H.B. No. 500
AN ACT
relating to the computation of the franchise tax, including certain
exclusions from the tax.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 171.0001(12), Tax Code, is amended to
read as follows:
(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;
(C) the activities classified as Industry Group
753 of the 1987 Standard Industrial Classification Manual published
by the federal Office of Management and Budget;
(D) rental-purchase agreement activities
regulated by Chapter 92, Business & Commerce Code;
(E) activities involving the rental or leasing of
tools, party and event supplies, and furniture that are classified
as Industry 7359 of the 1987 Standard Industrial Classification
Manual published by the federal Office of Management and Budget;
and
(F) heavy construction equipment rental or
leasing activities classified as Industry 7353 of the 1987 Standard
Industrial Classification Manual published by the federal Office of
Management and Budget.
SECTION 2. Subchapter A, Chapter 171, Tax Code, is amended
by adding Sections 171.0022 and 171.0023 to read as follows:
Sec. 171.0022. TEMPORARY PERMISSIVE ALTERNATE RATES FOR
2014. (a) Notwithstanding Section 171.002(a) and subject to
Section 171.1016 and Subsection (b) of this section, a taxable
entity may elect to pay the tax imposed under this chapter at a rate
of 0.975 percent of taxable margin.
(b) Notwithstanding Section 171.002(b) and subject to
Section 171.1016, a taxable entity primarily engaged in retail or
wholesale trade as defined by Sections 171.002(c) and (c-1) may
elect to pay the tax imposed under this chapter at a rate of 0.4875
percent of taxable margin.
(c) This section applies only to a report originally due on
or after January 1, 2014, and before January 1, 2015.
(d) This section expires December 31, 2014.
Sec. 171.0023. TEMPORARY PERMISSIVE ALTERNATE RATES FOR
2015. (a) Notwithstanding Section 171.002(a) and subject to
Section 171.1016 and Subsections (b) and (d) of this section, a
taxable entity may elect to pay the tax imposed under this chapter
at a rate of 0.95 percent of taxable margin.
(b) Notwithstanding Section 171.002(b) and subject to
Section 171.1016 and Subsection (d) of this section, a taxable
entity primarily engaged in retail or wholesale trade as defined by
Sections 171.002(c) and (c-1) may elect to pay the tax imposed under
this chapter at a rate of 0.475 percent of taxable margin.
(c) This section applies only to a report originally due on
or after January 1, 2015, and before January 1, 2016.
(d) A taxable entity may elect to compute the tax at the rate
provided by Subsection (a) or (b), as applicable, on a report
specified by Subsection (c) only if the comptroller certifies, on
or after September 1, 2014, that probable revenue for the state
fiscal biennium ending August 31, 2015, is estimated to exceed
probable revenue as stated in the comptroller's Biennial Revenue
Estimate for the 2014-2015 fiscal biennium, as adjusted for
estimates of revenue and disbursements associated with legislation
enacted by the 83rd Legislature, including any contingent
appropriations certified before September 1, 2014, by an amount
sufficient to offset the loss in probable revenue that will result
if taxable entities elect to compute the tax at the rates provided
by Subsections (a) and (b). If the comptroller does not make the
certification described by this subsection, a taxable entity may
not elect to pay the tax at the rate provided by Subsection (a) or
(b) and shall pay the tax at the rates provided by Section 171.002.
(e) This section expires December 31, 2015.
SECTION 3. Section 171.006(b), Tax Code, is amended to read
as follows:
(b) Beginning in 2010, on January 1 of each even-numbered
year, the amounts prescribed by Sections 171.002(d)(2) [,
171.0021,] and 171.1013(c) are increased or decreased by an amount
equal to the amount prescribed by those sections on December 31 of
the preceding year multiplied by the percentage increase or
decrease during the preceding state fiscal biennium in the consumer
price index and rounded to the nearest $10,000.
SECTION 4. Section 171.052(a), Tax Code, is amended to read
as follows:
(a) 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 that is
[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. A
nonadmitted insurance organization that is subject to an occupation
tax or any other tax that is imposed for the privilege of doing
business in another state or a foreign jurisdiction, including a
tax on gross premium receipts, is exempted from the franchise tax.
SECTION 5. Subchapter B, Chapter 171, Tax Code, is amended
by adding Section 171.086 to read as follows:
Sec. 171.086. EXEMPTION: POLITICAL SUBDIVISION
CORPORATION. A political subdivision corporation formed under
Section 304.001, Local Government Code, is exempted from the
franchise tax.
