This website will be unavailable from Friday, April 26, 2024 at 6:00 p.m. through Monday, April 29, 2024 at 7:00 a.m. due to data center maintenance.
H.B. No. 3
AN ACT
relating to certain taxes affecting businesses; making an
appropriation; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. (a) Section 21.02, Tax Code, is amended by
amending Subsection (a) and adding Subsection (e) to read as
follows:
(a) Except as provided by Subsections [Subsection] (b) and
(e) and by Sections 21.021, 21.04, and 21.05, tangible personal
property is taxable by a taxing unit if:
(1) it is located in the unit on January 1 for more
than a temporary period;
(2) it normally is located in the unit, even though it
is outside the unit on January 1, if it is outside the unit only
temporarily;
(3) it normally is returned to the unit between uses
elsewhere and is not located in any one place for more than a
temporary period; or
(4) the owner resides (for property not used for
business purposes) or maintains the owner's [his] principal place
of business in this state (for property used for business purposes)
in the unit and the property is taxable in this state but does not
have a taxable situs pursuant to Subdivisions (1) through (3) of
this subsection [section].
(e) In this subsection, "portable drilling rig" includes
equipment associated with the drilling rig. A portable drilling
rig designed for land-based oil or gas drilling or exploration
operations is taxable by the taxing unit in which the rig is located
on January 1 if the rig was located in the appraisal district that
appraises property for the unit for the preceding 365 consecutive
days. If the drilling rig was not located in the appraisal district
where it is located on January 1 for the preceding 365 days, it is
taxable by the taxing unit in which the owner's principal place of
business in this state is located on January 1.
(b) Section 21.02, Tax Code, as amended by this section,
applies only to the taxable situs of property for an ad valorem tax
year that begins on or after January 1, 2007.
(c) This section takes effect January 1, 2007.
SECTION 2. Subchapter A, Chapter 171, Tax Code, is amended
to read as follows:
SUBCHAPTER A. DEFINITIONS; TAX IMPOSED
Sec. 171.0001. GENERAL DEFINITIONS. In this chapter:
(1) "Affiliated group" means a group of one or more
entities in which a controlling interest is owned by a common owner
or owners, either corporate or noncorporate, or by one or more of
the member entities.
(2) "Assigned employee" has the meaning assigned by
Section 91.001, Labor Code.
(3) "Banking corporation" means each state, national,
domestic, or foreign bank, whether organized under the laws of this
state, another state, or another country, or under federal law,
including a limited banking association organized under Subtitle A,
Title 3, Finance Code, and each bank organized under Section 25(a),
Federal Reserve Act (12 U.S.C. Sections 611-631) (edge
corporations), but does not include a bank holding company as that
term is defined by Section 2, Bank Holding Company Act of 1956 (12
U.S.C. Section 1841).
(4) "Beginning date" means:
(A) for a taxable entity chartered or organized
in this state, the date on which the taxable entity's charter or
organization takes effect; and
(B) for any other taxable entity, the date on
which the taxable entity begins doing business in this state.
(5) "Charter" includes a limited liability company's
certificate of organization, a limited partnership's certificate
of limited partnership, and the registration of a limited liability
partnership.
(6) "Client company" has the meaning assigned by
Section 91.001, Labor Code.
(7) "Combined group" means taxable entities that are
part of an affiliated group engaged in a unitary business and that
are required to file a group report under Section 171.1014.
(8) "Controlling interest" means:
(A) for a corporation, either 80 percent or more,
owned directly or indirectly, of the total combined voting power of
all classes of stock of the corporation, or 80 percent or more,
owned directly or indirectly, of the beneficial ownership interest
in the voting stock of the corporation; and
(B) for a partnership, association, trust, or
other entity, 80 percent or more, owned directly or indirectly, of
the capital, profits, or beneficial interest in the partnership,
association, trust, or other entity.
(9) "Internal Revenue Code" means the Internal Revenue
Code of 1986 in effect for the federal tax year beginning on January
1, 2006, and any regulations adopted under that code applicable to
that period.
(10) "Lending institution" means an entity that makes
loans and is regulated by the Federal Reserve Board, the Office of
the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Texas Department of Banking, the Office of
Consumer Credit Commissioner, the Department of Savings and
Mortgage Lending, the Credit Union Department, or any comparable
regulatory body.
(11) "Management company" means a corporation,
limited liability company, or other limited liability entity that
conducts all or part of the active trade or business of another
entity (the "managed entity") in exchange for:
(A) a management fee; and
(B) reimbursement of specified costs incurred in
the conduct of the active trade or business of the managed entity,
including "wages and cash compensation" as determined under
Sections 171.1013(a) and (b).
(12) "Retail trade" means the activities described in
Division G of the 1987 Standard Industrial Classification Manual
published by the federal Office of Management and Budget.
(13) "Savings and loan association" means a savings
and loan association or savings bank, whether organized under the
laws of this state, another state, or another country, or under
federal law.
(14) "Shareholder" includes a limited liability
company's member and a limited banking association's participant.
(15) "Staff leasing services company" has the meaning
assigned by Section 91.001, Labor Code.
(16) "Total revenue" means the total revenue of a
taxable entity as determined under Section 171.1011.
(17) "Unitary business" means a single economic
enterprise that is made up of separate parts of a single entity or
of a commonly controlled group of entities that are sufficiently
interdependent, integrated, and interrelated through their
activities so as to provide a synergy and mutual benefit that
produces a sharing or exchange of value among them and a significant
flow of value to the separate parts. In determining whether a
unitary business exists, the comptroller shall consider any
relevant factor, including whether:
(A) the activities of the group members:
(i) are in the same general line, such as
manufacturing, wholesaling, retailing of tangible personal
property, insurance, transportation, or finance; or
(ii) are steps in a vertically structured
enterprise or process, such as the steps involved in the production
of natural resources, including exploration, mining, refining, and
marketing; and
(B) the members are functionally integrated
through the exercise of strong centralized management, such as
authority over purchasing, financing, product line, personnel, and
marketing.
(18) "Wholesale trade" means the activities described
in Division F of the 1987 Standard Industrial Classification Manual
published by the federal Office of Management and Budget.
Sec. 171.0002. DEFINITION OF TAXABLE ENTITY. (a) Except as
otherwise provided by this section, "taxable entity" means a
partnership, corporation, banking corporation, savings and loan
association, limited liability company, business trust,
professional association, business association, joint venture,
joint stock company, holding company, or other legal entity. The
term includes a combined group. A joint venture does not include
joint operating or co-ownership arrangements meeting the
requirements of Treasury Regulation Section 1.761-2(a)(3) that
elect out of federal partnership treatment as provided by Section
761(a), Internal Revenue Code.
(b) "Taxable entity" does not include:
(1) a sole proprietorship;
(2) a general partnership the direct ownership of
which is entirely composed of natural persons;
(3) a passive entity as defined by Section 171.0003;
or
(4) an entity that is exempt from taxation under
Subchapter B.
(c) "Taxable entity" does not include an entity that is:
(1) a grantor trust as defined by Sections 671 and
7701(a)(30)(E), Internal Revenue Code, all of the grantors and
beneficiaries of which are natural persons or charitable entities
as described in Section 501(c)(3), Internal Revenue Code, excluding
a trust taxable as a business entity pursuant to Treasury
Regulation Section 301.7701-4(b);
(2) an estate of a natural person as defined by Section
7701(a)(30)(D), Internal Revenue Code, excluding an estate taxable
as a business entity pursuant to Treasury Regulation Section
301.7701-4(b);
(3) an escrow;
(4) a family limited partnership that is a passive
entity in which at least 80 percent of the interests are held,
directly or indirectly, by members of the same family, including an
individual's ancestors, lineal descendants, spouse, and brothers
and sisters by the whole or half blood, and the estate of any of
these persons, and that is a limited partnership:
(A) formed pursuant to the Texas Revised Limited
Partnership Act (Article 6132a-1, Vernon's Texas Civil Statutes);
(B) formed pursuant to the limited partnership
law of any other state; or
(C) treated as a partnership for federal income
tax purposes;
(5) a passive investment partnership that is a passive
entity and that is:
(A) formed pursuant to the Texas Revised Limited
Partnership Act (Article 6132a-1, Vernon's Texas Civil Statutes);
(B) formed pursuant to the limited partnership
law of any other state; or
(C) formed pursuant to the limited partnership
laws of any foreign country;
(6) a passive investment partnership that is a passive
entity and is a general partnership;
(7) a trust that is a passive entity:
(A) that is taxable as a trust under Section 641,
Internal Revenue Code;
(B) all of the beneficiaries of which are natural
persons or charitable entities as defined in Section 501(c)(3),
Internal Revenue Code;
(C) that is not a trust taxable as a business
entity pursuant to Treasury Regulation Section 301.7701-4(b); and
(D) that is organized as a trust and is described
in Section 7701(a)(30)(E), Internal Revenue Code;
(8) a real estate investment trust (REIT) as defined
by Section 856, Internal Revenue Code, and its "qualified REIT
subsidiary" entities as defined by Section 856(i)(2), Internal
Revenue Code, provided that:
(A) a REIT with any amount of its assets in direct
holdings of real estate, other than real estate it occupies for
business purposes, as opposed to holding interests in limited
partnerships or other entities that directly hold the real estate,
is a taxable entity; and
(B) a limited partnership or other entity that
directly holds the real estate as described in Paragraph (A) is not
exempt under this subdivision, without regard to whether a REIT
holds an interest in it; or
(9) a real estate mortgage investment conduit (REMIC),
as defined by Section 860D, Internal Revenue Code.
(d) An entity that can file as a sole proprietorship for
federal tax purposes is not a sole proprietorship for purposes of
Subsection (b)(1) and is not exempt under that subsection if the
entity is formed in a manner under the statutes of this state or
another state that limit the liability of the entity.
Sec. 171.0003. DEFINITION OF PASSIVE ENTITY. (a) An entity
is a passive entity only if:
(1) the entity is a general or limited partnership 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) gains from the sale of real property,
commodities traded on a commodities exchange, and 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.
(a-1) In making the computation under Subsection (a)(3),
income described by Subsection (a)(2) may not be treated as income
from conducting an active trade or business.
(b) The income described by Subsection (a)(2) does not
include:
(1) rent; or
(2) income received by a nonoperator from mineral
properties under a joint operating agreement if the nonoperator is
a member of an affiliated group and another member of that group is
the operator under the same joint operating agreement.
Sec. 171.0004. DEFINITION OF CONDUCTING ACTIVE TRADE OR
BUSINESS. (a) The definition in this section applies only to
Section 171.0003.
(b) An entity conducts an active trade or business if:
(1) the activities being carried on by the entity
include one or more active operations that form a part of the
process of earning income or profit; and
(2) the entity performs active management and
operational functions.
(c) Activities performed by the entity include activities
performed by persons outside the entity, including independent
contractors, to the extent the persons perform services on behalf
of the entity and those services constitute all or part of the
entity's trade or business.
(d) An entity conducts an active trade or business if
assets, including royalties, patents, trademarks, and other
intangible assets, held by the entity are used in the active trade
or business of one or more related entities.
(e) For purposes of this section:
(1) the ownership of a royalty interest or a
nonoperating working interest in mineral rights does not constitute
conduct of an active trade or business; and
(2) payment of compensation to employees or
independent contractors for financial or legal services reasonably
necessary for the operation of the entity does not constitute
conduct of an active trade or business.
Sec. 171.001. TAX IMPOSED. (a) A franchise tax is imposed
on[:
[(1)] each taxable entity [corporation] that does
business in this state or that is chartered or organized in this
state[; and
[(2) each limited liability company that does business
in this state or that is organized under the laws of this state].
(b) [In this chapter:
[(1) "Banking corporation" means each state,
national, domestic, or foreign bank, whether organized under the
laws of this state, another state, or another country, or under
federal law, including a limited banking association organized
under Subtitle A, Title 3, Finance Code, and each bank organized
under Section 25(a), Federal Reserve Act (12 U.S.C. Secs. 611-631)
(edge corporations), but does not include a bank holding company as
that term is defined by Section 2, Bank Holding Company Act of 1956
(12 U.S.C. Sec. 1841).
[(2) "Beginning date" means:
[(A) for a corporation chartered in this state,
the date on which the corporation's charter takes effect; and
[(B) for a foreign corporation, the date on which
the corporation begins doing business in this state.
[(3) "Corporation" includes:
[(A) a limited liability company, as defined
under the Texas Limited Liability Company Act;
[(B) a savings and loan association; and
[(C) a banking corporation.
[(4) "Charter" includes a limited liability company's
certificate of organization.
[(5) "Internal Revenue Code" means the Internal
Revenue Code of 1986 in effect for the federal tax year beginning on
or after January 1, 1996, and before January 1, 1997, and any
regulations adopted under that code applicable to that period.
[(6) "Officer" and "director" include a limited
liability company's directors and managers and a limited banking
association's directors and managers and participants if there are
no directors or managers.
[(7) "Savings and loan association" means a savings
and loan association or savings bank, whether organized under the
laws of this state, another state, or another country, or under
federal law.
[(8) "Shareholder" includes a limited liability
company's member and a limited banking association's participant.
[(c)] The tax imposed under this chapter extends to the
limits of the United States Constitution and the federal law
adopted under the United States Constitution.
Sec. 171.0011. ADDITIONAL TAX. (a) Except as provided by
Subsection (e), an [An] additional tax is imposed on a taxable
entity [corporation] that for any reason becomes no longer subject
to the [earned surplus component of the tax, without regard to
whether the corporation remains subject to the taxable capital
component of the] tax imposed under this chapter.
(b) The additional tax is equal to the appropriate rate
under Section 171.002 of the taxable entity's taxable margin [4.5
percent of the corporation's net taxable earned surplus] computed
on the period beginning on the day after the last day for which the
tax imposed on taxable margin [net taxable earned surplus] was
computed [under Section 171.1532] and ending on the date the
taxable entity [corporation] is no longer subject to the [earned
surplus component of the] tax imposed under this chapter.
(c) The additional tax imposed and any report required by
the comptroller are due on the 60th day after the date the taxable
entity [corporation] becomes no longer subject to the [earned
surplus component of the] tax imposed under this chapter.
(d) Except as otherwise provided by this section, the
provisions of this chapter apply to the tax imposed under this
section.
(e) An additional tax is not imposed on a taxable entity
that becomes no longer subject to the tax imposed under this chapter
because the entity qualifies as a passive entity.
Sec. 171.002. RATES; COMPUTATION OF TAX. (a) Subject to
Section 171.003 and except as provided by Subsection (b), the rate
[The rates] of the franchise tax is one [are:
[(1) 0.25] percent per year of privilege period of
[net] taxable margin [capital; and
[(2) 4.5 percent of net taxable earned surplus].
(b) The rate of the franchise tax is 0.5 percent per year of
privilege period of taxable margin for those taxable entities
primarily engaged in retail or wholesale trade. [The amount of
franchise tax on each corporation is computed by adding the
following:
[(1) the amount calculated by applying the tax rate
prescribed by Subsection (a)(1) to the corporation's net taxable
capital; and
[(2) the difference between:
[(A) the amount calculated by applying the tax
rate prescribed by Subsection (a)(2) to the corporation's net
taxable earned surplus; and
[(B) the amount determined under Subdivision
(1).]
