In Re Allcat, Relator's Brief On The Merits (Tex. Sept. 12, 2011)

No.
11-0589
_______________________________________________

In The

Supreme Court of Texas
_______________________________________________

IN RE ALLCAT CLAIMS SERVICE, L.P. AND JOHN WEAKLY
Relators,

RELATORS BRIEF ON THE MERITS

James F. Martens
jmartens@textaxlaw.com
State Bar No. 13050720
Michael B. Seay
mseay@textaxlaw.com
Lacy L. Leonard
lleonard@textaxlaw.com
Amanda M. Traphagan
atraphagan@textaxlaw.com
MARTENS, SEAY, & TODD
301 Congress Avenue, Suite 1950
Austin, Texas 78701
Tele: (512) 542-9898
Fax: (512) 542-9899

ATTORNEYS FOR RELATORS,
ALLCAT CLAIMS SERVICE, L.P.
AND JOHN WEAKLY
FILED
IN THE SUPREME COURT
OF TEXAS
11 September 12 P5:56
BLAKE. A. HAWTHORNE
CLERK
No. 11-0589
_______________________________________________

In The

_______________________________________________

IN RE ALLCAT CLAIMS SERVICE, L.P. AND JOHN WEAKLY,
Relators.

RELATORS BRIEF ON THE MERITS

James F. Martens
Michael B. Seay
mseay@textaxlaw.com
Lacy L. Leonard
Amanda M. Traphagan
Austin, Texas 78701
Tele: (512) 542-9898
Fax: (512) 542-9899

AND JOHN WEAKLY

i

IDENTITY OF PARTIES & COUNSEL

Relators: Relators Counsel:
Allcat Claims Service, L.P. and James F. Martens
John Weakly jmartens@textaxlaw.com
Michael B. Seay
mseay@textaxlaw.com
Lacy L. Leonard
Amanda M. Traphagan
Austin, Texas 78701
Tele: (512) 542-9898
Fax: (512) 542-9899

Respondents: Respondents Counsel:
Susan Combs, Comptroller of Public Danica L. Milios
Accounts of the State of Texas, and Deputy Solicitor General
Greg Abbott, Attorney General of the danica.milios@oag.state.tx.us
State of Texas State Bar No. 00791261

Bill Davis
Assistant Solicitor General
bill.davis@oag.state.tx.us
OFFICE OF THE ATTORNEY GENERAL
P.O. Box 12548 (MC 059)
Austin, Texas 78711-2548
Tele: (512) 936-1700
Fax: (512) 474-2697

ii
Kevin Van Oort
Deputy Chief
Financial and Tax Litigation Division
kevin.vanoort@oag.state.tx.us
OFFICE OF THE ATTORNEY GENERAL
P.O. Box 12548 (MC 029)
Tele: (512) 463-8897
Fax: (512) 477-2348

iii
TABLE OF CONTENTS

IDENTITY OF PARTIES & COUNSEL ............................................................................. i
TABLE OF CONTENTS ................................................................................................... iii
TABLE OF AUTHORITIES ............................................................................................... x
STATEMENT OF THE CASE ...................................................................................... xviii
STATEMENT OF JURISDICTION ................................................................................ xix
ISSUES PRESENTED ...................................................................................................... xx
STATEMENT OF FACTS .................................................................................................. 1
I. History of the Bullock Amendment. ............................................................. 1
II. The Enactment of House Bill 3 in 2006 Made Sweeping Revisions to

Texass Business Tax System. ...................................................................... 4
III. Background of Relators, Allcat and Mr. Weakly. ......................................... 6
SUMMARY OF ARGUMENT ........................................................................................... 7
ARGUMENT ..................................................................................................................... 10
I. The Statement of Original Jurisdiction in Section 24 of House Bill 3 is

Valid under Article V, Section 3 of the Texas Constitution. ...................... 10
A. Our Legislature is Authorized by the Plain Language of Texas

Constitution Article V, Section 3 to Confer Original Jurisdiction on
this Court to Issue Mandatory Writs Against State Officers, and the
Legislature did so in Section 22.002 of the Government Code. ...... 11
B. The Original Jurisdiction Conferred in Section 24 of House Bill 3 is

Within the Constitutional Scope of Original Jurisdiction Previously
Granted by the Legislature in Government Code 22.002 for this
Court to Issue Mandatory Writs Against State Officers. ................. 13
C. Relators Instant Suit Satisfies the Standards for Granting

Mandamus Relief. ............................................................................ 18

iv
1. The Comptroller and Attorney General, as executive officers

of this State, have abused their discretion by administering
and enforcing an unconstitutional tax in an unconstitutional
manner. .................................................................................. 19
2. Relators have no other adequate remedy at law because the

Legislature has mandated them to initiate their suit in this
Court. ..................................................................................... 19
II. The Revised Franchise Tax Violates the Texas Constitution because it
Taxes a Natural Persons Share of Partnership Income, But it was Not
Approved by a Majority of Texas Voters. ................................................... 20
A. The Bullock Amendment Prohibits Enactment of a General Law

Imposing a Tax on a Natural Persons Income, Including Ones
Share of Partnership Income, Without Approval from a Majority of
Voters. .............................................................................................. 22
B. The Revised Franchise Tax is an Income Tax. ................................ 25
1. The revised franchise tax satisfies accepted definitions of

"income tax" because it allows for the deduction of "indirect
expenses." .............................................................................. 25

2. This Court should not allow the Legislature to circumvent the
constitutional requirements of the Bullock Amendment by
characterizing the revised franchise tax as anything other than
an income tax. .................................................................... 30
3. If this Court were to conclude the revised franchise tax is not

an income tax, it would have serious, detrimental
consequences on businesses of this State. ............................. 33
C. The Revised Franchise Tax is Imposed on a Natural Persons Share

of Partnership Income. ..................................................................... 34
1. Texas partnership law demonstrates that the revised franchise

tax, when imposed directly on a partnership, constitutes an
income tax on the natural partners share of that income. . 35

v
2. The legislative history of the Bullock Amendment
demonstrates that it was specifically designed to prevent
imposition of an income tax on a natural partners share of
partnership income without majority-voter approval. .......... 37
3. This Court should not limit the Bullock Amendments

application to instances of where an income tax is imposed
directly against the natural partners income share. .............. 40
4. The revised franchise tax is imposed on individual partners,

not on merely the partnership as an entity, as suggested by the
Comptroller and Attorney General. ...................................... 42
5. The individual impact of the revised franchise tax

demonstrates that it is an income tax imposed on a natural
persons share of partnership income. ................................... 46
III. The Courts Exclusive Original Jurisdiction Encompasses Relators (A)

Equal and Uniform Taxation Claim, and (B) Request to Recover Their
Costs and Attorneys Fees. .......................................................................... 47
A. Relators Equal and Uniform Taxation Claim is Within the Scope of

this Courts Original and Exclusive Jurisdiction. ............................ 48
B. Relators Request for Costs and Attorneys Fees is Within the Scope
of this Courts Original and Exclusive Jurisdiction. ........................ 48
PRAYER ........................................................................................................................... 50
CERTIFICATE OF SERVICE .......................................................................................... 52

APPENDIX (filed with Original Petition):

1. Act of May 2, 2006, 79
th
Leg., 3
rd
C.S., H.B. 3

2. Summary of Bill Stages and Actions on House Bill 3

3. Press Release, Office of the Governor, Gov. Perry (April 17, 2006)

4. Bill Summary of House Bill 3

vi
5. Act of June 15, 2007, 80th Leg., R.S., H.B. 3928, 39

6. Affidavit of John Weakly, 7/27/11
A. Relators' Tax Documents
i. Checks for Payment of 2008 Franchise Taxes (p.1-2)
ii. Relevant Pages of Allcat's 2008 Form 1065 (p. 3-9)
iii. Relevant Pages of Mr. Weakly's 2008 Form 1040 (p. 10-12)
iv. Allcat's 2008 Texas Franchise Tax Report (p. 13-14)
v. Allcat's 2009 Texas Franchise Tax Report (p. 15-16)
vi. Allcat's 2008 protest payment check (p. 17)
vii. Allcat's 2009 protest payment check (p. 18)

7. Election Details Report regarding Bullock Amendment

8. Letter from Carole Keeton Strayhorn to Rick Perry (May 15, 2006)


10. Letter from Carole Keeton Strayhorn to Greg Abbott (Apr. 21, 2006)

11. BLACK'S LAW DICTIONARY (8th ed. 2004) ("income tax" and "net income")

12. WI Tax Bulletin 156 (April 2008)

13. KS DOR Opinion Letter No. O-2008-004 (Sept. 2, 2008)

14. KS DOR Opinion Letter No. O-2009-005 (Mar. 24, 2009)

15. MO DOR Letter Ruling LR 5309 (Dec. 12, 2008)

16. SC Rev. Rul. 09-10 (Jul. 17, 2009)

17. CA Technical Advice Memorandum 2011-03 (Apr. 13, 2011)

18. Minutes of the August 2, 2006 Board Meeting on Potential FSP: Texas
Franchise Tax

19. Comptroller Letter No. 201008001L, "Franchise Tax and the Construction
Industry"

20. Texas Open Records Act Request Response

vii
SUPPLEMENTAL APPENDIX (separately bound):

1. Tex. Gov't Code 22.002

2. TEX. CONST. art. V, 3

3. A&T Consultants, Inc. v. Sharp, 904 S.W.2d 668 (Tex. 1995)

4. J. Michael Kennedy, Doomsday Budget Shows Texas the Cost of Not
Raising Taxes: A Huge Deficit Looms as a Result of Court-Ordered
Funding of Social Services. The Unthinkable May Occur: An Income Levy,
L.A. Times, May 22, 1991

5. Bullock Details Tax Plan, Income Levy Could Reduce Other State Fees,
Proposal Says, Dallas Morning News, Mar. 29, 1991

6. Clay Robison, Income Tax Bill Would Lift Burden From Poor, Legislator
Says, Houston Chronicle, Apr. 24, 1991

7. Mark Tatge, Corporations Brace for State Income Tax, Dallas Morning
News, Mar. 23, 1991

8. Ross Ramsey, House Leaders Study Variety of Possibilities for New Tax
Plan, Houston Chronicle, Jul. 31, 1991

9. Ross Ramsey, Taxes for Cigarettes, Gas May Be Increased/Hybrid
Corporate Levy Also Considered, Houston Chronicle, Aug. 8, 1991

10. Ross Ramsey and R.G. Ratcliffe, Grapping with Texas Finances/Senate
OKs State Budget, Tax Measure/Deadline Looms Tonight for House to
Follow Suit, Houston Chronicle, Aug. 13, 1991

11. Michele Kay, Tax Issue Drawing Little Agreement, Austin American-
Statesman, Mar. 24, 1991

12. Franchise Tax on Small Firms Opposed, Dallas Morning News, Jul. 25,
1991

13. Tax Reform: Lawmakers Should Revamp the Franchise Tax, Dallas
Morning News, Jul. 31, 1991

14. Laylan Copelin, Tax Bill Heightens Old Fears, Austin American-
Statesman, Aug. 4, 1991

viii

15. House Committee Report on HB 11, 72
nd
Legislature, First Called Session,
1991

16. Bob Bullock, et. al. to Ann Richards and Gibson Lewis, Jul 23, 1991, Bob
Bullock Collection, Lt. Governor Series, 1991-1992, Correspondence,
Elected Officials, Gov. Ann Richards, Baylor Collections of Political
Materials, Baylor University, Waco, Texas

17. Bob Bullock to Ann Richards, Jul. 19, 1991, Bob Bullock Collection, Lt.
Governor Series, 1991-1992, Correspondence, Elected Officials, Gov. Ann
Richards, Baylor Collections of Political Materials, Baylor University,
Waco, Texas

18. Bob Bullock, Corporations and Partnerships Should Not Be Taxed the
Same, Austin American-Statesman, Aug. 1, 1991

19. Bob Bullock, Leave Corporations Alone, Dallas Morning News, Aug. 4,
1991

20. Ross Ramsey, Legislators OK $34.6 Billion Budget, Houston Chronicle,
Aug. 11, 1991

21. TEX. CONST. art. VIII, 24

22. Press Release, Office of the Governor, Gov. Perry Names 24-Member
Texas Tax Reform Commission (Nov. 4, 2005)

23. Texas Tax Reform Commission, Tax Fairness: Property Tax Relief for
Texans, March 29, 2006

24. Draft legislation proposed by Texas Tax Reform Commission

25. Love v. Wilcox, 28 S.W.2d 515 (Tex. 1930)

26. Tex. Tax Code 141.001, art. II

27. Multistate Tax Commission, Member States

28. Jack P. Friedman, ed., Barrons Dictionary of Business Terms 429 (2d ed.
1994)

29. BLACKS LAW DICTIONARY 1136 (8
th
ed. 2004)

ix

30. Tex. Tax Code 171.101

31. Tex. Tax Code 171.1011

32. Tex. Tax Code 171.1012

33. Tex. Tax Code 171.1013

34. Instructions for Completing Franchise Tax Reports Originally Due on or
After January 1, 1992 and Before January 1, 2008

35. Financial Account Standards Board, Summary of Statement No. 109

36. NEV. CONST., art. 10, 1

37. Julia Rathgeber and Richard P. Sanchez, Senate Research Center, to John
Keel, Lt. Governors Office, Apr. 23, 1993, Bob Bullock Collection, Lt.
Governor Series, 1993, Issues, Revenue Income Tax, Baylor Collections
of Political Materials, Baylor University, Waco, Texas

x
TABLE OF AUTHORITIES

Constitutional Provisions

NEV. CONST., art. 10, 1(9) .............................................................................................. 41

TEX. CONST. art. IV, 1 .............................................................................................. 12, 13

TEX. CONST. art. V, 3 ............................................................. xix, xx, 8, 11, 14, 16, 18, 49

TEX. CONST. art. VIII, 24(a) ................................................................................. 8, 23, 35

TEX. CONST. art. XVI, 1 .................................................................................................. 19

Statutes

15 U.S.C.A 381(a) (West 2009) ..................................................................................... 32

15 U.S.C.A 381-384 (West 2009) ................................................................................ 32

Tex. Bus. Orgs. Code Ann. 1.002(68) (West 2009) ....................................................... 35

Tex. Bus. Orgs. Code Ann. 152.101 (West 2009) .......................................................... 42


Tex. Bus. Orgs. Code Ann. 152.202(a) (West 2009) .................................................... 35



Tex. Civ. Prac. & Rem. Code 37.009 (West 2009) ........................................................ 50

Tex. Civ. Prac. & Rem. Code 37.001-.011 (West 2009) .............................................. 49

Tex. Govt Code Ann. 311.005(13) (West 2009) ........................................................... 45

Tex. Govt Code Ann. 311.011 (West 2009) ................................................................. 26

Tex. Govt Code Ann. 311.023 (West 2009) ................................................................. 21

xi
Tex. Gov't Code Ann. 22.002 (West 2009) ............... xix, xx, 8, 10, 11, 13, 14, 18, 19, 49

Tex. Gov't Code Ann. 22.002(c) (West 2009) .................... xix, 11, 12, 13, 14, 17, 18, 19

Tex. Rev. Civ. Stat. Ann. Art. 6132b, 1.01(13).............................................................. 35

Tex. Rev. Civ. Stat. Ann. Art. 6132b, 1.03(a) ................................................................ 36

Tex. Rev. Civ. Stat. Ann. Art. 6132b, 4.01(b).......................................................... 35, 42

Tex. Tax Code 171.110 (repealed effective Jan. 1, 2008) ........................................ 32, 33

Tex. Tax Code Ann. 141.001, art. II, 4 (West 2009) ............................................ 25, 27

Tex Tax Code Ann. 171.0002 (West 2009) ................................................................... 37

Tex. Tax Code Ann. 171.0021 (West 2009) .................................................................. 27

Tex. Tax Code Ann. 171.1011 (West 2009) ...................................................... 27, 28, 50

Tex. Tax Code Ann. 171.1012 (West 2009) ...................................................... 29, 30, 50

Tex. Tax Code Ann. 171.1013 (West 2009) ............................................................ 29, 30

Tex. Tax Code Ann. 171.1014 (West 2009) .................................................................. 26

Tex. Tax Code Ann. 112.051-053 (West 2009) ........................................................... 13

Cases

A & T Consultants, Inc. v. Sharp,
904 S.W.2d 668 (Tex. 1995) ........................................................................... 11, 12, 13, 19

Asshauer v. Wells Fargo Foothill,
263 S.W.3d 468 (Tex. App.Dallas 2008, pet. denied) .................................................. 39

Brown v. Meyer,
787 S.W.2d 42 (Tex. 1990) .............................................................................................. 26

Chenault v. Phillips,
914 S.W.2d 140 (Tex. 1996) ............................................................................................ 49

xii

Chien v. Chien,
759 S.W.2d 484 (Tex.App.Austin 1988, no writ) ......................................................... 42

City of Beaumont v. Bouillion,
896 S.W.2d 143 (Tex. 1995) ............................................................................................. 26

City of Corpus Christi v. Pub. Util. Commn.,
51 S.W.3d 231 (Tex. 2001) ............................................................................................... 48