SECTION 6. Sections 171.101(a) and (b), Tax Code, are
amended to read as follows:
(a) The taxable margin of a taxable entity is computed by:
(1) determining the taxable entity's margin, which is
the lesser of:
(A) the amount provided by this paragraph, which
is the lesser of:
(i) 70 percent of the taxable entity's total
revenue from its entire business, as determined under Section
171.1011; or
(ii) an amount equal to the taxable entity's
total revenue from its entire business as determined under Section
171.1011 minus $1 million; 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 the greater of:
(i) $1 million; or
(ii) an amount equal to the sum of:
(a) [,] at the election of the taxable
entity, either:
(1) [(a)] cost of goods sold, as
determined under Section 171.1012; or
(2) [(b)] compensation, as
determined under Section 171.1013; and
(b) any [(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 taxable entity's margin to this
state as provided by Section 171.106 to determine the taxable
entity's apportioned margin; and
(3) subtracting from the amount computed under
Subdivision (2) any other allowable deductions to determine the
taxable entity's taxable margin.
(b) Notwithstanding Subsection (a)(1)(B)(ii)(a)
[(a)(1)(B)(ii)], a staff leasing services company may subtract only
the greater of $1 million as provided by Subsection (a)(1)(B)(i) or
compensation as determined under Section 171.1013.
SECTION 7. Section 171.1011, Tax Code, is amended by
amending Subsection (g-4) and adding Subsections (g-8), (g-10),
(g-11), (u), (v), and (x) to read as follows:
(g-4) A taxable entity that is a pharmacy cooperative shall
exclude from its total revenue, to the extent included under
Subsection (c)(1)(A), (c)(2)(A), or (c)(3), flow-through funds
from rebates from pharmacy wholesalers that are distributed to the
pharmacy cooperative's shareholders. A taxable entity that
provides a pharmacy network shall exclude from its total revenue,
to the extent included under Subsection (c)(1)(A), (c)(2)(A), or
(c)(3), reimbursements, pursuant to contractual agreements, for
payments to pharmacies in the pharmacy network.
(g-8) A taxable entity that is primarily engaged in the
business of transporting aggregates shall exclude from its total
revenue, to the extent included under Subsection (c)(1)(A),
(c)(2)(A), or (c)(3), subcontracting payments made by the taxable
entity to independent contractors for the performance of delivery
services on behalf of the taxable entity. In this subsection,
"aggregates" means any commonly recognized construction material
removed or extracted from the earth, including dimension stone,
crushed and broken limestone, crushed and broken granite, other
crushed and broken stone, construction sand and gravel, industrial
sand, dirt, soil, cementitious material, and caliche.
(g-10) A taxable entity that is primarily engaged in the
business of transporting barite shall exclude from its total
revenue, to the extent included under Subsection (c)(1)(A),
(c)(2)(A), or (c)(3), subcontracting payments made by the taxable
entity to nonemployee agents for the performance of transportation
services on behalf of the taxable entity. For purposes of this
subsection, "barite" means barium sulfate (BaSO4), a mineral used
as a weighing agent in oil and gas exploration.
(g-11) A taxable entity that is primarily engaged in the
business of performing landman services shall exclude from its
total revenue, to the extent included under Subsection (c)(1)(A),
(c)(2)(A), or (c)(3), subcontracting payments made by the taxable
entity to nonemployees for the performance of landman services on
behalf of the taxable entity. In this subsection, "landman
services" means:
(1) performing title searches for the purpose of
determining ownership of or curing title defects related to oil,
gas, or other related mineral or petroleum interests;
(2) negotiating the acquisition or divestiture of
mineral rights for the purpose of the exploration, development, or
production of oil, gas, or other related mineral or petroleum
interests; or
(3) negotiating or managing the negotiation of
contracts or other agreements related to the ownership of mineral
interests for the exploration, exploitation, disposition,
development, or production of oil, gas, or other related mineral or
petroleum interests.
(u) A taxable entity shall exclude from its total revenue
the actual cost paid by the taxable entity for a vaccine.
(v) A taxable entity primarily engaged in the business of
transporting goods by waterways that does not subtract cost of
goods sold in computing its taxable margin shall exclude from its
total revenue direct costs of providing transportation services by
intrastate or interstate waterways to the same extent that a
taxable entity that sells in the ordinary course of business real or
tangible personal property would be authorized by Section 171.1012
to subtract those costs as costs of goods sold in computing its
taxable margin, notwithstanding Section 171.1012(e)(3).
(x) A taxable entity that is registered as a motor carrier
under Chapter 643, Transportation Code, shall exclude from its
total revenue, to the extent included under Subsection (c)(1)(A),
(c)(2)(A), or (c)(3), flow-through revenue derived from taxes and
fees.
