By: Nelson S.B. No. 17
(In the Senate - Filed February 2, 2017; February 6, 2017,
read first time and referred to Committee on Finance;
March 6, 2017, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 12, Nays 2; March 6, 2017,
sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 17 By: Hinojosa
A BILL TO BE ENTITLED
AN ACT
relating to the decrease of the rates of the franchise tax under
certain circumstances and the expiration of that tax.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sections 171.002(a) and (b), Tax Code, are
amended to read as follows:
(a) Subject to Sections 171.003, 171.004, and 171.1016 and
except as provided by Subsection (b), the rate of the franchise tax
is 0.75 percent of taxable margin.
(b) Subject to Sections 171.003, 171.004, and 171.1016, the
rate of the franchise tax is 0.375 percent of taxable margin for
those taxable entities primarily engaged in retail or wholesale
trade.
SECTION 2. Subchapter A, Chapter 171, Tax Code, is amended
by adding Section 171.004 to read as follows:
Sec. 171.004. ADJUSTMENT OF TAX RATES. (a) In this
section:
(1) "Biennial revenue estimate" means the estimate of
anticipated revenue to this state for the succeeding biennium that
the comptroller prepares in accordance with Section 49a(a), Article
III, Texas Constitution.
(2) "Current biennium" means the state fiscal biennium
in which a biennial revenue estimate is submitted to the governor
and legislature.
(3) "Succeeding biennium" means the state fiscal
biennium beginning after the current biennium.
(b) The comptroller shall determine and include with the
biennial revenue estimate:
(1) the amount of total general revenue-related funds
that would be available for certification for the succeeding
biennium assuming a franchise tax rate adjustment under this
section does not take effect in that biennium;
(2) the percentage change between the amount of total
general revenue-related funds available for certification for the
current biennium, as provided by the biennial revenue estimate, and
the amount provided by Subdivision (1) for the succeeding biennium;
(3) if the percentage change under Subdivision (2) is
greater than five percent, the amount of total general
revenue-related funds that would be available for certification for
the succeeding biennium assuming the franchise tax rate adjustment
under this section takes effect in the succeeding biennium; and
(4) if the percentage change under Subdivision (2) is
greater than five percent, the percentage change between the amount
of total general revenue-related funds available for certification
for the current biennium, as provided by the biennial revenue
estimate, and the amount provided by Subdivision (3) for the
succeeding biennium.
(c) If the percentage change determined under Subsection
(b)(2) is greater than five percent, the comptroller shall
determine the amount of revenue available for franchise tax
reduction, which is computed as follows:
FTR = 0.5 X (SBGR - (CBGR X 1.05))
where:
"FTR" is the amount of revenue available for franchise tax
reduction;
"SBGR" is the amount provided by Subsection (b)(1) for the
succeeding biennium; and
"CBGR" is the amount of total general revenue-related funds
available for certification for the current biennium, as provided
by the biennial revenue estimate.
(d) This subsection applies only if the percentage change
determined under Subsection (b)(2) is greater than five percent.
Not later than the last day of a state fiscal biennium, the
comptroller shall determine the rates for purposes of Sections
171.002(a) and (b) and Section 171.1016 that, if effective
beginning January 1 of the even-numbered year occurring during the
succeeding biennium, are estimated to reduce the amount of revenue
collected under this chapter for the succeeding biennium, as
compared to the amount of revenue that would be collected if the
rates then in effect remained in effect, by the amount of revenue
available for franchise tax reduction determined under Subsection
(c). In determining the rates under this subsection, the
comptroller shall proportionally reduce the rates under Sections
171.002(a) and (b) and Section 171.1016 that are in effect on the
date the comptroller makes the determination.
(e) Not later than the last day of a state fiscal biennium,
the comptroller shall:
(1) adopt the adjusted tax rates determined under
Subsection (d), if applicable;
(2) publish notice of the adjusted tax rates in the
Texas Register; and
(3) provide any other notice relating to the adjusted
tax rates that the comptroller considers appropriate.