(c) A taxable entity is primarily engaged in retail or
wholesale trade only if:
(1) the total revenue from its activities in retail or
wholesale trade is greater than the total revenue from its
activities in trades other than the retail and wholesale trades;
(2) except as provided by Subsection (c-1), less than
50 percent of the total revenue from activities in retail or
wholesale trade comes from the sale of products it produces or
products produced by an entity that is part of an affiliated group
to which the taxable entity also belongs; and
(3) the taxable entity does not provide retail or
wholesale utilities, including telecommunications services and
electricity or gas. [In making a computation under Subsection (b),
an amount computed under Subsection (b)(1) or (b)(2) that is zero or
less is computed as a zero.]
(c-1) Subsection (c)(2) does not apply to total revenue from
activities in a retail trade described by Major Group 58 of the
Standard Industrial Classification Manual published by the federal
Office of Management and Budget.
(d) A taxable entity [corporation] is not required to pay
any tax and is not considered to owe any tax for a period if:
(1) the amount of tax computed for the taxable entity
[corporation] is less than $1,000 [$100]; or
(2) the amount of the taxable entity's total revenue
[corporation's gross receipts:
[(A)] from its entire business [under Section
171.105] is less than or equal to $300,000 or the amount determined
under Section 171.006 [$150,000; and
[(B) from its entire business under Section
171.1051, including the amount excepted under Section 171.1051(a),
is less than $150,000].
[Sec. 171.005. RATE OF TAX FOR CORPORATION IN PROCESS OF
LIQUIDATION. The franchise tax rate on a corporation in the process
of liquidation, as defined by Section 171.102 of this code, is the
rate established by Section 171.002 of this code.]
Sec. 171.003. INCREASE IN RATE REQUIRES VOTER APPROVAL.
(a) An increase in a rate provided by Section 171.002(a) or (b)
takes effect only if approved by a majority of the registered voters
voting in a statewide referendum held on the question of increasing
the rate. The referendum must specify the increased rate or rates.
(b) This section does not apply to a decrease in a rate
provided by Section 171.002(a) or (b). If a rate is decreased, this
section applies to any subsequent increase in that rate.
(c) This section does not apply to any change in the tax
imposed by this chapter in relation to:
(1) the manner in which the tax is computed, including
the determination of margin and taxable margin and any allowable
deductions or credits;
(2) the manner in which the tax is administered or
enforced; or
(3) the applicability of the tax to certain entities.
Sec. 171.006. ADJUSTMENT OF ELIGIBILITY FOR EXEMPTION AND
COMPENSATION DEDUCTION. (a) In this section, "consumer price
index" means the average over a state fiscal biennium of the
Consumer Price Index for All Urban Consumers (CPI-U), U.S. City
Average, published monthly by the United States Bureau of Labor
Statistics, or its successor in function.
(b) Beginning in 2009, on January 1 of each odd-numbered
year, the amounts prescribed by Sections 171.002(d)(2) and
171.1013(c) are increased or decreased by an amount equal to the
amount prescribed by those sections on December 31 of the preceding
year multiplied by the percentage increase or decrease during the
preceding state fiscal biennium in the consumer price index and
rounded to the nearest $10,000.
(c) The amounts determined under Subsection (b) apply to a
report originally due on or after the date the determination is
made.
(d) The comptroller shall make the determination required
by this section and may adopt rules related to making that
determination.
(e) A determination by the comptroller under this section is
final and may not be appealed.
SECTION 3. Section 171.052, Tax Code, is amended to read as
follows:
Sec. 171.052. CERTAIN CORPORATIONS. (a) Except as
provided by Subsection (c), an [An] insurance organization, title
insurance company, or title insurance agent authorized to engage in
insurance business in this state now required to pay an annual tax
under Chapter 4 or 9, Insurance Code, measured by its gross premium
receipts is exempted from the franchise tax. A nonadmitted
insurance organization that is required to pay a gross premium
receipts tax during a tax year is exempted from the franchise tax
for that same tax year.
(b) Farm mutuals, local mutual aid associations, and burial
associations are not subject to the franchise tax.
(c) An entity is subject to the franchise tax for a tax year
in any portion of which the entity is in violation of an order
issued by the Texas Department of Insurance under Section
2254.003(b), Insurance Code, that is final after appeal or that is
no longer subject to appeal.
SECTION 4. Subchapter B, Chapter 171, Tax Code, is amended
by adding Section 171.088 to read as follows:
Sec. 171.088. EXEMPTION--NONCORPORATE ENTITY ELIGIBLE FOR
CERTAIN EXEMPTIONS. An entity that is not a corporation but that,
because of its activities, would qualify for a specific exemption
under this subchapter if it were a corporation, qualifies for the
exemption and is exempt from the tax in the same manner and under
the same conditions as a corporation.
SECTION 5. Subchapter C, Chapter 171, Tax Code, is amended,
including the reenacting and amending of Section 171.109(g), Tax
Code, as amended by Chapters 801 and 1198, Acts of the 71st
Legislature, Regular Session, 1989, to read as follows:
SUBCHAPTER C. DETERMINATION OF TAXABLE MARGIN [CAPITAL AND TAXABLE
EARNED SURPLUS]; ALLOCATION AND APPORTIONMENT
Sec. 171.101. DETERMINATION OF [NET] TAXABLE MARGIN
[CAPITAL]. (a) The [Except as provided by Subsections (b) and (c),
the net] taxable margin [capital] of a taxable entity [corporation]
is computed by:
(1) determining the taxable entity's margin, which is
the lesser of:
(A) 70 percent of the taxable entity's total
revenue from its entire business, as determined under Section
171.1011; or
(B) an amount computed by:
(i) determining the taxable entity's total
revenue from its entire business, under Section 171.1011;
(ii) subtracting, at the election of the
taxable entity, either:
(a) cost of goods sold, as determined
under Section 171.1012; or
(b) compensation, as determined under
Section 171.1013; and
(iii) subtracting, in addition to any
subtractions made under Subparagraph (ii)(a) or (b), 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; [adding the corporation's stated capital, as defined by
Article 1.02, Texas Business Corporation Act, and the corporation's
surplus, to determine the corporation's taxable capital;]
(2) apportioning the taxable entity's margin
[corporation's taxable capital] to this state as provided by
Section 171.106 [171.106(a) or (c), as applicable,] to determine
the taxable entity's [corporation's] apportioned margin [taxable
capital]; and
(3) subtracting from the amount computed under
Subdivision (2) any other allowable deductions to determine the
taxable entity's [corporation's net] taxable margin [capital].
(b) Notwithstanding Subsection (a)(1)(B)(ii), a staff
leasing services company may subtract only compensation as
determined under Section 171.1013.
(c) In making a computation under this section, an amount
that is zero or less is computed as a zero [The net taxable capital
of a limited liability company is computed by:
[(1) adding the company's members' contributions, as
provided for under the Texas Limited Liability Company Act, and
surplus to determine the company's taxable capital;
[(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner that the taxable
capital of a corporation is apportioned to this state under Section
171.106(a) or (c), as applicable, to determine the company's
apportioned taxable capital; and
[(3) subtracting from the amount computed under
Subdivision (2) any other allowable deductions, to determine the
company's net taxable capital.
[(c) The net taxable capital of a savings and loan
association is computed by:
[(1) determining the association's net worth; and
[(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner that the taxable
capital of a corporation is apportioned to this state under Section
171.106(a) to determine the association's net taxable capital].
(d) An election under Subsection (a)(1)(B)(ii) shall be
made by the taxable entity on its annual report and is effective
only for that annual report. The election may be changed by filing
an amended report.
Sec. 171.1011. DETERMINATION OF TOTAL REVENUE FROM ENTIRE
BUSINESS. (a) In this section, a reference to an Internal Revenue
Service form includes a variant of the form. For example, a
reference to Form 1120 includes Forms 1120-A, 1120-S, and other
variants of Form 1120. A reference to an Internal Revenue Service
form also includes any subsequent form with a different number or
designation that substantially provides the same information as the
original form.
(b) In this section, a reference to an amount entered on a
line number on an Internal Revenue Service form includes the
corresponding amount entered on a variant of the form, or a
subsequent form, with a different line number. The comptroller
shall adopt rules as necessary to accomplish the legislative intent
prescribed by this subsection and Subsection (a).
(c) Except as provided by this section, and subject to
Section 171.1014, for the purpose of computing its taxable margin
under Section 171.101, the total revenue of a taxable entity is:
(1) for a taxable entity treated for federal income
tax purposes as a corporation, an amount computed by:
(A) adding:
(i) the amount entered on line 1c, Internal
Revenue Service Form 1120; and
(ii) the amounts entered on lines 4 through
10, Internal Revenue Service Form 1120; and
(B) subtracting:
(i) bad debt expensed for federal income
tax purposes that corresponds to items of gross receipts included
in Subsection (c)(1)(A) for the current reporting period or a past
reporting period;
(ii) to the extent included in Subsection
(c)(1)(A), foreign royalties and foreign dividends, including
amounts determined under Section 78 or Sections 951-964, Internal
Revenue Code;
(iii) to the extent included in Subsection
(c)(1)(A), net distributive income from partnerships and from
trusts and limited liability companies treated as partnerships for
federal income tax purposes and net distributive income from
limited liability companies and corporations treated as S
corporations for federal income tax purposes;
(iv) allowable deductions from Internal
Revenue Service Form 1120, Schedule C, to the extent the relating
dividend income is included in total revenue;
(v) to the extent included in Subsection
(c)(1)(A), items of income attributable to an entity that is a
disregarded entity for federal income tax purposes; and
(vi) to the extent included in Subsection
(c)(1)(A), other amounts authorized by this section;
(2) for a taxable entity treated for federal income
tax purposes as a partnership, an amount computed by:
(A) adding:
(i) the amount entered on line 1c, Internal
Revenue Service Form 1065;
(ii) the amounts entered on lines 4 through
7, Internal Revenue Service Form 1065; and
(iii) the amounts entered on lines 2
through 11, Internal Revenue Service Form 1065, Schedule K; and
(B) subtracting:
(i) bad debt expensed for federal income
tax purposes that corresponds to items of gross receipts included
in Subsection (c)(2)(A) for the current reporting period or a past
reporting period;
(ii) to the extent included in Subsection
(c)(2)(A), foreign royalties and foreign dividends, including
amounts determined under Section 78 or Sections 951-964, Internal
Revenue Code;
(iii) to the extent included in Subsection
(c)(2)(A), net distributive income from partnerships and from
trusts and limited liability companies treated as partnerships for
federal income tax purposes and net distributive income from
limited liability companies and corporations treated as S
corporations for federal income tax purposes;
(iv) to the extent included in Subsection
(c)(2)(A), items of income attributable to an entity that is a
disregarded entity for federal income tax purposes; and
(v) to the extent included in Subsection
(c)(2)(A), other amounts authorized by this section; or
(3) for a taxable entity other than a taxable entity
treated for federal income tax purposes as a corporation or
partnership, an amount determined in a manner substantially
equivalent to the amount for Subdivision (1) or (2) determined by
rules that the comptroller shall adopt.
(d) Subject to Section 171.1014, a corporation that is part
of a federal consolidated group shall compute its total revenue
under Subsection (c) as if it had filed a separate return for
federal income tax purposes.
(e) A taxable entity that owns an interest in a passive
entity that is not included in a group report under Section 171.1014
shall include in the taxable entity's total revenue the taxable
entity's share of the net income of the passive entity, but only to
the extent the net income of the passive entity was not generated by
the margin of any other taxable entity.
(f) A taxable entity shall exclude from its total revenue,
to the extent included under Subsection (c)(1)(A), (c)(2)(A), or
(c)(3), flow-through funds that are mandated by law or fiduciary
duty to be distributed to other entities, including taxes collected
from a third party by the taxable entity and remitted by the taxable
entity to a taxing authority.
(g) A taxable entity shall exclude from its total revenue,
to the extent included under Subsection (c)(1)(A), (c)(2)(A), or
(c)(3), only the following flow-through funds that are mandated by
contract to be distributed to other entities:
(1) sales commissions to nonemployees, including
split-fee real estate commissions;
(2) the tax basis as determined under the Internal
Revenue Code of securities underwritten; and
(3) subcontracting payments handled by the taxable
entity to provide services, labor, or materials in connection with
the actual or proposed design, construction, remodeling, or repair
of improvements on real property or the location of the boundaries
of real property.
(g-1) A taxable entity that is a lending institution shall
exclude from its total revenue, to the extent included under
Subsection (c)(1)(A), (c)(2)(A), or (c)(3), proceeds from the
principal repayment of loans.
(g-2) A taxable entity shall exclude from its total revenue,
to the extent included under Subsection (c)(1)(A), (c)(2)(A), or
(c)(3), the tax basis as determined under the Internal Revenue Code
of securities and loans sold.
(g-3) A taxable entity that provides legal services shall
exclude from its total revenue, to the extent included under
Subsection (c)(1)(A), (c)(2)(A), or (c)(3):
(1) the following flow-through funds that are mandated
by law, contract, or fiduciary duty to be distributed to the
claimant by the claimant's attorney or to other entities on behalf
of a claimant by the claimant's attorney:
(A) damages due the claimant;
(B) funds subject to a lien or other contractual
obligation arising out of the representation, other than fees owed
to the attorney;
(C) funds subject to a subrogation interest or
other third-party contractual claim; and
(D) fees paid an attorney in the matter who is not
a member, partner, shareholder, or employee of the taxable entity;
(2) reimbursement of the taxable entity's expenses
incurred in prosecuting a claimant's matter that are specific to
the matter and that are not general operating expenses; and
(3) the actual out-of-pocket expenses of the attorney,
not to exceed $500 per case, of providing pro bono legal services to
a person, but only if the attorney maintains records of the pro bono
services for auditing purposes in accordance with the manner in
which those services are reported to the State Bar of Texas.
(h) If the taxable entity belongs to an affiliated group,
the taxable entity may not exclude payments described by Subsection
(f), (g), (g-1), (g-2), or (g-3) that are made to entities that are
members of the affiliated group.
(i) Except as provided by Subsection (g), a payment made
under an ordinary contract for the provision of services in the
regular course of business may not be excluded.
(j) Any amount excluded under this section may not be
included in the determination of cost of goods sold under Section
171.1012 or the determination of compensation under Section
171.1013.
(k) A taxable entity that is a staff leasing services
company shall exclude from its total revenue payments received from
a client company for wages, payroll taxes on those wages, employee
benefits, and workers' compensation benefits for the assigned
employees of the client company.
(l) For purposes of Subsection (g)(1):
(1) "Sales commission" means:
(A) any form of compensation paid to a person for
engaging in an act for which a license is required by Chapter 1101,
Occupations Code; and
(B) compensation paid to a sales representative
by a principal in an amount that is based on the amount or level of
certain orders for or sales of the principal's product and that the
principal is required to report on Internal Revenue Service Form
1099-MISC.
(2) "Principal" means a person who:
(A) manufactures, produces, imports,
distributes, or acts as an independent agent for the distribution
of a product for sale;
(B) uses a sales representative to solicit orders
for the product; and
(C) compensates the sales representative wholly
or partly by sales commission.
(m) A taxable entity shall exclude from its total revenue,
to the extent included under Subsection (c)(1)(A), (c)(2)(A), or
(c)(3), dividends and interest received from federal obligations.
(m-1) A taxable entity that is a management company shall
exclude from its total revenue reimbursements of specified costs
incurred in its conduct of the active trade or business of a managed
entity, including "wages and cash compensation" as determined under
Sections 171.1013(a) and (b).