SECTION 8. Section 171.1011(p), Tax Code, is amended by
adding Subdivision (8) to read as follows:
(8) "Vaccine" means a preparation or suspension of
dead, live attenuated, or live fully virulent viruses or bacteria,
or of antigenic proteins derived from them, used to prevent,
ameliorate, or treat an infectious disease.
SECTION 9. Section 171.1012, Tax Code, is amended by adding
Subsections (k-2) and (k-3) to read as follows:
(k-2) This subsection applies only to a pipeline entity: (1)
that owns or leases and operates the pipeline by which the product
is transported for others and only to that portion of the product to
which the entity does not own title; and (2) that is primarily
engaged in gathering, storing, transporting, or processing crude
oil, including finished petroleum products, natural gas,
condensate, and natural gas liquids, except for a refinery
installation that manufactures finished petroleum products from
crude oil. Notwithstanding Subsection (e)(3) or (i), a pipeline
entity providing services for others related to the product that
the pipeline does not own and to which this subsection applies may
subtract as a cost of goods sold its depreciation, operations, and
maintenance costs allowed by this section related to the services
provided.
(k-3) For purposes of Subsection (k-2), "processing" means
the physical or mechanical removal, separation, or treatment of
crude oil, including finished petroleum products, natural gas,
condensate, and natural gas liquids after those materials are
produced from the earth. The term does not include the chemical or
biological transformation of those materials.
SECTION 10. (a) Section 171.1012, Tax Code, is amended by
adding Subsection (t) to read as follows:
(t) If a taxable entity that is a movie theater elects to
subtract cost of goods sold, the cost of goods sold for the taxable
entity shall be the costs described by this section in relation to
the acquisition, production, exhibition, or use of a film or motion
picture, including expenses for the right to use the film or motion
picture.
(b) Section 171.1012(t), Tax Code, as added by this section,
is a clarification of existing law and does not imply that existing
law may be construed as inconsistent with the law as amended by this
section.
(c) This section takes effect September 1, 2013.
SECTION 11. Section 171.1014, Tax Code, is amended by
amending Subsection (d) and adding Subsection (j) to read as
follows:
(d) For purposes of Section 171.101, a combined group shall
make an election to subtract either cost of goods sold or
compensation that applies to all of its members, or $1 million.
Regardless of the election, the taxable margin of the combined
group may not exceed the amount [70 percent of the combined group's
total revenue from its entire business, as] provided by Section
171.101(a)(1)(A) for the combined group.
(j) Notwithstanding any other provision of this section, a
taxable entity that provides retail or wholesale electric utilities
may not be included as a member of a combined group that includes
one or more taxable entities that do not provide retail or wholesale
electric utilities if that combined group in the absence of this
subsection:
(1) would not meet the requirements of Section
171.002(c) solely because one or more members of the combined group
provide retail or wholesale electric utilities; and
(2) would have less than five percent of the combined
group's total revenue derived from providing retail or wholesale
electric utilities.
SECTION 12. Section 171.106, Tax Code, is amended by adding
Subsection (g) to read as follows:
(g) A receipt from Internet hosting as defined by Section
151.108(a) is a receipt from business done in this state only if the
customer to whom the service is provided is located in this state.
SECTION 13. (a) Subchapter C, Chapter 171, Tax Code, is
amended by adding Section 171.109 to read as follows:
Sec. 171.109. DEDUCTION OF RELOCATION COSTS BY CERTAIN
TAXABLE ENTITIES FROM MARGIN APPORTIONED TO THIS STATE. (a) In
this section, "relocation costs" means the costs incurred by a
taxable entity to relocate the taxable entity's main office or
other principal place of business from one location to another. The
term includes:
(1) costs of relocating computers and peripherals,
other business supplies, furniture, and inventory; and
(2) any other costs related to the relocation that are
allowable deductions for federal income tax purposes.
(b) Subject to Subsection (c), a taxable entity may deduct
from its apportioned margin relocation costs incurred in relocating
the taxable entity's main office or other principal place of
business to this state from another state if the taxable entity:
(1) did not do business in this state before
relocating the taxable entity's main office or other principal
place of business to this state; and
(2) is not a member of an affiliated group engaged in a
unitary business, another member of which is doing business in this
state on the date the taxable entity relocates the taxable entity's
main office or other principal place of business to this state.
(c) A taxable entity must take the deduction authorized by
Subsection (b) on the report based on the taxable entity's initial
period described by Section 171.151(1).
