) "undocumented worker" means a person who is
not lawfully entitled to be present and employed in the United
States; and
(B) "goods" includes the husbandry of animals,
the growing and harvesting of crops, and the severance of timber
from realty.
SECTION 2. This Act applies only to a report originally due
on or after the effective date of this Act.
SECTION 3. This Act takes effect January 1, 2010.