(n) Except as provided by Subsection (o), a taxable entity
that is a health care provider shall exclude from its total revenue,
to the extent included under Subsection (c)(1)(A), (c)(2)(A), or
(c)(3):
(1) the total amount of payments the health care
provider received:
(A) under the Medicaid program, Medicare
program, Indigent Health Care and Treatment Act (Chapter 61, Health
and Safety Code), and Children's Health Insurance Program (CHIP);
(B) for professional services provided in
relation to a workers' compensation claim under Title 5, Labor
Code; and
(C) for professional services provided to a
beneficiary rendered under the TRICARE military health system; and
(2) the actual cost to the health care provider for any
uncompensated care provided, but only if the provider maintains
records of the uncompensated care for auditing purposes and, if the
provider later receives payment for all or part of that care, the
provider adjusts the amount excluded for the tax year in which the
payment is received.
(n-1) The comptroller shall adopt rules governing:
(1) the computation of the actual cost to a health care
provider of any uncompensated care provided under Subsection
(n)(2); and
(2) the audit requirements related to the computation
of those costs.
(o) A health care provider that is a health care institution
shall exclude from its total revenue, to the extent included under
Subsection (c)(1)(A), (c)(2)(A), or (c)(3), 50 percent of the
amounts described by Subsection (n).
(p) In this section:
(1) "Federal obligations" means:
(A) stocks and other direct obligations of, and
obligations unconditionally guaranteed by, the United States
government and United States government agencies; and
(B) direct obligations of a United States
government-sponsored agency.
(2) "Health care institution" means:
(A) an ambulatory surgical center;
(B) an assisted living facility licensed under
Chapter 247, Health and Safety Code;
(C) an emergency medical services provider;
(D) a home and community support services agency;
(E) a hospice;
(F) a hospital;
(G) a hospital system;
(H) an intermediate care facility for the
mentally retarded or a home and community-based services waiver
program for persons with mental retardation adopted in accordance
with Section 1915(c) of the federal Social Security Act (42 U.S.C.
Section 1396n);
(I) a birthing center;
(J) a nursing home;
(K) an end stage renal disease facility licensed
under Section 251.011, Health and Safety Code; or
(L) a pharmacy.
(3) "Health care provider" means a taxable entity that
participates in the Medicaid program, Medicare program, Children's
Health Insurance Program (CHIP), state workers' compensation
program, or TRICARE military health system as a provider of health
care services.
(4) "Obligation" means any bond, debenture, security,
mortgage-backed security, pass-through certificate, or other
evidence of indebtedness of the issuing entity. The term does not
include a deposit, a repurchase agreement, a loan, a lease, a
participation in a loan or pool of loans, a loan collateralized by
an obligation of a United States government agency, or a loan
guaranteed by a United States government agency.
(4-a) "Pro bono services" means the direct provision
of legal services to the poor, without an expectation of
compensation.
(4-b) "Out-of-pocket expenses" means, for purposes of
Subsection (g-3)(3), expenses incurred by the attorney in relation
to a case, including:
(A) postage expenses;
(B) telephone calls;
(C) faxes; and
(D) paper and other office supplies.
(5) "United States government" means any department or
ministry of the federal government, including a federal reserve
bank. The term does not include a state or local government, a
commercial enterprise owned wholly or partly by the United States
government, or a local governmental entity or commercial enterprise
whose obligations are guaranteed by the United States government.
(6) "United States government agency" means an
instrumentality of the United States government whose obligations
are fully and explicitly guaranteed as to the timely payment of
principal and interest by the full faith and credit of the United
States government. The term includes the Government National
Mortgage Association, the Department of Veterans Affairs, the
Federal Housing Administration, the Farmers Home Administration,
the Export-Import Bank, the Overseas Private Investment
Corporation, the Commodity Credit Corporation, the Small Business
Administration, and any successor agency.
(7) "United States government-sponsored agency" means
an agency originally established or chartered by the United States
government to serve public purposes specified by the United States
Congress but whose obligations are not explicitly guaranteed by the
full faith and credit of the United States government. The term
includes the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, the Farm Credit System, the Federal
Home Loan Bank System, the Student Loan Marketing Association, and
any successor agency.
(q) A taxable entity shall exclude from its total revenue,
to the extent included under Subsection (c)(1)(A), (c)(2)(A), or
(c)(3), all revenue received that is directly derived from the
operation of a facility that is:
(1) located on property owned or leased by the federal
government; and
(2) managed or operated primarily to house members of
the armed forces of the United States.
(r) A taxable entity shall exclude, to the extent included
under Subsection (c)(1)(A), (c)(2)(A), or (c)(3), total revenue
received from oil or gas produced, during the dates certified by the
comptroller pursuant to Subsection (s), from:
(1) an oil well designated by the Railroad Commission
of Texas or similar authority of another state whose production
averages less than 10 barrels a day over a 90-day period; and
(2) a gas well designated by the Railroad Commission
of Texas or similar authority of another state whose production
averages less than 250 mcf a day over a 90-day period.
(s) The comptroller shall certify dates during which the
monthly average closing price of West Texas Intermediate crude oil
is below $40 per barrel and the average closing price of gas is
below $5 per MMBtu, as recorded on the New York Mercantile Exchange
(NYMEX).
Sec. 171.1012. DETERMINATION OF COST OF GOODS SOLD. (a) In
this section:
(1) "Goods" means real or tangible personal property
sold in the ordinary course of business of a taxable entity.
(2) "Production" includes construction, installation,
manufacture, development, mining, extraction, improvement,
creation, raising, or growth.
(3)(A) "Tangible personal property" means:
(i) personal property that can be seen,
weighed, measured, felt, or touched or that is perceptible to the
senses in any other manner;
(ii) films, sound recordings, videotapes,
books, and other similar property embodying words, ideas, concepts,
images, or sound by the creator of the property for which, as costs
are incurred in producing the property, it is intended or is
reasonably likely that any tangible medium in which the property is
embodied will be mass-distributed by the creator or any one or more
third parties in a form that is not substantially altered; and
(iii) a computer program, as defined by
Section 151.0031.
(B) "Tangible personal property" does not
include:
(i) intangible property; or
(ii) services.
(b) Subject to Section 171.1014, a taxable entity that
elects to subtract cost of goods sold for the purpose of computing
its taxable margin shall determine the amount of that cost of goods
sold as provided by this section.
(c) The cost of goods sold includes all direct costs of
acquiring or producing the goods, including:
(1) labor costs;
(2) cost of materials that are an integral part of
specific property produced;
(3) cost of materials that are consumed in the
ordinary course of performing production activities;
(4) handling costs, including costs attributable to
processing, assembling, repackaging, and inbound transportation
costs;
(5) storage costs, including the costs of carrying,
storing, or warehousing property, subject to Subsection (e);
(6) depreciation, depletion, and amortization, to the
extent associated with and necessary for the production of goods,
including recovery described by Section 197, Internal Revenue Code;
(7) the cost of renting or leasing equipment,
facilities, or real property directly used for the production of
the goods, including pollution control equipment and intangible
drilling and dry hole costs;
(8) the cost of repairing and maintaining equipment,
facilities, or real property directly used for the production of
the goods, including pollution control devices;
(9) costs attributable to research, experimental,
engineering, and design activities directly related to the
production of the goods, including all research or experimental
expenditures described by Section 174, Internal Revenue Code;
(10) geological and geophysical costs incurred to
identify and locate property that has the potential to produce
minerals;
(11) taxes paid in relation to acquiring or producing
any material, or taxes paid in relation to services that are a
direct cost of production;
(12) the cost of producing or acquiring electricity
sold; and
(13) a contribution to a partnership in which the
taxable entity owns an interest that is used to fund activities, the
costs of which would otherwise be treated as cost of goods sold of
the partnership, but only to the extent that those costs are related
to goods distributed to the taxable entity as goods-in-kind in the
ordinary course of production activities rather than being sold.
(d) In addition to the amounts includable under Subsection
(c), the cost of goods sold includes the following costs in relation
to the taxable entity's goods:
(1) deterioration of the goods;
(2) obsolescence of the goods;
(3) spoilage and abandonment, including the costs of
rework labor, reclamation, and scrap;
(4) if the property is held for future production,
preproduction direct costs allocable to the property, including
costs of purchasing the goods and of storage and handling the goods,
as provided by Subsections (c)(4) and (c)(5);
(5) postproduction direct costs allocable to the
property, including storage and handling costs, as provided by
Subsections (c)(4) and (c)(5);
(6) the cost of insurance on a plant or a facility,
machinery, equipment, or materials directly used in the production
of the goods;
(7) the cost of insurance on the produced goods;
(8) the cost of utilities, including electricity, gas,
and water, directly used in the production of the goods;
(9) the costs of quality control, including
replacement of defective components pursuant to standard warranty
policies, inspection directly allocable to the production of the
goods, and repairs and maintenance of goods; and
(10) licensing or franchise costs, including fees
incurred in securing the contractual right to use a trademark,
corporate plan, manufacturing procedure, special recipe, or other
similar right directly associated with the goods produced.
(e) The cost of goods sold does not include the following
costs in relation to the taxable entity's goods:
(1) the cost of renting or leasing equipment,
facilities, or real property that is not used for the production of
the goods;
(2) selling costs, including employee expenses
related to sales;
(3) distribution costs, including outbound
transportation costs;
(4) advertising costs;
(5) idle facility expense;
(6) rehandling costs;
(7) bidding costs, which are the costs incurred in the
solicitation of contracts ultimately awarded to the taxable entity;
(8) unsuccessful bidding costs, which are the costs
incurred in the solicitation of contracts not awarded to the
taxable entity;
(9) interest, including interest on debt incurred or
continued during the production period to finance the production of
the goods;
(10) income taxes, including local, state, federal,
and foreign income taxes, and franchise taxes that are assessed on
the taxable entity based on income;
(11) strike expenses, including costs associated with
hiring employees to replace striking personnel, but not including
the wages of the replacement personnel, costs of security, and
legal fees associated with settling strikes;
(12) officers' compensation;
(13) costs of operation of a facility that is:
(A) located on property owned or leased by the
federal government; and
(B) managed or operated primarily to house
members of the armed forces of the United States; and
(14) any compensation paid to an undocumented worker
used for the production of goods. As used in this subdivision:
(A) "undocumented worker" means a person who is
not lawfully entitled to be present and employed in the United
States; and
(B) "goods" includes the husbandry of animals,
the growing and harvesting of crops, and the severance of timber
from realty.
(f) A taxable entity may subtract as a cost of goods sold
indirect or administrative overhead costs, including all mixed
service costs, such as security services, legal services, data
processing services, accounting services, personnel operations,
and general financial planning and financial management costs, that
it can demonstrate are allocable to the acquisition or production
of goods, except that the amount subtracted may not exceed four
percent of the taxable entity's total indirect or administrative
overhead costs, including all mixed service costs. Any costs
excluded under Subsection (e) may not be subtracted under this
subsection.
(g) A taxable entity that is allowed a subtraction by this
section for a cost of goods sold and that is subject to Section
263A, 460, or 471, Internal Revenue Code, shall capitalize that
cost in the same manner and to the same extent that the taxable
entity is required or allowed to capitalize the cost under federal
law and regulations, except for costs excluded under Subsection
(e), or in accordance with Subsections (c), (d), and (f).
(h) A taxable entity shall determine its cost of goods sold,
except as otherwise provided by this section, in accordance with
the methods permitted by federal statutes and regulations. This
subsection does not affect the type or category of cost of goods
sold that may be subtracted under this section.
(i) A taxable entity may make a subtraction under this
section in relation to the cost of goods sold only if that entity
owns the goods. The determination of whether a taxable entity is an
owner is based on all of the facts and circumstances, including the
various benefits and burdens of ownership vested with the taxable
entity. A taxable entity furnishing labor or materials to a project
for the construction, improvement, remodeling, repair, or
industrial maintenance (as the term "maintenance" is defined in 34
T.A.C. Section 3.357) of real property is considered to be an owner
of that labor or materials and may include the costs, as allowed by
this section, in the computation of cost of goods sold. Solely for
purposes of this section, a taxable entity shall be treated as the
owner of goods being manufactured or produced by the entity under a
contract with the federal government, including any subcontracts
that support a contract with the federal government,
notwithstanding that the Federal Acquisition Regulation may
require that title or risk of loss with respect to those goods be
transferred to the federal government before the manufacture or
production of those goods is complete.
(j) A taxable entity may not make a subtraction under this
section for cost of goods sold to the extent the cost of goods sold
was funded by partner contributions and deducted under Subsection
(c)(13).
(k) Notwithstanding any other provision of this section, if
the taxable entity is a lending institution that offers loans to the
public and elects to subtract cost of goods sold, the entity may
subtract as a cost of goods sold an amount equal to interest
expense.
(k-1) Notwithstanding any other provision of this section,
the following taxable entities may subtract as a cost of goods sold
the costs otherwise allowed by this section in relation to tangible
personal property that the entity rents or leases in the ordinary
course of business of the entity:
(1) a motor vehicle rental or leasing company that
remits a tax on gross receipts imposed under Section 152.026;
(2) a heavy construction equipment rental or leasing
company; and
(3) a railcar rolling stock rental or leasing company.
(l) Notwithstanding any other provision of this section, a
payment made by one member of an affiliated group to another member
of that affiliated group not included in the combined group may be
subtracted as a cost of goods sold only if it is a transaction made
at arm's length.
(m) In this section, "arm's length" means the standard of
conduct under which entities that are not related parties and that
have substantially equal bargaining power, each acting in its own
interest, would negotiate or carry out a particular transaction.
(n) In this section, "related party" means a person,
corporation, or other entity, including an entity that is treated
as a pass-through or disregarded entity for purposes of federal
taxation, whether the person, corporation, or entity is subject to
the tax under this chapter or not, in which one person, corporation,
or entity, or set of related persons, corporations, or entities,
directly or indirectly owns or controls a controlling interest in
another entity.
Sec. 171.1013. DETERMINATION OF COMPENSATION. (a) Except
as otherwise provided by this section, "wages and cash
compensation" means the amount entered in the Medicare wages and
tips box of Internal Revenue Service Form W-2 or any subsequent form
with a different number or designation that substantially provides
the same information. The term also includes, to the extent not
included above:
(1) net distributive income from partnerships and from
trusts and limited liability companies treated as partnerships for
federal income tax purposes, but only if the person receiving the
distribution is a natural person;
(2) net distributive income from limited liability
companies and corporations treated as S corporations for federal
income tax purposes, but only if the person receiving the
distribution is a natural person; and
(3) stock awards and stock options deducted for
federal income tax purposes.
(b) Subject to Section 171.1014, a taxable entity that
elects to subtract compensation for the purpose of computing its
taxable margin under Section 171.101 may subtract an amount equal
to:
(1) subject to the limitation in Subsection (c), all
wages and cash compensation paid by the taxable entity to its
officers, directors, owners, partners, and employees; and
(2) the cost of all benefits the taxable entity
provides to its officers, directors, owners, partners, and
employees, including workers' compensation benefits, health care,
employer contributions made to employees' health savings accounts,
and retirement to the extent deductible for federal income tax
purposes.
(c) Notwithstanding the actual amount of wages and cash
compensation paid by a taxable entity to its officers, directors,
owners, partners, and employees, a taxable entity may not include
more than $300,000, or the amount determined under Section 171.006,
for any person in the amount of wages and cash compensation it
determines under Section 171.101.
(c-1) Subject to Section 171.1014, a taxable entity that
elects to subtract compensation for the purpose of computing its
taxable margin under Section 171.101 may not subtract any wages or
cash compensation paid to an undocumented worker. As used in this
section "undocumented worker" means a person who is not lawfully
entitled to be present and employed in the United States.
