Bill Text: TX HB500 | 2013-2014 | 83rd Legislature | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to the computation of the franchise tax, including certain exclusions from the tax.
Spectrum: Strong Partisan Bill (Republican 71-4)
Status: (Passed) 2013-06-14 - See remarks for effective date [HB500 Detail]
Download: Texas-2013-HB500-Introduced.html
Bill Title: Relating to the computation of the franchise tax, including certain exclusions from the tax.
Spectrum: Strong Partisan Bill (Republican 71-4)
Status: (Passed) 2013-06-14 - See remarks for effective date [HB500 Detail]
Download: Texas-2013-HB500-Introduced.html
83R14288 E | ||
By: Hilderbran | H.B. No. 500 |
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relating to the franchise tax. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 171.1011(c), Tax Code, is amended to | ||
read as follows: | ||
(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 reportable as income on line | ||
1c, Internal Revenue Service Form 1120; | ||
(ii) the amounts reportable as income on | ||
lines 4 through 10, Internal Revenue Service Form 1120; and | ||
(iii) any total revenue reported by a lower | ||
tier entity as includable in the taxable entity's total revenue | ||
under Section 171.1015(b); [ |
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(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 a taxable entity treated as | ||
a partnership or as an S corporation 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; and | ||
(C) if the amount computed under Subsections | ||
(c)(1)(A) and (c)(1)(B) totals $20 million or less, subtracting $1 | ||
million; | ||
(2) for a taxable entity treated for federal income | ||
tax purposes as a partnership, an amount computed by: | ||
(A) adding: | ||
(i) the amount reportable as income on line | ||
1c, Internal Revenue Service Form 1065; | ||
(ii) the amounts reportable as income on | ||
lines 4, 6, and 7, Internal Revenue Service Form 1065; | ||
(iii) the amounts reportable as income on | ||
lines 3a and 5 through 11, Internal Revenue Service Form 1065, | ||
Schedule K; | ||
(iv) the amounts reportable as income on | ||
line 17, Internal Revenue Service Form 8825; | ||
(v) the amounts reportable as income on | ||
line 11, plus line 2 or line 45, Internal Revenue Service Form 1040, | ||
Schedule F; and | ||
(vi) any total revenue reported by a lower | ||
tier entity as includable in the taxable entity's total revenue | ||
under Section 171.1015(b); [ |
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(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 a taxable entity treated as | ||
a partnership or as an S corporation 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; and | ||
(C) if the amount computed under Subsections | ||
(c)(2)(A) and (c)(2)(B) totals $20 million or less, subtracting $1 | ||
million; 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), including the | ||
subtraction of $1 million as provided by Subdivision (1)(C) or | ||
(2)(C), determined by rules that the comptroller shall adopt. | ||
SECTION 2. Section 171.002(d), Tax Code, is amended to read | ||
as follows: | ||
(d) A taxable entity is not required to pay any tax and is | ||
not considered to owe any tax for a period if[ |
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entity is less than $1,000[ |
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SECTION 3. Section 171.006, Tax Code, is amended by | ||
amending Subsection (b) and adding Subsection (g) to read as | ||
follows: | ||
(b) Beginning in 2010, on January 1 of each even-numbered | ||
year, the amounts prescribed by Sections 171.1011(c)(1)(C), | ||
171.1011(c)(2)(C), 171.1011(c)(3) [ |
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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. | ||
(g) A receipt from Internet hosting described by Section | ||
151.108(a) is a receipt from business done in this state only if the | ||
customer to whom the service is provided is located in this state. | ||
SECTION 4. Section 171.1011, Tax Code, is amended by | ||
amending Subsection (g) and adding Subsection (g-8) to read as | ||
follows: | ||
(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; [ |
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(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; and | ||
(4) subcontracting payments made to individuals for | ||
services related to the acquisition or management of petroleum | ||
interests or the performance of title or contract functions related | ||
to the exploration, exploitation, or disposition of petroleum or | ||
mineral interests. | ||
(g-8) A taxable entity that is primarily engaged in the | ||
business of transporting aggregates shall exclude from its total | ||
revenue, to the extent included under Subsection (c)(1)(A), | ||
(c)(2)(A), or (c)(3), subcontracting payments made by the taxable | ||
entity to nonemployee agents for the performance of delivery | ||
services on behalf of the taxable entity. In this subsection, | ||
"aggregates" means any commonly recognized construction material | ||
removed or extracted from the earth, including dimension stone, | ||
crushed and broken limestone, crushed and broken granite, other | ||