(f) The tax rates adopted under Subsection (e):
(1) apply to a report originally due on or after
January 1 of the even-numbered year described by Subsection (d);
and
(2) are considered for purposes of this chapter to be
the rates provided by and imposed under Section 171.002 or
171.1016, as applicable.
(g) If the percentage change determined under Subsection
(b)(2) is not greater than five percent, the rates of the franchise
tax in effect when the biennial revenue estimate is submitted to the
governor and legislature remain in effect for the succeeding
biennium unless modified by other law.
(h) Notwithstanding Subsection (d), if an adjustment
otherwise required by that subsection would reduce a rate of the
franchise tax to less than zero, the rate is instead reduced to
zero.
(i) Notwithstanding any other law, if the rates of the
franchise tax are reduced to zero under Subsection (d) or (h), a
taxable entity does not owe any tax and is not required to file a
report that would otherwise be originally due on or after the date
those rates are reduced to zero.
(j) The comptroller may adopt rules related to making the
determinations required by this section.
(k) In the state fiscal year in which the rates of the
franchise tax are reduced to zero under Subsection (d) or (h):
(1) this chapter expires as provided by Section
171.9321; and
(2) not later than January 15 of that year the
comptroller shall:
(A) publish notice in the Texas Register that an
entity previously subject to the tax imposed under this chapter is
no longer required to file a report or pay the tax; and
(B) provide any other notice relating to the
expiration of the tax that the comptroller considers appropriate.
(l) An action taken by the comptroller under this section is
final and may not be appealed.
SECTION 3. Sections 171.1016(b) and (e), Tax Code, are
amended to read as follows:
(b) The amount of the tax for which a taxable entity that
elects to pay the tax as provided by this section is liable is
computed by:
(1) determining the taxable entity's total revenue
from its entire business, as determined under Section 171.1011;
(2) apportioning the amount computed under
Subdivision (1) to this state, as provided by Section 171.106, to
determine the taxable entity's apportioned total revenue; and
(3) multiplying the amount computed under Subdivision
(2) by the rate of 0.331 percent or, if applicable, an adjusted tax
rate determined under Section 171.004.
(e) A reference in this chapter or other law to the rate of
the franchise tax means, as appropriate:
(1)[,] the rate under Section 171.002 or, for a
taxable entity that elects to pay the tax as provided by this
section, the rate under this section; or
(2) the adjusted rates under Section 171.004.
SECTION 4. Chapter 171, Tax Code, is amended by adding
Subchapter Z to read as follows:
SUBCHAPTER Z. EXPIRATION
Sec. 171.9321. EXPIRATION. This chapter expires on
December 31 of the year in which the rates of the franchise tax
under Sections 171.002 and 171.1016 are reduced to zero under
Section 171.004(d) or (h).
SECTION 5. (a) After Chapter 171, Tax Code, expires as
provided by Subchapter Z, Chapter 171, Tax Code, as added by this
Act:
(1) Chapter 171 and Subtitle B, Title 2, Tax Code,
continue to apply to audits, deficiencies, redeterminations, and
refunds of any tax due or collected under Chapter 171 until barred
by limitations; and
(2) Sections 171.206 through 171.210, Tax Code,
continue to apply to information described by those sections.
(b) The expiration of Chapter 171, Tax Code, does not
affect:
(1) the status of a taxable entity that has had its
corporate privileges, certificate of authority, certificate of
organization, certificate of limited partnership, corporate
charter, or registration revoked, a suit filed against it, or a
receiver appointed under Subchapter F, G, or H of that chapter;
(2) the ability of the comptroller of public accounts,
secretary of state, or attorney general to take action against a
taxable entity under Subchapter F, G, or H of that chapter for
actions that took place before the chapter expired; or
(3) the right of a taxable entity to contest a
forfeiture, revocation, lawsuit, or appointment of a receiver under
Subchapter F, G, or H of that chapter.
SECTION 6. This Act applies only to a report originally due
on or after January 1, 2020.
SECTION 7. This Act takes effect September 1, 2017.
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