(d) A taxable entity that is a staff leasing services
company:
(1) may not include as wages or cash compensation
payments described by Section 171.1011(k); and
(2) shall determine compensation as provided by this
section only for the taxable entity's own employees that are not
assigned employees.
(e) Subject to the other provisions of this section, in
determining compensation, a taxable entity that is a client company
that contracts with a staff leasing services company for assigned
employees:
(1) shall include payments made to the staff leasing
services company for wages and benefits for the assigned employees
as if the assigned employees were actual employees of the entity;
(2) may not include an administrative fee charged by
the staff leasing services company for the provision of the
assigned employees; and
(3) may not include any other amount in relation to the
assigned employees, including payroll taxes.
(f) A taxable entity that is a management company:
(1) may not include as wages or cash compensation any
amounts reimbursed by a managed entity; and
(2) shall determine compensation as provided by this
section for only those wage and compensation payments that are not
reimbursed by a managed entity.
(g) A taxable entity that is a managed entity shall include
reimbursements made to the management company for wages and
compensation as if the reimbursed amounts had been paid to
employees of the managed entity.
(h) Subject to Section 171.1014, a taxable entity that
elects to subtract compensation for the purpose of computing its
taxable margin under Section 171.101 may not include as wages or
cash compensation amounts paid to an employee whose primary
employment is directly associated with the operation of a facility
that is:
(1) located on property owned or leased by the federal
government; and
(2) managed or operated primarily to house members of
the armed forces of the United States.
Sec. 171.1014. COMBINED REPORTING; AFFILIATED GROUP
ENGAGED IN UNITARY BUSINESS. (a) Taxable entities that are part of
an affiliated group engaged in a unitary business shall file a
combined group report in lieu of individual reports based on the
combined group's business. The combined group may not include a
taxable entity that conducts business outside the United States if
80 percent or more of the taxable entity's property and payroll, as
determined by factoring under Chapter 141, are assigned to
locations outside the United States. In applying Chapter 141, if
either the property factor or the payroll factor is zero, the
denominator is one. The combined group may not include a taxable
entity that conducts business outside the United States and has no
property or payroll if 80 percent or more of the taxable entity's
gross receipts, as determined under Sections 171.103, 171.105, and
171.1055, are assigned to locations outside the United States.
(b) The combined group is a single taxable entity for
purposes of the application of the tax imposed under this chapter.
(c) For purposes of Section 171.101, a combined group shall
determine its total revenue by:
(1) determining the total revenue of each of its
members as provided by Section 171.1011 as if the member were an
individual taxable entity;
(2) adding the total revenues of the members
determined under Subdivision (1) together; and
(3) subtracting, to the extent included under Section
171.1011(c)(1)(A), (c)(2)(A), or (c)(3), items of total revenue
received from a member of the combined group.
(d) For purposes of Section 171.101, a combined group shall
make an election to subtract either cost of goods sold or
compensation that applies to all of its members.
(e) For purposes of Section 171.101, a combined group that
elects to subtract costs of goods sold shall determine that amount
by:
(1) determining the cost of goods sold for each of its
members as provided by Section 171.1012 as if the member were an
individual taxable entity;
(2) adding the amounts of cost of goods sold
determined under Subdivision (1) together; and
(3) subtracting from the amount determined under
Subdivision (2) any cost of goods sold amounts paid from one member
of the combined group to another member of the combined group, but
only to the extent the corresponding item of total revenue was
subtracted under Subsection (c)(3).
(f) For purposes of Section 171.101, a combined group that
elects to subtract compensation shall determine that amount by:
(1) determining the compensation for each of its
members as provided by Section 171.1013 as if each member were an
individual taxable entity;
(2) adding the amounts of compensation determined
under Subdivision (1) together; and
(3) subtracting from the amount determined under
Subdivision (2) any compensation amounts paid from one member of
the combined group to another member of the combined group, but only
to the extent the corresponding item of total revenue was
subtracted under Subsection (c)(3).
(g) A combined group may elect to include in the combined
group an exempt entity that would be included in the group if the
entity were not exempt and to treat the exempt entity as if it were a
taxable entity.
Sec. 171.1015. REPORTING FOR CERTAIN PARTNERSHIPS IN TIERED
PARTNERSHIP ARRANGEMENT. (a) In this section, "tiered partnership
arrangement" means an ownership structure in which all of the
interests in one partnership, trust, or limited liability company
that is treated for federal income taxes as a partnership or a
limited liability company treated as an S corporation for federal
income tax purposes (an "upper tier partnership") are owned by one
or more other taxable entities (a "lower tier entity"). A tiered
partnership arrangement may have two or more tiers.
(b) In addition to the tax it is required to pay under this
chapter on its own taxable margin, a taxable entity that is a lower
tier entity may pay the tax on the taxable margin of a higher tier
partnership if the higher tier partnership submits a report to the
comptroller showing the amount of taxable margin that each lower
tier entity that owns it should include within the lower tier
entity's own taxable margin, according to the profits interest of
the lower tier entity. An upper tier partnership is not required to
pay tax under this chapter on any taxable margin reported under this
section.
(c) This section does not apply to that percentage of the
taxable margin attributable to a lower tier entity by an upper tier
partnership if the lower tier entity is not subject to the tax under
this chapter. In this case, the higher tier partnership is liable
for the tax on its taxable margin.
(d) The comptroller shall adopt rules to administer this
section.
[Sec. 171.102. DETERMINATION OF TAXABLE CAPITAL OF
CORPORATION IN PROCESS OF LIQUIDATION. (a) "Corporation in the
process of liquidation" means a corporation that:
[(1) adopts and pursues in good faith a plan to marshal
the assets of the corporation, to pay or settle with the
corporation's creditors and debtors, and to apportion the remaining
assets of the corporation among the corporation's stockholders;
[(2) adopts the plan by a resolution approved by the
corporation's board of directors and ratified by a majority of the
stockholders of record; and
[(3) conducts the liquidation in the manner provided
by the law of this state to dissolve a corporation.
[(b) The taxable capital of a corporation in the process of
liquidation is the difference between the amount of the
corporation's stock issued and the amount of the liquidating
dividends paid on the stock.
[(c) The president and the secretary of the corporation
shall file an affidavit with the comptroller containing information
about the amount of liquidating dividends paid and a statement that
the corporation is in the process of liquidation. The plan
described by Subsection (a) of this section for the corporation's
liquidation shall be attached to and be a part of the affidavit.
[(d) This section applies only to the computation of a
corporation's taxable capital under Section 171.101 of this code.]
Sec. 171.103. DETERMINATION OF GROSS RECEIPTS FROM BUSINESS
DONE IN THIS STATE FOR MARGIN [TAXABLE CAPITAL]. (a) Subject to
Section 171.1055, in [In] apportioning margin [taxable capital],
the gross receipts of a taxable entity [corporation] from its
business done in this state is the sum of the taxable entity's
[corporation's] receipts from:
[(1) each sale of tangible personal property if the
property is delivered or shipped to a buyer in this state regardless
of the FOB point or another condition of the sale, and each sale of
tangible personal property shipped from this state to a purchaser
in another state in which the seller is not subject to taxation;
[(2) each service performed in this state;
[(3) each rental of property situated in this state;
[(4) the use of a patent, copyright, trademark,
franchise, or license in this state;
[(5) each sale of real property located in this state,
including royalties from oil, gas, or other mineral interests; and
[(6) other business done in this state.
[Sec. 171.1032. DETERMINATION OF GROSS RECEIPTS FROM
BUSINESS DONE IN THIS STATE FOR TAXABLE EARNED SURPLUS. (a) Except
for the gross receipts of a corporation that are subject to the
provisions of Section 171.1061, in apportioning taxable earned
surplus, the gross receipts of a corporation from its business done
in this state is the sum of the corporation's receipts from:]
(1) each sale of tangible personal property if the
property is delivered or shipped to a buyer in this state regardless
of the FOB point or another condition of the sale[, and each sale of
tangible personal property shipped from this state to a purchaser
in another state in which the seller is not subject to any tax on, or
measured by, net income, without regard to whether the tax is
imposed];
(2) each service performed in this state, except that
receipts derived from servicing loans secured by real property are
in this state if the real property is located in this state;
(3) each rental of property situated in this state;
(4) the use of a patent, copyright, trademark,
franchise, or license in this state;
(5) each sale of real property located in this state,
including royalties from oil, gas, or other mineral interests; and
(6) [each partnership or joint venture to the extent
provided by Subsection (c); and
[(7)] other business done in this state.
(b) A combined group shall include in its gross receipts
computed under Subsection (a) the gross receipts of each taxable
entity that is a member of the combined group and that has a nexus
with this state for the purpose of taxation. [A corporation shall
deduct from its gross receipts computed under Subsection (a) any
amount to the extent included under Subsection (a) because of the
application of Section 78 or Sections 951-964, Internal Revenue
Code, any amount excludable under Section 171.110(k), and dividends
received from a subsidiary, associate, or affiliated corporation
that does not transact a substantial portion of its business or
regularly maintain a substantial portion of its assets in the
United States.
[(c) A corporation shall include in its gross receipts
computed under Subsection (a) the corporation's share of the gross
receipts of each partnership and joint venture of which the
corporation is a part apportioned to this state as though the
corporation directly earned the receipts, including receipts from
business done with the corporation.
[Sec. 171.104. GROSS RECEIPTS FROM BUSINESS DONE IN TEXAS:
DEDUCTION FOR FOOD AND MEDICINE RECEIPTS. A corporation may deduct
from its receipts includable under Section 171.103(1) of this code
the amount of the corporation's receipts from sales of the
following items, if the items are shipped from outside this state
and the receipts would be includable under Section 171.103(1) of
this code in the absence of this section:
[(1) food that is exempted from the Limited Sales,
Excise, and Use Tax Act by Section 151.314(a) of this code; and
[(2) health care supplies that are exempted from the
Limited Sales, Excise, and Use Tax Act by Section 151.313 of this
code.]
Sec. 171.105. [DETERMINATION OF GROSS RECEIPTS FROM ENTIRE
BUSINESS FOR TAXABLE CAPITAL. (a) In apportioning taxable
capital, the gross receipts of a corporation from its entire
business is the sum of the corporation's receipts from:
[(1) each sale of the corporation's tangible personal
property;
[(2) each service, rental, or royalty; and
[(3) other business.
[(b) If a corporation sells an investment or capital asset,
the corporation's gross receipts from its entire business for
taxable capital include only the net gain from the sale.
[Sec. 171.1051.] DETERMINATION OF GROSS RECEIPTS FROM
ENTIRE BUSINESS FOR MARGIN [TAXABLE EARNED SURPLUS]. (a) Subject
to Section 171.1055 [Except for the gross receipts of a corporation
that are subject to the provisions of Section 171.1061], in
apportioning margin [taxable earned surplus], the gross receipts of
a taxable entity [corporation] from its entire business is the sum
of the taxable entity's [corporation's] receipts from:
(1) each sale of the taxable entity's [corporation's]
tangible personal property;
(2) each service, rental, or royalty; and
(3) [each partnership and joint venture as provided by
Subsection (d); and
[(4)] other business.
(b) If a taxable entity [corporation] sells an investment or
capital asset, the taxable entity's [corporation's] gross receipts
from its entire business for taxable margin [earned surplus]
includes only the net gain from the sale.
(c) A combined group shall include in its gross receipts
computed under Subsection (a) the gross receipts of each taxable
entity that is a member of the combined group, without regard to
whether that entity has a nexus with this state for the purpose of
taxation.
Sec. 171.1055. EXCLUSION OF CERTAIN RECEIPTS FOR MARGIN
APPORTIONMENT. (a) In apportioning margin, receipts excluded from
total revenue by a taxable entity under Section 171.1011 may not be
included in either the receipts of the taxable entity from its
business done in this state as determined under Section 171.103 or
the receipts of the taxable entity from its entire business done as
determined under Section 171.105.
(b) In apportioning margin, receipts derived from
transactions between individual members of a combined group that
are excluded under Section 171.1014(c)(3) may not be included in
the receipts of the taxable entity from its business done in this
state as determined under Section 171.103, except that receipts
derived from the sale of tangible personal property between
individual members of a combined group where one member party to the
transaction does not have nexus in this state shall be included in
the receipts of the taxable entity from its business done in this
state as determined under Section 171.103 to the extent that the
member of the combined group that does not have nexus in this state
resells the tangible personal property without modification to a
purchaser in this state.
(c) In apportioning margin, receipts derived from
transactions between individual members of a combined group that
are excluded under Section 171.1014(c)(3) may not be included in
the receipts of the taxable entity from its entire business done as
determined under Section 171.105. [A corporation shall deduct from
its gross receipts computed under Subsection (a) any amount to the
extent included in Subsection (a) because of the application of
Section 78 or Sections 951-964, Internal Revenue Code, any amount
excludable under Section 171.110(k), and dividends received from a
subsidiary, associate, or affiliated corporation that does not
transact a substantial portion of its business or regularly
maintain a substantial portion of its assets in the United States.
[(d) A corporation shall include in its gross receipts
computed under Subsection (a) the corporation's share of the gross
receipts of each partnership and joint venture of which the
corporation is a part.]
Sec. 171.106. APPORTIONMENT OF MARGIN [TAXABLE CAPITAL AND
TAXABLE EARNED SURPLUS] TO THIS STATE. (a) [Except as provided by
Subsections (c) and (d), a corporation's taxable capital is
apportioned to this state to determine the amount of the tax imposed
under Section 171.002(b)(1) by multiplying the corporation's
taxable capital by a fraction, the numerator of which is the
corporation's gross receipts from business done in this state, as
determined under Section 171.103, and the denominator of which is
the corporation's gross receipts from its entire business, as
determined under Section 171.105.
[(b)] Except as provided by this section [Subsections (c)
and (d)], a taxable entity's margin [corporation's taxable earned
surplus] is apportioned to this state to determine the amount of tax
imposed under Section 171.002 [171.002(b)(2)] by multiplying the
margin [taxable earned surplus] by a fraction, the numerator of
which is the taxable entity's [corporation's] gross receipts from
business done in this state, as determined under Section 171.103
[171.1032], and the denominator of which is the taxable entity's
[corporation's] gross receipts from its entire business, as
determined under Section 171.105 [171.1051].
(b) [(c)] A taxable entity's margin [corporation's taxable
capital or earned surplus] that is derived, directly or indirectly,
from the sale of management, distribution, or administration
services to or on behalf of a regulated investment company,
including a taxable entity [corporation] that includes trustees or
sponsors of employee benefit plans that have accounts in a
regulated investment company, is apportioned to this state to
determine the amount of the tax imposed under Section 171.002 by
multiplying the taxable entity's [corporation's] total margin
[taxable capital or earned surplus] from the sale of services to or
on behalf of a regulated investment company by a fraction, the
numerator of which is the average of the sum of shares owned at the
beginning of the year and the sum of shares owned at the end of the
year by the investment company shareholders who are commercially
domiciled in this state or, if the shareholders are individuals,
are residents of this state, and the denominator of which is the
average of the sum of shares owned at the beginning of the year and
the sum of shares owned at the end of the year by all investment
company shareholders. [The corporation shall make a separate
computation to allocate taxable capital and earned surplus.] In
this subsection, "regulated investment company" has the meaning
assigned by Section 851(a), Internal Revenue Code.