crushed and broken stone, construction sand and gravel, industrial | ||
sand, dirt, soil, cementitious material, and caliche. | ||
SECTION 5. Section 171.1014, Tax Code, is amended by | ||
amending Subsection (c) and adding Subsections (j) and (k) to read | ||
as follows: | ||
(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, except that only one member of the | ||
combined group may subtract $1 million under Section | ||
171.1011(c)(1)(C), (c)(2)(C), or (c)(3); | ||
(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. | ||
(j) Notwithstanding any other provision of this chapter and | ||
except as provided by Subsection (k), a nonqualified affiliate that | ||
would, except as otherwise provided by this subsection, be included | ||
in a combined group with a qualified affiliate may not be included | ||
in such combined group if: | ||
(1) more than 50 percent of the threshold amount is | ||
from activities in retail or wholesale trade; | ||
(2) less than 50 percent of the threshold amount is | ||
from the sale of products produced by any entity that is included in | ||
an affiliated group with such qualified affiliate; and | ||
(3) less than 5 percent of the threshold amount is from | ||
providing retail or wholesale electric utilities. | ||
(k) For purposes of Subsection (j): | ||
(1) "nonqualified affiliate" means an individual | ||
taxable entity that provides retail or wholesale electric | ||
utilities; | ||
(2) "qualified affiliate" means an individual taxable | ||
entity that does not provide retail or wholesale electric | ||
utilities; and | ||
(3) "threshold amount" means the total revenue | ||
determined under Subsection (c), provided that Subsection (j) has | ||
no effect on the determination of total revenue. | ||
SECTION 6. Section 171.1015(d), Tax Code, is amended to | ||
read as follows: | ||
(d) Section 171.002(d) does not apply to an upper tier | ||
entity if, before the attribution of any total revenue by a lower | ||
tier entity to an upper tier entity under this section, the lower | ||
tier entity does not meet the criteria of Section 171.002(d) | ||
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SECTION 7. Sections 171.1016(a) and (b), Tax Code, are | ||
amended to read as follows: | ||
(a) Notwithstanding any other provision of this chapter, a | ||
taxable entity whose total revenue from its entire business is not | ||
more than $20 [ |
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this chapter in the amount computed and at the rate provided by this | ||
section rather than in the amount computed and at the tax rate | ||
provided by Section 171.002. | ||
(b) The amount of the tax for which a taxable entity that | ||
elects to pay the tax as provided by this section is liable is | ||
computed by: | ||
(1) determining the taxable entity's total revenue | ||
from its entire business, as determined under Section 171.1011; | ||
(2) apportioning the amount computed under | ||
Subdivision (1) to this state, as provided by Section 171.106, to | ||
determine the taxable entity's apportioned total revenue; and | ||
(3) multiplying the amount computed under Subdivision | ||
(2) by the rate of 0.48 [ |
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SECTION 8. (a) Section 1(c), Chapter 286 (H.B. 4765), Acts | ||
of the 81st Legislature, Regular Session, 2009, as amended by | ||
Section 37.01, Chapter 4 (S.B. 1), Acts of the 82nd Legislature, 1st | ||
Called Session, 2011, is repealed. | ||
(b) This section takes effect September 1, 2013. | ||
SECTION 9. (a) Section 2, Chapter 286 (H.B. 4765), Acts of | ||
the 81st Legislature, Regular Session, 2009, as amended by Section | ||
37.02, Chapter 4 (S.B. 1), Acts of the 82nd Legislature, 1st Called | ||
Session, 2011, and which amended former Subsection (d), Section | ||
171.002, Tax Code, is repealed. | ||
(b) This section takes effect September 1, 2013. | ||
SECTION 10. (a) Section 3, Chapter 286 (H.B. 4765), Acts of | ||
the 81st Legislature, Regular Session, 2009, as amended by Section | ||
37.03, Chapter 4 (S.B. 1), Acts of the 82nd Legislature, 1st Called | ||
Session, 2011, and which amended former Subsection (a), Section | ||
171.0021, Tax Code, is repealed. | ||
(b) This section takes effect September 1, 2013. | ||
SECTION 11. (a) The comptroller of public accounts shall | ||
conduct a comprehensive study of alternative methods of taxing | ||
business entities that would generate approximately the same | ||
revenue as the franchise tax. | ||
(b) In conducting the study, the comptroller shall assume | ||
that: | ||
(1) the alternative method of tax is imposed on all | ||
taxable entities subject to the current franchise tax; and | ||
(2) the alternative method of tax is imposed on all | ||
taxable entities at the same rate. | ||
(c) The comptroller of public accounts shall submit a report | ||
to the legislature regarding the results of the study conducted | ||
under this section not later than January 1, 2015. | ||
SECTION 12. Sections 171.0021, 171.1016(d), and | ||
171.204(b), Tax Code, are repealed. | ||
SECTION 13. This Act applies only to a report originally due | ||
on or after January 1, 2014. | ||
SECTION 14. Except as otherwise provided by this Act, this | ||
Act takes effect January 1, 2014. |