City of Houston v. Clark,
197 S.W.3d 314 (Tex. 2006) ............................................................................................. 21

Collins v. Tracy,
36 Tex. 546 (1872) ............................................................................................................ 26

Dawson v. Kentucky Distilleries & Warehouse Co.,
255 U.S. 288 (1921) .................................................................................................... 30, 44

Federal Land Bank of St. Paul v. Bismarck Lumber Co.,
314 U.S. 95 (1941) ............................................................................................................ 45

Firemen's Ins. Co. v. Burch,
442 S.W.2d 331 (Tex. 1968) ............................................................................................. 49

Galveston, Harrisburg & San Antonio Railway Co. v. Texas,
210 U.S. 217 (1908) .................................................................................................... 31, 44

Gragg v. Cayuga Indep. Sch. Dist.,
539 S.W.2d 861 (Tex. 1976) ................................................................................. 21, 26, 44

Hanson v. Jordan,
198 S.W.2d 262 (Tex. 1946) ............................................................................................. 40

In re Reece,
341 S.W.3d 360 (Tex. 2011) ............................................................................................. 20

In re Smith,
333 S.W.3d 582 (Tex. 2011) ...................................................................................... 12, 13

Lane v. Ross,
249 S.W.2d 591 (Tex. 1952) ....................................................................................... 16, 17

xiii
Leander Indep. Sch. Dist. v. Cedar Park Water Supply Corp.,
479 S.W.2d 908 (Tex. 1972) ............................................................................................. 40

Leitch v. Hornsby,
935 S.W.2d 114 (Tex. 1996) ....................................................................................... 38, 39

Love v. Wilcox,
28 S.W.2d 515 (Tex. 1930) ................................................................................... 15, 17, 22

Neeley v. West Orange-Cove Consol. Independent School Dist.,
176 S.W.3d 746 (Tex. 2005) ............................................................................................... 5

Ojo v. Farmers Group, Inc.,
54 Tex. Sup. Ct. J. 1068, 2011 WL 2112778, *12-13 (Tex. May 27, 2011) .................... 22

Pickle v. McCall,
24 S.W. 265 (Tex. 1893) .................................................................................................. 13

Pinebrook Props., Ltd. v. Brookhaven Lake Prop. Owners Assn,
77 S.W.3d 487 (Tex. App.Texarkana 2002, pet. denied) ............................................. 39

R.R. Commn v. Arco Oil & Gas Co.,
876 S.W.2d 473 (Tex. App.Austin 1994, writ denied) ................................................. 45

Republic Ins. Co. v. Silverton Elevators, Inc.,
493 S.W.2d 748 (Tex. 1973) ............................................................................................ 45

Republican Party v. Dietz,
940 S.W.2d. 86 (Tex. 1997) ............................................................................................. 26

Seidman & Seidman v. Schwartz,
665 S.W.2d 214 (Tex.App.San Antonio 1984, writ dismd) ......................................... 42

State v. Ferguson,
125 S.W.2d 272 (Tex. 1939) ............................................................................................. 17

State v. Hodges,
92 S.W.3d 489 (Tex. 2002) ............................................................................................... 21

Suburban Utility Corporation v. Public Utility Commission of Texas,
650 S.W.2d 358 (Tex. 1983) ............................................................................................. 44

xiv
Tex. Workers Comp. Commn v. Garcia,
893 S.W.2d 504, 518 n. 16 (Tex. 1995) ............................................................................ 48

Texas Ass'n of Bus. v. Texas Air Control Bd.,
852 S.W.2d 440 (Tex. 1993) ............................................................................................ 49

Travelers Ins. Co. v. Marshall,
76 S.W.2d 1007 (Tex. 1934) ............................................................................................. 21

Trinova Corp. v. Michigan Dept of Treasury,
498 U.S. 358 (1991) .................................................................................................... 32, 44

United Serv. Life Ins. Co. v. Delaney,
396 S.W.2d 855 (Tex. 1965) ............................................................................................. 49

Walker v. Packer,
827 S.W.2d 833, 839-40 (Tex. 1992) ................................................................................ 18

Newspaper Articles

Bob Bullock, Corporations and Partnerships Should Not Be Taxed the Same, Austin
American-Statesman, Aug. 1, 1991 ............................................................................... 3, 38

Bob Bullock, Leave Corporations Alone, Dallas Morning News, Aug. 4, 1991 .......... 3, 38

Bullock Details Tax Plan, Income Levy Could Reduce Other State Fees, Proposal Says,
Dallas Morning News, Mar. 29, 1991 ................................................................................. 1

Clay Robison, Income Tax Bill Would Lift Burden From Poor, Legislator Says, Houston
Chronicle, Apr. 24, 1991 ..................................................................................................... 1

Franchise Tax on Small Firms Opposed, Dallas Morning News, Jul. 25, 1991 ................. 1

J. Michael Kennedy, Doomsday Budget Shows Texas the Cost of Not Raising Taxes: A
Huge Deficit Looms as a Result of Court-Ordered Funding of Social Services. The
Unthinkable May Occur: An Income Levy, L.A. Times, May 22, 1991 ............................. 1

Laylan Copelin, Tax Bill Heightens Old Fears, Austin American-Statesman, Aug. 4,
1991 ..................................................................................................................................... 1

Mark Tatge, Corporations Brace for State Income Tax, Dallas Morning News, Mar. 23,
1991 ..................................................................................................................................... 1

xv
Michele Kay, Tax Issue Drawing Little Agreement, Austin American-Statesman, Mar. 24,
1991 ..................................................................................................................................... 1

Ross Ramsey and R.G. Ratcliffe, Grapping with Texas Finances/Senate OKs State
Budget, Tax Measure/Deadline Looms Tonight for House to Follow Suit, Houston
Chronicle, Aug. 13, 1991 .................................................................................................... 1

Ross Ramsey, House Leaders Study Variety of Possibilities for New Tax Plan, Houston
Chronicle, Jul. 31, 1991 ....................................................................................................... 1

Ross Ramsey, Legislators OK $34.6 Billion Budget, Houston Chronicle, Aug. 11, 1991 . 3

Ross Ramsey, Taxes for Cigarettes, Gas May Be Increased/Hybrid Corporate Levy Also
Considered, Houston Chronicle, Aug. 8, 1991 ................................................................... 1

Tax Reform: Lawmakers Should Revamp the Franchise Tax, Dallas Morning News, Jul.
31, 1991 ............................................................................................................................... 1

Other Authorities

17 Tex. Reg. 7667 (Oct. 30, 1992) .................................................................................... 43

Act of June 15, 2007, 80th Leg., R.S., H.B. 3928, 39 .................................................... 28

Act of May 2, 2006, 79th Leg., 3rd C.S., H.B. 3, 24 ........ xix, xx, 7, 8, 10, 13, 14, 18, 47

BLACKS LAW DICTIONARY 1136 (8
th
ed. 2004) ......................................................... 27, 30

th
ed. 2004) ............................................................... 26

BLACKS LAW DICTIONARY 973 (7th ed. 1999) ................................................................ 14

BLACK'S LAW DICTIONARY 779 (8
th
ed. 2004) ............................................................ 26, 27

Bob Bullock to Ann Richards, Jul. 19, 1991, Bob Bullock Collection, Lt. Governor
Series, 1991-1992, Correspondence, Elected Officials, Gov. Ann Richards, Baylor
Collections of Political Materials, Baylor University, Waco, Texas ................................ 38

Bob Bullock, et. al. to Ann Richards and Gibson Lewis, Jul 23, 1991, Bob Bullock
Collection, Lt. Governor Series, 1991-1992, Correspondence, Elected Officials, Gov.
Ann Richards, Baylor Collections of Political Materials, Baylor University, Waco, Texas
........................................................................................................................................... 38

xvi

CA Technical Advice Memorandum 2001-03 (Apr. 13, 2011) ........................................ 34

House Committee Report on HB 11, 72nd Legislature, First Called Session, 1991 .. 23, 37

Jack P. Friedman, ed., Barrons Dictionary of Business Terms 429 (2d ed. 1994) .... 27, 30

Julia Rathgeber and Richard P. Sanchez, Senate Research Center, to John Keel, Lt.
Governors Office, Apr. 23, 1993, Bob Bullock Collection, Lt. Governor Series, 1993,
Issues, Revenue Income Tax, Baylor Collections of Political Materials, Baylor
University, Waco, Texas ................................................................................................... 41

KS DOR Opinion Letter No. O-2008-004 (Sept. 2, 2008) ................................................ 34

KS DOR Opinion Letter No. O-2009-005 (Mar. 24, 2009) .............................................. 34

Legislative Reference Library of Texas, SJR 49, 73rd Regular Session, Election Details
........................................................................................................................................... 23

Letter from Carole Keeton Strayhorn to Greg Abbott (Apr. 21, 2006) ....................... 24, 26

Letter from Carole Keeton Strayhorn to Rick Perry (May 15, 2006) ............................... 24

Letter from Carole Keeton Strayhorn to Rick Perry (May 2, 2006) ................................. 24

Minutes of the August 2, 2006 Board Meeting on Potential FSP: Texas Franchise Tax .. 33

MO DOR Letter Ruling LR 5309 (Dec. 12, 2008) ........................................................... 34

Multistate Tax Commission, Member States .................................................................... 25

Press Release, Office of the Governor, Gov. Perry Announces Special Session of
Legislature (April 17, 2006) ................................................................................................ 5

Press Release, Office of the Governor, Gov. Perry Names 24-Member Texas Tax Reform
Commission (Nov. 4, 2005) ................................................................................................ 4

SC Rev. Rul. 09-10 (Jul. 17, 2009) ................................................................................... 34

Summary of Bill Stages on HB 3 ........................................................................................ 5

Tex. H.B. 11, 72nd Leg., 1st C.S., Article 8 (1991) ............................................................ 3

xvii
Tex. H.B. 11, 72th Leg., 1st C.S. (1991) ............................................................................. 2

Tex. H.B. 11, 72th Leg., 1st C.S., Article 8 (1991) ........................................................... 39

Tex. S.J.R. 49, 73rd Leg. (1993) ....................................................................................... 23

Texas Tax Reform Commission, Tax Fairness: Property Tax Relief for Texans, March
29, 2006 ............................................................................................................................... 4

WI Tax Bulletin 156 (April 2008) ..................................................................................... 34

xviii
STATEMENT OF THE CASE

This is an original mandamus proceeding brought by Relators Allcat Claims
Service, L.P. (Allcat) and John Weakly (Mr. Weakly) (collectively Relators)
against Respondents Susan Combs, Comptroller of Public Accounts of the State of Texas,
and Greg Abbott, Attorney General of the State of Texas (the Comptroller and Attorney
General). In 2006, our Legislature enacted an unconstitutional revised franchise tax.
The Comptroller and Attorney General, as executive officers of the State of Texas, have
since attempted to administer and enforce this unconstitutional franchise tax in an
unconstitutional manner. This Court has original and exclusive jurisdiction to grant
mandamus relief (inclusive of injunctive and declaratory relief) against the Comptroller
and Attorney General, specifically when the need for such relief is rooted in a
constitutional challenge to the 2006 franchise tax, which is an issue of great importance
to the jurisprudence of the State and affects the substantial rights of Relators for which
they otherwise have no adequate remedy at law. Hence, Relators seek a writ of
mandamus from this Court compelling the Comptroller and Attorney General to perform
their duties correctly. More specifically, Relators ask this Court to exercise its writ
power to (1) enjoin the Comptroller and Attorney General from enforcing, collecting, or
assessing this unconstitutional tax against Allcat and similarly-situated taxpayers; and (2)
declare that (a) the revised franchise tax in Chapter 171 of the Texas Tax Code violates
the Texas Constitution because it imposes a tax on a natural persons share of partnership
income without the constitutionally-required voter approval, and (b) the Comptrollers
interpretation of the revised franchise tax violates the equal and uniform taxation clause

xix
of the Texas Constitution. In connection with this relief, Relators seek to recover their
costs and attorneys fees.
STATEMENT OF JURISDICTION

Effective September 1, 2006, [t]he supreme court has exclusive and original
jurisdiction over a challenge to the constitutionality of this Act [House Bill 3, now Tex.
Tax Code Ch. 171] or any part of this Act and may issue injunctive or declaratory relief
in connection with the challenge. 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. Act of May
2, 2006, 79th Leg., 3rd C.S., H.B. 3, 24, 27 (Appx. 1).
1

As analyzed below, this narrow statement of original jurisdiction is grounded in
Texas Government Code 22.002(c) (Supp. Appx. 1), which states [o]nly the supreme
court has the authority to issue a writ of mandamus or injunction, or any other mandatory
or compulsory writ or process, against any of the officers of the executive departments of
the government of this state to order or compel the performance of a judicial, ministerial,
or discretionary act or duty that, by state law, the officer or officers are authorized to
perform. . . . This Court has repeatedly acknowledged Section 22.002 as a valid exercise
of this Courts authority under Article V, 3 of the Texas Constitution (Supp. Appx. 2),
2

which expressly allows the Legislature [to] confer original jurisdiction on the Supreme
Court to issue writs of quo warranto and mandamus in such cases as may be specified,

1
All Appx. cites refer to the Appendix filed with Relators Original Petition. All Supp.
Appx. cites refer to the Supplemental Appendix filed with this brief.
2
See A&T Consultants, Inc. v. Sharp, 904 S.W.2d 668, 672-673 (Tex. 1995) (Supp.
Appx. 3).

xx
except as against the Governor of the State. Because the Legislatures statement of
original jurisdiction is constitutionally valid and because the requirements for issuance of
a mandatory writ against the Comptroller and Attorney General are satisfied here, this
Court should exercise its jurisdiction as requested by Relators below.
ISSUES PRESENTED

Issue 1: The Legislatures narrow statement of original jurisdiction in Section 24 of
House Bill 3 is constitutionally valid and should be exercised here. The
jurisdiction conferred here falls within the scope of this Courts long-standing
original jurisdiction to issue mandatory writs against state officials, granted by
Texas Government Code 22.002 in accordance with Article V, 3 of the
Texas Constitution, and all mandamus requirements are satisfied in this case.

Issue 2: The revised franchise tax violates the Texas Constitution (specifically, the
Bullock Amendment) because it is a general law enacted by the Legislature
without voter approval that imposes a tax on a natural persons share of
partnership income.

Issue 3: A. Relators equal and uniform taxation claim is not beyond the scope of
House Bill 3, Section 24s statement of original and exclusive jurisdiction
because nothing in the plain language of that section limits the type of
constitutional challenges that may be brought against the revised franchise tax
in this Court.
3

B. Relators request to recover their costs and attorneys fees is not beyond the
scope of House Bill 3, Section 24s statement of original and exclusive
jurisdiction because the plain language of that section allows this Court, in
exercising its original writ power, to grant declaratory relief, and this Court has
recognized its correlative authority to issue additional relief to make its writ of
mandamus effective. The Declaratory Judgment Act (a remedial statute
available when the Court otherwise has jurisdiction) expressly allows for
recovery of ones costs and attorneys fees.

3
By its Order of August 22, 2011, this Court instructed Relators to not brief the merits of
their Original Petitions Issues 2 and 3 but, instead, to brief only whether these claims fall within
the scope of the Courts jurisdiction under House Bill 3, Section 24. Relators have complied
with that Order but do not intend to waive the merits of Issues 2 and 3. Relators will brief the
merits of these issues upon request from the Court.

1
STATEMENT OF FACTS

I. HISTORY OF THE BULLOCK AMENDMENT.

Texas faced a $4.6 billion budget shortfall in 1991.
4
Members of Texass 72
nd

Legislature considered a variety of new taxes to balance the budget. Among these were a
personal income tax, a corporate income tax, and an income tax on all businesses,
including partnerships.
5
The Legislature and members of the public fiercely debated
these proposals.
6

The Regular Session of the 72
nd
Legislature ended without it passing any of the
new tax proposals.
7
Governor Ann Richards called a special session to balance the
budget. Early in the special session, the House Ways & Means Committee adopted H.B.

