83R1850 BEF-D
By: Perry H.B. No. 2250
A BILL TO BE ENTITLED
AN ACT
relating to the franchise tax; changing the manner in which the
franchise tax is computed and the rate of the tax; authorizing a
filing fee; repealing the fee for failing to timely file a report.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 171.0001, Tax Code, is amended to read as
follows:
Sec. 171.0001. GENERAL DEFINITIONS. In this chapter:
(1) "Affiliated group" means a group of one or more
entities in which a controlling interest is owned by a common owner
or owners, either corporate or noncorporate, or by one or more of
the member entities.
[(1-a) "Artist" means a natural person or an entity
that contracts to perform or entertain at a live entertainment
event.]
(2) ["Assigned employee" has the meaning assigned by
Section 91.001, Labor Code.
[(3)] "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 25A [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).
(3) [(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.
(4) [(5)] "Charter" includes a limited liability
company's certificate of organization, a limited partnership's
certificate of limited partnership, and the registration of a
limited liability partnership.
(5) [(6) "Client company" means:
[(A) a person that contracts with a license
holder under Chapter 91, Labor Code, and is assigned employees by
the license holder under that contract; or
[(B) a client of a temporary employment service,
as that term is defined by Section 93.001(2), Labor Code, to whom
individuals are assigned for a purpose described by that
subdivision.
[(7) "Combined group" means taxable entities that are
part of an affiliated group engaged in a unitary business and that
are required to file a group report under Section 171.1014.
[(8) "Controlling interest" means:
[(A) for a corporation, either more than 50
percent, owned directly or indirectly, of the total combined voting
power of all classes of stock of the corporation, or more than 50
percent, owned directly or indirectly, of the beneficial ownership
interest in the voting stock of the corporation;
[(B) for a partnership, association, trust, or
other entity other than a limited liability company, more than 50
percent, owned directly or indirectly, of the capital, profits, or
beneficial interest in the partnership, association, trust, or
other entity; and
[(C) for a limited liability company, either more
than 50 percent, owned directly or indirectly, of the total
membership interest of the limited liability company or more than
50 percent, owned directly or indirectly, of the beneficial
ownership interest in the membership interest of the limited
liability company.
[(9)] "Internal Revenue Code" means the Internal
Revenue Code of 1986 in effect for the federal tax year beginning on
January 1, 2013 [2007], not including any changes made by federal
law after that date, and any regulations adopted under that code
applicable to that period.
(6) [(10) "Lending institution" means an entity that
makes loans and:
[(A) is regulated by the Federal Reserve Board,
the Office of the Comptroller of the Currency, the Federal Deposit
Insurance Corporation, the Commodity Futures Trading Commission,
the Office of Thrift Supervision, the Texas Department of Banking,
the Office of Consumer Credit Commissioner, the Credit Union
Department, or any comparable regulatory body;
[(B) is licensed by, registered with, or
otherwise regulated by the Department of Savings and Mortgage
Lending;
[(C) is a "broker" or "dealer" as defined by the
Securities Exchange Act of 1934 at 15 U.S.C. Section 78c; or
[(D) provides financing to unrelated parties
solely for agricultural production.
[(10-a) "Live entertainment event" means an event that
occurs on a specific date to which tickets are sold in advance by a
third-party vendor and at which:
[(A) a natural person or a group of natural
persons, physically present at the venue, performs for the purpose
of entertaining a ticket holder who is present at the event;
[(B) a traveling circus or animal show performs
for the purpose of entertaining a ticket holder who is present at
the event; or
[(C) a historical, museum-quality artifact is on
display in an exhibition.
[(10-b) "Live event promotion services" means
services related to the promotion, coordination, operation, or
management of a live entertainment event. The term includes
services related to:
[(A) the provision of staff for the live
entertainment event; or
[(B) the scheduling and promotion of an artist
performing or entertaining at the live entertainment event.
[(11) "Management company" means a corporation,
limited liability company, or other limited liability entity that
conducts all or part of the active trade or business of another
entity (the "managed entity") in exchange for:
[(A) a management fee; and
[(B) reimbursement of specified costs incurred
in the conduct of the active trade or business of the managed
entity, including "wages and cash compensation" as determined under
Sections 171.1013(a) and (b).
[(11-a)] "Natural person" means a human being or the
estate of a human being. The term does not include a purely legal
entity given recognition as the possessor of rights, privileges, or
responsibilities, such as a corporation, limited liability
company, partnership, or trust.
(7) "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.
