Texas House Bill HB2766

Texas 2013 - 83rd Regular

Caption

Relating to the exclusion of certain flow-through funds in determining total revenue for purposes of the franchise tax.

Impact

If passed, HB2766 will impact how businesses in Texas report their revenue and, consequently, their tax liabilities. The exclusions proposed would primarily concern sales commissions to non-employees, payments related to securities, and subcontracting payments associated with real property improvements. These changes are likely to reduce the taxable revenue reported by entities utilizing these types of funds, potentially leading to a lower tax burden for those affected businesses. As a result, the bill could provide some financial relief to companies involved in real estate transactions or those engaging in subcontracting activities.

Summary

House Bill 2766 aims to amend the Tax Code of Texas by delineating specific exclusions of flow-through funds in calculating total revenue for the franchise tax. The bill specifically targets revenue classifications mandated by contract or subcontract to be distributed to other entities, allowing taxable entities to exclude certain payments from their total revenue calculations. This legislative action is designed to provide clearer guidelines for determining taxable amounts in the state’s revenue collection process.

Contention

Although the bill received favorable votes in both the House and Senate, some discussions may have emerged regarding the implications of reducing taxable revenues for state funding. Concerns could arise over how these tax breaks may influence public services funded through franchise taxes, as the state dependent on stable revenue streams may need to adapt to these changes. Stakeholders, including state legislators and business groups, may have differing viewpoints on balancing tax relief for businesses while ensuring that state revenues are not adversely affected.