Texas 2015 - 84th Regular

Texas House Bill HB2674 Compare Versions

Only one version of the bill is available at this time.

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1	1	By: Parker H.B. No. 2674
2	2
3	3
4	4	A BILL TO BE ENTITLED
5	5	AN ACT
6	6	relating to the determination of cost of goods sold for purposes of
7	7	computing the franchise tax.
8	8	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	9	SECTION 1. Section 171.101(a), Tax Code, is amended to read
10	10	as follows:
11	11	(a) The taxable margin of a taxable entity is computed by:
12	12	(1) determining the taxable entity's margin, which is
13	13	the lesser of:
14	14	(A) the amount provided by this paragraph, which
15	15	is the lesser of:
16	16	(i) 70 percent of the taxable entity's total
17	17	revenue from its entire business, as determined under Section
18	18	171.1011; or
19	19	(ii) an amount equal to the taxable entity's
20	20	total revenue from its entire business as determined under Section
21	21	171.1011 minus $1 million; or
22	22	(B) an amount computed by determining the taxable
23	23	entity's total revenue from its entire business under Section
24	24	171.1011 and subtracting the greater of:
25	25	(i) $1 million; or
26	26	(ii) an amount equal to the sum of:
27	27	(a) at the election of the taxable
28	28	entity, either:
29	29	(1) cost of goods sold, as
30	30	determined under Section 171.1012 or 171.10121; or
31	31	(2) compensation, as determined
32	32	under Section 171.1013; and
33	33	(b) any compensation, as determined
34	34	under Section 171.1013, paid to an individual during the period the
35	35	individual is serving on active duty as a member of the armed forces
36	36	of the United States if the individual is a resident of this state
37	37	at the time the individual is ordered to active duty and the cost of
38	38	training a replacement for the individual;
39	39	(2) apportioning the taxable entity's margin to this
40	40	state as provided by Section 171.106 to determine the taxable
41	41	entity's apportioned margin; and
42	42	(3) subtracting from the amount computed under
43	43	Subdivision (2) any other allowable deductions to determine the
44	44	taxable entity's taxable margin.
45	45	SECTION 2. Section 171.1011(v), Tax Code, is amended to
46	46	read as follows:
47	47	(v) A taxable entity primarily engaged in the business of
48	48	transporting goods by waterways that does not subtract cost of
49	49	goods sold in computing its taxable margin shall exclude from its
50	50	total revenue direct costs of providing transportation services by
51	51	intrastate or interstate waterways to the same extent that a
52	52	taxable entity that sells in the ordinary course of business real or
53	53	tangible personal property would be authorized by Section 171.1012
54	54	or 171.10121 to subtract those costs as costs of goods sold in
55	55	computing its taxable margin, notwithstanding Section
56	56	171.1012(e)(3).
57	57	SECTION 3. Subchapter C, Chapter 171, Tax Code, is amended
58	58	by adding Section 171.10121 to read as follows:
59	59	Sec. 171.10121. ALTERNATIVE DETERMINATION OF COST OF GOODS
60	60	SOLD. In lieu of determining cost of goods sold as provided by
61	61	Section 171.1012 and subject to Section 171.1014, a taxable entity
62	62	that elects to subtract cost of goods sold for the purpose of
63	63	computing its taxable margin may determine the amount of that cost
64	64	of goods sold as follows:
65	65	(1) for a taxable entity treated for federal income
66	66	tax purposes as a corporation, the cost of goods sold is the amount
67	67	reportable as cost of goods sold on line 2, Internal Revenue Service
68	68	Form 1120;
69	69	(2) for a taxable entity treated for federal income
70	70	tax purposes as a partnership, the cost of goods sold is the amount
71	71	reportable as cost of goods sold on line 2, Internal Revenue Service
72	72	Form 1065;
73	73	(3) for a taxable entity treated for federal income
74	74	tax purposes as an S corporation, the cost of goods sold is the
75	75	amount reportable as cost of goods sold on line 2, Internal Revenue
76	76	Service Form 1120S; or
77	77	(4) for any other taxable entity, the cost of goods
78	78	sold is an amount determined in a manner substantially equivalent
79	79	to the amount for Subdivision (1), (2), or (3) determined by rules
80	80	the comptroller shall adopt.
81	81	SECTION 4. Section 171.1014, Tax Code, is amended by
82	82	amending Subsection (e) and adding Subsection (e-1) to read as
83	83	follows:
84	84	(
85	85	e) For purposes of Section 171.101, a combined group that
86	86	elects to subtract costs of goods sold shall determine that amount
87	87	by:
88	88	(1) determining the cost of goods sold for each of its
89	89	members as provided by Section 171.1012 or 171.10121 as if the
90	90	member were an individual taxable entity;
91	91	(2) adding the amounts of cost of goods sold
92	92	determined under Subdivision (1) together; and
93	93	(3) subtracting from the amount determined under
94	94	Subdivision (2) any cost of goods sold amounts paid from one member
95	95	of the combined group to another member of the combined group, but
96	96	only to the extent the corresponding item of total revenue was
97	97	subtracted under Subsection (c)(3).
98	98	(e-1) For purposes of Subsection (e), each member of a
99	99	combined group may elect to determine its cost of goods sold under
100	100	either Section 171.1012 or 171.10121.
101	101	SECTION 5. This Act applies only to a report originally due
102	102	on or after the effective date of this Act.
103	103	SECTION 6. This Act takes effect January 1, 2016.