4
J. Michael Kennedy, Doomsday Budget Shows Texas the Cost of Not Raising Taxes: A
Huge Deficit Looms as a Result of Court-Ordered Funding of Social Services. The Unthinkable
May Occur: An Income Levy, L.A. Times, May 22, 1991 (Supp. Appx. 4); Bullock Details Tax
Plan, Income Levy Could Reduce Other State Fees, Proposal Says, Dallas Morning News, Mar.
29, 1991 (Supp. Appx. 5); Clay Robison, Income Tax Bill Would Lift Burden From Poor,
Legislator Says, Houston Chronicle, Apr. 24, 1991 (Supp. Appx. 6).
5
Mark Tatge, Corporations Brace for State Income Tax, Dallas Morning News, Mar. 23,
1991 (Supp. Appx. 7); Bullock Details Tax Plan, Income Levy Could Reduce Other State Fees,
Proposal Says, Dallas Morning News, Mar. 29, 1991 (Supp. Appx. 5); Ross Ramsey, House
Leaders Study Variety of Possibilities for New Tax Plan, Houston Chronicle, Jul. 31, 1991
(Supp. Appx. 8); Ross Ramsey, Taxes for Cigarettes, Gas May Be Increased/Hybrid Corporate
Levy Also Considered, Houston Chronicle, Aug. 8, 1991 (Supp. Appx. 9); Ross Ramsey and
R.G. Ratcliffe, Grapping with Texas Finances/Senate OKs State Budget, Tax Measure/Deadline
Looms Tonight for House to Follow Suit, Houston Chronicle, Aug. 13, 1991 (Supp. Appx. 10).
6
Michele Kay, Tax Issue Drawing Little Agreement, Austin American-Statesman, Mar. 24,
1991(Supp. Appx. 11); Franchise Tax on Small Firms Opposed, Dallas Morning News, Jul. 25,
1991 (Supp. Appx. 12); Tax Reform: Lawmakers Should Revamp the Franchise Tax, Dallas
Morning News, Jul. 31, 1991 (Supp. Appx. 13); Laylan Copelin, Tax Bill Heightens Old Fears,
Austin American-Statesman, Aug. 4, 1991 (Supp. Appx. 14).
7
Lt. Governor Bob Bullock never filed his proposed personal and business income tax
bills. The House Ways & Means Committee did not pass either Representative Hurys income
tax on corporations, partnerships, and all other businesses (H.B. 1553) or Representative
Garfields personal income tax (H.B. 250).

2
11.
8
The Bill included a proposal to significantly expand the franchise tax. The Bill
proposed an earned surplus component to the franchise tax calculation, which added a
net income base to the franchise tax. The Bill also proposed imposing the franchise tax
on non-corporate entities, including partnerships, joint ventures, [and] business
associations.
9

The Senate did not accept the Houses plan. Lieutenant Governor Bob Bullock
(Bullock) and a majority of the Texas Senate sent a letter to Governor Richards and
House Speaker Gibson Lewis pledging to oppose an income tax on partnerships and other
unincorporated businesses because such a tax [was] really a tax on personal income that
only applies to some persons.
10
In this pledge letter, they noted that a narrow income
tax on independent business men and women is no more acceptable to the public than a
broad based income tax.
11

Around the same time, Bullock sent a memo to Governor Richards entitled
Corporations and Partnerships: Apples and Oranges in Law and Taxes, in which he
opposed the imposition of the franchise tax on unincorporated businessesexpressly
including limited partnershipsbecause a corporate tax applied to non-corporate
businesses would actually tax the incomes of Texans in business for themselves.
12

8
Tex. H.B. 11, 72th Leg., 1st C.S. (1991).
9
House Committee Report on HB 11, 72
nd
Legislature, First Called Session, 1991 (Supp.
Appx. 15).
10
Bob Bullock, et. al. to Ann Richards and Gibson Lewis, Jul. 23, 1991, Bob Bullock
Collection, Lt. Governor Series, 1991-1992, Correspondence, Elected Officials, Gov. Ann
Richards, Baylor Collections of Political Materials, Baylor University, Waco, Texas (Supp.
Appx. 16).
11
Id.
12
Bob Bullock to Ann Richards, Jul. 19, 1991, Bob Bullock Collection, Lt. Governor

3
Newspapers around the State also published an op-ed piece by Bullock in which he
wrote, A corporate tax applied to non-corporate businesses would actually be the same
as an income tax on Texans in business for themselves.
13

Ultimately, Bullock and the Senators prevailed, and the 72
nd
Legislature chose not
to tax partnerships and other unincorporated businesses. Instead, the State modified the
franchise tax by adding a corporate net income tax.
14

In the wake of these political battles, Bullock and many of the Senators who had
signed the pledge letter opposing a tax on partnerships authored an amendment to the
Texas Constitution, which was adopted in the next legislative session.
15
This amendment,
which has popularly become known as the Bullock Amendment, states:
A general law enacted by the legislature that imposes a tax on the net
incomes of natural persons, including a persons share of partnership
and unincorporated association income, must provide that the portion
of the law imposing the tax not take effect until approved by a majority
of the registered voters in a statewide referendum held on the question
of imposing the tax.
16

Series, 1991-1992, Correspondence, Elected Officials, Gov. Ann Richards, Baylor Collections of
Political Materials, Baylor University, Waco, Texas (emphasis added; italics in original) (Supp.
Appx. 17).
13
See, e.g., Bob Bullock, Corporations and Partnerships Should Not Be Taxed the Same,
Austin American-Statesman, Aug. 1, 1991 (Supp. Appx. 18); Bob Bullock, Leave Corporations
Alone, Dallas Morning News, Aug. 4, 1991 (Supp. Appx. 19). Both articles are identical, though
the newspapers published them under different titles.
14
Tex. H.B. 11, 72
nd
Leg., 1st C.S., Article 8 (1991); Ross Ramsey, Legislators OK $34.6
Billion Budget, Houston Chronicle, Aug. 11, 1991 (The tax bill includes creation of a hybrid
corporate income tax to replace the states business franchise tax . . .) (Supp. Appx. 20).
15
Tex. S.J.R. 49, 73
rd
Leg. (1993). S.J.R. 49, which proposed the Bullock Amendment, has
25 listed authors and co-authors. Fourteen of these authors and co-authors signed the pledge
letter.
16
TEX. CONST. ART. VIII, 24(a) (Supp. Appx. 21) (emphasis added).

4
Texas voters overwhelmingly approved the amendment on November 2, 1993 by a vote
of 775,822 to 343,638.
17

II. THE ENACTMENT OF HOUSE BILL 3 IN 2006 MADE SWEEPING REVISIONS TO
TEXASS BUSINESS TAX SYSTEM.

Less than a decade later, the State found itself in financial peril once again. To
address this problem in late 2005, Governor Perry charged the Texas Tax Reform
Commission (the Commission) with the task of modernizing the Texas tax system,
providing long-term property tax relief, and finding new financing for the public school
system.
18
The 24 members of the Commission included 22 members of the business
community. While these individuals represented a variety of industries in Texas, over
half came from capital-intensive industries.
19
The service industry had only one
representative, a partner in a Big Four accounting firm.
The Commission prepared a report noting that, while the service industry had
grown substantially over the past decade, it paid relatively little state and local tax per
employee. In contrast, while the capital-intensive industries had lost employees, they
contributed a relatively large amount of taxes per employee.
20
Consequently, the

17
Legislative Reference Library of Texas, SJR 49, 73rd Regular Session, Election Details
available at
http://www.lrl.state.tx.us/legis/billsearch/amendmentDetails.cfm?amendmentID=516&legSessio
n=73-0&billTypedetail=SJR&billNumberDetail=49 (last visited Sept. 1, 2011) (reporting that
the amendment was adopted by a vote of 775,822 to 343,638) (Appx. 7).
18
Press Release, Office of the Governor, Gov. Perry Names 24-Member Texas Tax Reform
Commission (Nov. 4, 2005), available at http://governor.state.tx.us/news/appointment/5077/
(Supp. Appx. 22).
19
Five of the members had significant ties to construction and real estate; four had
significant ties to the oil and gas industry; three had significant ties to manufacturing; and two
had significant ties to inventory-intensive retail.
20
Texas Tax Reform Commission, Tax Fairness: Property Tax Relief for Texans, March

5
Commission recommended imposing the Texas franchise tax on partnerships because
many businesses in the service industry operated as partnerships.
21
Along with this
report, the Commission drafted most of House Bill 3.
22

On April 17, 2006, a few weeks after the Commission issued its report and draft
legislation, a special session was called to consider House Bill 3.
23
During the next two
and a half weeks, our Representatives hurriedly pushed House Bill 3 through the House
and the Senate, forcing its swift enactment to comply with the deadlines set by this Court
in Neeley v. West Orange-Cove Consol. Independent School Dist., 176 S.W.3d 746 (Tex.
2005) (modifying injunctive deadline for State to cure constitutional defects in public
school financing to be June 1, 2006).
24
House Bill 3 was passed by the House on April
26, and by the Senate on May 2, 2006.
25
There was no time for amendment between the
House and the Senates passage.
26
The Governor signed the Bill into law on May 19,
2006, with the various sections to take effect on June 1 or September 1, as designated
within the Bill.
27

29, 2006, pg. 14, available at
http://govinfo.library.unt.edu/ttrc/files/TTRC_report.pdf. (Supp. Appx. 23)
21
Id. at 18.
22
Id. at 16. See also the draft of the Commissions legislation, available at
http://govinfo.library.unt.edu/ttrc/files/tax_reform_bill.pdf. (Supp. Appx. 24).
23
Press Release, Office of the Governor, Gov. Perry Announces Special Session of
Legislature (April 17, 2006), available at http://governor.state.tx.us/news/press-release/2465/.
(Appx. 3); See also Appx. 2.
24
Summary of Bill Stages on HB 3, available at
http://www.legis.state.tx.us/billlookup/BillStages.aspx?Leg. Sess=793& Bill=HB3;
and Summary of Actions on HB 3, available at
http://www.legis.state.tx.us/billlookup/Actions.aspx?LegSess=793&Bill=HB3. (Appx. 2).
25
Appx. 2.
26
Id.
27
Id.; see also Appx. 1.

6
House Bill 3 resulted in the codification of several additions and amendments to
Chapter 171 of the Texas Tax Code. Unquestionably, the most drastic change made by
these amendments was the extension of the franchise tax to general partnerships and
limited partnerships, including Allcat. While these amendments also changed the
formula for calculating the franchise tax, the tax remains one imposed on net income.
Just because the Legislature eliminated some of the deductions that were previously
allowed under the corporate net income tax, the Legislature did not fundamentally
transform the character of the tax from being one that is imposed on net income. The fact
that the revised franchise tax remains one imposed on net income is clear in light of the
common definition of a net income tax, which Texas and many other states have adopted.
III. BACKGROUND OF RELATORS, ALLCAT AND MR. WEAKLY.

Allcat is a Texas limited partnership headquartered in Boerne, Texas.
28
Some of
Allcats partners are natural persons.
29
Plaintiff John Weakly is one such natural
person.
30
Allcat provides insurance adjustment services to several national and regional
insurance carriers that insure real property improvements.
31
Allcat inspects real property
to determine the cause of the damage and the need and costs of the required repairs.
32

Allcat is also available to negotiate the costs and methods of repair or replacement with

28
Affidavit of John Weakly, 4 (Appx. 6).
29
Id., 5.
30
Id.
31
Id., 6.
32
Id., 7.

7
the insured and the insureds contractor and, in many cases, does so.
33
Allcat performs its
services using independent adjusters.
34

Allcat timely filed its 2008 and 2009 Texas Franchise Tax Reports (the Reports)
and timely paid the franchise taxes that were shown due on those reports.
35
Allcat also
paid 2008 and 2009 franchise taxes under protest totaling Allcat $96,039.
36

As a result of the imposition and payment of those Texas franchise taxes, Allcats
natural person partners, such as Mr. Weakly, financially suffered in two ways, which we
establish later in this brief: First, they indirectly incurred those taxes in proportion to
their respective percentages of profit and loss interests in Allcat.
37
Second, the values
and liquidation rights of their investments in Allcat fell in direct proportion to their
respective shares of the Texas franchise tax payments.
38
As Relators, Allcat and Mr.
Weakly bring this original mandamus proceeding asking the Court to exercise its original
writ power against the Comptroller and Attorney General. The need for such relief is
rooted in Relators constitutional challenge to the revised franchise tax statutes.
SUMMARY OF ARGUMENT

In 2006, within Section 24 of House Bill 3, our Legislature validly stated that this
Court has exclusive and original jurisdiction over a challenge to the constitutionality of
[the revised franchise tax under Texas Tax Code Ch. 171] . . . and may issue injunctive or

33
Id.
34
Id., 8.
35
Id., 28.
36
Id., 29.
37
See section II(C)(5), infra.
38
Id.

8
declaratory relief in connection with the challenge. Without question, when a taxpayer
challenges the constitutionality of a tax statute, the only persons against whom the related
injunctive or declaratory relief would ever be issued are the Comptroller and Attorney
General, as the executive officers of this State responsible for administration and
enforcement of taxes. This Courts original and exclusive jurisdiction to issue a writ of
mandamus or injunction, or any other mandatory or compulsory writ or process, against
any of the officers of the executive departments of the government of this state . . . .,
especially when the matter is of State-wide importance, is well-recognized under
Government Code 22.002. This Court has repeatedly acknowledged section 22.002 as
a valid exercise of this Courts authority under Article V, 3 of the Texas Constitution,
which expressly allows the Legislature [to] confer original jurisdiction on the Supreme
Court to issue writs of quo warranto and mandamus in such cases as may be specified,
except as against the Governor of the State. Hence, when the Legislature enacted
Section 24 of House Bill 3, it clarified a narrow exercise of this Courts pre-existing
jurisdictional power, which has long been recognized as valid under our constitution.
Because the requirements for issuing a mandatory writ against the Comptroller and
Attorney General are satisfied here, this Court should exercise its jurisdiction to grant the
relief requested by Relators.
Upon exercising this jurisdiction, this Court should find that the revised franchise
tax violates Article VIII, Section 24(a) of the Texas Constitution (the Bullock
Amendment) because it is a general law enacted by the Legislature that imposes a tax on
a natural persons share of partnership income, which Texas voters never approved. The

9
Bullock Amendments text, as well as its history and public statements by its authors,
reflect that the amendment is properly understood as precluding the revised franchise tax
because it is exactly the type of tax Texas voters demanded the right to approve. It is (1)
a net income tax (2) imposed on a natural persons share of partnership income.
First, the revised franchise tax is a net income tax because it is imposed on net
income. Net income is defined by the Tax Code and other sources as (a) gross income
(b) less one or more deductions that are not specifically and directly related to particular
transactions. The revised franchise tax is calculated by taking (a) the sum of federal
gross income, as reported on the entitys federal returns, (b) less one or more deductions
that are not specifically and directly related to particular transactions.
Second, the revised franchise tax is imposed on a natural persons share of
partnership income. The Texas Business Organizations Code establishes that each
partner owns a share of the partnerships net income. As a result, a tax directly imposed
on a partnerships net income is also imposed on each individual partners net income
share. In light of the plain language of the Bullock Amendment, the clear intent of its
authors, and the rules of statutory construction, this Court should not construe the
Bullock Amendment to reach only those instances where a natural person is directly
taxed on his or her share of partnership income. Instead, the proper construction of the
Bullock Amendment also precludes (in the absence of voter approval) imposition of an
income tax directly on a partnership because such a tax is really a tax on personal
income that only applies to some persons.

10
Finally, the original and exclusive jurisdiction given to this Court in Government
Code 22.002 and clarified in 2006s House Bill 3, Section 24, encompasses (a)
Relators equal and uniform taxation claim, and (b) Relators request for costs and
attorneys fees under the Declaratory Judgment Act. First, House Bill 3, Section 24 does
not limit the types of constitutional challenges to the revised franchise tax over which this
Court may exercise its original jurisdiction. This necessarily includes both facial and
as-applied challenges. Second, this Court is empowered to award Relators costs and
attorneys fees. Our legislature clarified that, when exercising its original jurisdiction in
the context of a constitutional challenge to the revised franchise tax (as here), this Court
may award declaratory relief. This Court has previously recognized its correlative
authority to issue other relief to make its writ of mandamus effective. The Uniform
Declaratory Judgment Act (UDJA) is a remedial statute that may be utilized where this
Court otherwise has jurisdiction, and it expressly allows for the recovery of costs and
attorneys fees. The Legislature was aware of this when it enacted House Bill 3, Section
24. Hence, the Legislature intended (and validly provided) a means for such recovery by
expressly incorporating declaratory relief into House Bill 3, Section 24.
ARGUMENT

I. THE STATEMENT OF ORIGINAL JURISDICTION IN SECTION 24 OF HOUSE BILL 3
IS VALID UNDER ARTICLE V, SECTION 3 OF THE TEXAS CONSTITUTION.

In 2006, our Legislature clarified that taxpayers must initiate in this Court any suit
against the Comptroller and Attorney General seeking injunctive or declaratory relief
based on a constitutional challenge to the revised franchise tax. This mandate is valid

11
because it is a narrow exercise of the Legislatures well-settled authority under Article V,
3 of the Texas Constitution. The essential nature of the relief that this Court may award
a taxpayer under Section 24 of House Bill 3 is that of a mandatory writ compelling state
officers to do or refrain from doing some act.
A. Our Legislature is Authorized by the Plain Language of Texas
Constitution Article V, 3 to Confer Original Jurisdiction on this
Court to Issue Mandatory Writs Against State Officers, and the
Legislature did so in Section 22.002 of the Government Code.

Since 1891, the Texas Constitution has stated that the Legislature may confer
original jurisdiction on the Supreme Court to issue writs of quo warranto and mandamus
in such cases as may be specified, except as against the Governor of the State. Tex.
Const. Art. V, 3. Pursuant to this constitutional grant of authority, the Legislature
enacted Texas Government Code 22.002, which states in part:
Only the supreme court has the authority to issue a writ of mandamus
or injunction, or any other mandatory or compulsory writ or process,
against any of the officers of the executive departments of the government
of this state to order or compel the performance of a judicial, ministerial, or
discretionary act or duty that, by state law, the officer or officers are
authorized to perform.

Tex. Govt. Code 22.002(c) (emphasis added).