(c) [(d)] A taxable entity's margin [corporation's taxable
capital or taxable earned surplus] that is derived, directly or
indirectly, from the sale of management, administration, or
investment services to an employee retirement plan is apportioned
to this state to determine the amount of the tax imposed under
Section 171.002 by multiplying the taxable entity's [corporation's]
total margin [taxable capital or earned surplus] from the sale of
services to an employee retirement plan company by a fraction, the
numerator of which is the average of the sum of beneficiaries
domiciled in Texas at the beginning of the year and the sum of
beneficiaries domiciled in Texas at the end of the year, and the
denominator of which is the average of the sum of all beneficiaries
at the beginning of the year and the sum of all beneficiaries at the
end of the year. [The corporation shall make a separate computation
to apportion taxable capital and earned surplus.] In this section,
"employee retirement plan" means a plan or other arrangement that
is qualified under Section 401(a), Internal Revenue Code, or
satisfies the requirements of Section 403, Internal Revenue Code,
or a government plan described in Section 414(d), Internal Revenue
Code. The term does not include an individual retirement account or
individual retirement annuity within the meaning of Section 408,
Internal Revenue Code.
(d) [(e) On or before January 1, 1998, each entity
registered with the State Securities Board under The Securities Act
(Article 581, Vernon's Texas Civil Statutes) that provides
management, administration, or investment services to an employee
retirement plan, must file a report with the comptroller containing
such information as the comptroller deems necessary in order to
determine the fiscal impact of Subsection (d). The State
Securities Board and the Securities Commissioner shall cooperate
with the comptroller in obtaining the information. The Securities
Commissioner shall impose the penalties provided in The Securities
Act (Article 581-1 et seq., Vernon's Texas Civil Statutes) against
any entity that the comptroller certifies is delinquent in the
filing of the report required by this section.
[(f) On or before September 1, 1998, the comptroller shall
issue a report which evaluates the statewide fiscal impact of
Subsection (d). If the comptroller determines that implementing
Subsection (d) will not have a negative fiscal impact on this state,
Subsection (d) shall be effective for reports or returns originally
due on or after January 1, 1999. If the comptroller determines that
there will be a negative fiscal impact, that subsection shall not be
implemented.
[(g) If this Act and another Act of the 75th Legislature,
Regular Session, 1997, make the same substantive change from the
current law but differ in text, this Act prevails regardless of the
relative dates of enactment.
[(h)] A banking corporation shall exclude from the
numerator of the bank's apportionment factor interest earned on
federal funds and interest earned on securities sold under an
agreement to repurchase that are held in this state in a
correspondent bank that is domiciled in this state. In this
subsection, "correspondent" has the meaning assigned by 12 C.F.R.
Section 206.2(c).
(e) [(i)] Receipts from services that a defense
readjustment project performs in a defense economic readjustment
zone are not receipts from business done in this state.
[Sec. 171.1061. ALLOCATION OF CERTAIN TAXABLE EARNED
SURPLUS TO THIS STATE. An item of income included in a
corporation's taxable earned surplus, except that portion derived
from dividends and interest, that a state, other than this state, or
a country, other than the United States, cannot tax because the
activities generating that item of income do not have sufficient
unitary connection with the corporation's other activities
conducted within that state or country under the United States
Constitution, is allocated to this state if the corporation's
commercial domicile is in this state. Income that can only be
allocated to the state of commercial domicile because the income
has insufficient unitary connection with any other state or country
shall be allocated to this state or another state or country net of
expenses related to that income. A portion of a corporation's
taxable earned surplus allocated to this state under this section
may not be apportioned under Section 171.110(a)(2).]
Sec. 171.107. DEDUCTION OF COST OF SOLAR ENERGY DEVICE FROM
MARGIN [TAXABLE CAPITAL OR TAXABLE EARNED SURPLUS] APPORTIONED TO
THIS STATE. (a) In this section, "solar energy device" means a
system or series of mechanisms designed primarily to provide
heating or cooling or to produce electrical or mechanical power by
collecting and transferring solar-generated energy. The term
includes a mechanical or chemical device that has the ability to
store solar-generated energy for use in heating or cooling or in the
production of power.
(b) A taxable entity [corporation] may deduct from [its
apportioned taxable capital the amortized cost of a solar energy
device or from] its apportioned margin [taxable earned surplus] 10
percent of the amortized cost of a solar energy device if:
(1) the device is acquired by the taxable entity
[corporation] for heating or cooling or for the production of
power;
(2) the device is used in this state by the taxable
entity [corporation]; and
(3) the cost of the device is amortized in accordance
with Subsection (c) [of this section].
(c) The amortization of the cost of a solar energy device
must:
(1) be for a period of at least 60 months;
(2) provide for equal monthly amounts or conform to
federal depreciation schedules;
(3) begin on the month in which the device is placed in
service in this state; and
(4) cover only a period in which the device is in use
in this state.
(d) A taxable entity [corporation] that makes a deduction
under this section shall file with the comptroller an amortization
schedule showing the period in which a deduction is to be made. On
the request of the comptroller, the taxable entity [corporation]
shall file with the comptroller proof of the cost of the solar
energy device or proof of the device's operation in this state.
[(e) A corporation may elect to make the deduction
authorized by this section either from apportioned taxable capital
or apportioned taxable earned surplus for each separate regular
annual period. An election for an initial period applies to the
second tax period and to the first regular annual period.]
Sec. 171.108. DEDUCTION OF COST OF CLEAN COAL PROJECT FROM
MARGIN [TAXABLE CAPITAL OR TAXABLE EARNED SURPLUS] APPORTIONED TO
THIS STATE. (a) In this section, "clean coal project" has the
meaning assigned by Section 5.001, Water Code.
(b) A taxable entity [corporation] may deduct from its
apportioned margin [taxable capital the amortized cost of equipment
or from its apportioned taxable earned surplus] 10 percent of the
amortized cost of equipment:
(1) that is used in a clean coal project;
(2) that is acquired by the taxable entity
[corporation] for use in generation of electricity, production of
process steam, or industrial production;
(3) that the taxable entity [corporation] uses in this
state; and
(4) the cost of which is amortized in accordance with
Subsection (c).
(c) The amortization of the cost of capital used in a clean
coal project must:
(1) be for a period of at least 60 months;
(2) provide for equal monthly amounts;
(3) begin in the month during which the equipment is
placed in service in this state; and
(4) cover only a period during which the equipment is
used in this state.
(d) A taxable entity [corporation] that makes a deduction
under this section shall file with the comptroller an amortization
schedule showing the period for which the deduction is to be made.
On the request of the comptroller, the taxable entity [corporation]
shall file with the comptroller proof of the cost of the equipment
or proof of the equipment's operation in this state.
[(e) A corporation may elect to make the deduction
authorized by this section from apportioned taxable capital or
apportioned taxable earned surplus, but not from both, for each
separate regular annual period. An election for an initial period
applies to the second tax period and to the first regular annual
period.
[Sec. 171.109. SURPLUS. (a) In this chapter:
[(1) "Surplus" means the net assets of a corporation
minus its stated capital. For a limited liability company,
"surplus" means the net assets of the company minus its members'
contributions. Surplus includes unrealized, estimated, or
contingent losses or obligations or any writedown of assets other
than those listed in Subsection (i) of this section net of
appropriate income tax provisions. The definition under this
subdivision does not apply to earned surplus.
[(2) "Net assets" means the total assets of a
corporation minus its total debts.
[(3) "Debt" means any legally enforceable obligation
measured in a certain amount of money which must be performed or
paid within an ascertainable period of time or on demand.
[(a-1) A legally enforceable obligation that requires the
return of a like-kind property that was borrowed will be considered
debt if it is a liability according to generally accepted
accounting principles and if the return must be made within an
ascertainable period of time or on demand. The amount that will be
considered debt is the fair market value measured on the last day on
which the report is based as required by Section 171.153. For
purposes of this subsection, "like-kind property" means the same
quantity, quality, and nature or character as the property
borrowed.
[(b) Except as otherwise provided in this section, a
corporation must compute its surplus, assets, and debts according
to generally accepted accounting principles. If generally accepted
accounting principles are unsettled or do not specify an accounting
practice for a particular purpose related to the computation of
surplus, assets, or debts, the comptroller by rule may establish
rules to specify the applicable accounting practice for that
purpose.
[(c) A corporation whose taxable capital is less than $1
million may report its surplus according to the method used in the
corporation's most recent federal income tax return originally due
on or before the date on which the corporation's franchise tax
report is originally due. In determining if taxable capital is less
than $1 million, the corporation shall apply the methods the
corporation used in computing that federal income tax return unless
another method is required under this chapter.
[(d) A corporation shall report its surplus based solely on
its own financial condition. Consolidated reporting of surplus is
prohibited.
[(e) Unless the provisions of Section 171.111 apply due to
an election under that section, a corporation may not change the
accounting methods used to compute its surplus more often than once
every four years without the written consent of the comptroller. A
change in accounting methods is not justified solely because it
results in a reduction of tax liability.
[(f) A corporation declaring dividends shall exclude those
dividends from its taxable capital, and a corporation receiving
dividends shall include those dividends in its gross receipts and
taxable capital as of the earlier of:
[(1) the date the dividends are declared, if the
dividends are actually paid within one year after the declaration
date; or
[(2) the date the dividends are actually paid.
[(g) All oil and gas exploration and production activities
conducted by a corporation that reports its surplus according to
generally accepted accounting principles as required or permitted
by this chapter must be reported according to the successful
efforts or the full cost method of accounting.
[(h) A parent or investor corporation must use the cost
method of accounting in reporting and calculating the franchise tax
on its investments in subsidiary corporations or other investees.
The retained earnings of a subsidiary corporation or other investee
before acquisition by the parent or investor corporation may not be
excluded from the cost of the subsidiary corporation or investee to
the parent or investor corporation and must be included by the
parent or investor corporation in calculating its surplus.
[(i) The following accounts may also be excluded from
surplus, to the extent they are in conformance with generally
accepted accounting principles or the appropriate federal income
tax method, whichever is applicable:
[(1) a reserve or allowance for uncollectable
accounts; and
[(2) a contra-asset account for depletion,
depreciation, or amortization.
[(j) A corporation may not exclude from surplus:
[(1) liabilities for compensation and other benefits
provided to employees, other than wages, that are not debt as of the
end of the accounting period on which the taxable capital component
is based, including retirement, medical, insurance,
postretirement, and other similar benefits; and
[(2) deferred investment tax credits.
[(k) Notwithstanding any other provision in this chapter, a
corporation subject to the tax imposed by this chapter shall use
double entry bookkeeping to account for all transactions that
affect the computation of that tax.
[(l) The "first in-first out" and "last in-first out"
methods of accounting are acceptable methods for computing surplus.
[(m) A corporation may not use the push-down method of
accounting in computing or reporting its surplus.
[(n) A corporation must use the equity method of accounting
when reporting an investment in a partnership or joint venture.
[Sec. 171.110. DETERMINATION OF NET TAXABLE EARNED SURPLUS.
(a) The net taxable earned surplus of a corporation is computed by:
[(1) determining the corporation's reportable federal
taxable income, subtracting from that amount any amount excludable
under Subsection (k), any amount included in reportable federal
taxable income under Section 78 or Sections 951-964, Internal
Revenue Code, and dividends received from a subsidiary, associate,
or affiliated corporation that does not transact a substantial
portion of its business or regularly maintain a substantial portion
of its assets in the United States, and adding to that amount any
compensation of officers or directors, or if a bank, any
compensation of directors and executive officers, to the extent
excluded in determining federal taxable income to determine the
corporation's taxable earned surplus;
[(2) apportioning the corporation's taxable earned
surplus to this state as provided by Section 171.106(b) or (c), as
applicable, to determine the corporation's apportioned taxable
earned surplus;
[(3) adding the corporation's taxable earned surplus
allocated to this state as provided by Section 171.1061; and
[(4) subtracting from that amount any allowable
deductions and any business loss that is carried forward to the tax
reporting period and deductible under Subsection (e).
[(b) Except as provided by Subsection (c), a corporation is
not required to add the compensation of officers or directors as
required by Subsection (a)(1) if the corporation is:
[(1) a corporation that has not more than 35
shareholders; or
[(2) an S corporation, as that term is defined by
Section 1361, Internal Revenue Code.
[(c) A subsidiary corporation may not claim the exclusion
under Subsection (b) if it has a parent corporation that does not
qualify for the exclusion. For purposes of this subsection, a
corporation qualifies as a parent if it ultimately controls the
subsidiary, even if the control arises through a series or group of
other subsidiaries or entities. Control is presumed if a parent
corporation directly or indirectly owns, controls, or holds a
majority of the outstanding voting stock of a corporation or
ownership interests in another entity.
[(d) A corporation's reportable federal taxable income is
the corporation's federal taxable income after Schedule C special
deductions and before net operating loss deductions as computed
under the Internal Revenue Code, except that an S corporation's
reportable federal taxable income is the amount of the income
reportable to the Internal Revenue Service as taxable to the
corporation's shareholders.
[(e) For purposes of this section, a business loss is any
negative amount after apportionment and allocation. The business
loss shall be carried forward to the year succeeding the loss year
as a deduction to net taxable earned surplus, then successively to
the succeeding four taxable years after the loss year or until the
loss is exhausted, whichever occurs first, but for not more than
five taxable years after the loss year. Notwithstanding the
preceding sentence, a business loss from a tax year that ends before
January 1, 1991, may not be used to reduce net taxable earned
surplus. A business loss can be carried forward only by the
corporation that incurred the loss and cannot be transferred to or
claimed by any other entity, including the survivor of a merger if
the loss was incurred by the corporation that did not survive the
merger.
[(f) A corporation may use either the "first in-first out"
or "last in-first out" method of accounting to compute its net
taxable earned surplus, but only to the extent that the corporation
used that method on its most recent federal income tax report
originally due on or before the date on which the corporation's
franchise tax report is originally due.
[(g) For purposes of this section, an approved Employee
Stock Ownership Plan controlling a minority interest and voted
through a single trustee shall be considered one shareholder.
[(h) A corporation shall report its net taxable earned
surplus based solely on its own financial condition. Consolidated
reporting is prohibited.
[(i) For purposes of this section, any person designated as
an officer is presumed to be an officer if that person:
[(1) holds an office created by the board of directors
or under the corporate charter or bylaws; and
[(2) has legal authority to bind the corporation with
third parties by executing contracts or other legal documents.
[(j) A corporation may rebut the presumption described in
Subsection (i) that a person is an officer if it conclusively shows,
through the person's job description or other documentation, that
the person does not participate or have authority to participate in
significant policy making aspects of the corporate operations.
[(k) Dividends and interest received from federal
obligations are not included in earned surplus or gross receipts
for earned surplus purposes.
[(l) In this section:
[(1) "Federal obligations" means:
[(A) stocks and other direct obligations of, and
obligations unconditionally guaranteed by, the United States
government and United States government agencies; and
[(B) direct obligations of a United States
government-sponsored agency.
[(2) "Obligation" means any bond, debenture,
security, mortgage-backed security, pass-through certificate, or
other evidence of indebtedness of the issuing entity. The term does
not include a deposit, a repurchase agreement, a loan, a lease, a
participation in a loan or pool of loans, a loan collateralized by
an obligation of a United States government agency, or a loan
guaranteed by a United States government agency.
[(3) "United States government" means any department
or ministry of the federal government, including a federal reserve
bank. The term does not include a state or local government, a
commercial enterprise owned wholly or partly by the United States
government, or a local governmental entity or commercial enterprise
whose obligations are guaranteed by the United States government.
[(4) "United States government agency" means an
instrumentality of the United States government whose obligations
are fully and explicitly guaranteed as to the timely payment of
principal and interest by the full faith and credit of the United
States government. The term includes the Government National
Mortgage Association, the Department of Veterans Affairs, the
Federal Housing Administration, the Farmers Home Administration,
the Export-Import Bank, the Overseas Private Investment
Corporation, the Commodity Credit Corporation, the Small Business
Administration, and any successor agency.
[(5) "United States government-sponsored agency"
means an agency originally established or chartered by the United
States government to serve public purposes specified by the United
States Congress but whose obligations are not explicitly guaranteed
by the full faith and credit of the United States government. The
term includes the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, the Farm Credit System, the
Federal Home Loan Bank System, the Student Loan Marketing
Association, and any successor agency.]
Sec. 171.111. TEMPORARY CREDIT ON TAXABLE MARGIN. [NET
TAXABLE EARNED SURPLUS.] (a) Not later than March 1, 2007, a
taxable entity [1992, a corporation] may notify the comptroller in
writing of its intent to preserve its right to take a credit in an
amount allowed by this section on the tax due on taxable margin.
The taxable entity [net taxable earned surplus. The comptroller
may not grant an extension. The corporation] may thereafter elect
to claim the credit for the current year and future year at or
before the original due date of any report due after January 1,
2007, [1992,] until the taxable entity [corporation] revokes the
election or this section expires, whichever is earlier. A taxable
entity [corporation] may claim the credit for not more than 20
consecutive privilege periods beginning with the first report due
under this chapter after January 1, 2007. [1992.] A taxable entity
[corporation] may make only one election under this section and the
election may not be conveyed, assigned, or transferred to another
entity.
(b) The credit allowed under this section for any privilege
period is computed by:
(1) determining the amount, as of the end of the
taxable entity's accounting year ending in 2006, of the difference
between (i) the taxable entity's deductible temporary differences
and net operating loss carryforwards, net of related valuation
allowance amounts, shown on the taxable entity's books and records
on the last day of its taxable year ending in 2006, and (ii) the
taxable entity's taxable temporary differences as shown on those
books and records on that date. The amount of other net deferred
tax items may be less than zero. For the purpose of computing the
amount of the taxable entity's other net deferred tax items, any
credit carryforward allowed under this chapter shall be excluded
from the amount of deductible temporary differences to the extent
such credit carryforward amount, net of any related valuation
allowance amount, is otherwise included in the taxable entity's
deductible temporary differences, net of related valuation
allowance amounts, shown on the taxable entity's books and records
on the last day of the taxable entity's taxable year ending in 2006;
[(1) determining the amount, as of the end of the
corporation's accounting year ending in 1991, that is the
difference between the basis used for financial accounting purposes
and the basis used for federal income tax purposes of an asset or a
liability that at some future date will reverse;]
(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner taxable margin
[earned surplus] is apportioned under Section 171.106 [171.106(b)
or (c), as applicable,] on the first report due on or after January
1, 2007; [1992;]
(3) multiplying the amount determined under
Subdivision (2) by 10 [five] percent; and
(4) multiplying the amount determined under
Subdivision (3) by the tax rate prescribed by Section
171.002(a)(2).
(c) [In computing the amount under Subsection (b)(1), the
corporation may not consider differences that result from deferred
investment tax credits, allowances for funds used during
construction, or any other timing difference for which a deferred
tax liability is not required under generally accepted accounting
principles.
[(d) After making the election under Subsection (a) the
corporation must, for purposes of computing its taxable capital
under this chapter, use the same accounting methods under generally
accepted accounting principles to account for the assets and
liabilities that determine the amount of the credit that the
corporation uses to compute the credit. Notwithstanding Section
171.109(e), if a corporation changes an accounting method for an
asset or liability that determines, in whole or in part, the amount
of the credit during the period the election is in effect, the
election is automatically revoked.
[(e)] A taxable entity [corporation] that notifies the
comptroller of its intent to preserve its right to take a credit
allowed by this section shall submit with its notice of intent a
statement of the amount determined under Subsection (b)(1). The
comptroller may request that the taxable entity [corporation]
submit in the annual report for each succeeding privilege period in
which the taxable entity [corporation] is eligible to take a credit
information relating to the amount determined under Subsection
(b)(1). The taxable entity [corporation] shall submit in the form
and content the comptroller requires any information relating to
the assets and liabilities that determine the amount of the credit,
the amount determined under Subsection (b)(1), or any other matter
relevant to the computation of the credit for which the taxable
entity [corporation] is eligible.
(d) A credit that a taxable entity is entitled to under this
section does not convey, and may not be assigned or transferred, in
relation to a transaction in which the taxable entity is purchased
by another entity.
(e) [(f) A credit allowed under this section may not be
carried forward or backward or used to create a business loss
carryover under Section 171.110.
[(g) A corporation may not use a credit allowed under this
section in connection with the computation of the corporation's tax
on net taxable capital.
[(h) In addition to the tax imposed by Section 171.002, an
additional tax is imposed on each corporation during each year the
corporation takes the credit allowed under this section. The
additional tax is equal to 0.2 percent of the corporation's net
taxable capital per year of privilege period.
[(i)] This section expires September 1, 2026. [2012.
[Sec. 171.112. GROSS RECEIPTS FOR TAXABLE CAPITAL. (a) For
purposes of this section, "gross receipts" means all revenues that
would be recognized annually under a generally accepted accounting
principles method of accounting, without deduction for the cost of
property sold, materials used, labor performed, or other costs
incurred, unless otherwise specifically provided in this chapter.
[(b) Except as otherwise provided in this section, a
corporation must compute gross receipts in accordance with
generally accepted accounting principles. If generally accepted
accounting principles are unsettled or do not specify an accounting
practice for a particular purpose related to the computation of
gross receipts, the comptroller by rule may establish rules to
specify the applicable accounting practice.
[(c) A corporation whose taxable capital is less than $1
million may report its gross receipts according to the method used
in the corporation's most recent federal income tax return
originally due on or before the date on which the corporation's
franchise tax report is originally due. In determining if taxable
capital is less than $1 million, the corporation shall apply the
methods the corporation used in computing that federal income tax
return unless another method is required under this chapter.
[(d) A corporation shall report its gross receipts based
solely on its own financial condition. Consolidated reporting is
prohibited.
[(e) Unless the provisions of Section 171.111 apply due to
an election under that section, a corporation may not change its
accounting methods used to calculate gross receipts more often than
once every four years without the express written consent of the
comptroller. A change in accounting methods is not justified
solely because it results in a reduction of tax liability.
[(f) Notwithstanding any other provision in this chapter, a
corporation subject to the tax imposed by this chapter shall use
double entry bookkeeping to account for all transactions that
affect the computation of that tax.
[(g) Chapter 141 does not apply to this chapter.
[(h) Except as otherwise provided by this section, a
corporation shall use the same accounting methods to apportion its
taxable capital as it used to compute its taxable capital.]
Sec. 171.1121. GROSS RECEIPTS FOR MARGIN [TAXABLE EARNED
SURPLUS]. (a) For purposes of this section, "gross receipts" means
all revenues reportable by a taxable entity [corporation] on its
federal tax return, without deduction for the cost of property
sold, materials used, labor performed, or other costs incurred,
unless otherwise specifically provided in this chapter. ["Gross
receipts" does not include revenues that are not included in
taxable earned surplus. For example, Schedule C special deductions
and any amounts subtracted from reportable federal taxable income
under Section 171.110(a)(1) are not included in taxable earned
surplus and therefore are not considered gross receipts.]
(b) Except as otherwise provided by this section, a taxable
entity [corporation] shall use the same accounting methods to
apportion margin [taxable earned surplus] as used in computing
reportable federal taxable income.
(c) A taxable entity [A corporation shall report its gross
receipts based solely on its own financial condition. Consolidated
reporting is prohibited.
[(d) Unless the provisions of Section 171.111 apply due to
an election under that section, a corporation] may not change its
accounting methods used to calculate gross receipts more often than
once every four years without the express written consent of the
comptroller. A change in accounting methods is not justified
solely because it results in a reduction of tax liability.
[(e) A corporation's share of a partnership's gross receipts
that is included in the corporation's federal taxable income must
be used in computing the corporation's gross receipts under this
section. Unless otherwise provided by this chapter, a corporation
may not deduct costs incurred from the corporation's share of a
partnership's gross receipts. The gross receipts must be
apportioned as though the corporation directly earned them.
[Sec. 171.113. ALTERNATE METHOD OF DETERMINING TAXABLE
CAPITAL AND GROSS RECEIPTS FOR CERTAIN CORPORATIONS. (a) This
section applies only to:
[(1) a corporation organized as a close corporation
under Part 12, Texas Business Corporation Act, that has not more
than 35 shareholders;
[(2) a foreign corporation organized under the close
corporation law of another state that has not more than 35
shareholders; and
[(3) an S corporation as that term is defined by
Section 1361, Internal Revenue Code of 1986 (26 U.S.C. Section
1361).
[(b) A corporation to which this section applies may elect
to compute its surplus, assets, debts, and gross receipts according
to the method the corporation uses to report its federal income tax
instead of as provided by Sections 171.109(b) and (g) and Section
171.112(b). This section does not affect the application of the
other subsections of Sections 171.109 and 171.112 and other
provisions of this chapter to a corporation making the election.
[(c) The comptroller may adopt rules as necessary to specify
the reporting requirements for corporations to which this section
applies.
[(d) This section does not apply to a subsidiary corporation
unless it applies to the parent corporation of the subsidiary.
[(e) The election under Subsection (b) becomes effective
when written notice of the election is received by the comptroller
from the corporation. An election under Subsection (b) must be
postmarked not later than the due date for the electing
corporation's franchise tax report to which the election applies.]
SECTION 6. Subchapter D, Chapter 171, Tax Code, is amended
to read as follows:
SUBCHAPTER D. PAYMENT OF TAX
Sec. 171.151. PRIVILEGE PERIOD COVERED BY TAX. The
franchise tax shall be paid for each of the following:
(1) an initial period beginning on the taxable
entity's [corporation's] beginning date and ending on the day
before the first anniversary of the beginning date;
(2) a second period beginning on the first anniversary
of the beginning date and ending on December 31 following that date;
and
(3) after the initial and second periods have expired,
a regular annual period beginning each year on January 1 and ending
the following December 31.
Sec. 171.152. DATE ON WHICH PAYMENT IS DUE. (a) Payment of
the tax covering the initial period is due within 90 days after the
date that the initial period ends or, if applicable, within 91 days
after the date of the merger.
(b) Payment of the tax covering the second period is due on
the same date as the tax covering the initial period.
(c) Payment of the tax covering the regular annual period is
due May 15, of each year after the beginning of the regular annual
period. However, if the first anniversary of the taxable entity's
[corporation's] beginning date is after October 3 and before
January 1, the payment of the tax covering the first regular annual
period is due on the same date as the tax covering the initial
period.
[Sec. 171.153. BUSINESS ON WHICH TAX ON NET TAXABLE CAPITAL
IS BASED. (a) The tax covering the initial period is reported on
the initial report and is based on the business done by the
corporation during the period beginning on the corporation's
beginning date and:
[(1) ending on the last accounting period ending date
that is at least six months after the beginning date and at least 60
days before the original due date of the initial report; or
[(2) if there is no such period ending date in
Subdivision (1) of this subsection, then ending on the day that is
the last day of a calendar month and that is nearest to the end of
the corporation's first year of business; or
[(3) ending on the day after the merger occurs, for the
survivor of a merger which occurs after the day on which the tax is
based in Subdivision (1) or Subdivision (2), whichever is
applicable, of Subsection (a) and before January 1, of the year an
initial report is due by the survivor.
[(b) The tax covering the second period is reported on the
initial report and is based on the same business on which the tax
covering the initial period is based and is to be prorated based on
the length of the second period.
[(c) The tax covering the regular annual period is based on
the business done by the corporation during its last accounting
period that ends in the year before the year in which the tax is due;
unless a corporation is the survivor of a merger which occurs
between the end of its last accounting period in the year before the
report year and January 1 of the report year, in which case the tax
will be based on the financial condition of the surviving
corporation for the 12-month period ending on the day after the
merger. However, if the first anniversary of the corporation's
beginning date is after October 3 and before January 1, the tax
covering the first regular annual period is based on the same
business on which the tax covering the initial period is based and
is reported on the initial report.
[Sec. 171.1531. CREDIT FOR SURVIVOR OF MERGER. (a) "Credit
period" means the period from the date of the merger or the date the
survivor was required to pay franchise tax, whichever is later,
through the end of the privilege period for which tax was actually
paid by the nonsurvivors.
[(b) The survivor of a merger is entitled to a credit
against the tax computed on its net taxable capital under Section
171.002(b)(1) in the amount of the franchise tax computed on net
taxable capital paid by the nonsurvivors for the credit period,
provided the tax computed on net taxable capital paid by the
survivor for the credit period is based on the survivor's financial
condition after the merger. Only a survivor that is subject to the
franchise tax is entitled to the merger credit. The merger credit
shall be allocated among survivors based on net taxable capital
reported, and as provided by Section 171.153.
[(c) The credit will be limited to the lesser of the amount
of tax on net taxable capital paid for the credit period by the
survivor or by the nonsurvivors.]
Sec. 171.1532. BUSINESS ON WHICH TAX ON NET TAXABLE MARGIN
[EARNED SURPLUS] IS BASED. (a) The tax covering the privilege
periods included on the initial report[, as required by Section
171.153,] is based on the business done by the taxable entity
[corporation] during the period beginning on the taxable entity's
[corporation's] beginning date and:
(1) ending on the last accounting period ending date
that is at least 60 days before the original due date of the initial
report; or
(2) if there is no such period ending date in
Subdivision (1) [of this subsection], then ending on the day that is
the last day of a calendar month and that is nearest to the end of
the taxable entity's [corporation's] first year of business.
(b) The tax covering the regular annual period, other than a
regular annual period included on the initial report, is based on
the business done by the taxable entity [corporation] during the
period beginning with the day after the last date upon which [net]
taxable margin [earned surplus] on a previous report was based and
ending with its last accounting period ending date for federal
income tax purposes in the year before the year in which the report
is originally due.
Sec. 171.154. PAYMENT TO COMPTROLLER. A taxable entity
[corporation] on which a tax is imposed by this chapter shall pay
the tax to the comptroller.
Sec. 171.158. PAYMENT BY FOREIGN TAXABLE ENTITY
[CORPORATION] BEFORE WITHDRAWAL FROM STATE. (a) Except as
provided by Subsection (b) [of this section], a foreign taxable
entity [corporation] holding a registration or certificate of
authority to do business in this state may withdraw from doing
business in this state by filing a certificate of withdrawal with
the secretary of state. The secretary of state shall file the
certificate of withdrawal as provided by law.
(b) The foreign taxable entity [corporation] may not
withdraw from doing business in this state unless it has paid,
before filing the certificate of withdrawal, any tax or penalty
imposed by this chapter on the taxable entity [corporation].
SECTION 7. Subchapter E, Chapter 171, Tax Code, is amended
to read as follows:
SUBCHAPTER E. REPORTS AND RECORDS
Sec. 171.201. INITIAL REPORT. (a) Except as provided by
Section 171.2022, a taxable entity [corporation] on which the
franchise tax is imposed shall file an initial report with the
comptroller containing:
(1) information showing the financial condition of the
taxable entity [corporation] on the day that is the last day of a
calendar month and that is nearest to the end of the taxable
entity's [corporation's] first year of business;
(2) the name and address of:
(A) each officer, [and] director, and manager of
the taxable entity [corporation];
(B) for a limited partnership, each general
partner;
(C) for a general partnership or limited
liability partnership, each managing partner or, if there is not a
managing partner, each partner; or
(D) for a trust, each trustee;
(3) the name and address of the agent of the taxable
entity [corporation] designated under Section 171.354; and
(4) other information required by the comptroller.