(d) On the comptroller's request, a taxable entity that
takes a deduction authorized by this section shall file with the
comptroller proof of the deducted relocation costs.
(b) The change in law made by this section applies only to a
taxable entity that relocates the taxable entity's main office or
other principal place of business to this state on or after the
effective date of this section.
(c) This section takes effect September 1, 2013.
SECTION 14. (a) Chapter 171, Tax Code, is amended by adding
Subchapter S to read as follows:
SUBCHAPTER S. TAX CREDIT FOR CERTIFIED REHABILITATION OF CERTIFIED
HISTORIC STRUCTURES
Sec. 171.901. DEFINITIONS. In this subchapter:
(1) "Certified historic structure" means a property in
this state that is:
(A) listed individually in the National Register
of Historic Places;
(B) designated as a Recorded Texas Historic
Landmark under Section 442.006, Government Code, or as a state
archeological landmark under Chapter 191, Natural Resources Code;
or
(C) certified by the commission as contributing
to the historic significance of:
(i) a historic district listed in the
National Register of Historic Places; or
(ii) a local district certified by the
United States Department of the Interior in accordance with 36
C.F.R. Section 67.9.
(2) "Certified rehabilitation" means the
rehabilitation of a certified historic structure that the
commission has certified as meeting the United States secretary of
the interior's Standards for Rehabilitation as defined in 36 C.F.R.
Section 67.7.
(3) "Commission" means the Texas Historical
Commission.
(4) "Eligible costs and expenses" means qualified
rehabilitation expenditures as defined by Section 47(c)(2),
Internal Revenue Code.
Sec. 171.902. ELIGIBILITY FOR CREDIT. An entity is
eligible to apply for a credit in the amount and under the
conditions and limitations provided by this subchapter against the
tax imposed under this chapter.
Sec. 171.903. QUALIFICATION. An entity is eligible for a
credit for eligible costs and expenses incurred in the certified
rehabilitation of a certified historic structure as provided by
this subchapter if:
(1) the rehabilitated certified historic structure is
placed in service on or after September 1, 2013;
(2) the entity has an ownership interest in the
certified historic structure in the year during which the structure
is placed in service after the rehabilitation; and
(3) the total amount of the eligible costs and
expenses incurred exceeds $5,000.
Sec. 171.904. CERTIFICATION OF ELIGIBILITY. (a) Before
claiming, selling, or assigning a credit under this subchapter, the
entity that incurred the eligible costs and expenses in the
rehabilitation of a certified historic structure must request from
the commission a certificate of eligibility on which the commission
certifies that the work performed meets the definition of a
certified rehabilitation. The entity must include with the
entity's request:
(1) information on the property that is sufficient for
the commission to determine whether the property meets the
definition of a certified historic structure; and
(2) information on the rehabilitation, and
photographs before and after work is performed, sufficient for the
commission to determine whether the rehabilitation meets the United
States secretary of the interior's Standards for Rehabilitation as
defined in 36 C.F.R. Section 67.7.
(b) The commission shall issue a certificate of eligibility
to an entity that has incurred eligible costs and expenses as
provided by this subchapter. The certificate must:
(1) confirm that:
(A) the property to which the eligible costs and
expenses relate is a certified historic structure; and
(B) the rehabilitation qualifies as a certified
rehabilitation; and
(2) specify the date the certified historic structure
was first placed in service after the rehabilitation.
(c) The entity must forward the certificate of eligibility
and the following documentation to the comptroller to claim the tax
credit:
(1) an audited cost report issued by a certified
public accountant, as defined by Section 901.002, Occupations Code,
that itemizes the eligible costs and expenses incurred in the
certified rehabilitation of the certified historic structure by the
entity;
(2) the date the certified historic structure was
first placed in service after the rehabilitation and evidence of
that placement in service; and
(3) an attestation of the total eligible costs and
expenses incurred by the entity on the rehabilitation of the
certified historic structure.
(d) For purposes of approving the tax credit under
Subsection (c), the comptroller may rely on the audited cost report
provided by the entity that requested the tax credit.
(e) An entity that sells or assigns a credit under this
subchapter to another entity shall provide a copy of the
certificate of eligibility, together with the audited cost report,
to the purchaser or assignee.
Sec. 171.905. AMOUNT OF CREDIT; LIMITATIONS. (a) The total
amount of the credit under this subchapter with respect to the
rehabilitation of a single certified historic structure that may be
claimed may not exceed 25 percent of the total eligible costs and
expenses incurred in the certified rehabilitation of the certified
historic structure.