This Court has long recognized the validity of 22.002 and has repeatedly held
that this Court is the only available forum when a relator seeks to compel an executive
officer to perform duties imposed by law. A & T Consultants, Inc. v. Sharp, 904 S.W.2d
668, 672 (Tex. 1995) (orig. proceeding) is the seminal case on this issue. There, relator
sought a writ of mandamus compelling the Comptroller to disclose information regarding
the states franchise taxpayers. Id. at 670. The Comptroller urged that a district court is

12
the proper forum for [open records]-based mandamus actions, but this Court disagreed.
Id. at 671-72. This Court held that, although district courts generally have original
mandamus jurisdiction, such is not the case when the respondent is an executive officer
named by the constitution, [including] . . . the comptroller of public accounts, . . . and the
attorney general. Id. at 672 (citing TEX. CONST. art. IV, 1). For mandamus
proceedings against [these] executive officers, sections 3 and 8 in article V of the
constitution allowed the legislature to create an exception to district courts ordinary
exclusive original jurisdiction. Under the authority of these two sections in article V, the
legislature conferred exclusive original jurisdiction on this Court over mandamus
proceedings against executive officers, except for the governor, in section 22.002(c) of
the Government Code. Based on this clear and valid grant of authority, this Court
issued a conditional writ of mandamus compelling the Comptroller to disclose some of
the requested information. Id. at 671.
This Court recently affirmed A & T Consultants in In re Smith, 333 S.W.3d 582,
585 (Tex. 2011). There, this Court exercised original jurisdiction to issue a writ of
mandamus against the Comptroller compelling her to increase the amount of
compensation owed to relator, a wrongfully-imprisoned person who had accepted the
Comptrollers reduced compensation under protest. Id. at 588. In so holding, this Court
noted that the Comptroller has no discretion to misinterpret the law and, when the right to
relief turns on an issue of statutory construction, this Courts review is de novo. Id. at
585. Furthermore, A & T Consultants based its holding on a long line of cases
concluding that this Court has exclusive original jurisdiction over mandamus proceedings

13
compelling executive officials to perform their duties. 904 S.W.2d. at 672-73 (listing
numerous cases in which the Court has followed the dictates of section 22.002(c) of the
Government Code by exercising our jurisdiction in mandamus proceedings in which an
executive officer has allegedly failed to perform his legal duties.).
B. The Original Jurisdiction Conferred in Section 24 of House Bill 3 is
Within the Constitutional Scope of Original Jurisdiction Previously
Granted by the Legislature in Government Code 22.002 for this
Court to Issue Mandatory Writs Against State Officers.

This Court must presume that when the Legislature enacted Section 24 of House
Bill 3, it was fully aware of its authority under Art. V, 3 of the Texas Constitution, the
limits of that authority, and the case law interpreting Texas Government Code 22.002.
A & T Consultants, 904 S.W.2d at 673 ([I]t must be presumed that the legislature,
aware of the rules of law applicable to the subject, intended to confer such jurisdiction as
was necessary to that end) (quoting Pickle v. McCall, 24 S.W. 265, 265-66 (Tex. 1893)).
It is also without question that the Legislature, in enacting Section 24 of House Bill 3,
would have understood that any suit such as thiswhich seeks a mandatory writ
compelling the tax code to be administered and enforced in a constitutional manner
would have to be brought against the Comptroller and the Attorney General, as the two
executive officers of this State who are charged with the administration and enforcement
of the tax code. TEX. CONST. art. IV, 1; Tex. Tax Code Ann. 112.051-053 (West
2009). Therefore, just as in A & T Consultants, the many cases it was based on, and the
In re Smith affirmation of that holding, this Court has valid, original and exclusive
jurisdiction to issue a writ of mandamus against the Comptroller and Attorney General,

14
and it should exercise that jurisdiction.
While Section 24 of House Bill 3 does not use the term mandamus, that is
clearly the nature of the relief it authorizes. Mandamus simply means a writ issued by
a superior court to compel . . . a government officer to perform mandatory or purely
ministerial duties correctly. BLACKS LAW DICTIONARY 973 (7th ed. 1999). Hence, the
permission given in Article V, 3 of the Texas Constitution for the Legislature [to]
confer original jurisdiction on the Supreme Court to issue writs of . . . mandamus . . .,
broadly allows for a grant of original jurisdiction to issue mandatory writs compelling
action or inaction by a state official. In recognition of this broad scope, the Legislature
conferred exclusive and original jurisdiction on this Court to issue a writ of mandamus
or injunction, or any other mandatory or compulsory writ or process, against any of the
officers of the executive departments of the government of this state . . . . Tex. Govt
Code 22.002(c). This Court recently recognized the broad scope of its mandamus
power under Article V, 3 and Section 22.002(c). In In re Reece, 341 S.W.3d 360, 374
(Tex. 2011), the Court held:
[O]ur constitutional and statutory grant of mandamus jurisdiction is broad. .
. . Mandamus review of significant rulings in exceptional cases may be
essential to preserve important substantive and procedural rights from
impairment or loss. . . . Mandamus is a remedy not restricted by rigid
rules that are necessarily inconsistent with the flexibility that is the
remedy's principle virtue. . . . . And mandamus is a proper vehicle for this
Court to correct blatant injustice that otherwise would elude review by the
appellate courts.

Id. (internal citations omitted). The instant case (based on a constitutional challenge to a
state-wide tax) is precisely the type of exceptional case affecting important

15
substantive rights that would otherwise elude review unless this Court were to
exercise its original jurisdiction to correct the unconstitutional actions of the Comptroller
and Attorney General through issuance of a writ of mandamus.
Furthermore, in Love v. Wilcox, 28 S.W.2d 515 (Tex. 1930) (Supp. Appx. 25),
this Court recognized that its mandamus authority may be used to prevent a state
officials enforcement of an invalid resolution, and concluded that its jurisdiction
conferred the ability to issue prohibitive injunctive relief consistent with the writ of
mandamus. There, relator sought a writ of mandamus compelling respondents (the State
and County Democratic Executive Committees) to print relators name on the
Democratic Party primary ballot for Governor, and ordering that respondents desist and
refrain from enforcing certain resolutions adopted by the Committee, which Relator
argued were legally void. Id. at 517. This Court examined legislative history to
determine that both the House and the Senate had considered and denied respondents the
right to exclude someone from participation in a primary race based on his or her
affiliation with another party. Id. at 524. Nevertheless, that was the effect of the
respondents resolutions, to the detriment of relator. Id. Because these resolutions
directly violated the legislative intent to prohibit such a law, this Court held that the
resolutions were void and unenforceable. Id.
In Love, the Courts jurisdiction was based on a provision in Senate Bill 16 of
1930 in which the Legislature conferred original jurisdiction on the Supreme Court to
issue a writ of mandamus to compel the performance of election laws. Id. at 518.
Respondents claimed that this legislative grant of jurisdiction was invalid. Id. This Court

16
primarily disagreed. Id. at 518, 521 (citing TEX. CONST. art. V, 3).
39
In enforcing the
act within the bounds of the constitution, this Court concluded:
[T]he law entitles relator to the relief he seeks to the extent of awarding to
him a mandamus, commanding and requiring respondents to proceed with
their statutory duties as though the [legally invalid] resolutions of February
1, 1930, had not been adopted and specifically commanding respondents
and each of them to desist and refrain from enforcing said resolutions in
certifying names of candidates for the 1930 Democratic primaries and
requiring respondents to be governed by this opinion in the performance of
the duties to which it relates.

Id. at 526 (emphasis added). Just as the Court did in Love, the Court in this case should
issue a mandatory writ ordering the Comptroller and Attorney General to refrain from
enforcement of the unconstitutional tax provision.
40

In Lane v. Ross, 249 S.W.2d 591 (Tex. 1952), this Court recognized Love v.
Wilcox as having validly granted injunctive relief in connection with the writ of
mandamus. In cases in which this court's jurisdiction to issue a writ of mandamus has
attached, the court necessarily has the correlative authority to issue a writ of injunction to
make the writ of mandamus effective. Id. at 593. In Lane, however, no injunctive relief
was warranted because relator could not establish a right to mandamus. Justice Wilson,
dissenting, elaborated on the interrelation of mandamus and injunctive relief:

39
Still, this Court held that, to any extent the legislative act attempted to confer broader
authority than that granted by the constitution, that portion of the act was void and severable. Id.
at 522.
40
The analysis of legislative history in Love is especially compelling here. In Love, the
Court explained that the House and Senate had made clear their intention to not allow political
committees the right to do what was done by the respondents resolution. The resolution was
hence invalid and could not be enforced. Id. at 524. This situation is parallel to ours, where the
Legislature expressly stated its intent, by passage of the Bullock Amendment, to not allow a tax
on a natural persons share of partnership income to take effect unless it was first approved by a
majority of Texas voters. Because the revised franchise tax flies in the face of this clear
legislative intent (and constitutional enactment), it should be deemed unenforceable.

17
[A]n examination of the long history of both [mandamus and injunction]
demonstrates that there has always been a borderland of overlapping
functions. This Court has in the past used its original jurisdiction of
mandamus to restrict a public official from illegally performing his duty. . .
. While mandamus, in general, is a remedy whereby a person or officer is
required to do something which he wrongfully declines to do, nevertheless
in exceptional cases it may properly be given a restraining effect or one of
reversal or amendment of a previous act.'. . . . To think in terms of the need
for two separate writs [of mandamus and injunction] is a reversion to the
rigid formulism of the early common law. . . . [Mandamus should be
defined in our jurisdiction] as including both the positive and the negative
of the same command.

Id. at 596-97 (emphasis added) (internal citations omitted); see also State v. Ferguson,
125 S.W.2d 272 (Tex. 1939) (It is a generally accepted rule that injunctive relief may be
granted to prevent the enforcement of an unconstitutional statute when its enforcement
will result in irreparable injury to property rights. An unconstitutional statute is no
statute at all, and the court may issue injunctive relief to prevent the officer from
proceeding under the unconstitutional rule.).
Notably, Love, Lane, and Ferguson predated the enactment of Section 22.002(c),
which now confirms this Courts express authority to issue injunctive relief (affirmative
or restrictive) in connection with its mandamus jurisdiction. These cases are important,
however, to confirm this Courts long-standing interpretation of its mandamus
jurisdiction to include the authority of issuing correlative injunctive relief. Specifically,
in Love and Ferguson, restrictive injunctive relief was employed within the context of a
mandamus challenging the legal validity of a law so as to order that the state officials
refrain from enforcement of the invalid or unconstitutional law. In light of Section

18
22.002(c)s enactment, the Courts jurisdiction to issue such relief in this case is even
more clear.
Consequently, the ability of this Court to compel the Comptroller and Attorney
General to administer and enforce the tax code in a constitutional manner, through
issuance of injunctive and declaratory relief under Section 24 of House Bill 3, falls within
the scope of this Courts broader, preexisting authority to issue mandatory writs against
state officials, which is conferred by Government Code 22.002 in accordance with
Article V, 3 of the Texas Constitution. More specifically, this Court is authorized to
grant injunctive and/or declaratory relief in this suit as is necessary to enforce a writ of
mandamus against the Comptroller and Attorney General based on their unconstitutional
administration and enforcement of the tax code.
C. Relators Instant Suit Satisfies the Standards for Granting Mandamus
Relief.

Based on the foregoing, it clear that the Legislatures statement of original
jurisdiction in Section 24 of House Bill 3 is constitutionally valid. The next question is
whether an exercise of this jurisdiction is warranted here. Relators urge this Court to
answer that question in the affirmative because (a) the Comptroller and Attorney General
are executive officers who have abused their discretion by administering and enforcing an
unconstitutional tax in an unconstitutional manner, and (b) Relators have no other remedy
at law. See Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (to obtain mandamus
relief, the relator must demonstrate a clear abuse of discretion for which there is no
adequate remedy at law).

19
1. The Comptroller and Attorney General, as executive officers of this
State, have abused their discretion by administering and enforcing an
unconstitutional tax in an unconstitutional manner.

Without question under A & T Consultants, the Comptroller and Attorney General
are executive officers subject to this Courts original jurisdiction to issue writs of
mandamus. 904 S.W.2d at 672. The Comptrollers and Attorney Generals most basic
duty and oath of office is to preserve, protect and defend the Constitution of Texas.
TEX. CONST. art. XVI, 1. Both have violated this duty by administering and enforcing
the revised franchise tax against Relators and other similarly-situated taxpayers because
the tax violates the Texas Constitution, as explained below.
2. Relators have no other adequate remedy at law because the
Legislature has mandated them to initiate their suit in this Court.

Relators have no adequate remedy at law because the Legislature has conferred
exclusive and original jurisdiction on this Court to decide this dispute. Tex. Govt Code
22.002(c); House Bill 3, 24 (2006). Here, the Legislature expressly mandated that if a
taxpayer contends the revised franchise tax (as enacted in House Bill 3 of 2006) is
unconstitutional, and the taxpayer seeks a mandatory writ to declare it so and to enjoin
the Comptroller and Attorney General from administering and enforcing it, then the
taxpayer has no option but to initiate its original proceeding in this Court. In light of the
potentially significant impact of a constitutional challenge to House Bill 3 on state
finances, it is evident that the Legislature believed it was imperative to obtain a swift
resolution to such challenges and therefore, limited taxpayers in this narrow circumstance
to pursuing such claims directly with this Court. Accordingly, unless their Petition is

20
granted by this Court, Relators have no adequate remedy at law.
As recently explained by this Court, its original mandamus jurisdiction should be
employed where a statutory gap prevents the relator from obtaining adequate appellate
relief. In re Reece, 341 S.W.3d 360, 374-75 & n.21 (Tex. 2011) (discussing this Courts
prior grants of mandamus in certain cases where there was no right of interlocutory
appeal before the legislature amended Civil Practice and Remedies Code to close this
gap). This is such a case: Because the grant of jurisdiction over this proceeding lies
exclusively in this Court, Relators have no other remedy available.
The Legislature validly granted this Court original and exclusive jurisdiction over
this proceeding, and Relators complied with the legislative mandate to initiate its
proceeding before this Court. As a result, this Court should exercise jurisdiction and hear
this case.
II. THE REVISED FRANCHISE TAX VIOLATES THE TEXAS CONSTITUTION BECAUSE
IT TAXES A NATURAL PERSONS SHARE OF PARTNERSHIP INCOME, BUT IT WAS
NOT APPROVED BY A MAJORITY OF TEXAS VOTERS.

This case turns on the proper construction of Article VIII, Section 24(a) of the
Texas Constitution, known as the Bullock Amendment, and of the revised franchise tax
law enacted in House Bill 3 of 2006, both of which are detailed below. Under the proper
construction of these statutes, this Court should conclude that the revised franchise tax is
an income tax and, as such, it is subject to the Bullock Amendment and required to be
approved by a majority of Texas voters before it can be effective.
This Court has written, [i]t is our duty in construing the Constitution to ascertain
and give effect to the plain intent and language of the framers of a constitutional

21
amendment and of the people who adopted it. Gragg v. Cayuga Indep. Sch. Dist., 539
S.W.2d 861, 865-66 (Tex. 1976). In determining that intent, this Court has also identified
the following factors:
Generally it may be said that in determining the meaning, intent, and
purpose of a law or constitutional provision, the history of the times out of
which it grew, and to which it may be rationally supposed to bear some
direct relationship, the evils intended to be remedied, and the good to be
accomplished, are proper subjects of inquiry.

Travelers Ins. Co. v. Marshall, 76 S.W.2d 1007, 1012 (Tex. 1934). This view is
consistent with the cannons of statutory construction set forth by our Legislature and
regularly employed by this Court. Pursuant to the Code Construction Act, whether or not
a statute is considered ambiguous on its face, this Court may consider among other
matters the:
(1) object sought to be attained;
(2) circumstances under which the statute was enacted;
(3) legislative history;
(4) common law or former statutory provisions, including laws on the
same or similar subjects;
(5) consequences of a particular construction;
(6) administrative construction of the statute; and
(7) title (caption), preamble, and emergency provision.

Tex. Govt Code Ann. 311.023 (West 2009); see e.g., City of Houston v. Clark, 197
S.W.3d 314 (Tex. 2006); State v. Hodges, 92 S.W.3d 489 (Tex. 2002).
Chief Justice Jefferson recently explained the useful tool that legislative history
can provide for the Courts statutory analysis, even if not expressly relied on to
construe the meaning of a statutes plain text:
Legislative history is not always a villain. It is central to the process by
which the Legislature enacts the laws that govern society. . . . We look first

22
to the text. When the text is not clear, we explore extrinsic aids, including
legislative history. . . . [Even when the statute is unambiguous, the Court
may cite to legislative history as part of] a larger discourse, however,
because it is useful to understand what options were available when our
representatives in government enacted policy.

An appellate opinion is . . . part of a dialogue between parties, citizens,
legislators, and judgesa dialogue that provides a historical record of the
relevant controversy. . . . [W]e give not only a conclusion but also a
narrative, by which we seek to legitimize our decision by placing it in
historical context, demonstrating that it is consistent with our notions of
justiceand, indeed, that it comports with the state of the law.