(8) [(11-b) "Qualified live event promotion company"
means a taxable entity that:
[(A) receives at least 50 percent of the entity's
annual total revenue from the provision or arrangement for the
provision of three or more live event promotion services;
[(B) maintains a permanent nonresidential office
from which the live event promotion services are provided or
arranged;
[(C) employs 10 or more full-time employees
during all or part of the period for which taxable margin is
calculated;
[(D) does not provide services for a wedding or
carnival; and
[(E) is not a movie theater.
[(12) "Retail trade" means:
[(A) the activities described in Division G of
the 1987 Standard Industrial Classification Manual published by the
federal Office of Management and Budget; and
[(B) apparel rental activities classified as
Industry 5999 or 7299 of the 1987 Standard Industrial
Classification Manual published by the federal Office of Management
and Budget.
[(13)] "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.
(9) [(13-a) "Security," for purposes of Sections
171.1011(g), 171.1011(g-2), and 171.106(f) only, has the meaning
assigned by Section 475(c)(2), Internal Revenue Code, and includes
instruments described by Sections 475(e)(2)(B), (C), and (D) of
that code.
[(14)] "Shareholder" includes a limited liability
company's member and a limited banking association's participant.
(10) [(15) "Staff leasing services company" means:
[(A) a business entity that offers staff leasing
services, as that term is defined by Section 91.001, Labor Code; or
[(B) a temporary employment service, as that term
is defined by Section 93.001, Labor Code.
[(16) "Total revenue" means the total revenue of a
taxable entity as determined under Section 171.1011.
[(17)] "Unitary business" means a single economic
enterprise that is made up of separate parts of a single entity or
of a commonly controlled group of entities that are sufficiently
interdependent, integrated, and interrelated through their
activities so as to provide a synergy and mutual benefit that
produces a sharing or exchange of value among them and a significant
flow of value to the separate parts. In determining whether a
unitary business exists, the comptroller shall consider any
relevant factor, including whether:
(A) the activities of the group members are in
the same general line, such as manufacturing, wholesaling,
retailing of tangible personal property, insurance,
transportation, or finance;
(B) the activities of the group members are steps
in a vertically structured enterprise or process, such as the steps
involved in the production of natural resources, including
exploration, mining, refining, and marketing; or
(C) the members are functionally integrated
through the exercise of strong centralized management, such as
authority over purchasing, financing, product line, personnel, and
marketing.
[(18) "Wholesale trade" means the activities
described in Division F of the 1987 Standard Industrial
Classification Manual published by the federal Office of Management
and Budget.]
SECTION 2. Section 171.0002(a), Tax Code, is amended to
read as follows:
(a) Except as otherwise provided by this section, "taxable
entity" means a partnership, limited liability partnership,
corporation, banking corporation, savings and loan association,
limited liability company, business trust, professional
association, business association, joint venture, joint stock
company, holding company, or other legal entity. [The term
includes a combined group.] A joint venture does not include joint
operating or co-ownership arrangements meeting the requirements of
Treasury Regulation Section 1.761-2(a)(3) that elect out of federal
partnership treatment as provided by Section 761(a), Internal
Revenue Code.
SECTION 3. Section 171.0003(a), Tax Code, is amended to
read as follows:
(a) An entity is a passive entity only if:
(1) the entity is a general or limited partnership or a
trust, other than a business trust;
(2) during the period on which earned surplus [margin]
is based, the entity's federal gross income consists of at least 90
percent of the following income:
(A) dividends, interest, foreign currency
exchange gain, periodic and nonperiodic payments with respect to
notional principal contracts, option premiums, cash settlement or
termination payments with respect to a financial instrument, and
income from a limited liability company;
(B) distributive shares of partnership income to
the extent that those distributive shares of income are greater
than zero;
(C) capital gains from the sale of real property,
gains from the sale of commodities traded on a commodities
exchange, and gains from the sale of securities; and
(D) royalties, bonuses, or delay rental income
from mineral properties and income from other nonoperating mineral
interests; and
(3) the entity does not receive more than 10 percent of
its federal gross income from conducting an active trade or
business.
SECTION 4. Section 171.0011(b), Tax Code, is amended to
read as follows:
(b) The additional tax is equal to 0.25 percent of the
taxable entity'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 and ending on the date the taxable entity is no
longer subject to the tax imposed under this chapter.