(b) The taxable entity [corporation] shall file the report
on or before the date the payment is due under [Subsection (a) of]
Section 171.152(a) [171.152].
Sec. 171.202. ANNUAL REPORT. (a) Except as provided by
Section 171.2022, a taxable entity [corporation] on which the
franchise tax is imposed shall file an annual report with the
comptroller containing:
(1) financial information of the taxable entity
[corporation] necessary to compute the tax under this chapter;
(2) the name and address of each officer and director
of the taxable entity [corporation];
(3) the name and address of the agent of the taxable
entity [corporation] designated under Section 171.354; and
(4) other information required by the comptroller.
(b) The taxable entity [corporation] shall file the report
before May 16 of each year after the beginning of the regular annual
period. The report shall be filed on forms supplied by the
comptroller.
(c) The comptroller shall grant an extension of time to a
taxable entity [corporation] that is not required by rule to make
its tax payments by electronic funds transfer for the filing of a
report required by this section to any date on or before the next
November 15, if a taxable entity [corporation]:
(1) requests the extension, on or before May 15, on a
form provided by the comptroller; and
(2) remits with the request:
(A) not less than 90 percent of the amount of tax
reported as due on the report filed on or before November 15; or
(B) 100 percent of the tax reported as due for the
previous calendar year on the report due in the previous calendar
year and filed on or before May 14.
(d) In the case of a taxpayer whose previous return was its
initial report, the optional payment provided under Subsection
(c)(2)(B) or (e)(2)(B) must be equal to [the greater of:
[(1)] an amount produced by multiplying the [net]
taxable margin [capital], as reported on the initial report filed
on or before May 14, by the rate of tax in Section 171.002
[171.002(a)(1)] that is effective January 1 of the year in which the
report is due[; or
[(2) an amount produced by multiplying the net taxable
earned surplus, as reported on the initial report filed on or before
May 14, by the rate of tax in Section 171.002(a)(2) that is
effective January 1 of the year in which the report is due].
(e) The comptroller shall grant an extension of time for the
filing of a report required by this section by a taxable entity
[corporation] required by rule to make its tax payments by
electronic funds transfer to any date on or before the next August
15, if the taxable entity [corporation]:
(1) requests the extension, on or before May 15, on a
form provided by the comptroller; and
(2) remits with the request:
(A) not less than 90 percent of the amount of tax
reported as due on the report filed on or before August 15; or
(B) 100 percent of the tax reported as due for the
previous calendar year on the report due in the previous calendar
year and filed on or before May 14.
(f) The comptroller shall grant an extension of time to a
taxable entity [corporation] required by rule to make its tax
payments by electronic funds transfer for the filing of a report due
on or before August 15 to any date on or before the next November 15,
if the taxable entity [corporation]:
(1) requests the extension, on or before August 15, on
a form provided by the comptroller; and
(2) remits with the request the difference between the
amount remitted under Subsection (e) and 100 percent of the amount
of tax reported as due on the report filed on or before November 15.
(h) If the sum of the amounts paid under Subsections (e)(2)
and (f)(2) is at least 99 percent of the amount reported as due on
the report filed on or before November 15, penalties for
underpayment with respect to the amount paid under Subsection
(f)(2) are waived.
(i) If a taxable entity [corporation] requesting an
extension under Subsection (c) or (e) does not file the report due
in the previous calendar year on or before May 14, the taxable
entity [corporation] may not receive an extension under Subsection
(c) or (e) unless the taxable entity [corporation] complies with
Subsection (c)(2)(A) or (e)(2)(A), as appropriate.
Sec. 171.2022. EXEMPTION FROM REPORTING REQUIREMENTS. A
taxable entity [corporation] that does not owe any tax under this
chapter for any period is not required to file a report under
Section 171.201 or[,] 171.202[, or 171.2021]. The exemption
applies only to a period for which no tax is due.
Sec. 171.203. PUBLIC INFORMATION REPORT. (a) A
corporation on which the franchise tax is imposed, regardless of
whether the corporation is required to pay any tax, shall file a
report with the comptroller containing:
(1) the name of each corporation in which the
corporation filing the report owns a 10 percent or greater interest
and the percentage owned by the corporation;
(2) the name of each corporation that owns a 10 percent
or greater interest in the corporation filing the report;
(3) the name, title, and mailing address of each
person who is an officer or director of the corporation on the date
the report is filed and the expiration date of each person's term as
an officer or director, if any;
(4) the name and address of the agent of the
corporation designated under Section 171.354 [of this code]; and
(5) the address of the corporation's principal office
and principal place of business.
(b) The corporation shall file the report once a year on a
form prescribed by the comptroller.
(c) The comptroller shall forward the report to the
secretary of state.
(d) The corporation shall send a copy of the report to each
person named in the report under Subsection (a)(3) who is not
currently employed by the corporation or a related corporation
listed in Subsection (a)(1) or (2). An officer or director of the
corporation or another authorized person must sign the report under
a certification that:
(1) all information contained in the report is true
and correct to the best of the person's knowledge; and
(2) a copy of the report has been mailed to each person
identified in this subsection on the date the return is filed.
(e) If a person's name is included in a report under
Subsection (a)(3) and the person is not an officer or director of
the corporation on the date the report is filed, the person may file
with the comptroller a sworn statement disclaiming the person's
status as shown on the report. The comptroller shall maintain a
record of statements filed under this subsection and shall make
that information available on request using the same procedures the
comptroller uses for other requests for public information.
(f) A public information report that is filed
electronically complies with the signature and certification
requirements prescribed by Subsection (d).
Sec. 171.2035. ADDITIONAL PUBLIC INFORMATION REPORT. (a)
A taxable entity that has more than 100,000 employees in this state
shall file a report with the comptroller stating the number of the
taxable entity's employees in this state that receive assistance
for that employee or the employee's family under the Children's
Health Insurance Program (CHIP) or the Medicaid program.
(b) A taxable entity described by Subsection (a) shall file
the report once a year on a form prescribed by the comptroller.
Sec. 171.204. INFORMATION REPORT. (a) Except as provided
by Subsection (b), to determine eligibility for the exemption
provided by Section 171.2022, or to determine the amount of the
franchise tax or the correctness of a franchise tax report, the
comptroller may require [an officer of] a taxable entity
[corporation] that may be subject to the tax imposed under this
chapter to file an information report with the comptroller stating
the amount of the taxable entity's margin [corporation's taxable
capital and earned surplus], or any other information the
comptroller may request that is necessary to make a determination
under this subsection.
(b) The comptroller may require a taxable entity [an officer
of a corporation] that does not owe any tax because of the
application of Section 171.002(d)(2) to file an abbreviated
information report with the comptroller stating the amount of the
taxable entity's total revenue [corporation's gross receipts] from
its entire business. The comptroller may not require a taxable
entity [corporation] described by this subsection to file an
information report that requires the taxable entity [corporation]
to report or compute its margin [earned surplus or taxable
capital].
Sec. 171.205. ADDITIONAL INFORMATION REQUIRED BY
COMPTROLLER. The comptroller may require a taxable entity
[corporation] on which the franchise tax is imposed to furnish to
the comptroller information from the taxable entity's
[corporation's] books and records that has not been filed
previously and that is necessary for the comptroller to determine
the amount of the tax.
Sec. 171.206. CONFIDENTIAL INFORMATION. Except as provided
by Section 171.207 [of this code], the following information is
confidential and may not be made open to public inspection:
(1) information that is obtained from a record or
other instrument that is required by this chapter to be filed with
the comptroller; or
(2) information, including information about the
business affairs, operations, profits, losses, cost of goods sold,
compensation, or expenditures of a taxable entity [corporation],
obtained by an examination of the books and records, officers,
partners, trustees, agents, or employees of a taxable entity
[corporation] on which a tax is imposed by this chapter.
Sec. 171.207. INFORMATION NOT CONFIDENTIAL. The following
information is not confidential and shall be made open to public
inspection:
(1) information contained in a document filed under
this chapter with a county clerk as notice of a tax lien; and
(2) information contained in a report required by
Section 171.203 or 171.2035 [of this code].
Sec. 171.208. PROHIBITION OF DISCLOSURE OF INFORMATION. A
person, including a state officer or employee or an owner [a
shareholder] of a taxable entity [corporation], who has access to a
report filed under this chapter may not make known in a manner not
permitted by law the amount or source of the taxable entity's
[corporation's] income, profits, losses, expenditures, cost of
goods sold, compensation, or other information in the report
relating to the financial condition of the taxable entity
[corporation].
Sec. 171.209. RIGHT OF OWNER [SHAREHOLDER] TO EXAMINE OR
RECEIVE REPORTS. If an owner [a person owning at least one share of
outstanding stock] of a taxable entity [corporation] on whom the
franchise tax is imposed presents evidence of the ownership to the
comptroller, the person is entitled to examine or receive a copy of
an initial or annual report that is filed under Section 171.201 or
171.202 [of this code] and that relates to the taxable entity
[corporation].
Sec. 171.210. PERMITTED USE OF CONFIDENTIAL INFORMATION.
(a) To enforce this chapter, the comptroller or attorney general
may use information made confidential by this chapter.
(b) The comptroller or attorney general may authorize the
use of the confidential information in a judicial proceeding in
which the state is a party. The comptroller or attorney general may
authorize examination of the confidential information by:
(1) another state officer of this state;
(2) a law enforcement official of this state; or
(3) a tax official of another state or an official of
the federal government if the other state or the federal government
has a reciprocal arrangement with this state.
Sec. 171.211. EXAMINATION OF [CORPORATE] RECORDS. To
determine the franchise tax liability of a taxable entity
[corporation], the comptroller may investigate or examine the
records of the taxable entity [corporation].
Sec. 171.212. REPORT OF CHANGES TO FEDERAL INCOME TAX
RETURN. (a) A taxable entity [corporation] must file an amended
report under this chapter if:
(1) the taxable entity's [corporation's net] taxable
margin [earned surplus] is changed as the result of an audit or
other adjustment by the Internal Revenue Service or another
competent authority; or
(2) the taxable entity [corporation] files an amended
federal income tax return or other return that changes the taxable
entity's [corporation's net] taxable margin [earned surplus].
(b) The taxable entity [corporation] shall file the amended
report under Subsection (a)(1) not later than the 120th day after
the date the revenue agent's report or other adjustment is final.
For purposes of this subsection, a revenue agent's report or other
adjustment is final on the date on which all administrative appeals
with the Internal Revenue Service or other competent authority have
been exhausted or waived.
(c) The taxable entity [corporation] shall file the amended
report under Subsection (a)(2) not later than the 120th day after
the date the taxable entity [corporation] files the amended federal
income tax return or other return. For purposes of this subsection,
a taxable entity [corporation] is considered to have filed an
amended federal income tax return if the taxable entity
[corporation] is a member of an affiliated group during a period in
which an amended consolidated federal income tax report is filed.
(d) If a taxable entity [corporation] fails to comply with
this section, the taxable entity [corporation] is liable for a
penalty of 10 percent of the tax that should have been reported
under this section and that had not previously been reported to the
comptroller. The penalty prescribed by this subsection is in
addition to any other penalty provided by law.
SECTION 8. The heading to Subchapter F, Chapter 171, Tax
Code, is amended to read as follows:
SUBCHAPTER F. FORFEITURE OF CORPORATE AND BUSINESS PRIVILEGES
SECTION 9. Subchapter F, Chapter 171, Tax Code, is amended
by adding Section 171.2515 to read as follows:
Sec. 171.2515. FORFEITURE OF RIGHT OF TAXABLE ENTITY TO
TRANSACT BUSINESS IN THIS STATE. (a) The comptroller may, for the
same reasons and using the same procedures the comptroller uses in
relation to the forfeiture of the corporate privileges of a
corporation, forfeit the right of a taxable entity to transact
business in this state.
(b) The provisions of this subchapter, including Section
171.255, that apply to the forfeiture of corporate privileges apply
to the forfeiture of a taxable entity's right to transact business
in this state.
SECTION 10. Section 171.351, Tax Code, is amended to read as
follows:
Sec. 171.351. VENUE OF SUIT TO ENFORCE CHAPTER. Venue of a
civil suit against a taxable entity [corporation] to enforce this
chapter is either in a county where the taxable entity's
[corporation's] principal office is located according to its
charter or certificate of authority or in Travis County.
SECTION 11. Section 171.353, Tax Code, is amended to read as
follows:
Sec. 171.353. APPOINTMENT OF RECEIVER. If a court forfeits
a taxable entity's [corporation's] charter or certificate of
authority, the court may appoint a receiver for the taxable entity
[corporation] and may administer the receivership under the laws
relating to receiverships.
SECTION 12. Section 171.354, Tax Code, is amended to read as
follows:
Sec. 171.354. AGENT FOR SERVICE OF PROCESS. Each taxable
entity [corporation] on which a tax is imposed by this chapter shall
designate a resident of this state as the taxable entity's
[corporation's] agent for the service of process.
SECTION 13. Sections 171.362(a), (d), and (e), Tax Code,
are amended to read as follows:
(a) If a taxable entity [corporation] on which a tax is
imposed by this chapter fails to pay the tax when it is due and
payable or fails to file a report required by this chapter when it
is due, the taxable entity [corporation] is liable for a penalty of
five percent of the amount of the tax due.
(d) If a taxable entity [corporation] electing to remit
under [Paragraph (A) of Subdivision (2) of Subsection (c) of]
Section 171.202(c)(2)(A) [171.202 of this code] remits less than
the amount required, the penalties imposed by this section and the
interest imposed under Section 111.060 [of this code] are assessed
against the difference between the amount required to be remitted
under [Paragraph (A) of Subdivision (2) of Subsection (c) of]
Section 171.202(c)(2)(A) [171.202] and the amount actually
remitted on or before May 15.
(e) If a taxable entity [corporation] remits the entire
amount required by [Subsection (c) of] Section 171.202(c) [171.202
of this code], no penalties will be imposed against the amount
remitted on or before November 15.
SECTION 14. Sections 171.363(a) and (b), Tax Code, are
amended to read as follows:
(a) A taxable entity [corporation] commits an offense if the
taxable entity [corporation] is subject to the provisions of this
chapter and the taxable entity [corporation] wilfully:
(1) fails to file a report;
(2) fails to keep books and records as required by this
chapter;
(3) files a fraudulent report;
(4) violates any rule of the comptroller for the
administration and enforcement of the provisions of this chapter;
or
(5) attempts in any other manner to evade or defeat any
tax imposed by this chapter or the payment of the tax.
(b) A person commits an offense if the person is an
accountant or an agent for or an officer or employee of a taxable
entity [corporation] and the person knowingly enters or provides
false information on any report, return, or other document filed by
the taxable entity [corporation] under this chapter.
SECTION 15. Section 171.401, Tax Code, is amended to read as
follows:
Sec. 171.401. REVENUE DEPOSITED IN GENERAL REVENUE FUND.
The revenue from the tax imposed by this chapter [on corporations]
shall be deposited to the credit of the general revenue fund.
SECTION 16. (a) Section 313.007, Tax Code, is amended to
read as follows:
Sec. 313.007. EXPIRATION. Subchapters B, C, and D expire
December 31, 2011 [2007].