When used in this contextual manner, there is little reason to think
legislative history inappropriate for citation. . . . [B]ackground is given not
because it controls, but because it contextualizes. . . . There is no
justification for placing one enormous, useless hole in our consideration of
a case's history.

Ojo v. Farmers Group, Inc., 54 Tex. Sup. Ct. J. 1068, 2011 WL 2112778, *12-13 (Tex.
May 27, 2011) (Jefferson, C.J., concurring). Relators respectfully urge this Court to
follow Chief Justice Jeffersons analysis in Ojo and consider the larger historical contexts
in which both the Bullock Amendment and the revised franchise tax were passed. See
also Love v. Wilcox, 28 S.W.2d 515, 518-24 (Tex. 1930) (extensively examining
legislative history to determine that respondents resolution violated legislative intent and
was not enforceable).
A. The Bullock Amendment Prohibits Enactment of a General Law
Imposing a Tax on a Natural Persons Income, Including Ones Share
of Partnership Income, Without Approval from a Majority of Voters.

An examination of the Bullock Amendment in light of the factors discussed above
demonstrates that the revised franchise tax is exactly the sort of tax Texas voters expected
the amendment to cover. As described more thoroughly in Relators Statement of Facts,

23
the Bullock Amendment arose out of the heated political battle over the taxation of
Texans personal and business income that occurred in the 1991 First Special Session.
See p. 1-3, supra. In August 1991, the House Ways & Means Committee adopted a bill
that would impose an income tax on partnerships and other unincorporated businesses.
Supp. Appx. 15. Bob Bullock and most of the Senate vehemently and publicly opposed
such a tax. Supp. Appx. 16-19. Ultimately, the bill failed to pass. Less than two years
later, Bullock and many of these senators proposed the Bullock Amendment,
41
requiring
voter approval for such a tax to take effect. Tex. S.J.R. 49, 73
rd
Leg. (1993). Texas voters
embraced the opportunity to vote on any attempt by the State to tax their personal and
business incomes and overwhelmingly approved the amendment on November 2, 1993,
by a vote of 775,822 to 343,638. Appx. 7.
Since 1993, the Bullock Amendment has required approval by a majority of Texas
voters before an income tax, including a tax on an individuals share of partnership
income, may become constitutionally effective:
A general law enacted by the legislature that imposes a tax on the net
incomes of natural persons, including a persons share of partnership
and unincorporated association income, must provide that the portion of
the law imposing the tax not take effect until approved by a majority of
the registered voters in a statewide referendum held on the question of
imposing the tax.

TEX. CONST. art. VIII, 24(a) (emphasis added).

The revised franchise tax (passed in House Bill 3 of 2006 and codified in Texas
Tax Code 171) falls squarely within the purview of the Bullock Amendment. It is

41
S.J.R. 49, which proposed the Bullock Amendment, has 25 listed authors and co-authors.
Fourteen of these authors and co-authors signed the pledge letter.

24
beyond dispute that the revised franchise tax is a general law enacted by the Legislature.
It is beyond dispute that a majority of registered voters did not approve the revised
franchise tax in a statewide referendum. And it is beyond dispute that, based on the
Comptrollers and Attorney Generals abuses of discretion, this tax has unconstitutionally
taken effect in the absence of voter approval. The Comptroller and Attorney General
have been administering, assessing, and collecting the revised franchise tax for at least
four years. Therefore, if this Court concludes that the tax is being imposed on the net
incomes of natural persons, including a persons share of partnership income, then this
Court must conclude that the revised franchise tax violates the Bullock Amendment of
the Texas Constitution.
Notably, the Comptroller previously acknowledged that this test is satisfied.
While the 79
th
Legislature debated House Bill 3 during its third special session, the Office
of the Texas Comptroller publicly expressed great concern that the revised franchise tax
required voter approval under the Bullock Amendment before it could be enacted, or else
this Court would find it unconstitutional. As stated by the Comptroller at that time:
Taxing income from partnerships is strictly prohibited by the Texas Constitution, and I
believe when this portion of HB 3 is challenged in court, the State will lose.
42

42
Letter from Carole Keeton Strayhorn to Rick Perry (May 2, 2006), available at
http://www.window.state.tx.us/news/60502taxplan.pdf (Appx. 9); see also Letter from
Comptroller Carole Keeton Strayhorn to Rick Perry (May 15, 2006), available at
http://www.window.state.tx.us/news/60515letter.html (stating that the revised franchise tax is
an unconstitutional income tax on partnerships and unincorporated associations) (Appx. 8);
Letter to Attorney General Greg Abbott from the Comptroller (Apr. 21, 2006), available at
http://www.window.state.tx.us/news/60421letter.html (stating that the revised franchise tax
would require a referendum under Article VIII, Sec. 24(a), precluding any adoption absent voter
approval.) (Appx. 10).

25
B. The Revised Franchise Tax is an Income Tax.

The applicable legal authorities and rules of statutory construction demonstrate
that the revised franchise tax is an income tax imposed on a natural persons share of
partnership income. This is the precise type of tax that a majority of Texas voters
demanded the right to approve before it could take effect. The Comptroller and Attorney
General have denied this right to the voters and unconstitutionally imposed the tax on
Relators and similarly-situated persons and entities.
1. THE REVISED FRANCHISE TAX SATISFIES ACCEPTED DEFINITIONS
OF INCOME TAX BECAUSE IT ALLOWS FOR THE DEDUCTION OF
INDIRECT EXPENSES.

The Bullock Amendment does not define either income tax or tax on net
income. But the Texas Tax Code does:
Income tax means a tax imposed on or measured by net income including
any tax imposed on or measured by an amount arrived at by deducting
expenses from gross income, one or more forms of which are not
specifically and directly related to particular transactions.

Tex. Tax Code 141.001, art. II, 4 (emphasis added) (Supp. Appx. 26). Notably,
eighteen other states and the District of Columbia adhere to this same definition under the
Multistate Tax Compact.
43
Additionally, this statutory definition of income tax
comports with the terms common definition. Blacks Law Dictionary defines income
tax as [a] tax on an individual or entitys net income and defines net income as

43
These states are Alabama, Alaska, Arkansas, California, Colorado, Hawaii, Idaho,
Kansas, Michigan, Minnesota, Missouri, Montana, New Mexico, North Dakota, Oregon, South
Dakota, Utah, Washington. Like Texas, they have all adopted the Multistate Tax Compact.
Multistate Tax Commission, Member States, available at
http://www.mtc.gov/AboutStateMap.aspx (Supp. Appx. 27).

26
[t]otal income from all sources minus deductions, exemptions, and other tax reductions.
BLACKS LAW DICTIONARY 1497, 779 (8
th
ed. 2004) (emphasis added) (Appx. 11). As
warily noted by the Comptroller at the time of enactment, the revised franchise tax
satisfies both the statutory and common-law definitions of income tax, and likely
would not withstand a constitutional challenge before the Court. Appx. 10.
These accepted definitions of income tax should govern this Courts
interpretation of that phrase in the Bullock Amendment. This Court interprets words in
the constitution as they are generally understood. City of Beaumont v. Bouillion, 896
S.W.2d 143, 148 (Tex. 1995). Additionally, undefined constitutional terms must be
construed in light of the law existing at the time of their adoption. Collins v. Tracy, 36
Tex. 546, 547 (1872). Chapter 141 of the Texas Tax Code included this definition of
income tax in 1993, when the Bullock Amendment was added to the Constitution, and
it still contains this definition today. In fact, the revised franchise tax statute (Texas Tax
Code section 171.1014) expressly references Chapter 141. It is also well-recognized that
[w]ords and phrases [of a statute] shall be read in context and construed according to the
rules of grammar and common usage, while [w]ords and phrases that have acquired a
technical or particular meaning, whether by legislative definition or otherwise, shall be
construed accordingly. Tex. Govt Code Ann. 311.011 (West 2009). This Court often
looks to Blacks Law Dictionary to determine the common definition of words in
constitutional provisions. See, e.g., Republican Party v. Dietz, 940 S.W.2d. 86, 91 (Tex.
1997); Brown v. Meyer, 787 S.W.2d 42, 47 (Tex. 1990); Gragg v. Cayuga Indep.
Sch.Dist., 539 S.W.2d 861 (Tex. 1976).

27
The revised franchise tax is an income tax under these accepted definitions
because it allows for deductions, exemptions, and other tax reductions of indirect
expenses.
44
Succinctly stated, net income is gross income less one or more
deductions that are not specifically and directly related to particular transactions. See
Tex. Tax Code 141.001, art. II, 4; see also BLACKS LAW DICTIONARY at 779 (Appx.
11). Hence, to be an income tax, the calculation must allow for the deduction of
indirect expenses, i.e., expenses that are not specifically and directly related to the
particular transaction in question.
Indirect expenses, which are also referred to as overhead expenses, cannot be
traced to particular transactions; the business incurs the cost regardless of the number or
volume of transactions. Barrons Dictionary of Business Terms defines them:
Overhead indirect expenses of running a business not directly associated with a
particular item or service sold. For example, wages paid to factory workers and
the cost of production materials are direct costs. Electricity, insurance, and
benefits paid to workers are overhead expenses.

Jack P. Friedman, ed., Barrons Dictionary of Business Terms 429 (2d ed. 1994) (Supp.
Appx. 28). Blacks Law Dictionary contains a similar definition:
Overhead Business expenses (such as rent, utilities, or support-staff salaries) that
cannot be allocated to a particular product or service; fixed or ordinary operating
costs also termed administrative expense; office expense.

th
ed. 2004) (Supp. Appx. 29). Thus, under the
accepted definitions, a tax is an income tax when it allows for the deduction of

44
The revised franchise tax allows for deductions in addition to those allowed under the
provisions for cost of goods sold and compensation deductions. See Tex. Tax Code Ann.
171.1011(e), (f), & (g), 171.0021 (West 2009).

28
indirect expenses from gross income.
The revised franchise tax constitutes a net income tax because it allows for the
deduction of indirect (overhead) costs. Both available calculations of the tax base (cost
of goods sold and compensation) allow for overhead deductions. Both calculations
begin with the items of gross income reported on the federal return. From this amount,
both methods provide for the subtraction of one or more deductions that are not
specifically and directly related to particular transactions.
A detailed examination of the formula for calculating the revised franchise tax
illustrates this.
45
First, the entity calculates its federal gross income. To do this, the
entity adds together the revenue amounts it reported on various lines of its federal income
tax return.
46

Next, the entity subtracts deductions available to all entities from federal gross
income to arrive at an amount the statute labels total revenue.
47
Taxpayers deduct
these items on line 9, Deductions from gross revenue, on the Texas Franchise Tax
Report to arrive at Total Revenue on line 10. See e.g. Appx. 6, p. 13.

45
See generally Tex. Tax. Code Ann. 171.101 (West 2009) (Supp. Appx. 30). The
statute also contains an alternate method for calculating the Revised Franchise Tax known as the
E-Z Calculation. Taxable entities may elect this method when their total revenues are $10
million or less. However, the E-Z Calculation is not relevant to determining the constitutionality
of the Revised Franchise Tax because H.B. 3928 provides that if a court finds that the other
methods of calculating the Revised Franchise Tax are unconstitutional, it must invalidate the E-Z
Calculation as well. Act of June 15, 2007, 80th Leg., R.S., H.B. 3928, 39 (Appx. 5).
46
These amounts include gross receipts from a trade or business, dividends, interest, rents
and royalties, capital gains, and other types of gross income. Tex. Tax Code Ann.
171.1011(c)(2)(A) (Supp. Appx. 31); Appx. 4.
47
These deductions include, among others, bad debts, sales commissions, the cost of
securities sold, amounts paid to real property subcontractors, the cost of providing indigent care,
and co-counsel payments to other attorneys. Id. 171.1011(c)(2)(B) & (e)-(r); Appx. 4.

29
Next, the entity calculates two tax bases by subtracting from total revenue more
deductions falling into one of these categories:
Cost of Goods Sold. This category includes both the direct costs of
acquiring and producing goods and indirect costs, such as insurance,
utilities, rent, administrative salaries, payroll and property taxes, and the
like. Id. 171.1012(c)-(d), (f) (Supp. Appx. 32).

Compensation. This category includes the total wages, salaries and benefits
paid to officers, directors, owners, partners, and employees. Id.
171.1013(b) (Supp. Appx. 33). This includes payments to both
production workers and administrative staff.

Id.

Under the cost of goods sold method, section 171.1012(d) specifically provides for
the deduction of indirect expenses: In addition to the amounts includable under
Subsection (c), the cost of goods sold includes the following costs:
the cost of insurance on a plant or a facility, machinery, equipment, or
materials directly used in the production of the goods;

the cost of insurance on the produced goods; and

the cost of utilities, including electricity, gas, and water, directly used in
the production of the goods.

Tex. Tax Code 171.1012(d) (West 2009). Subsection (f) allows more deductions for
indirect costs. It states that a taxable entity may subtract as a cost of goods sold indirect
or administrative overhead costs. Id. 171.1012(f).
48
The subsection provides
examples of these costs, including security services, legal services, data processing
services, accounting services, personnel operations, and general financial planning and
financial management costs.

48
Subsection (f) limits the deduction for indirect expenses to 4% of total indirect or
administrative overhead costs.

30
Administrative staff wages, salaries and benefits are deductible under both the cost
of goods sold and compensation calculations. Tex. Tax Code Ann. 171.1012(f),
171.1013(b) (West 2009). Indeed, the compensation calculation includes no
requirement that any of its costs relate to particular transactions. Tex. Tax Code Ann.
171.1013 (West 2009). It expressly includes the compensation and benefits paid to all
employees, regardless of whether they are direct workers or administrative staff.
Compensation and benefits paid to administrative staff are indirect costs. Supp. Appx.
28-29. Thus, the revised franchise tax constitutes an income tax under either tax base
calculation.
2. THIS COURT SHOULD NOT ALLOW THE LEGISLATURE TO
CIRCUMVENT THE CONSTITUTIONAL REQUIREMENTS OF THE
BULLOCK AMENDMENT BY CHARACTERIZING THE REVISED
FRANCHISE TAX AS ANYTHING OTHER THAN AN INCOME TAX.

The Legislatures unsupported statement in H.B. 3 (Section 27) that the revised
franchise tax is not an income tax does not alter the revised franchise taxs character.
The United States Supreme Court has repeatedly held that a taxs nature and effect, not
Legislative or statutory labeling, ultimately determines its character. In Dawson v.
Kentucky Distilleries & Warehouse Co., 255 U.S. 288 (1921), the U.S. Supreme Court
wrote that [t]he name by which the tax is described in the statute is, of course,
immaterial. Its character must be determined by its incidents . . . Id. at 292. In
Dawson, the State had imposed a tax of 50 cents on each gallon of whiskey removed
from bonded warehouses in Kentucky or transferred in bond from a warehouse in

31
Kentucky to a warehouse in another state.
49
Id. at 289. Kentucky labeled this tax an
annual license tax on the business of manufacturing or owning and storing
whiskey. Id. at 289. The taxpayers argued that the tax was actually a property tax on the
whiskey itself. Id. at 291. The taxpayers further alleged that the tax violated Kentuckys
state constitutional requirements for property taxes. Id. at 294. Kentucky conceded that
the tax would violate Kentuckys state constitutional requirements for property taxes if it
were a property tax. Id. The Supreme Court found that the taxs statutory label as an
annual license tax was not controlling. Id. at 293-294. Instead, the Supreme Court
found that the tax was, in nature and effect, a property tax on the whiskey. Id.
Similarly, in Galveston, Harrisburg & San Antonio Railway Co. v. Texas, the
Supreme Court wrote that [n]either the state courts nor the legislatures, by giving the tax
a particular name or by the use of some form of words, can take away [a courts] duty to
consider its nature and effect. 210 U.S. 217, 227 (1908). There, our Legislature had
imposed a tax on an amount equal to one per cent of [railroads] gross receipts. Id. at
224. By making the tax equal to a certain percentage of gross receipts instead of
imposing the tax directly on gross receipts, Texas argued that the tax was an occupation
tax instead of an unconstitutional gross receipts tax on interstate commerce. Id. The
Supreme Court disagreed. Id. at 227. In doing so, it found that the statutes label as an

49
A bonded warehouse is a warehouse in which one may manufacture or store goods
subject to excise taxes or customs duties without the paying the tax. Instead, the owner of the
goods posts a bond for the tax. The owner may move the goods to other bonded warehouses or
transfer title to the goods to others without paying tax. The goods become subject to tax only
when removed from bond for consumption or export.