SECTION 5. Section 171.002, Tax Code, is amended by
amending Subsections (a) and (d) and adding Subsection (e) to read
as follows:
(a) The [Subject to Sections 171.003 and 171.1016 and except
as provided by Subsection (b), the] rate of the franchise tax is
0.25 [one] percent of net taxable earned surplus [margin].
(d) A 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 taxable entity
is less than $1,000; or
(2) the taxable entity:
(A) is not part of an affiliated group engaged in
a unitary business and the amount of the taxable entity's gross
receipts [total revenue] from its [entire] business done in this
state under Section 171.1032 is less than or equal to $1 million; or
(B) is part of an affiliated group engaged in a
unitary business and the total amount of gross receipts of all
taxable entities that are part of that affiliated group from their
business done in this state under Section 171.1032 is less than or
equal to $1 million [or the amount determined under Section 171.006
per 12-month period on which margin is based].
(e) If the amount of tax computed to be due under this
chapter for any privilege period is less than zero, the comptroller
shall consider the amount to be zero.
SECTION 6. The heading to Subchapter C, Chapter 171, Tax
Code, is amended to read as follows:
SUBCHAPTER C. DETERMINATION OF TAXABLE EARNED SURPLUS [MARGIN];
ALLOCATION AND APPORTIONMENT
SECTION 7. Subchapter C, Chapter 171, Tax Code, is amended
by adding Section 171.1032 to read as follows:
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 taxable entity that are subject to
Section 171.1061, in apportioning taxable earned surplus, the gross
receipts of a taxable entity from its business done in this state is
the sum of the 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 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 taxable entity 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(i), 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 taxable entity shall include in its gross receipts
computed under Subsection (a) the taxable entity's share of the
gross receipts of each partnership and joint venture of which the
taxable entity is a part apportioned to this state as though the
taxable entity directly earned the receipts, including receipts
from business done with the taxable entity.
SECTION 8. Subchapter C, Chapter 171, Tax Code, is amended
by adding Section 171.1051 to read as follows:
Sec. 171.1051. DETERMINATION OF GROSS RECEIPTS FROM ENTIRE
BUSINESS FOR TAXABLE EARNED SURPLUS. (a) Except for the gross
receipts of a taxable entity that are subject to Section 171.1061,
in apportioning taxable earned surplus, the gross receipts of a
taxable entity from its entire business is the sum of the taxable
entity's receipts from:
(1) each sale of the taxable entity's tangible
personal property;
(2) each service, rental, or royalty;
(3) each partnership and joint venture as provided by
Subsection (d); and
(4) other business.
(b) If a taxable entity sells an investment or capital
asset, the taxable entity's gross receipts from its entire business
for taxable earned surplus includes only the net gain from the sale.
(c) A taxable entity 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(i), 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 taxable entity shall include in its gross receipts
computed under Subsection (a) the taxable entity's share of the
gross receipts of each partnership and joint venture of which the
taxable entity is a part.
SECTION 9. The heading to Section 171.106, Tax Code, is
amended to read as follows:
Sec. 171.106. APPORTIONMENT OF TAXABLE EARNED SURPLUS
[MARGIN] TO THIS STATE.
SECTION 10. Sections 171.106(a), (b), and (c), Tax Code,
are amended to read as follows:
(a) Except as provided by Subsections (b) and (c) [this
section], a taxable entity's taxable earned surplus [margin] is
apportioned to this state to determine the amount of tax imposed
under Section 171.002 by multiplying the taxable earned surplus
[margin] by a fraction, the numerator of which is the 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 taxable entity's gross receipts from its entire
business, as determined under Section 171.1051 [171.105].
(b) A taxable entity's taxable earned surplus [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 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 taxable entity's total taxable 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. In this subsection, "regulated investment company"
has the meaning assigned by Section 851(a), Internal Revenue Code.
(c) A taxable entity's taxable earned surplus [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 taxable entity's
total taxable 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. 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.
SECTION 11. Subchapter C, Chapter 171, Tax Code, is amended
by adding Section 171.1061 to read as follows:
Sec. 171.1061. ALLOCATION OF CERTAIN TAXABLE EARNED SURPLUS
TO THIS STATE. An item of income included in a taxable entity'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 taxable entity's other activities conducted
within that state or country under the United States Constitution,
is allocated to this state if the taxable entity'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 taxable entity's taxable
earned surplus allocated to this state under this section may not be
apportioned under Section 171.110(a)(2).
SECTION 12. The heading to Section 171.107, Tax Code, is
amended to read as follows:
Sec. 171.107. DEDUCTION OF COST OF SOLAR ENERGY DEVICE FROM
TAXABLE EARNED SURPLUS [MARGIN] APPORTIONED TO THIS STATE.