(b) The total credit claimed for a report, including the
amount of any carryforward under Section 171.906, may not exceed
the amount of franchise tax due for the report after any other
applicable tax credits.
(c) Eligible costs and expenses may only be counted once in
determining the amount of the tax credit available, and more than
one entity may not claim a credit for the same eligible costs and
expenses.
Sec. 171.906. CARRYFORWARD. (a) If an entity is eligible
for a credit that exceeds the limitation under Section 171.905(b),
the entity may carry the unused credit forward for not more than
five consecutive reports.
(b) A carryforward is considered the remaining portion of a
credit that cannot be claimed in the current year because of the
limitation under Section 171.905(b).
Sec. 171.907. APPLICATION FOR CREDIT. (a) An entity must
apply for a credit under this subchapter on or with the report for
the period for which the credit is claimed.
(b) An entity shall file with any report on which the credit
is claimed a copy of the certificate of eligibility issued by the
commission under Section 171.904 and any other information required
by the comptroller to sufficiently demonstrate that the entity is
eligible for the credit.
(c) The burden of establishing eligibility for and the value
of the credit is on the entity.
Sec. 171.908. SALE OR ASSIGNMENT OF CREDIT. (a) An entity
that incurs eligible costs and expenses may sell or assign all or
part of the credit that may be claimed for those costs and expenses
to one or more entities, and any entity to which all or part of the
credit is sold or assigned may sell or assign all or part of the
credit to another entity. There is no limit on the total number of
transactions for the sale or assignment of all or part of the total
credit authorized under this subchapter, however, collectively all
transfers are subject to the maximum total limits provided by
Section 171.905.
(b) An entity that sells or assigns a credit under this
section and the entity to which the credit is sold or assigned shall
jointly submit written notice of the sale or assignment to the
comptroller on a form promulgated by the comptroller not later than
the 30th day after the date of the sale or assignment. The notice
must include:
(1) the date of the sale or assignment;
(2) the amount of the credit sold or assigned;
(3) the names and federal tax identification numbers
of the entity that sold or assigned the credit or part of the credit
and the entity to which the credit or part of the credit was sold or
assigned; and
(4) the amount of the credit owned by the selling or
assigning entity before the sale or assignment, and the amount the
selling or assigning entity retained, if any, after the sale or
assignment.
(c) The sale or assignment of a credit in accordance with
this section does not extend the period for which a credit may be
carried forward and does not increase the total amount of the credit
that may be claimed. After an entity claims a credit for eligible
costs and expenses, another entity may not use the same costs and
expenses as the basis for claiming a credit.
(d) Notwithstanding the requirements of this subchapter, a
credit earned or purchased by, or assigned to, a partnership,
limited liability company, S corporation, or other pass-through
entity may be allocated to the partners, members, or shareholders
of that entity and claimed under this subchapter in accordance with
the provisions of any agreement among the partners, members, or
shareholders and without regard to the ownership interest of the
partners, members, or shareholders in the rehabilitated certified
historic structure, provided that the entity that claims the credit
must be subject to the tax imposed under this chapter.
Sec. 171.909. RULES. The commission and the comptroller
shall adopt rules necessary to implement this subchapter.
(b) This section takes effect January 1, 2015.
SECTION 15. Sections 171.0021, 171.1016(d), and 171.103(c)
and (d), Tax Code, are repealed.
SECTION 16. 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 17. 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 18. 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 19. This Act applies only to a report originally due
on or after the effective date of this Act.
SECTION 20. Except as otherwise provided by this Act, this
Act takes effect January 1, 2014.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 500 was passed by the House on May 8,
2013, by the following vote: Yeas 117, Nays 24, 7 present, not
voting; that the House refused to concur in Senate amendments to
H.B. No. 500 on May 24, 2013, and requested the appointment of a
conference committee to consider the differences between the two
houses; that the House adopted the conference committee report on
H.B. No. 500 on May 26, 2013, by the following vote: Yeas 131, Nays
14, 1 present, not voting; and that the House adopted H.C.R. No. 221
authorizing certain corrections in H.B. No. 500 on May 27, 2013, by
the following vote: Yeas 145, Nays 3, 2 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 500 was passed by the Senate, with
amendments, on May 21, 2013, by the following vote: Yeas 31, Nays
0; at the request of the House, the Senate appointed a conference
committee to consider the differences between the two houses; that
the Senate adopted the conference committee report on H.B. No. 500
on May 26, 2013, by the following vote: Yeas 27, Nays 4; and that
the Senate adopted H.C.R. No. 221 authorizing certain corrections
in H.B. No. 500 on May 27, 2013, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor