87R11612 BEF-D
By: Morrison H.B. No. 2704
A BILL TO BE ENTITLED
AN ACT
relating to the treatment of certain limited liability companies as
passive entities for purposes of the franchise tax.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 171.0003(a), Tax Code, is amended to
read as follows:
(a) An entity is a passive entity only if:
(1) the entity is a general or limited partnership, a
limited liability company, or a trust, other than a business trust;
(2) during the period on which margin is based, the
entity's federal gross income consists of at least 90 percent of the
following income:
(A) dividends, interest, foreign currency
exchange gain, periodic and nonperiodic payments with respect to
notional principal contracts, option premiums, cash settlement or
termination payments with respect to a financial instrument, and
income from a limited liability company;
(B) distributive shares of partnership income to
the extent that those distributive shares of income are greater
than zero;
(C) capital gains from the sale of real property,
gains from the sale of commodities traded on a commodities
exchange, and gains from the sale of securities; and
(D) royalties, bonuses, or delay rental income
from mineral properties and income from other nonoperating mineral
interests; and
(3) the entity does not receive more than 10 percent of
its federal gross income from conducting an active trade or
business.
SECTION 2. This Act applies only to a report originally due
on or after the effective date of this Act.
SECTION 3. This Act takes effect January 1, 2022.