32
occupation tax was not controlling. Instead, it found that the statute, in nature and
effect, taxed gross receipts and the Legislatures labels changed nothing. Id.
It is important to follow this precedent because, otherwise, it would be too easy for
the Legislature to circumvent constitutional safeguards such as the Bullock Amendment
simply by labeling a prohibited or restricted tax as something else. A tax is defined by
how it is measured, not by what it is labeled. As the United States Supreme Court put it,
[a] tax on sleeping measured by the number of pairs of shoes you have in your closet is a
tax on shoes. Trinova Corp. v. Michigan Dept of Treasury, 498 U.S. 358, 374 (1991).
As demonstrated above, the revised franchise tax is an income tax in its nature and effect.
Thus, our Legislature may not avoid the will of the Texas voters and the Texas
Constitution merely by proclaiming that the revised franchise tax is something it is not.
The Comptroller recognized this principle under the prior franchise tax when she
treated the earned surplus component of the old franchise tax as a net income tax,
despite its label.
50
Like the revised franchise tax, the earned surplus component included
all of the entitys federal gross income. Like the revised franchise tax, the earned surplus
base included some, but not all, of the entitys federal tax deductions.
51
Tex. Tax. Code

50
Because the Comptroller recognized that the earned surplus component was a net income
tax, she recognized that Public Law 86-262 (15 U.S.C. 381-384) applied to it. Public Law 86-
272 imposes certain limits on the ability of a state to impose a net income tax on interstate
commerce. 15 U.S.C.A 381(a) (West 2009). See also 34 Tex. Admin. Code 3.554. See also
Rylander v. B & A Mktg., 997 S.W.2d 326, 329 (Tex. App.Austin 1999, no pet.) (P.L. 86272
applies only to the earned surplus component of the franchise tax because earned surplus is
measured by net income.); INOVA Diagnostics, Inc. v. Strayhorn, 166 S.W.3d 394, 397 (Tex.
App.Austin 2005, pet. denied).
51
The Comptrollers instructions for completing franchise tax reports originally due on or
after January 1, 1992 and before January 1, 2008, available at
http://www.window.state.tx.us/taxinfo/taxforms/05-364.pdf (Supp. Appx. 34), explain that the

33
171.110 (repealed effective Jan. 1, 2008). And, just as the prior tax was acknowledged
and treated as a net income tax despite its title, so should be the revised franchise tax.
3. IF THIS COURT WERE TO CONCLUDE THE REVISED FRANCHISE
TAX IS NOT AN INCOME TAX, IT WOULD HAVE SERIOUS,
DETRIMENTAL CONSEQUENCES ON BUSINESSES OF THIS STATE.

Other prominent authorities have already determined that the Texas revised
franchise tax is an income tax. The Federal Accounting Standards Board (FASB)
determined that the revised franchise tax is an income tax.
52
The FASB sets national
accounting standards and is therefore very familiar with concepts such as net income,
gross receipts, and taxation. The FASB also reported that preparers, auditors, and
regulators would likely agree that the revised franchise tax is an income tax.
53

If the FASB were to stop classifying the revised franchise tax as an income tax
based on the arguments made by the Comptroller and Attorney General, then many Texas
businessesincluding large publicly-traded companieswould be forced to make
significant adjustments to their financial statements. Presently, the FASB allows some
businesses to capitalize as deferred tax assets on their financial statements certain
differences between their financial statement records and their tax records.
54
If the FASB

earned surplus calculation begins with federal taxable income and then requires several
adjustments. For instance, Item 19 requires a subtraction for income from federal obligations and
an add-back for bonus depreciation under the Job Creation and Workers Assistance Act of
2002, among other adjustments. Item 20 allows a subtraction for certain corporate dividends
received. Item 21 requires an add-back of officer compensation. Despite the fact that the earned
surplus calculation does not equal federal taxable income because of these adjustments and add-
backs, both the Comptroller and Texas law classify the earned surplus as a net income tax.
52
Minutes of the August 2, 2006 Board Meeting on Potential FSP: Texas Franchise Tax,
available at http://www.fasb.org/jsp/FASB/Page/08-02-06_texas_franchise_tax.pdf. (Appx. 18).
53
Id.
54
See Summary of Statement No. 109 Accounting for Income Taxes, available at

34
changed its classification, these businesses would have to write-off these deferred tax
assets. This would cause these companies to report reduced net income or even losses on
their financial statements even though they underwent no economic change.
The taxing authorities of several other states have also determined that the revised
franchise tax constitutes an income tax.
55
As a result, several states, including
Wisconsin, Kansas, Missouri, and California, allow Texas businesses to claim credits
against their income taxes for payments of the revised franchise tax. They allow the tax
credits because they have determined that the revised franchise tax is an income tax.
Appx. 12-15, 17. If this Court finds that the revised franchise tax is not a net income tax,
Texas businesses operating in these states may lose these significant tax benefits.
C. The Revised Franchise Tax is Imposed on a Natural Persons Share of
Partnership Income.

The meaning of the Bullock Amendment is clear on its face. But its meaning
becomes even more obvious when we examine it in the larger context of Texas
partnership law and the legislative history behind the Amendment. These circumstances
strongly suggest that the drafters of the Bullock Amendment added the phrase including
a persons share of partnership . . . income to prevent exactly what the 79
th
Legislature
attempted to accomplishto impose an income tax on partnerships without obtaining
voter approval.

http://www.fasb.org/st/summary/stsum109.shtml (Supp. Appx. 35)
55
See, e.g., WI Tax Bulletin 156 (April 2008) (Appx. 12); KS DOR Opinion Letter No. O-
2008-004 (Sept. 2, 2008) (Appx. 13), KS DOR Opinion Letter No. O-2009-005 (Mar. 24, 2009)
(Appx. 14) ; MO DOR Letter Ruling LR 5309 (Dec. 12, 2008) (Appx. 15); SC Rev. Rul. 09-10
(Jul. 17, 2009) (Appx. 16); CA Technical Advice Memorandum 2011-03 (Apr. 13, 2011) (Appx.
17) .

35
1. Texas partnership law demonstrates that the revised franchise tax,
when imposed directly on a partnership, constitutes an income tax
on the natural partners share of that income.

Under Texas partnership law, imposing a tax on a partnerships net income is the
same as imposing the tax its partners shares of that net income. As we discuss below,
Texas law establishes that a partnership has no net income separate and apart from the net
income of the partners. Therefore, a tax directly imposed on a partnerships net income
is imposed on each partner. The drafters of the Bullock Amendment understood these
important principles of Texas partnership law and embodied them in the language of the
Bullock Amendment. The Bullock Amendment expressly states that the net income of a
natural person includes a persons share of partnership . . . income. TEX. CONST. ART.
VIII, 24(a) (emphasis added). Under the Texas Revised Partnership Act (enacted by
the same Legislature that proposed the Bullock Amendment), each partner owns a share
of the partnerships net income. It provides that a partnership interest includes the
partner's share of profits and losses or similar items, and the right to receive
distributions. Tex. Rev. Civ. Stat. Ann. Art. 6132(b) 1.01(13) (emphasis added).
56
It
also states that [e]ach partner is entitled to be credited with an equal share of the
partnerships profits and is chargeable with a share of the partnerships losses, whether
capital or operating, in proportion to the partners share of the profits. Id., 4.01(b)
(emphasis added); see also Tex. Bus. Org. Code Ann. 152.202(a) (West 2009).
Therefore, under Texas law, a portion of the partnerships income becomes a

56
The quoted language is identical to the current codified language included in Tex. Bus.
Orgs. Code Ann. 1.002(68) (West 2009).

36
partners share of the income as it is earned.
57
The partnerships net income
remains divided into shares at all times, not just when it is distributed to the
partners. Consequently, it is impossible to tax the partnerships net income without
taxing the partners shares at the same time.
The following diagram illustrates how taxing a partnerships net income also taxes
each partners 25% individual share:

57
Under the Texas Revised Partnership Act, the partnership agreement controls. The Act
only governs the relationship between the partners and the partnership to the extent the
agreement does not otherwise provide. See Tex. Rev. Civ. Stat. Ann. Art. 6132b, 1.03(a).

37
The center square represents the partnership. The revised franchise tax classifies
the partnershipthe center squareas a taxable entity, and imposes a tax on its net
income. Tex Tax. Code Ann. 171.0002 (West 2009). Each partners net income
includes his share of the partnerships net income, so the State imposes the tax on the net
income of each natural person at the same time it taxes the partnership.
2. The legislative history of the Bullock Amendment demonstrates that
it was specifically designed to prevent imposition of an income tax
on a natural partners share of partnership income without majority-
voter approval.

The legislative history of the Bullock Amendment confirms that its drafters were
concerned in 1993 about an income tax being imposed on partnership income, given that
the Legislature nearly enacted one in the previous session. In August of 1991, the
Chairman of the House Ways and Means Committee championed a tax on partnership net
income. Supp. Appx. 15. As we discuss below, Bullock and a majority of the Texas
Senate believed this would be blatantly unfair because such a tax would be no different
than a narrowly-based personal income tax that applied only to owners of partnership
interests. A key component of their reasoning was that a tax on a partnerships income is
no different than a direct tax on the partners income from the partnerships.
The drafters of the Bullock Amendment expressly stated this in correspondence
with other elected officials. In 1991, approximately half of the twenty-five (25) senators
who would eventually author or co-author the Bullock Amendment sent a letter to
Governor Ann Richards and House Speaker Gibson Lewis. In this letter, the senators
pledged to oppose any income tax on partnerships because such a tax is really a tax on

38
personal income that only applies to some persons. Supp. Appx. 16. They noted that
a narrow income tax on independent business men and women is no more acceptable to
the public than a broad based income tax, and therefore the franchise tax should not be
expanded to tax partnerships income. Id. Around the same time, Bullock sent a memo to
Governor Richards in which he opposed the imposition of the franchise tax on
partnerships, expressly including limited partnerships, because a corporate tax applied to
non-corporate businesses would actually tax the incomes of Texans in business for
themselves. Supp. Appx. 17 (emphasis original). Newspapers around the state also
published an op-ed piece by Bullock in which he wrote, A corporate tax applied to non-
corporate businesses would actually be the same as an income tax on Texans in business
for themselves. Supp. Appx. 18-19.
Bullock and the senators objected to including partnerships under the franchise tax
because in their view, partnerships and unincorporated associations did not enjoy the
same state privileges that corporations enjoyed. For instance, they noted that partners
remain personally liable for the debts and obligations of the partnership. Supp. Appx.
16-19. This is true for both general and limited partnerships. As Bullock wrote, Even
the limited partnership form ultimately has at least one, final partner subject to
liabilities. Supp. Appx. 17. Limited partners are also liable for the debts and
obligations of the partnership when they participate in the control of the business. See
Tex. Bus. Orgs. Code Ann. 153.102 (West 2009). In contrast, the shareholders of
corporations are not liable for the actions of the corporation absent an independent duty,
even if they are involved in its control. Leitch v. Hornsby, 935 S.W.2d 114, 117 (Tex.

39
1996). This protection is known as the corporate shield or corporate veil. In the case
of partnerships, Texas courts have repeatedly recognized that there is no veil that needs
piercing, even when dealing with a limited partnership, because the general partner is
always liable for the debts and obligations of the partnership to third parties. Pinebrook
Props., Ltd. v. Brookhaven Lake Prop. Owners Assn, 77 S.W.3d 487, 500 (Tex. App.
Texarkana 2002, pet. denied); Asshauer v. Wells Fargo Foothill, 263 S.W.3d 468, 474
(Tex. App.Dallas 2008, pet. denied).
Bullock and the senators prevailed in defeating the tax on partnership income in
1991; the House of Representatives eventually removed from the franchise tax reform bill
the provision that would have expanded the tax to partnerships.
58
But Bullock and his
senatorial allies knew that their opponents may try again in future sessions. Therefore, in
the very next Legislative session, they added a constitutional safeguard, the Bullock
Amendment. One clear purpose of the Bullock Amendment is to restrain the
Legislatures ability to enact a personal income tax. But to ensure that the Legislature
also could not tax partnership income, the drafters included the phrase including a
persons share of partnership and unincorporated association income. The way the
drafters phrased the amendment also expressed their understanding of Texas partnership
law by equating a tax on a persons share of partnership . . . income with a tax on the
net incomes of natural persons. Texas voters understood this because they saw the

58
The resulting franchise tax reform bill enacted the earned surplus method, and generally
adopted the franchise tax that existed until the 79th Legislature replaced it with the revised
franchise tax in 2006. See Tex. H.B. 11, 72th Leg., 1st C.S., Article 8 (1991).

40
extensive media coverage of the battle over partnership taxation less than two years prior.
See, e.g. Supp. Appx. 11-14, 18-19.
3. This Court should not limit the Bullock Amendments application to
instances of where an income tax is imposed directly against the
natural partners income share.

In light of the plain language of the Bullock Amendment and the clear intent of its
authors, this Court should not limit the Bullock Amendment to reach only those instances
where a natural person is directly taxed on his or her share of partnership income. Such a
limitation would blatantly violate Texass rules of statutory construction under which
courts must (a) presume the language of the Constitution was carefully selected and (b)
avoid construing constitutional provisions in a manner that renders them meaningless or
inoperative. Leander Indep. Sch. Dist. v. Cedar Park Water Supply Corp., 479 S.W.2d
908 (Tex. 1972); Hanson v. Jordan, 198 S.W.2d 262, 263 (Tex. 1946).
The phrase including a persons share of partnership . . . income would be
rendered meaningless and inoperative if this Court were to construe the Bullock
Amendment to apply only when the statute directly taxes a natural-person partner, like
under the federal tax scheme. This is true because the first phrase of the Bullock
Amendment already does that: it prohibits a tax on the net incomes of natural persons.
Because the net income of a natural person already includes that persons share of
partnership income, the second phrase of the Bullock Amendment would be rendered
meaningless and inoperative by such a construction.
If the drafters of the Bullock Amendment had intended for it to only protect
against an income tax imposed on natural persons, and not an income tax imposed on

41
partnerships, they could have expressed this intent clearly. When other states have
disallowed personal income taxes but allowed taxes on partnerships and other
unincorporated businesses, they have done so specifically. Bullock and his staff were
aware of this but chose not to propose similar language. For example, Article 10,
Section 1(9) of the Nevada Constitution states:
No income tax shall be levied upon the wages or personal income of natural
persons. Notwithstanding the foregoing provision, and except as otherwise
provided in subsection 1 of this Section, taxes may be levied upon the income or
revenue of any business in whatever form it may be conducted for profit in the
State.

(Supp. Appx. 36).

The Nevada provision predates the Bullock Amendment. It reflects the common legal
understanding that taxing a partnership or other unincorporated business is the same as
taxing its partners directly. Nevada nevertheless chose not to prohibit such a tax in its
constitution.
If the drafters of the Bullock Amendment intended the amendment to prohibit only
a personal income tax, they would have worded it similarly to the Nevada amendment.
The drafters were aware of the Nevada provision at the time the Senate was considering
passage of the Bullock Amendment. Bullocks office received a memorandum from the
Senate Research Center regarding state constitutional amendments that prohibited income
taxes.
59
The memo includes discussion and analysis of the Nevada amendment. In light

59
Julia Rathgeber and Richard P. Sanchez, Senate Research Center, to John Keel, Lt.
Governors Office, Apr. 23, 1993, Bob Bullock Collection, Lt. Governor Series, 1993, Issues,
Revenue Income Tax, Baylor Collections of Political Materials, Baylor University, Waco,
Texas (Supp. Appx. 37).

42
of the drafters awareness of the clear language of the Nevada amendment, their choice to
instead use the language of the Bullock amendment suggests that they intended to the
Texas amendment to accomplish a different goal. Instead of including language that
expressly allows a tax on businesses in any form, like Nevada did, the drafters included
a phrase that expressly restricted such a tax.
4. The revised franchise tax is imposed on individual partners, not on
merely the partnership as an entity, as suggested by the Comptroller
and Attorney General.

The Comptroller and Attorney General argued in their Response to Relators
Petition that the revised franchise tax does not violate the Bullock Amendment because
Texas law has chosen to treat partnerships as distinct business entities, and not as an
aggregate of the partners. Response, p. 6. However, this separate entity concept only
applies in contexts unrelated to net income, such as partnership property ownership and
enforcement of liability. Tex. Bus. Orgs. Code Ann. 152.101-.102, 152.306 (West
2009); see Chien v. Chien, 759 S.W.2d 484, 489 (Tex.App.Austin 1988, no writ)
(stating that the entity theory was meant to establish whether the partnership or the
partners have a right of action to sue.); Seidman & Seidman v. Schwartz, 665 S.W.2d 214,
218 (Tex.App.San Antonio 1984, writ dismd) (stating that one reason the Legislature
specified that partnerships are separate entities from their partners is to define rights in
partnership property). Texas law does not adopt the entity approach for partnership
income, which it divides into individual shares. Tex. Rev. Civ. Stat. Ann. Art. 6132b,
4.01(b); see also Destec Energy, Inc. v. Houston Lighting & Power Co., 966 S.W.2d 792,
795 (Tex.AppAustin 1998, no pet.) (noting that scholars believe that aggregate theory

43
is still used to ensure continued conduit taxation of the partnership form, despite
Legislative adoption of the entity theory in some circumstances). Thus, the revised
franchise tax cannot impose a tax on a partnerships separate income, because such a
concept does not exist under Texas law.
The Comptroller has recognized in her own rules that the separate entity concept
does not apply to partnership income and receipts. In Comptroller Rule 3.557(24),
regarding apportionment of Texas receipts under the earned surplus component of the
former franchise tax
60
, the Comptroller instructed corporations to treat their share of
income from partnerships as their own income. This rule, as originally adopted, stated
that:
The corporation's share of the gross receipts of a partnership or joint
venture included in federal taxable income must be used in calculating
gross receipts. The receipts must be apportioned as though the
corporation directly earned such receipts (emphasis added).

