85R920 BEF-D By: Huffines S.B. No. 112 A BILL TO BE ENTITLED AN ACT relating to the decrease of the rates of the franchise tax under certain circumstances and the expiration of that tax. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Sections 171.002(a) and (b), Tax Code, are amended to read as follows: (a) Subject to Sections 171.003, 171.004, and 171.1016 and except as provided by Subsection (b), the rate of the franchise tax is 0.75 percent of taxable margin. (b) Subject to Sections 171.003, 171.004, and 171.1016, the rate of the franchise tax is 0.375 percent of taxable margin for those taxable entities primarily engaged in retail or wholesale trade. SECTION 2. Subchapter A, Chapter 171, Tax Code, is amended by adding Section 171.004 to read as follows: Sec. 171.004. ADJUSTMENT OF TAX RATES. (a) In this section, "maximum general revenue fund appropriations" means for a state fiscal biennium the sum of: (1) the maximum amount of state tax revenues not dedicated by the constitution that may be appropriated under Sections 22(a) and (c), Article VIII, Texas Constitution, for that biennium; and (2) the estimated amount of anticipated revenue to be deposited to the credit of the general revenue fund during that biennium that is not subject to the limit on appropriations under Section 22(a), Article VIII, Texas Constitution, as specified in the estimate prepared by the comptroller as required by Section 49a(a), Article III, Texas Constitution. (b) Beginning in 2020, on January 1 of each year if the comptroller determines that the maximum general revenue fund appropriations for the state fiscal biennium during which that date occurs is at least $110 billion: (1) the rate of the franchise tax under Section 171.002(a) is adjusted by subtracting 0.15 from the rate in effect on December 31 of the previous year; and (2) the rate of the franchise tax under Section 171.002(b) is adjusted by subtracting 0.075 from the rate in effect on December 31 of the previous year. (c) The tax rates determined under Subsection (b): (1) apply to a report originally due on or after the date the determination is made; and (2) are considered for purposes of this chapter to be the rates provided by and imposed under Section 171.002. (d) Notwithstanding Subsection (b), if an adjustment otherwise required by Subsection (b) would reduce a rate of the franchise tax to less than zero, the rate is instead reduced to zero. (e) Notwithstanding any other law, if the rates of the franchise tax are reduced to zero under Subsection (b) or (d), a taxable entity does not owe any tax and is not required to file a report that would otherwise be originally due on or after the date the rates are reduced to zero. (f) The comptroller shall make the determination required by Subsection (b) and may adopt rules related to making that determination. The comptroller shall publish the franchise tax rates determined under this section in the Texas Register and on the comptroller's Internet website not later than January 15 of each year. (g) In the state fiscal year in which the rates of the franchise tax are reduced to zero under Subsection (b) or (d): (1) this chapter expires as provided by Section 171.9121; and (2) not later than January 15 of that year the comptroller shall: (A) publish notice in the Texas Register that an entity previously subject to the tax imposed under this chapter is no longer required to file a report or pay the tax; and (B) provide any other notice relating to the expiration of the tax that the comptroller considers appropriate. (h) An action taken by the comptroller under this section is final and may not be appealed. SECTION 3. Chapter 171, Tax Code, is amended by adding Subchapter Z to read as follows: SUBCHAPTER Z. EXPIRATION Sec. 171.9121. EXPIRATION. This chapter expires on December 31 of the year in which the rates of the franchise tax are reduced to zero under Section 171.004(b) or (d). SECTION 4. (a) Chapter 171, Tax Code, and Subtitle B, Title 2, Tax Code, continue to apply to audits, deficiencies, redeterminations, and refunds of any tax due or collected under Chapter 171 until barred by limitations. (b) The expiration of Chapter 171, Tax Code, does not affect: (1) the status of a taxable entity that has had its corporate privileges, certificate of authority, certificate of organization, certificate of limited partnership, corporate charter, or registration revoked, a suit filed against it, or a receiver appointed under Subchapter F, G, or H of that chapter; (2) the ability of the comptroller of public accounts, secretary of state, or attorney general to take action against a taxable entity under Subchapter F, G, or H of that chapter for actions that took place before the chapter expired; or (3) the right of a taxable entity to contest a forfeiture, revocation, lawsuit, or appointment of a receiver under Subchapter F, G, or H of that chapter. SECTION 5. This Act applies only to a report originally due on or after January 1, 2020. SECTION 6. This Act takes effect January 1, 2018.