SECTION 13. Section 171.107(b), Tax Code, is amended to
read as follows:
(b) A taxable entity may deduct 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 taxable entity for
heating or cooling or for the production of power;
(2) the device is used in this state by the taxable
entity; and
(3) the cost of the device is amortized in accordance
with Subsection (c).
SECTION 14. The heading to Section 171.108, Tax Code, is
amended to read as follows:
Sec. 171.108. DEDUCTION OF COST OF CLEAN COAL PROJECT FROM
TAXABLE EARNED SURPLUS [MARGIN] APPORTIONED TO THIS STATE.
SECTION 15. Section 171.108(b), Tax Code, is amended to
read as follows:
(b) A taxable entity may deduct 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 taxable entity for use in
generation of electricity, production of process steam, or
industrial production;
(3) that the taxable entity uses in this state; and
(4) the cost of which is amortized in accordance with
Subsection (c).
SECTION 16. Subchapter C, Chapter 171, Tax Code, is amended
by adding Section 171.110 to read as follows:
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 (i), 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 in excess of $300,000 per
person, or if a bank, any compensation of directors and executive
officers in excess of $300,000 per person, 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(a), (b), or
(c), 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 (c).
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) A corporation shall report its net taxable earned
surplus based solely on its own financial condition. Consolidated
reporting is prohibited.
(g) 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.
(h) A corporation may rebut the presumption described in
Subsection (g) 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.
(i) Dividends and interest received from federal
obligations are not included in earned surplus or gross receipts
for earned surplus purposes.
(j) For a taxable entity other than a taxable entity treated
for federal income tax purposes as a corporation, the net taxable
earned surplus is computed in a manner substantially similar to the
manner provided by this section for a corporation, under rules that
the comptroller shall adopt. For a taxable entity treated for
federal income tax purposes as a partnership, disregarded entity,
or other entity on which federal income tax is not imposed, the
comptroller's rules shall treat the entity as if the entity were
subject to federal income tax.
(k) 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.
SECTION 17. Section 171.1121, Tax Code, is amended to read
as follows:
Sec. 171.1121. GROSS RECEIPTS FOR TAXABLE EARNED SURPLUS
[MARGIN]. (a) For purposes of this section, "gross receipts" means
all revenues reportable by a 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 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 taxable entity 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 [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 taxable entity's share of a partnership's gross
receipts that is included in the taxable entity's federal taxable
income must be used in computing the taxable entity's gross
receipts under this section. Unless otherwise provided by this
chapter, a taxable entity may not deduct costs incurred from the
taxable entity's share of a partnership's gross receipts. The gross
receipts must be apportioned as though the taxable entity directly
earned them.
SECTION 18. The heading to Section 171.1532, Tax Code, is
amended to read as follows:
Sec. 171.1532. BUSINESS ON WHICH TAX ON NET TAXABLE EARNED
SURPLUS [MARGIN] IS BASED.
SECTION 19. Sections 171.202(a) and (d), Tax Code, are
amended to read as follows:
(a) Except as provided by Section 171.2022, a taxable entity
on which the franchise tax is imposed shall file an annual report
with the comptroller containing:
(1) financial information of the taxable entity
necessary to compute the tax under this chapter;
(2) the name and address of each officer and director
of the taxable entity;
(3) the name and address of the agent of the taxable
entity designated under Section 171.354; [and]
(4) a copy of the taxable entity's federal income tax
return if the taxable entity filed a federal income tax return, a
copy of any consolidated federal income tax return that includes
information about the taxable entity's income if the taxable entity
is a member of a federal affiliated group that filed a consolidated
federal income tax return, or a copy of any federal income tax
return that includes information about the taxable entity's income
if the taxable entity is treated as a disregarded entity for federal
income tax purposes; and
(5) other information required by the comptroller.
(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 an amount produced by
multiplying the net taxable earned surplus [margin], as reported on
the initial report filed on or before May 14, by the rate of tax in
Section 171.002 that is effective January 1 of the year in which the
report is due.
SECTION 20. Section 171.203, Tax Code, is amended by
amending Subsections (a), (b), (d), and (e) and adding Subsections
(a-1), (a-2), (a-3), (a-4), and (d-1) to read as follows:
(a) A taxable entity [corporation or limited liability
company] on which the franchise tax is imposed, regardless of
whether the taxable entity [corporation or limited liability
company] is required to pay any tax, shall file a report with the
comptroller containing the taxable entity's name, taxpayer number,
file number assigned by the secretary of state, or other
information required by the comptroller to identify the taxable
entity. A taxable entity, other than a nonprofit entity, shall
remit with the report a $200 filing fee.
