| 1 | 1 | | By: Taylor of Galveston, Menéndez S.B. No. 1031 |
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| 2 | 2 | | (In the Senate - Filed February 22, 2017; March 6, 2017, |
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| 3 | 3 | | read first time and referred to Committee on Finance; May 3, 2017, |
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| 4 | 4 | | reported adversely, with favorable Committee Substitute by the |
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| 5 | 5 | | following vote: Yeas 10, Nays 4; May 3, 2017, sent to printer.) |
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| 6 | 6 | | Click here to see the committee vote |
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| 7 | 7 | | COMMITTEE SUBSTITUTE FOR S.B. No. 1031 By: Taylor of Galveston |
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| 8 | 8 | | |
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| 9 | 9 | | |
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| 10 | 10 | | A BILL TO BE ENTITLED |
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| 11 | 11 | | AN ACT |
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| 12 | 12 | | relating to a deduction under the franchise tax for certain |
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| 13 | 13 | | contracts with the federal government. |
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| 14 | 14 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 15 | 15 | | SECTION 1. Section 171.101(a), Tax Code, is amended to read |
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| 16 | 16 | | as follows: |
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| 17 | 17 | | (a) The taxable margin of a taxable entity is computed by: |
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| 18 | 18 | | (1) determining the taxable entity's margin, which is |
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| 19 | 19 | | the lesser of: |
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| 20 | 20 | | (A) the amount provided by this paragraph, which |
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| 21 | 21 | | is the lesser of: |
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| 22 | 22 | | (i) 70 percent of the taxable entity's total |
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| 23 | 23 | | revenue from its entire business, as determined under Section |
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| 24 | 24 | | 171.1011; or |
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| 25 | 25 | | (ii) an amount equal to the taxable entity's |
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| 26 | 26 | | total revenue from its entire business as determined under Section |
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| 27 | 27 | | 171.1011 minus $1 million; or |
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| 28 | 28 | | (B) an amount computed by determining the taxable |
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| 29 | 29 | | entity's total revenue from its entire business under Section |
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| 30 | 30 | | 171.1011 and subtracting the greater of: |
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| 31 | 31 | | (i) $1 million; or |
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| 32 | 32 | | (ii) an amount equal to the sum of: |
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| 33 | 33 | | (a) at the election of the taxable |
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| 34 | 34 | | entity, either: |
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| 35 | 35 | | (1) cost of goods sold, as |
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| 36 | 36 | | determined under Section 171.1012; or |
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| 37 | 37 | | (2) compensation, as determined |
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| 38 | 38 | | under Section 171.1013; [and] |
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| 39 | 39 | | (b) any compensation, as determined |
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| 40 | 40 | | under Section 171.1013, paid to an individual during the period the |
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| 41 | 41 | | individual is serving on active duty as a member of the armed forces |
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| 42 | 42 | | of the United States if the individual is a resident of this state |
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| 43 | 43 | | at the time the individual is ordered to active duty and the cost of |
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| 44 | 44 | | training a replacement for the individual; and |
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| 45 | 45 | | (c) any costs not already subtracted |
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| 46 | 46 | | under Sub-subparagraph (a) that are properly allowable under the |
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| 47 | 47 | | Federal Acquisition Regulation (48 C.F.R. Chapter 1), or a |
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| 48 | 48 | | successor regulation, for contracts, or subcontracts supporting |
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| 49 | 49 | | those contracts, for the sale of goods or services to the federal |
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| 50 | 50 | | government by a taxable entity that is a party to at least one |
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| 51 | 51 | | contract subject to the requirements of 48 C.F.R. Chapter 2; |
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| 52 | 52 | | (2) apportioning the taxable entity's margin to this |
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| 53 | 53 | | state as provided by Section 171.106 to determine the taxable |
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| 54 | 54 | | entity's apportioned margin; and |
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| 55 | 55 | | (3) subtracting from the amount computed under |
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| 56 | 56 | | Subdivision (2) any other allowable deductions to determine the |
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| 57 | 57 | | taxable entity's taxable margin. |
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| 58 | 58 | | SECTION 2. This Act applies only to a report originally due |
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| 59 | 59 | | on or after the effective date of this Act. |
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| 60 | 60 | | SECTION 3. This Act takes effect January 1, 2020. |
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| 61 | 61 | | * * * * * |
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