The Comptroller enacted this rule on October 30, 1992, shortly before Texas
adopted the Bullock Amendment. See 17 Tex. Reg. 7667. This rule remained
substantially the same until the Legislature enacted the revised franchise tax in 2006. In
fact, the 77th Legislature codified the Comptrollers policy in 2001. Senate Bill 1125,
77th Legislature, 2001.

60
Both the revised franchise tax and the earned surplus method require apportionment
because they only apply to business done in Texas. Therefore the income must be apportioned
between Texas and all other jurisdictions. The method by which the tax code accomplishes this
has remained relatively consistent over the years. Under both taxes, to apportion its tax base, an
entity must multiply its earned surplus or taxable margin by a fraction, the numerator of which
consists of receipts from business done in Texas, and the denominator of which consists of all of
the entitys gross receipts, including those earned in Texas. See TGS-NOPEC Geophysical Co. v.
Combs, 340 S.W.3d 432, 437 (Tex. 2011).

44
Even if it were technically possible to impose the tax at the entity level, the
substance of the revised franchise tax actually taxes the partners. This Court must look to
the substance of the revised franchise tax, not its form, to determine its true character. As
the U.S. Supreme Court wrote in Galveston, Harrisburg & San Antonio Railway Co.,
[n]either the state courts nor the legislatures, by giving the tax a particular name or by
the use of some form of words, can take away our duty to consider its nature and effect.
210 U.S. 217, 227 (1908); see also Trinova Corp. v. Michigan Dept of Treasury, 498
U.S. 358, 374 (1991); Dawson v. Kentucky Distilleries & Warehouse Co., 255 U.S. 288
(1921).
This Court, too, looks to substance over form in tax matters. In Suburban Utility
Corporation v. Public Utility Commission of Texas, 650 S.W.2d 358 (Tex. 1983), the
Court looked to economic substance when it allowed a utility organized as a Subchapter
S corporation to include the federal income taxes that its shareholders paid as a
component of its operating expenses for the purpose of determining the rate that the
utility could charge its customers. The Court noted that the fundamental inquiry is not
limited to technical distinctions, but is determined by practical economic facts. Id. at
363. Similarly, in Gragg, this Court upheld a taxing authoritys calculation that included
income from corporations and partnerships in a natural persons income for property tax
purposes. In doing so, the Texas Supreme Court looked to the legal effect of the taxing
authoritys calculation. 539 S.W.2d at 863.
The Comptroller and Attorney General argue that the phrase including a persons
share of partnership . . . income does not expand the scope of the Bullock Amendment

45
to taxes on partnerships but merely explains one possible type of income that could
contribute to a natural persons net income. Response, p. 5. The Comptroller and
Attorney General suggest that the phrase is merely descriptive because it leads with the
word including. Id. However, under Texas law, the word including is a term of
expansion, not merely of description. The Texas Code Construction Act states that
including is a term of enlargement and not of limitation or exclusive enumeration.
Tex. Govt Code Ann. 311.005(13) (West 2009). Texas case law also states that [i]t is
well settled that the term including is generally employed as a term of enlargement
rather than a term of limitation or restriction. R.R. Commn v. Arco Oil & Gas Co., 876
S.W.2d 473, 492 (Tex. App.Austin 1994, writ denied); see also Republic Ins. Co. v.
Silverton Elevators, Inc., 493 S.W.2d 748, 752 (Tex. 1973).
The Comptrollers and Attorney Generals Response to the Petition also
erroneously suggested that the U.S. Supreme Court held in Federal Land Bank of St. Paul
v. Bismarck Lumber Co. that the word including cannot expand the scope of a
provision. In doing so, they omitted a key portion of a quotation from the case.
Response, p. 5. The full quotation makes clear that the case actually holds that the word
including cannot limit the scope of a provision:
We recently had occasion under other circumstances to point out that the term
including is not one of all-embracing definition, but connotes simply an
illustrative application of the general principle.

314 U.S. 95, 100 (1941).

Further, as discussed above, treating the phrase including a persons share of
partnership . . . income as a mere explanatory or descriptive phrase renders it

46
superfluous, in violation of Texass principles of statutory construction. The Comptroller
and Attorney General also offer no explanation of why the Legislature considered it
necessary to list a persons share of partnership . . . income as an example of an
individuals net income, but not include other more common income sources, such as
wages, dividends, or capital gains. Such an interpretation is illogical and does not
presume the language of the Constitution was carefully selected, as the rules of
construction require.
5. The individual impact of the revised franchise tax demonstrates that
it is an income tax imposed on a natural persons share of
partnership income.

The economic effect of the tax on each partner demonstrates how imposing the tax
on the partnership is the same as taxing each partner. Imposing the revised franchise tax
on the partnerships income imposes the tax on each partner in proportion to each
partners respective interest in the partnership. As a result, the value of each partners
investment in the partnership falls in direct proportion to the partners respective shares
of the partnerships franchise tax payments. Each partners share of both net income and
partnership assets is reduced due to the assessment of the franchise tax.
John Weaklys circumstances illustrate this point. Mr. Weakly owns an
approximate thirty percent (30%) interest in Allcat. Appx. 6, 3. During 2008, Allcat
paid franchise taxes to Texas totaling $27,241. Id., 10. Allcats federal partnership tax
return reported this amount on Statement 2 of its 2008 Form 1065. Id., 15. As a direct
result of paying these franchise taxes, Allcats net income fell from $6,101,471 to
$6,074,230the amount Allcat reported on page one of its 2008 Form 1065. Id. 15-18.

47
And as a direct result of Allcats payment of $27,241 in Texas franchise taxes, Mr.
Weakly was burdened by his proportionate share of the franchise tax in the amount
$8,091. Id. 23-24. The value of Mr. Weaklys Allcat partnership interest fell by the
same amount. So too did the amount Mr. Weakly would receive if Allcat were
liquidated.
For the reasons stated above, the revised franchise tax is imposed on a natural
persons share of partnership income. Texas voters never approved the imposition of the
revised franchise tax in a statewide referendum as required by the Bullock Amendment.
Therefore, the revised franchise tax violates the Texas Constitution, and this Court should
issue a mandatory writ to declare it invalid and enjoin the Comptroller and Attorney
General from enforcing it.
III. THE COURTS EXCLUSIVE ORIGINAL JURISDICTION ENCOMPASSES RELATORS
(A) EQUAL AND UNIFORM TAXATION CLAIM, AND (B) REQUEST TO RECOVER
THEIR COSTS AND ATTORNEYS FEES.

As detailed in Issue I, the Legislature validly stated in Section 24 of House Bill 3
that this Court has original and exclusive jurisdiction, in any taxpayer case challenging
the constitutionality of the revised franchise tax, which would necessarily be brought as
an original proceeding against the Comptroller and/or Attorney General. The Courts
jurisdiction in such a case includes the power to issue injunctive and declaratory relief, as
would be necessary to enforce a mandatory writ against the state officials arising from the
unconstitutionality of the statute or the manner in which is it being administered or
enforced. As such, this Courts jurisdiction encompasses Relators equal and uniform

48
taxation claim, and their request to recover costs and attorneys fees under the Uniform
Declaratory Judgment Act.
A. Relators Equal and Uniform Taxation Claim is Within the Scope of
this Courts Original and Exclusive Jurisdiction.

Relators equal and uniform taxation claim falls within House Bill 3, Section 24s
statement of jurisdictional because it is a challenge to the constitutionality of the revised
franchise tax statute. House Bill 3, Section 24 states that this Court has exclusive original
jurisdiction over any type of challenge to the constitutionality of the revised franchise tax
or any part of it. The statement contains no limitation on the type of constitutional
challenge that may be brought. It is a well-established principle of constitutional law that
a litigant may challenge the constitutionality of a statute on a facial or as-applied basis.
See Tex. Workers Comp. Commn v. Garcia, 893 S.W.2d 504, 518 n. 16 (Tex. 1995);
City of Corpus Christi v. Pub. Util. Commn., 51 S.W.3d 231, 240-41 (Tex. 2001).
Therefore, Relators as-applied challenge to the constitutionality of the provisions of the
revised franchise tax providing deductions for the real estate industry falls within the
Courts jurisdiction over this case.
B. Relators Request for Costs and Attorneys Fees is Within the Scope of
this Courts Original and Exclusive Jurisdiction.

In House Bill 3, Section 24, the Legislature provided for declaratory and
injunctive relief because where this Court has the authority to issue a writ of mandamus,
the Court necessarily has correlative authority to issue a writ of injunction to make the
writ of mandamus effective. Lane v. Ross, 249 S.W.2d 591 (Tex. 1952). Similarly, the
Court has stated that while a request for declaratory relief alone does not establish

49
jurisdiction, the power to issue a declaration regarding the constitutionality of a statue is a
procedural device for deciding cases already within a courts jurisdiction. Chenault v.
Phillips, 914 S.W.2d 140, 141 (Tex. 1996); State v. Morales, 869 S.W.2d 941, 947 (Tex.
1994); see also Texas Ass'n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 444 (Tex.
1993); Firemen's Ins. Co. v. Burch, 442 S.W.2d 331, 333 (Tex. 1968); United Serv. Life
Ins. Co. v. Delaney, 396 S.W.2d 855, 863 (Tex. 1965).
The UDJA is the procedural mechanism in Texas through which parties may seek
declarations regarding the constitutionality of laws, and it provides for attorney fees.
Tex. Civ. Prac. & Rem. Code 37.001-.011 (West 2009). There is no other mechanism
but the UDJA to obtain such relief. Therefore, this Court should presume that the
Legislature, aware of the UDJA and its provision for attorney fees, intended for taxpayers
challenging the constitutionality of the revised franchise tax to have a claim for attorneys
fees available to them. A litigants request for declaratory relief cannot confer
jurisdiction on this Court, nor can it change the basic character of this suit. Morales, 869
S.W.2d at 947. Thus, the Legislatures statement that the Court may issue injunctive or
declaratory relief in connection with the challenge [to the constitutionality of House Bill
3] must also be presumed to be in light of the original grant of jurisdiction they provided
in 22.002 in accordance with Article V, 3 of the Texas Constitution.
If the Court decides to exercise jurisdiction over any of relators claims, it may
employ the procedural devices available to it, such as the UDJA and injunctive relief, to
decide the issues within its jurisdiction. Chenault, 914 S.W.2d at 141. Hence, this Court

50
may grant Relators claim for attorneys fees under the Uniform Declaratory Judgments
Act (UDJA).
PRAYER

Relators respectfully request that this court exercise jurisdiction over this original
proceeding, including Relators equal and uniform taxation and attorneys fees claims,
and, within 120 days of the filing of Allcats Original Petition, that this Court issue
mandatory writ (1) permanently enjoining the Comptroller and Attorney General from
enforcing, collecting, or assessing the revised franchise tax from Allcat and similarly-
situated taxpayers; (2) declaring that the revised franchise tax found in Chapter 171 of the
Texas Tax Code violates the Texas Constitution; (3) declaring that the Comptrollers
interpretation of Texas Tax Code 171.1011(g)(3) and 171.1012 violates the equal and
uniform taxation clause of the Texas Constitution; (4) taxing all costs and reasonable and
necessary attorneys fees as are equitable and just, reasonable and necessary, against the
Comptroller and the Attorney General under Texas Civil Practice and Remedies Code
37.009; and (5) awarding Relators any such other and further relief to which they may be
justly entitled at law or in equity.

51
Respectfully submitted,

MARTENS, SEAY & TODD
James F. Martens
Michael B. Seay
mseay@textaxlaw.com
Lacy L. Leonard
Amanda M. Traphagan
Austin, Texas 78701
Tele: (512) 542-9898
Fax: (512) 542-9899

By /s/ James F. Martens
James F. Martens

AND JOHN WEAKLY

52
CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of Relators Brief on the Merits has
been sent via ProDoc eFiling and electronic mail on September 12, 2011 to:

Danica Milios
Deputy Solicitor General
danica.milios@oag.state.tx.us
Bill Davis
Assistant Solicitor General
bill.davis@oag.state.tx.us
Office of the Attorney General
P.O. Box 12548 (MC 059)

Kevin Van Oort
Deputy Chief
Financial and Tax Litigation Division
kevin.vanoort@oag.state.tx.us
Office of the Attorney General
P.O. Box 12548 (MC 029)