(a-1) Except as provided by Subsection (a-2), 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 a taxable entity
that may be subject to the tax imposed under this chapter to include
on the report under Subsection (a) the amount of the taxable
entity's taxable earned surplus or any other information the
comptroller may request that is necessary to make a determination
under this subsection.
(a-2) The comptroller may require a taxable entity that does
not owe any tax because of the application of Section 171.002(d)(2)
to include on the report under Subsection (a) the amount of the
taxable entity's gross receipts from its business done in this
state. The comptroller may not require a taxable entity described
by this subsection to report or compute its taxable earned surplus.
(a-3) 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.
(a-4) A corporation or limited liability company shall
include on the report under Subsection (a):
(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 taxable entity [corporation or limited liability
company] shall file the report once a year on a form prescribed by
the comptroller.
(d) A [The] corporation or limited liability company shall
send a copy of the report to each person named in the report under
Subsection (a-4)(3) [(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-4)(1) [(a)(1)]
or (2).
(d-1) An officer or director of the taxable entity
[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 Subsection (d) [this subsection] on the date the
return is filed, if applicable.
(e) If a person's name is included in a report under
Subsection (a-4)(3) [(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.
SECTION 21. Section 171.206, Tax Code, is amended to read as
follows:
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 including information required under Sections
171.203(a-1), (a-2), and (a-3); or
(2) information, including information about the
business affairs, operations, profits, losses, [cost of goods sold,
compensation,] or expenditures of a taxable entity, obtained by an
examination of the books and records, officers, partners, trustees,
agents, or employees of a taxable entity on which a tax is imposed
by this chapter.
SECTION 22. Section 171.207, Tax Code, is amended to read as
follows:
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, other than information required under Section
171.203(a-1), (a-2), or (a-3) [or 171.2035].
SECTION 23. Section 171.208, Tax Code, is amended to read as
follows:
Sec. 171.208. PROHIBITION OF DISCLOSURE OF INFORMATION. A
person, including a state officer or employee or an owner of a
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 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 taxable entity.
SECTION 24. Section 171.212(a), Tax Code, is amended to
read as follows:
(a) A taxable entity must file an amended report under this
chapter if:
(1) the taxable entity's net 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 taxable entity files an amended federal income
tax return or other return that changes the taxable entity's net
taxable earned surplus [margin].
SECTION 25. Subchapter E, Chapter 171, Tax Code, is amended
by adding Section 171.216 to read as follows:
Sec. 171.216. SUNSET REVIEW OF CERTAIN PROVISIONS BY
COMPTROLLER. (a) Not later than January 1, 2023, the comptroller
shall review and issue a written report to the 88th Legislature
recommending whether the following provisions should be continued
in effect or amended:
(1) the rate of the franchise tax and the application
of the franchise tax to a taxable entity's net taxable earned
surplus under Section 171.002(a);
(2) the amount of a taxable entity's gross receipts
from its business done in this state that results in the exemption
provided by Section 171.002(d)(2); and
(3) the compensation that a taxable entity must add
under Section 171.110(a)(1).
(b) The comptroller shall consider the following criteria
in determining whether to recommend a provision described by
Subsection (a) be continued in effect or amended:
(1) the efficiency and effectiveness of the franchise
tax with the provision;
(2) the purposes for the franchise tax and the extent
to which the purposes have been achieved with the provision; and
(3) the estimated fiscal impact of any proposed
amendment to the provision.
SECTION 26. Sections 171.362(a) and (b), Tax Code, are
amended to read as follows:
(a) If a 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 taxable
entity is liable for a penalty of five percent of the amount of the
tax due and of the filing fee due under Section 171.203(a).
(b) If the tax is not paid or the report is not filed within
30 days after the due date, a penalty of an additional five percent
of the tax due and of the filing fee due under Section 171.203(a) is
imposed.
SECTION 27. Subchapter H, Chapter 490, Government Code, is
transferred to Chapter 171, Tax Code, redesignated as Subchapter L,
Chapter 171, Tax Code, and amended to read as follows:
SUBCHAPTER L. [H. FRANCHISE] TAX CREDIT FOR CLEAN ENERGY PROJECT
Sec. 171.651 [490.351]. DEFINITION. In this subchapter,
"clean energy project" has the meaning assigned by Section 120.001,
Natural Resources Code.
