| 1 | 1 | | 84R13303 BEF-F |
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| 2 | 2 | | By: Capriglione H.B. No. 2939 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to the deduction of certain officers' compensation as a |
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| 8 | 8 | | cost of goods sold for purposes of the franchise tax. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. Section 171.1012(e), Tax Code, is amended to |
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| 11 | 11 | | read as follows: |
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| 12 | 12 | | (e) The cost of goods sold does not include the following |
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| 13 | 13 | | costs in relation to the taxable entity's goods: |
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| 14 | 14 | | (1) the cost of renting or leasing equipment, |
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| 15 | 15 | | facilities, or real property that is not used for the production of |
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| 16 | 16 | | the goods; |
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| 17 | 17 | | (2) selling costs, including employee expenses |
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| 18 | 18 | | related to sales; |
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| 19 | 19 | | (3) distribution costs, including outbound |
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| 20 | 20 | | transportation costs; |
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| 21 | 21 | | (4) advertising costs; |
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| 22 | 22 | | (5) idle facility expense; |
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| 23 | 23 | | (6) rehandling costs; |
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| 24 | 24 | | (7) bidding costs, which are the costs incurred in the |
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| 25 | 25 | | solicitation of contracts ultimately awarded to the taxable entity; |
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| 26 | 26 | | (8) unsuccessful bidding costs, which are the costs |
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| 27 | 27 | | incurred in the solicitation of contracts not awarded to the |
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| 28 | 28 | | taxable entity; |
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| 29 | 29 | | (9) interest, including interest on debt incurred or |
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| 30 | 30 | | continued during the production period to finance the production of |
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| 31 | 31 | | the goods; |
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| 32 | 32 | | (10) income taxes, including local, state, federal, |
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| 33 | 33 | | and foreign income taxes, and franchise taxes that are assessed on |
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| 34 | 34 | | the taxable entity based on income; |
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| 35 | 35 | | (11) strike expenses, including costs associated with |
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| 36 | 36 | | hiring employees to replace striking personnel, but not including |
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| 37 | 37 | | the wages of the replacement personnel, costs of security, and |
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| 38 | 38 | | legal fees associated with settling strikes; |
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| 39 | 39 | | (12) officers' compensation that is not compensation |
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| 40 | 40 | | for direct labor; |
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| 41 | 41 | | (13) costs of operation of a facility that is: |
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| 42 | 42 | | (A) located on property owned or leased by the |
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| 43 | 43 | | federal government; and |
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| 44 | 44 | | (B) managed or operated primarily to house |
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| 45 | 45 | | members of the armed forces of the United States; and |
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| 46 | 46 | | (14) any compensation paid to an undocumented worker |
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| 47 | 47 | | used for the production of goods. As used in this subdivision: |
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| 48 | 48 | | (A) "undocumented worker" means a person who is |
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| 49 | 49 | | not lawfully entitled to be present and employed in the United |
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| 50 | 50 | | States; and |
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| 51 | 51 | | (B) "goods" includes the husbandry of animals, |
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| 52 | 52 | | the growing and harvesting of crops, and the severance of timber |
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| 53 | 53 | | from realty. |
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| 54 | 54 | | SECTION 2. This Act applies only to a report originally due |
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| 55 | 55 | | on or after the effective date of this Act. |
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| 56 | 56 | | SECTION 3. This Act takes effect January 1, 2016. |
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