(b) Section 313.024(a), Tax Code, is amended to read as
follows:
(a) This subchapter and Subchapters C and D apply only to
property owned by an entity [a corporation or limited liability
company] to which Chapter 171 [Section 171.001] applies.
(c) Section 313.024(b), Tax Code, is amended to read as
follows:
(b) To be eligible for a limitation on appraised value under
this subchapter, the entity [corporation or limited liability
company] must use the property in connection with:
(1) manufacturing;
(2) research and development;
(3) a clean coal project, as defined by Section 5.001,
Water Code;
(4) a gasification project for a coal and biomass
mixture; or
(5) renewable energy electric generation.
(d) Section 313.025(b), Tax Code, is amended to read as
follows:
(b) The governing body of a school district is not required
to consider an application for a limitation on appraised value that
is filed with the governing body under Subsection (a). If the
governing body of the school district does elect to consider an
application, the governing body shall request that the Texas
Education Agency [engage a third person to] conduct an economic
impact evaluation of the application on behalf of the school
district, and that agency shall conduct the evaluation as soon as
practicable. The governing body shall provide to the Texas
Education Agency any information requested by that agency. The
Texas Education Agency may develop a methodology to allow
comparisons of economic impact for different schedules of addition
of qualified investment or qualified property as part of the
economic impact evaluation. The economic impact evaluation of the
Texas Education Agency is binding on the governing body of the
school district and the applicant. The governing body shall
provide a copy of the evaluation to the applicant on request. The
Texas Education Agency may charge and collect a fee sufficient to
cover the costs of providing the economic impact evaluation. The
governing body of a school district shall [and] approve or
disapprove an application before the 121st day after the date the
application is filed, unless the Texas Education Agency's economic
impact evaluation has not been received or an extension is agreed to
by the governing body and the applicant.
(e) Section 313.051, Tax Code, is amended to read as
follows:
Sec. 313.051. APPLICABILITY. (a) This subchapter applies
only to a school district that has territory in:
(1) a strategic investment area, as defined by Section
171.721;[, Tax Code,] or
(2) [in] a county:
(A) [(1)] that has a population of less than
50,000;
(B) [(2)] that is not partially or wholly located
in a metropolitan statistical area; and
(C) [(3)] in which, from 1990 to 2000, according
to the federal decennial census, the population:
(i) [(A)] remained the same;
(ii) [(B)] decreased; or
(iii) [(C)] increased, but at a rate of not
more than three percent per annum.
(a-1) Notwithstanding Subsection (a), if on January 1,
2002, this subchapter applied to a school district in whose
territory is located a federal nuclear facility, this subchapter
continues to apply to the school district regardless of whether the
school district ceased or ceases to be described by Subsection (a)
after that date.
(b) The governing body of a school district to which this
subchapter applies may enter into an agreement in the same manner as
a school district to which Subchapter B applies may do so under
Subchapter B, subject to Sections 313.052-313.054. Except as
otherwise provided by this subchapter, the provisions of Subchapter
B apply to a school district to which this subchapter applies. For
purposes of this subchapter, a property owner is required to create
only at least 10 new jobs on the owner's qualified property. At
least 80 percent of all the new jobs created must be qualifying jobs
as defined by Section 313.021(3), except that, for a school
district described by Subsection (a)(2), each qualifying job must
pay at least 110 percent of the average weekly wage for
manufacturing jobs in the region designated for the regional
planning commission, council of governments, or similar regional
planning agency created under Chapter 391, Local Government Code,
in which the district is located.
(f) Section 313.051(b), Tax Code, as amended by this
section, applies only to a limitation on the appraised value for
school district maintenance and operations ad valorem tax purposes
for which the owner files an application on or after the effective
date of this Act. A limitation on the appraised value for school
district maintenance and operations ad valorem tax purposes for
which the owner files an application before the effective date of
this Act is governed by the law as it existed immediately before the
effective date of this Act, and that law is continued in effect for
that purpose.
SECTION 17. (a) The repeal of Section 171.111, Tax Code,
by this Act does not affect a credit that accrued under that section
before the effective date of this Act.
(b) A corporation that has any unused credits accrued before
the effective date of this Act under Section 171.111, Tax Code, may
claim those unused credits on or with the tax report for the period
in which the credits were accrued, and the former law under which
the corporation accrued the credits is continued in effect for
purposes of determining the amount of the credits the corporation
may claim and the manner in which the corporation may claim the
credits.
SECTION 18. (a) The following provisions of Chapter 171,
Tax Code, are repealed:
(1) Subchapter L;
(2) Subchapter M;
(3) Subchapter N;
(4) Subchapter O;
(5) Subchapter P;
(6) Subchapter Q;
(7) Subchapter R;
(8) Subchapter S;
(9) Subchapter T;
(10) Subchapter U as added by Chapter 209, Acts of the
78th Legislature, Regular Session, 2003; and
(11) Subchapter U as added by Chapter 1274, Acts of the
78th Legislature, Regular Session, 2003.
(b) This section does not affect a credit authorized by a
provision listed in Subsection (a) of this section that accrued
under Chapter 171, Tax Code, before the effective date of this Act
or a credit that continues to accrue under Section 19 of this Act.
(c) A corporation that has any unused credits accrued before
the effective date of this Act under a provision other than
Subchapter O, P, or Q, Chapter 171, Tax Code, may claim those unused
credits on or with the tax report for the period in which the
credits were accrued, and the former law under which the
corporation accrued the credits is continued in effect for purposes
of determining the amount of the credits the corporation may claim
and the manner in which the corporation may claim the credits.
(d) A corporation that has any unused credits accrued before
the effective date of this Act under Subchapter O, Chapter 171, Tax
Code, may claim those unused credits on or with the tax report for
the period in which the credit was accrued. However, if the
corporation was allowed to carry forward unused credits under that
subchapter, the corporation may continue to apply those credits on
or with each consecutive report until the earlier of the date the
credit would have expired under the terms of Subchapter O, Chapter
171, Tax Code, had it continued in existence, or December 31, 2027,
and the former law under which the corporation accrued the credits
is continued in effect for purposes of determining the amount of the
credits the corporation may claim and the manner in which the
corporation may claim the credits.
(e) A corporation that has any unused credits accrued before
the effective date of this Act under Subchapter P, Chapter 171, Tax
Code, may claim those unused credits on or with the tax report for
the period in which the credit was accrued. However, if the
corporation was allowed to carry forward unused credits under that
subchapter, the corporation may continue to apply those credits on
or with each consecutive report until the earlier of the date the
credit would have expired under the terms of Subchapter P, Chapter
171, Tax Code, had it continued in existence, or December 31, 2012,
and the former law under which the corporation accrued the credits
is continued in effect for purposes of determining the amount of the
credits the corporation may claim and the manner in which the
corporation may claim the credits.
(f) A corporation that has any unused credits accrued before
the effective date of this Act under Subchapter Q, Chapter 171, Tax
Code, may claim those unused credits on or with the tax report for
the period in which the credit was accrued. However, if the
corporation was allowed to carry forward unused credits under that
subchapter, the corporation may continue to apply those credits on
or with each consecutive report until the earlier of the date the
credit would have expired under the terms of Subchapter Q, Chapter
171, Tax Code, had it continued in existence, or December 31, 2012,
and the former law under which the corporation accrued the credits
is continued in effect for purposes of determining the amount of the
credits the corporation may claim and the manner in which the
corporation may claim the credits.
(g) The comptroller shall adopt rules to administer this
section.
SECTION 19. A written agreement between the Texas
Department of Economic Development or its successor and a taxpayer
effective before June 1, 2006, that allows for credits against the
tax imposed under Chapter 171, Tax Code, continues in effect and the
credits allowed under the agreement continue to accrue and may be
claimed in the manner provided by the agreement against the tax
imposed under Chapter 171, Tax Code, as amended by this Act, for the
duration of the agreement. The former law under which the agreement
was made and under which the taxpayer received the entitlement to
the credits is continued in effect for purposes of determining the
amount of the credits the taxpayer may claim and the manner in which
the taxpayer may claim the credits.
SECTION 20. The comptroller shall adopt rules to implement
the legislative intent in Sections 171.1012(e)(14) and
171.1013(c-1), Tax Code.
SECTION 21. The franchise tax imposed by Chapter 171, Tax
Code, as amended by this Act, is not an income tax and Pub. L. No.
86-272 does not apply to the tax.
SECTION 22. (a) Subject to other provisions of this
section, this Act applies to reports originally due on or after the
effective date of this Act.
(b) For an entity becoming subject to the franchise tax
under this Act:
(1) margin or gross receipts occurring before June 1,
2006, may not be considered for purposes of determining taxable
margin or for apportionment purposes;
(2) an entity subject to the franchise tax on January
1, 2008, that was not previously subject to the tax and for which
January 1, 2008, is not the beginning date, shall file an annual
report due May 15, 2008, based on the period:
(A) if the entity has an accounting period that
ends on or after January 1, 2007, and before June 1, 2007:
(i) beginning on the later of:
(a) June 1, 2006; or
(b) the date the entity was organized
in this state or, if a foreign entity, the date it began doing
business in this state; and
(ii) ending on the date that accounting
period ends in 2007;
(B) if the entity has an accounting period that
ends on or after June 1, 2007, and before December 31, 2007:
(i) beginning on the date that accounting
period begins; and
(ii) ending on the date that accounting
period ends in 2007; and
(C) if the entity has an accounting period that
ends on December 31, 2007, or if the entity does not have an
accounting period that ends in 2007:
(i) beginning on the later of:
(a) January 1, 2007; or
(b) the date the entity was organized
in the state or, if a foreign entity, the date it began doing
business in this state; and
(ii) ending on December 31, 2007; and
(3) an entity subject to the franchise tax as it
existed before the effective date of this Act at any time after
December 31, 2006, and before January 1, 2008, but not subject to
the franchise tax on January 1, 2008, shall file a final report for
the privilege of doing business at any time after June 30, 2007, and
before January 1, 2008, based on the period:
(A) beginning on the later of:
(i) January 1, 2007; or
(ii) the date the entity was organized in
this state or, if a foreign entity, the date it began doing business
in this state; and
(B) ending on the date the entity became no
longer subject to the franchise tax.
(c) For purposes of this Act, an existing partnership is
considered as continuing if it is not terminated.
(d) A partnership is considered terminated only if no part
of any business, financial operation, or venture of the partnership
continues to be carried on by any of its partners in a partnership.
(e) For a merger or consolidation of two or more
partnerships, the resulting partnership is, for purposes of this
Act, considered the continuation of any merging or consolidating
partnership whose members own an interest of more than 50 percent in
the capital and profits of the resulting partnership.
(f) For a division of a partnership into two or more
partnerships, the resulting partnerships, other than any resulting
partnership the members of which had an interest of 50 percent or
less in the capital and profits of the prior partnership, are, for
purposes of this Act, considered a continuation of the prior
partnership.
SECTION 23. (a) The comptroller shall require the entities
specified by this section to file an information report in the
manner provided by this section. The information report is
confidential and exempt from disclosure under Chapter 552,
Government Code.
(b) The information report required under this section must
contain the same information that an entity required to file the
report would have submitted in its report due to the comptroller in
2006 under Chapter 171, Tax Code, if the changes made by this Act to
Chapter 171, Tax Code, had been in effect January 1, 2006. The
information report shall also contain the total of maintenance and
operations school property taxes paid by the entity to school
districts in Texas in the 2005, 2006, and 2007 tax years. The
comptroller shall provide the forms and instructions to the
entities required to file a report under this section.
(c) The comptroller shall take action to revoke the charter,
as that term is defined by Section 171.0001, Tax Code, as added by
this Act, of an entity that does not file an information return in
the manner and under the time limits provided by this section.
(d) The comptroller shall identify and require the
following entities to file an information report under this
section:
(1) the 1,000 entities that paid or are required to pay
the most franchise tax for the annual reporting period ending
December 31, 2005, under Chapter 171, Tax Code, as that chapter
existed on the effective date of this section;
(2) the 1,000 entities doing business in this state
that had the greatest amount of gross receipts in 2005, as
determined under Sections 171.105 and 171.1051, Tax Code, as those
sections existed on the effective date of this section;
(3) the 1,000 entities doing business in this state
with the greatest number of employees in this state, according to
records maintained by the Texas Workforce Commission, in 2005; and
(4) the 1,000 entities doing business in this state
with the greatest school maintenance-and-operations property tax
levy in this state, according to records maintained or collected
for this purpose by the Property Tax Division of the Office of the
Comptroller, in 2005;
(e) An entity may be listed in one or more of the categories
under Subsection (d) of this section. An entity that is listed more
than once is required by this section to file only one information
return.
(f) The comptroller:
(1) shall identify the entities described by
Subsection (d) of this section;
(2) shall prepare all forms and instructions required
for those entities to file their information reports as required by
this section;
(3) shall provide those forms and instructions to
those entities on or after November 15, 2006, but before December 2,
2006;
(4) shall require the entities to submit their
information reports on or before February 15, 2007, and February
15, 2008;
(5) may not grant any extensions for filing the
information reports; and
(6) shall report to the governor, the lieutenant
governor, and the members of the legislature, on or before April 1,
2007, and April 1, 2008, the results of the information reports,
stating the amount of revenue generated by the tax under Chapter
171, Tax Code, in each year, the amount that would have been
generated from the entities submitting information reports under
this section if the changes made by this Act to Chapter 171, Tax
Code, had been in effect January 1, 2006, and the school maintenance
and operations property taxes paid by the entities in the 2005,
2006, and 2007 tax years.
(g) The report required under Subsection (f)(6) of this
section may not be formatted in a manner or include any information
that discloses or effectively discloses the specific identity of a
reporting entity.
(h) This section takes effect as provided by Section 27 of
this Act.
SECTION 24. (a) The supreme court has exclusive and
original jurisdiction over a challenge to the constitutionality of
this Act or any part of this Act and may issue injunctive or
declaratory relief in connection with the challenge.
(b) The supreme court shall rule on a challenge filed under
this section on or before the 120th day after the date the challenge
is filed.
(c) This section takes effect as provided by Section 27 of
this Act.
SECTION 25. (a) The amount of $2 million is appropriated
out of the general revenue fund to the comptroller of public
accounts for the state fiscal biennium ending August 31, 2007, for
the implementation of this Act and for audit and enforcement
activities.
(b) This section takes effect as provided by Section 27 of
this Act.
SECTION 26. Except as otherwise provided by Section 27 of
this Act, this Act takes effect January 1, 2008, and applies to
reports originally due on or after that date.
SECTION 27. A section of this Act that provides that it
takes effect as provided by this section takes effect June 1, 2006,
if this Act receives a vote of two-thirds of all the members elected
to each house, as provided by Section 39, Article III, Texas
Constitution. If this Act does not receive the vote necessary for
effect on that date, that section takes effect September 1, 2006.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 3 was passed by the House on April 24,
2006, by the following vote: Yeas 88, Nays 68, 0 present, not
voting; passed subject to the provisions of Article III, Section
49a, of the Constitution of the State of Texas.
______________________________
Chief Clerk of the House
I certify that H.B. No. 3 was passed by the Senate on May 2,
2006, by the following vote: Yeas 16, Nays 14; passed subject to
the provisions of Article III, Section 49a, of the Constitution of
the State of Texas.
______________________________
Secretary of the Senate
I certify that the amounts appropriated in the herein H.B.
No. 3, 3rd Called Session of the 79th Legislature, are within
amounts estimated to be available in the affected fund.
Certified_____________________
______________________________
Comptroller of Public Accounts
APPROVED: __________________
Date
__________________
Governor