Sec. 171.652. [490.352. FRANCHISE] TAX CREDIT FOR CLEAN
ENERGY PROJECT. (a) The comptroller shall adopt rules for issuing
to an entity implementing a clean energy project in this state a
[franchise tax] credit against the tax imposed under this chapter.
A clean energy project is eligible for a [franchise tax] credit
only if the project is implemented in connection with the
construction of a new facility.
(b) The comptroller shall issue a [franchise tax] credit to
an entity operating a clean energy project after:
(1) the Railroad Commission of Texas has issued a
certificate of compliance for the project to the entity as provided
by Section 120.004, Natural Resources Code;
(2) the construction of the project has been
completed;
(3) the electric generating facility associated with
the project is fully operational;
(4) the Bureau of Economic Geology of The University
of Texas at Austin verifies to the comptroller that the electric
generating facility associated with the project is sequestering at
least 70 percent of the carbon dioxide resulting from or associated
with the generation of electricity by the facility; and
(5) the owner or operator of the project has entered
into an interconnection agreement relating to the project with the
Electric Reliability Council of Texas.
(c) The total amount of the [franchise tax] credit that may
be issued to the entity designated in the certificate of compliance
for a clean energy project is equal to the lesser of:
(1) 10 percent of the total capital cost of the
project, including the cost of designing, engineering, permitting,
constructing, and commissioning the project, the cost of procuring
land, water, and equipment for the project, and all fees, taxes, and
commissions paid and other payments made in connection with the
project but excluding the cost of financing the capital cost of the
project; or
(2) $100 million.
(d) The amount of the [franchise tax] credit for each report
year is calculated by determining the amount of [franchise] tax
imposed under this chapter that is due based on the net taxable
earned surplus [margin] generated by a clean energy project from
the generation and sale of power and the sale of any products that
are produced by the electric generation facility. The amount of the
[franchise tax] credit claimed under this section for a report year
may not exceed the amount of [franchise] tax under this chapter
attributable to the clean energy project for that report year.
[(e) The comptroller may not issue a franchise tax credit
under this section before September 1, 2013. This subsection
expires September 2, 2013.]
SECTION 28. The following provisions of the Tax Code are
repealed:
(1) Sections 171.002(b), (c), and (c-1);
(2) Section 171.0021;
(3) Section 171.003;
(4) Section 171.006;
(5) Section 171.101;
(6) Section 171.1011;
(7) Section 171.1012;
(8) Section 171.1013;
(9) Section 171.1014;
(10) Section 171.1015;
(11) Section 171.1016;
(12) Section 171.103;
(13) Section 171.105;
(14) Section 171.1055;
(15) Sections 171.106(f) and (f-1);
(16) Section 171.111;
(17) Section 171.204;
(18) Section 171.2125; and
(19) Section 171.362(f).
SECTION 29. Section 1(c), Chapter 286 (H.B. 4765), Acts of
the 81st Legislature, Regular Session, 2009, as amended by Section
37.01, Chapter 4 (S.B. 1), Acts of the 82nd Legislature, 1st Called
Session, 2011, is repealed.
SECTION 30. Section 2, Chapter 286 (H.B. 4765), Acts of the
81st Legislature, Regular Session, 2009, as amended by Section
37.02, Chapter 4 (S.B. 1), Acts of the 82nd Legislature, 1st Called
Session, 2011, and which amended former Subsection (d), Section
171.002, Tax Code, is repealed.
SECTION 31. Section 3, Chapter 286 (H.B. 4765), Acts of the
81st Legislature, Regular Session, 2009, as amended by Section
37.03, Chapter 4 (S.B. 1), Acts of the 82nd Legislature, 1st Called
Session, 2011, and which amended former Subsection (a), Section
171.0021, Tax Code, is repealed.
SECTION 32. (a) Section 24, Chapter 1 (H.B. 3), Acts of the
79th Legislature, 3rd Called Session, 2006, is repealed.
(b) The change in law made by this section applies only to a
challenge filed on or after the effective date of this Act. A
challenge filed before the effective date of this Act is governed by
the law in effect on the date the challenge was filed, and the
former law is continued in effect for that purpose.
SECTION 33. (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 taxable entity 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 taxable entity established the credits is continued
in effect for purposes of determining the amount of the credits the
taxable entity may claim and the manner in which the taxable entity
may claim the credits.
SECTION 34. (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 35. This Act takes effect January 1, 2014.