Texas 2017 - 85th Regular

Texas Senate Bill SB130 Compare Versions

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1	1	85R687 BEF-D
2	2	By: Creighton S.B. No. 130
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the computation of 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	computed by determining the taxable entity's total revenue from its
14	14	entire business, as determined under Section 171.1011, and
15	15	subtracting an amount equal to the sum of:
16	16	(A) $1 million;
17	17	(B) cost of goods sold, as determined under
18	18	Section 171.1012; and
19	19	(C) compensation, as determined under Section
20	20	171.1013 [the lesser of:
21	21	[(A) the amount provided by this paragraph, which
22	22	is the lesser of:
23	23	[(i) 70 percent of the taxable entity's
24	24	total revenue from its entire business, as determined under Section
25	25	171.1011; or
26	26	[(ii) an amount equal to the taxable
27	27	entity's total revenue from its entire business as determined under
28	28	Section 171.1011 minus $1 million; or
29	29	[(B) an amount computed by determining the
30	30	taxable entity's total revenue from its entire business under
31	31	Section 171.1011 and subtracting the greater of:
32	32	[(i) $1 million; or
33	33	[(ii) an amount equal to the sum of:
34	34	[(a) at the election of the taxable
35	35	entity, either:
36	36	[(1) cost of goods sold, as
37	37	determined under Section 171.1012; or
38	38	[(2) compensation, as determined
39	39	under Section 171.1013; and
40	40	[(b) any compensation, as determined
41	41	under Section 171.1013, paid to an individual during the period the
42	42	individual is serving on active duty as a member of the armed forces
43	43	of the United States if the individual is a resident of this state
44	44	at the time the individual is ordered to active duty and the cost of
45	45	training a replacement for the individual];
46	46	(2) apportioning the taxable entity's margin to this
47	47	state as provided by Section 171.106 to determine the taxable
48	48	entity's apportioned margin; and
49	49	(3) subtracting from the amount computed under
50	50	Subdivision (2) any other allowable deductions to determine the
51	51	taxable entity's taxable margin.
52	52	SECTION 2. Section 171.1011(v), Tax Code, is amended to
53	53	read as follows:
54	54	(v) A taxable entity primarily engaged in the business of
55	55	transporting goods by waterways [that does not subtract cost of
56	56	goods sold in computing its taxable margin] shall exclude from its
57	57	total revenue direct costs of providing transportation services by
58	58	intrastate or interstate waterways to the same extent that a
59	59	taxable entity that sells in the ordinary course of business real or
60	60	tangible personal property would be authorized by Section 171.1012
61	61	to subtract those costs as costs of goods sold in computing its
62	62	taxable margin, notwithstanding Section 171.1012(e)(3).
63	63	SECTION 3. Sections 171.1012(b), (k), (o), and (t), Tax
64	64	Code, are amended to read as follows:
65	65	(b) Subject to Section 171.1014, a taxable entity shall
66	66	determine the amount of [that elects to subtract] cost of goods sold
67	67	as provided by this section for the purpose of computing its taxable
68	68	margin [shall determine the amount of that cost of goods sold as
69	69	provided by this section].
70	70	(k) Notwithstanding any other provision of this section, a
71	71	[if the] taxable entity that is a lending institution and that
72	72	offers loans to the public [and elects to subtract cost of goods
73	73	sold, the entity], other than an entity primarily engaged in an
74	74	activity described by category 5932 of the 1987 Standard Industrial
75	75	Classification Manual published by the federal Office of Management
76	76	and Budget, may subtract as a cost of goods sold an amount equal to
77	77	interest expense. For purposes of this subsection, an entity
78	78	engaged in lending to unrelated parties solely for agricultural
79	79	production offers loans to the public.
80	80	(o) The cost of goods sold for [If] a taxable entity,
81	81	including a taxable entity with respect to which cost of goods sold
82	82	is determined pursuant to Section 171.1014(e)(1), whose principal
83	83	business activity is film or television production or broadcasting
84	84	or the distribution of tangible personal property described by
85	85	Subsection (a)(3)(A)(ii), or any combination of these activities,
86	86	[elects to subtract cost of goods sold, the cost of goods sold for
87	87	the taxable entity] shall be the costs described in this section in
88	88	relation to the property and include depreciation, amortization,
89	89	and other expenses directly related to the acquisition, production,
90	90	or use of the property, including expenses for the right to
91	91	broadcast or use the property.
92	92	(t) The cost of goods sold for [If] a taxable entity that is
93	93	a movie theater [elects to subtract cost of goods sold, the cost of
94	94	goods sold for the taxable entity] shall be the costs described by
95	95	this section in relation to the acquisition, production,
96	96	exhibition, or use of a film or motion picture, including expenses
97	97	for the right to use the film or motion picture.
