Texas 2017 - 85th Regular

Texas House Bill HB2545 Compare Versions

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

Old	New	Differences
1	1	85R32 ADM-D
2	2	By: Sanford H.B. No. 2545
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the determination of cost of goods sold for purposes of
8	8	computing the franchise tax.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 171.101(a), Tax Code, is amended to read
11	11	as follows:
12	12	(a) The taxable margin of a taxable entity is computed by:
13	13	(1) determining the taxable entity's margin, which is
14	14	the lesser of:
15	15	(A) the amount provided by this paragraph, which
16	16	is the lesser of:
17	17	(i) 70 percent of the taxable entity's total
18	18	revenue from its entire business, as determined under Section
19	19	171.1011; or
20	20	(ii) an amount equal to the taxable entity's
21	21	total revenue from its entire business as determined under Section
22	22	171.1011 minus $1 million; or
23	23	(B) an amount computed by determining the taxable
24	24	entity's total revenue from its entire business under Section
25	25	171.1011 and subtracting the greater of:
26	26	(i) $1 million; or
27	27	(ii) an amount equal to the sum of:
28	28	(a) at the election of the taxable
29	29	entity, either:
30	30	(1) cost of goods sold, as
31	31	determined under Section 171.1012 or 171.10121; or
32	32	(2) compensation, as determined
33	33	under Section 171.1013; and
34	34	(b) any compensation, as determined
35	35	under Section 171.1013, paid to an individual during the period the
36	36	individual is serving on active duty as a member of the armed forces
37	37	of the United States if the individual is a resident of this state
38	38	at the time the individual is ordered to active duty and the cost of
39	39	training a replacement for the individual;
40	40	(2) apportioning the taxable entity's margin to this
41	41	state as provided by Section 171.106 to determine the taxable
42	42	entity's apportioned margin; and
43	43	(3) subtracting from the amount computed under
44	44	Subdivision (2) any other allowable deductions to determine the
45	45	taxable entity's taxable margin.
46	46	SECTION 2. Section 171.1011(v), Tax Code, is amended to
47	47	read as follows:
48	48	(v) A taxable entity primarily engaged in the business of
49	49	transporting goods by waterways that does not subtract cost of
50	50	goods sold in computing its taxable margin shall exclude from its
51	51	total revenue direct costs of providing transportation services by
52	52	intrastate or interstate waterways to the same extent that a
53	53	taxable entity that sells in the ordinary course of business real or
54	54	tangible personal property would be authorized by Section 171.1012
55	55	or 171.10121 to subtract those costs as costs of goods sold in
56	56	computing its taxable margin, notwithstanding Section
57	57	171.1012(e)(3).
58	58	SECTION 3. Subchapter C, Chapter 171, Tax Code, is amended
59	59	by adding Section 171.10121 to read as follows:
60	60	Sec. 171.10121. ALTERNATIVE DETERMINATION OF COST OF GOODS
61	61	SOLD. In lieu of determining cost of goods sold as provided by
62	62	Section 171.1012 and subject to Section 171.1014, a taxable entity
63	63	that elects to subtract cost of goods sold for the purpose of
64	64	computing its taxable margin may determine the amount of that cost
65	65	of goods sold as follows:
66	66	(1) for a taxable entity treated for federal income
67	67	tax purposes as a corporation, the cost of goods sold is the amount
68	68	reportable as cost of goods sold on line 2, Internal Revenue Service
69	69	Form 1120;
70	70	(2) for a taxable entity treated for federal income
71	71	tax purposes as a partnership, the cost of goods sold is the amount
72	72	reportable as cost of goods sold on line 2, Internal Revenue Service
73	73	Form 1065;
74	74	(3) for a taxable entity treated for federal income
75	75	tax purposes as an S corporation, the cost of goods sold is the
76	76	amount reportable as cost of goods sold on line 2, Internal Revenue
77	77	Service Form 1120S; or
78	78	(4) for any other taxable entity, the cost of goods
79	79	sold is an amount determined in a manner substantially equivalent
80	80	to the amount for Subdivision (1), (2), or (3) determined by rules
81	81	the comptroller shall adopt.
82	82	SECTION 4. Section 171.1014, Tax Code, is amended by
83	83	amending Subsection (e) and adding Subsection (e-1) to read as
84	84	follows:
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, 2018.