Texas House Bill HB1722

Texas 2013 - 83rd Regular

Caption

Relating to the amount of indirect or administrative overhead costs that a taxable entity may subtract as a cost of goods sold under the franchise tax.

Impact

The implications of HB1722 are significant as it alters the parameters under which businesses calculate their taxable income. By allowing businesses to subtract up to 5.5% of their total indirect or administrative overhead costs, the legislation provides a form of relief that might enhance the financial viability of many businesses operating in Texas. This could foster a more favorable business climate and stimulate economic growth within the state.

Summary

House Bill 1722 proposes amendments to the Texas Tax Code regarding the calculation of costs that a taxable entity can subtract as administrative overhead from their franchise tax. Specifically, the bill allows for a deduction of indirect or administrative overhead costs, which includes a wide range of mixed service costs such as security, legal services, data processing, and accounting. This change is designed to benefit taxable entities by enabling them to reduce their taxable income through these deductions, thereby potentially lowering their overall tax burden.

Contention

Despite the potential benefits, the bill may raise concerns among certain stakeholders. Critics could argue that the new provisions might lead to discrepancies in how different entities report their costs, which could complicate state revenue calculations and enforcement. Additionally, there may be discussion around whether this change disproportionately favors larger businesses that can better allocate costs, potentially leading to unequal tax advantages and economic disparities.