98	98	SECTION 4. Sections 171.1013(b), (b-1), (c-1), and (h), Tax
99	99	Code, are amended to read as follows:
100	100	(b) Subject to Section 171.1014, [a taxable entity that
101	101	elects to subtract compensation] for the purpose of computing its
102	102	taxable margin under Section 171.101 a taxable entity shall [may]
103	103	subtract an amount of compensation equal to:
104	104	(1) subject to the limitation in Subsection (c), all
105	105	wages and cash compensation paid by the taxable entity to its
106	106	officers, directors, owners, partners, and employees; and
107	107	(2) the cost of all benefits, to the extent deductible
108	108	for federal income tax purposes, the taxable entity provides to its
109	109	officers, directors, owners, partners, and employees, including
110	110	workers' compensation benefits, health care, employer
111	111	contributions made to employees' health savings accounts, and
112	112	retirement.
113	113	(b-1) This subsection applies to a taxable entity that is a
114	114	small employer, as that term is defined by Section 1501.002,
115	115	Insurance Code, and that has not provided health care benefits to
116	116	any of its employees in the calendar year preceding the beginning
117	117	date of its reporting period. Subject to Section 171.1014, [a
118	118	taxable entity to which this subsection applies that elects to
119	119	subtract compensation] for the purpose of computing its taxable
120	120	margin under Section 171.101 a taxable entity to which this
121	121	subsection applies may subtract health care benefits as provided
122	122	under Subsection (b) and may also subtract:
123	123	(1) for the first 12-month period on which margin is
124	124	based and in which the taxable entity provides health care benefits
125	125	to all of its employees, an additional amount equal to 50 percent of
126	126	the cost of health care benefits provided to its employees for that
127	127	period; and
128	128	(2) for the second 12-month period on which margin is
129	129	based and in which the taxable entity provides health care benefits
130	130	to all of its employees, an additional amount equal to 25 percent of
131	131	the cost of health care benefits provided to its employees for that
132	132	period.
133	133	(c-1) Subject to Section 171.1014, [a taxable entity that
134	134	elects to subtract compensation] for the purpose of computing its
135	135	taxable margin under Section 171.101 a taxable entity may not
136	136	subtract as compensation any wages or cash compensation paid to an
137	137	undocumented worker. As used in this section "undocumented
138	138	worker" means a person who is not lawfully entitled to be present
139	139	and employed in the United States.
140	140	(h) Subject to Section 171.1014, [a taxable entity that
141	141	elects to subtract compensation] for the purpose of computing its
142	142	taxable margin under Section 171.101 a taxable entity may not
143	143	include as wages or cash compensation amounts paid to an employee
144	144	whose primary employment is directly associated with the operation
145	145	of a facility that is:
146	146	(1) located on property owned or leased by the federal
147	147	government; and
148	148	(2) managed or operated primarily to house members of
149	149	the armed forces of the United States.
150	150	SECTION 5. Sections 171.1014(d), (e), and (f), Tax Code,
151	151	are amended to read as follows:
152	152	(d) For purposes of Section 171.101, a combined group shall
153	153	[make an election to] subtract the sum of [either] cost of goods
154	154	sold, as determined under Subsection (e), [or] compensation, as
155	155	determined under Subsection (f), and [that applies to all of its
156	156	members, or] $1 million. [Regardless of the election, the taxable
157	157	margin of the combined group may not exceed the amount provided by
158	158	Section 171.101(a)(1)(A) for the combined group.]
159	159	(e) For purposes of Section 171.101, a combined group shall
160	160	determine cost [that elects to subtract costs] of goods sold [shall
161	161	determine that amount] by:
162	162	(1) determining the cost of goods sold for each of its
163	163	members as provided by Section 171.1012 as if the member were an
164	164	individual taxable entity;
165	165	(2) adding the amounts of cost of goods sold
166	166	determined under Subdivision (1) together; and
167	167	(3) subtracting from the amount determined under
168	168	Subdivision (2) any cost of goods sold amounts paid from one member
169	169	of the combined group to another member of the combined group, but
170	170	only to the extent the corresponding item of total revenue was
171	171	subtracted under Subsection (c)(3).
172	172	(f) For purposes of Section 171.101, a combined group shall
173	173	determine the amount of compensation [that elects] to subtract
174	174	[compensation shall determine that amount] by:
175	175	(1) determining the compensation for each of its
176	176	members as provided by Section 171.1013 as if each member were an
177	177	individual taxable entity, subject to the limitation prescribed by
178	178	Section 171.1013(c);
179	179	(2) adding the amounts of compensation determined
180	180	under Subdivision (1) together; and
181	181	(3) subtracting from the amount determined under
182	182	Subdivision (2) any compensation amounts paid from one member of
183	183	the combined group to another member of the combined group, but only
184	184	to the extent the corresponding item of total revenue was
185	185	subtracted under Subsection (c)(3).
186	186	SECTION 6. Sections 171.101(b) and (d), Tax Code, are
187	187	repealed.
188	188	SECTION 7. This Act applies only to a report originally due
189	189	on or after the effective date of this Act.
190	190	SECTION 8. This Act takes effect January 1, 2018.