86R5685 BEF-D
By: Goldman H.B. No. 1607
A BILL TO BE ENTITLED
AN ACT
relating to a deduction under the franchise tax for certain
contracts with the federal government.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The legislature finds that:
(1) Texas is an epicenter of this nation's aerospace,
aviation, defense, and military industries;
(2) with NASA's Johnson Space Center in Houston, the
new Army Futures Command, 15 active military bases across the
state, and major military aircraft manufacturing and maintenance
operations, the Texas economy and our nation's aerospace and
defense capabilities are inextricably linked;
(3) these crucial industries employ tens of thousands
of Texans and support dozens of our communities across the state;
and
(4) it is therefore paramount that state tax policy
foster a competitive economic climate to ensure growth and
retention of jobs related to the development, manufacture,
maintenance, and ongoing services for military hardware, aircraft,
spacecraft, and weapons systems used by and produced for our armed
forces, related federal government agencies, and our global allies.
SECTION 2. Section 171.101(a), Tax Code, is amended to read
as follows:
(a) The taxable margin of a taxable entity is computed by:
(1) determining the taxable entity's margin, which is
the lesser of:
(A) the amount provided by this paragraph, which
is the lesser of:
(i) 70 percent of the taxable entity's total
revenue from its entire business, as determined under Section
171.1011; or
(ii) an amount equal to the taxable entity's
total revenue from its entire business as determined under Section
171.1011 minus $1 million; or
(B) an amount computed by determining the taxable
entity's total revenue from its entire business under Section
171.1011 and subtracting the greater of:
(i) $1 million; or
(ii) an amount equal to the sum of:
(a) at the election of the taxable
entity, either:
(1) cost of goods sold, as
determined under Section 171.1012; or
(2) compensation, as determined
under Section 171.1013; [and]
(b) any compensation, as determined
under Section 171.1013, paid to an individual during the period the
individual is serving on active duty as a member of the armed forces
of the United States if the individual is a resident of this state
at the time the individual is ordered to active duty and the cost of
training a replacement for the individual; and
(c) any costs not already subtracted
under Sub-subparagraph (a) that are properly allowable under the
Federal Acquisition Regulation (48 C.F.R. Chapter 1), or a
successor regulation, for contracts, or subcontracts supporting
those contracts, for the sale of goods or services to the federal
government by a taxable entity that is a party to at least one
contract subject to the requirements of 48 C.F.R. Chapter 2;
(2) apportioning the taxable entity's margin to this
state as provided by Section 171.106 to determine the taxable
entity's apportioned margin; and
(3) subtracting from the amount computed under
Subdivision (2) any other allowable deductions to determine the
taxable entity's taxable margin.
SECTION 3. This Act applies only to a report originally due
on or after January 1, 2020.
SECTION 4. This Act takes effect January 1, 2020.