/s/ James F. Martens
James F. Martens

o.
]n \!rue
~ u p r e n l e ([ourt of \!rexa%
IN RE ALL CAT CLAIMS SERVICE, L.P. AND JOHN WEAKLY
Relators,
APPENDIX TO ORIGINAL PETITION
James F. Martens
Texas Bar No. 13050720
Michael B. Seay
Lacy L. Leonard
Amanda M. Traphagan
MARTENS, SEA Y, & TODD
Austin, Texas 78701
Tele: (512) 542-9898
Fax: (512) 542-9899
AND JOHN WEAKLY
No.
]n '{!tbe
~ u p r e n l e Qtourt of '{!texas
Relators,
APPENDIX TO ORIGINAL PETITION
James F. Martens
Michael B. Seay
Texas BarNo. 24051318
Lacy L. Leonard
State BarNo. 24040561
Amanda M. Traphagan
Austin, Texas 78701
Tele: (512) 542-9898
Fax: (512) 542-9899
AND JOHN WEAKLY
TABLE OF CONTENTS
1. Act of May 2, 2006, 79th Leg., 3rd C.S., H.B. 3
2. Summary of Bill Stages and Actions on House Bill 3
3. Press Release, Office of the Governor, Gov. Perry (April 17,2006)
4. Bill Summary of House Bill 3
5. Act of June 15,2007, 80th Leg., R.S., H.B. 3928, 39
6. Affidavit of John Weakly, 7/27111
1. Checks for Payment of 2008 Franchise Taxes (p.I-2)
11. Relevant Pages of Allcat's 2008 Form 1065 (p. 3-9)
111. Relevant Pages ofMr. Weakly's 2008 Form 1040 (p. 10-12)
iv. Allcat's 2008 Texas Franchise Tax Report (p. 13-14)
v. Allcat's 2009 Texas Franchise Tax RepOli (p. 15-16)
VI. Allcat's 2008 protest payment check (p. 17)
7. Election Details RepOli regarding Bullock Amendment
8. Letter from Carole Keeton Strayhorn to Rick Perry (May 15,2006)
10. Letter from Carole Keeton Strayhorn to Greg Abbott (Apr. 21, 2006)
11. BLACK'S LA W DICTIONARY (8th ed. 2004) ("income tax" and "net income")
12. WI Tax Bulletin 156 (April 2008)
13. KS DOR Opinion Letter No. 0-2008-004 (Sept. 2, 2008)
14. KS DOR Opinion Letter No. 0-2009-005 (Mar. 24, 2009)
15. MO DOR Letter Ruling LR 5309 (Dec. 12,2008)
16. SC Rev. Rul. 09-10 (JuI. 17, 2009)
17. CA Technical Advice Memorandum 2011-03 (Apr. 13,2011)
18. Minutes ofthe August 2, 2006 Board Meeting on Potential FSP: Texas
Franchise Tax
19. Comptroller Letter No. 201008001L, "Franchise Tax and the Construction
Industry"
20. Texas Open Records Act Request Response
1
Act of May 2,2006, 79th Leg.,
3rd C.S., H.B. 3
TEXAS SESSION LAWS 2006
GENERAL AND SPECIAL
Seventy.Ninth Legislature, Third Called Session
CHAPTER 1
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 [Subseetiol1] (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
(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 .Tanuary 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 mm'e entities in which a controlling
interest is owned by a common owner or owners, either corporate or noncorpora.te, 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 countrzJ, or
1
HeinOnline -- 2007 vol. 1 1 2007
en. 1, 2 79th LEGISLATURE-THIRD CALLED SESSION
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 liabil'ity company's certificate of organization, a
limited partnel'ship's cel-tificate of limited partnership, and the registmtion of a limited
liability partnership.
(6) "Client company" has the meaning assigned by Section 91.001, Labor Code.
m "Combined gmup" 1118ans 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 mOl'e, owned directly or indirectly, of the
total combined voting power of all classes of stock of the corporation, 01' 80 pel'cent or
m01'e, owned direcUy or indirectly, of the beneficial ownership interest in the voting
stock of the corporation; and
(E) for a pa.,-tnership, association, or other entity, 80 percent or more, owned
directly Ot' indirectly, of the profits, o'r beneficial 'interest in the partnership,
association, or other entity.
(9) "Intm'nal Revenue Code" means the Intel"1wl Revenue Code of 1986 in effect for the
federal tax year beginning on January I, 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 Boatd, the Office of the Comptroller of the CU1,ency, the Federal Deposit
Insurance Corpomtion, the Texas Department of Banking, the Office of Consumer Credit
Commissioner, the Department of Savings and Mortgage Lending, the Ct'edit Union
Depal-tment, 01' 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 anothej'
entity (the "managed in exchange for:
(A) a management fee; and
(B) reimbursement of specified costs incurred in the conduct of the active trade 01'
business of the ma1w.ged entity, including "wages and cash compensation" as deter-
mined under Sections 171.1013(a) and (b).
(12) "Retail trade" means the activities described in Di1,isioll G of the 1987 Standa'rd
Indust1ial Classification Manual published by the federal Office of Management and
Budget.
(M) "Savings a:nd loan associat'ion" means a savings and loa1/ association 01' savings
bank, whethe'r organized under the laws of this sta,te, another state, 01' anothe'I' counhy, o'r
under federal law.
(14) "Shareholder" includes a limited liability company's m.embe1' and a limited
banking association's pat-ticipant.
(15) "Staff leasing services company" has the meaning ass'igned by Sectioll 91.001,
LaboT Code.
(16) "Total1"evenue" means the total1'evenue of a ta;cable entity ag dete1'mined under
Section 171.1011.
2
HeinOnline 2007 vol. I 2 2007
79th LEGISLATURE-THIRD CALLED SESSION
Ch. 1, 2
(17) "Unitary business" means a single economic enterprise is mad.e up of sep'arate
parts of a single entity or of a commonly controlled group' of that are
integrated, and interrelated through thetr actwtttes so as to promde a
syn.ergy and mutual ben.efit that produces a sharing or exchange ?fyalue among them. and
a significant flow of value to the separate parts. In determtmng ,,?hethe.r a unttary
business exists, the comptroller shall consider any relevant factor, tncludmg whether:
(AJ the activities of the group members:
(i) are in the same general lin.e, 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 exploj"ation, mining,
refining, and marketing; and
(B) the members are functionally integrated through the exercise of strong centralized
such as authority over purchasing, financing, product lin.e, 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 provid-
ed by this section, "taxable entity" means a pa1inership, corporation, banking corporation,
savings and loan association, limited liability company, business trust, professional associa-
tion, business association, joint venture, jO'int stock company, holding company, or other
legal entity. The term includes a combined g1"OUp. A joint venture does not include joint
operating or co-ownership aTrangements meeting the requirements of Treasury Regulation
Section 1.761-2(a)(3) that elect out of federal partnel'ship t1'eatment as provided by Section
761(a), Internal Revenue Code.
(b) "Taxable entity" does not include:
(1) a sole proprietorship;
(2) a general patine1'ship 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 a,re natural peTsons or charitable
entities as described in Section 501(c)(3), Internal Revenue Code, excluding a trust taxable
as a business entity pursuant to Treasury Regu.lation Section 301. 7701...,4 (b);
(2) an estate of a natural person as defined by Section 7701 (a)(80)(D), Internal Revenue
Code, excluding an estate taxable as a business entity pursuant to Treasury RegUlation
Section 301. 7701-Mb);
(3) an escrow;
<4! a family limited 'l!artnership is a passive entity in which at lea.st 80 percent of
are held, dt.rectly or t11dtrectly, by members of the same family, including an
tndwtdual s ancestors, l1.neal descendants, spouse, and brothet's and sistm's by the whole 01'
half blood, and the estate of any of these pet'sons, and that is a limited partnership:
(A) formed pursuant to the Te:r;a.s Revised Limited Patinership Act (A/ticle 6132a-1
Vernon's Texas Civil Statutes); ,
(B) formed pursuant to the limited partne1'ship law of any other state; 01'
(C) treated as a partn.e1"ship for fedeml income taa: purposes;
(5) a passive investment partnership that is a passive entity and that is:
(A) formed pUTSuant to the Texas Revised Limited Partnership Act (Article 6132a-1
Vernon's Texas Civil Statutes); ,
3
HeinOnline -- 2007 voL 1 3 2007
Ch. 1, 2
(B) formed pursuant to the limited partnership law of any other state; or
(CJ 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 partner-
ship;
(7) a trust that is a passive entity:
(AJ 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-.Mb); 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 sale
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 dist1-ibutive
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 no1wperating mineral interests; and
(3) the entity does not receive l1wre than .10 percent of its federal gross income from
conducting an active trade or business.
(ar-l) In ?nuking the computation under Subsection (a)(3), income described by Subsection
(a)(f) may not be treated as income from conducting an active trade or business.
(b) The income described by Subsection (a)(f) does not include:
(1) rent; 01"
(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 agree1nent.
4
HeinOnline -- 2007 vol. I 4 2007
Ch. 1, 2
Sec. 171.0004. DEFINITION OF CONDUCTING ACTJVE TRADE OR BUSINESS, (a)
The definition in this section applies only to Section .17.1.0003,
(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 pe'lj'orms active management and operational junctions.
(c) Activities performed by the entity include activities performed by persons outside the
entity, including independent contractors, to the extent the persons pe'lj'orm services on
behalf of the entity and those services constitute all 01' part of the entity's trade or business,
(d) An entity conducts an active trade or business if assets, il1luding 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[.
[W] each taxable entity [OOl'pGFatiooJ that does business in this state or that is chartered
or organized in this state[t--aBd
eaeh limited liability eompany that does business in this state or that is organized
under the laws of this state].
(b) [In this ehapter:
[(1) "Banking eorpOl'ation" means eaeh state, national, domestie, or foreign bank, ',l,rheth
er organized under the laws of this state, another state, or another eountry, or under
fe.deral law, ineJ.udmg a limited banking assoeiation organized under Subtitle .. i>..., Title 3,
Fmanee Code, and eaeh bank organized under Seetion 25(a), Federal Reserve .. LI .. et (12
V.S.C. Sees. @11 (31) (edge eorporations), but does not inernde a bank holding eompany as
that term is defined by Seetion 2, Bank Holding Company l'..st of 195@ (12 V.B.C. See. 1841).
[(2) "Beginning date" means:
[( .. LlL) fur a corporation cl!.artered m this state, the date on whicil the eorporatiOI'I's
eharter takes effoeti and
. fur a foreign eorporation, the date on ',!Ihkh the eorporation begins doing busmsss.
m trus state.
[(3) "Corporation" ineludes:
rCA) a limited liability eompany, as defined tlBder the Texas Limited Liability Compa

[(B) a savi.ngs and loan assoeiationj and
[(C) a banking eorporatioB.
[(4) "Charter" a limited liability eompaBy's eertifieate of organization.
[(3) "Internal R8'.:ern:e Code" means the Internal R8'leBtle Code of in eft'eet for the
federal.tax year begmnmg on or after JanHary 1, 199@, and befure JaBuarJ' 1, and any
regulatwns adopted Hnder that code applieable to that period.
[(6) an? in;lud.e a limited liability company's direetors and maBagers
a lmuted bankmg assomatwn s direetors and managers and partieipants if there are no
direetors or managers.
[(7) and loan association" means a Sa:iBgS and loan assoeiation or SaviBgS bank,
whether orgamzed Hnder the laws of this state, another state, or aBother country or uBder
federal law. '
5
Ch. 1, 2 79th LEGISLATURE-THIRD CALLED SESSION
[(8) "Shareholder" ineludes a limited liability compaBY's member and a limited bankiBg
associatioB's partieipant.
[W] 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 [AIt]
additional tax is imposed on a taxable entity [corporatioB] that for any reason becomes no
longer subject to the [earned SurplllS eompoBeBt of the tax, without regard to whether the
cerporatieB remains subject to the taxable eapital eomponent of the] tax imposed under this
chapter.
(b) The additional tax is equal to the appmpriate rate under Section 171.002 of the taxable
entity's taxable ma,r'gin [4.5 pereent of'the corporathm's net ta.xable earned surplus] comput-
ed on the period beginning on the day after the last day for which the tax imposed on taxable
margin [net taxable earned slll'plllS] was computed [under SeetioB 171.1532] and ending on
the date the taxable entity [eorporatioB] is no longer subject to the [earned surplus
eompoBeBt of the] tax imposed under this chapte1.
(c) The additional tax imposed and any report required by the comptroller are due on the
60th day after the date the ta:.rable entity [corpomtioB] becomes no longer subject to the
[earned surplus eOl'BpOBent 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 eutity 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 pmvided by S7.I,bsection (b), the rate [The rates) of the franchise tax is one [fWGT
percent per year of privilege period of [n-et) taxable margin [e-apitalj and
of net ta.xable earned surplus].
(b) The rate of the franchise tax i.s 0.5 percent per yea/' of privilege period of taxable
margin for those taxable entities plinlQ.1'ily engaged in retail or wholesale trade. [The
amount of franchise tax on each eorporation is computed by adding the following:
[W-the amount caleulated by applying the tax rate prescribed by Subsection (a)C1) to the
eorporation's Bet taxable eapital; and
[(2) the difference bet>.l:een:
[CAl the amount ealeulated by applying the tax rate preseribed by Subseetion (a)C2) to
the eorporation's net taxable earned sill'plus; and
the amount determined under Subdivision (1).]
(c) A taxable entity is p7-ima1-ily engaged ill retail 01' /{'holesale tmde only if:
(1) the totall'evelllle from its activities illl'etail aI' u'holesole trade is greater than the
total revenue from its activit'iesin t1'ades other' tha n the 1'etail (! lid wholesale trades;
(2) except as provided by Su,bsection (c-l), l,ess than 50 pe1'cent of the total l'el'enue f1'011/,
activities in Teta'il or wholesa,le tmde COil/eN ji'orn the sale of p1'oducts it p7'Oduces 01'
products produced by an entity that is part of all affiliated g'I'OIlP to which the taxable
entity also belongs, aud
(3) the ta:rable entity does not pl'Ovide t'etail 01' /l'holesale utilities, inclllding telfcommll-
nications services and electricity 01' ga.s. [In malting a eomputation under Subsection (b),
an amount eompllted under Subseetion (b)(1) or (b}(2) that is zero or less is eomputed as a
zero.,]
(c-l) Subsection (c) (2) does not apply to total 1'evellue from actil'ities in a 1'etail trad.e
descl-ibed by Major Group 58 of the StandaTd Industrial Cln.ss(t/cation Manual pu.bli.shed by
thejedeml Office of Manage'llzent and Hudget,
(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 ta.mble f'ntity [eel'perati(m] is less than $1,000
[$J,OO); 01'
6
HeinOnline -- 2007 voL I 62007
79th LEGISLATURE-THIRD CAl.LED SESSION
Ch. 1, 4
(2) the amount of the ta..'l;able entity's total revenue [corporation's gross receipts:
[W] from its entire business [under Section 171.105] is less than or equal to $300,000
or the arrwunt determined under Section 171.006 [$150,000; and
[(B) from its entire business under Section 171.1051, including the amount e;x:cepted
under Section 171.1051(a), is less than $150,OQQ).
[See. 171.Q05. RATE OF TP ..... X FOR CORPOR.A ... TION IN PROCESS OF LIQUI
D.A..TION. The franchise tax rate on a corporation in the process of liquidation, as defined by
Section 171.102 Q...this Gode, is the rate established by Section 171.QQg 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 by.a majo;ity of
the registered voters voting in a statewide referendum held on the questwn of 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 enfoned; or
(3) the applicability of the tax to certain entities.
Sec. 171.006. ADJUSTMENT OF ELIGIBILITY FOR EXEMPTION AND COMPEN-
SATION DEDUCTION. (a) In this section, "consu/mer 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 arrwunts prescribed
by Sections 171.002(d)(2) and 17U013(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 dU1-ing the preceding state fiscal biennium in the
conSU71wr 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 shall1nake 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 a.ny p01iion of which the
entity is in violation of an order issued by the Texas Department of Insurance under Section
225",.003(b), Insu'rance Code, that is final after appeal or that is no longeI' 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, bec(J;use of its activities, would
qualify for a specific exemption under this subchapter i,f it were a corpom.tion, for
7
Ch. 1, 4
79th LEGllSLATURE-THIRD CALLED SESSION
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
TP .... E.ARNED SURPLUS]; ALLOCATION AND APPORTIONMENT
Sec, 171.101. DETERMINATION OF [NET] TAXABLE MARGIN [C.WITAL], (a)
The [Exeept as provided by Subseetions (b) and (e), the net] taxable margin of a
taxable entity [corporation] is computed by:
(1) determining the taxable ent'ity's maryin, which is the lesser of
(A) 70 percent of the taxable entity's total revenue from its entire business, as
determined under Section .17.1.101.1; 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 171.10.12; or
(b) compensation, u.s determined under Section .17.1.10.13; 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 m,ember 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
[adding the eorporation's stated eapital, as defined by A...>1iele 1.02, Texas
Business Corporation A.et, and the eorporation's sYrplus, to determine the eorpora
tion's ta.xable eapital;]
(2) apportioning the taxable entity's margin [eorporation's taxable eapital] to this state
as provided by Section .171.106 [I71.101'i(a) or (c), as applisable,] to determine the taxable
entity's [eorporation's] apportioned margin [taxable eapital); and
(3) subtracting from the amount computed under Subdivision (2) any other allowable
deductions to determine the taxable entity's [sorporation's net] taxable margin [eapital],
(b) Notwithstanding Subsection (a)(l)(B)(ii), a staff leasing services company may sub-
tract 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 Ret ta.xable capital gf a limited compaRY is eomputed by:
[(1) adding the sompany's cORtributioRS, as Texas
Limited Liability Company ltd, and surplus to determine the eompany's taxable capital;
[00- apportioning the amount determined under Subdivision (1) to this state in the same
manner that the taxable eapital of a eorporation is apportioned to this state under Sestion
I7I.lOfci(a) or (c), as appLieable, to deternJine the company's apportioned ta..xabls eapital; and
[(g) subtraeting from the amount eomputed under Subdivision (2) any other allowable
deductions, to determine the eompany's net taxable eapital.
net taxable capital of a sa'P..ngs and loan assoeiation is eomputed 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 eapital of a sOl'poration is apportioned to this state under Seetion
I71.l0fci(a) to detsrmine the association's net taxable eapital],
(d) An election unde1' Subsection (a)(1)(B)(ii) shall be made by the taxable entity on its
annual report and is effective only for that ann'ual repoTt The election may be changed by
filing an amended Teport.
8
79th LEGISLATURE-THIRD CAIJLED SESSION
Ch. 1, 5
Sec. 17.1.1011. DETERMINATION OF TOTAL REVENUE FROM ENTIRE BUSI-
NESS. (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 H20-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 17.1.1014, for the purpose of
computing its taxable margin under Section 17.1.101, 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 lc, Internal Revenue Service Form 1120; and
(ii) the amounts entered on lines 4 through 10, Internal Revenue Service Form
.l120; and
(B) subtracting:
(i) bad debt expensed for federal income tax purposes that corresponds to items of
gross receipts included in Subsection (c)(l)(A) for the current reporting period or a
past reporting period;
(ii) to the extent included in Subsection (c)(l)(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) (l)(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 pur-
poses;
(iv) allowable deductions from Internal Revenue Service Form H20, 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)(l)(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 .Ie, 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 for federal. income tax purposes that corresponds to items of
gross recetpts tncluded m Subsectwn (c)(2)(A) for the current 1'ep01iing period or a
past reporting period;
. to thE: included in Subse?tion (c)(2)(A), f?reign royalties and foreign
dtvtdends, tncludmg amounts determtned under Seetwn 78 or Secti.ons
Internal Revenue Code;
9
Ch. 1, 5
79th LEGISLATURE-THIRD CAl,LED SESSION
(iii) to the extent included in Subsection 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 pur-
poses;
(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 substan-
tially 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 undet'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 shall include in the taxable entity's total revenue the
taxable entity's share of the net income of the passi.ve entity, but only to the extent the net
income of the passive entity was not generated by the margin of any other taxable entity.
(j) 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 t-emitted 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)(l)(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 secu-rities under--
written; and
(3) subcontracting payments handled by the taxable entity to provide services, labor, or
materials in connection with the actual or proposed design, construction, t'emodeling, or
repair of improvements on real property or the location of the boundaries of real property,
(g-l) A taxable entity that is a lending institution shall exclude from its total revenue, to
the extent included under Subsection (c)(l)(A), (c)(:2)(A), or (c)(3), proceeds from the
principal rel)ayment of loans_
(g-2) A taxable entity shall exclude from its totalt'evenue, to the e:J.:ie'llt i.ncluded under
Subsection (c)(l)(A), (c)(2)(A), or (c)(3), the tax basis a.s determined under the Internal
Revenue Code of securities and loans sold.
(g-3) A t,axable entity that provides legal set'vices shall exclude from its total revenu.e, to
the extent included under Subsection (C)(l)(A), (c)(2)(A), or (c)(:3):
(1) the following flow-through funds that are mandated by law, contmct, or fiduciary
duty to be distributed to the claimant by the claimant's attorney at' to other elltities on
behalf of a claimant by the claimant's attorney:
(A) damages due the claimant;
(B) funds subject to a lien 01' other contractual obligation arising out of the represen-
tation, other than fees owed to the attorney;
(C) funds subject to a subrogation interest or other thinl-pa1ty cont-ra.ctual claim;
and
(D) fees paid an att01'ney in the matter who is not a mernbe'r, shareholder, or
employee of the taxable entity;
(2) reimbursement of the taxable entity's expenses incwrredin prosecuting a claimant's
matter that are specific to the matter and that m-e not geneml opemting expenses; and
10
HeinOnline -- 2007 vol. 1 102007
Ch. 1, 5
(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 of
the pro bono services for auditing purposes in accordance with the manner tn whtch those
services are reported to the State Bar of Texas.
(h) If the taxable entity belongs to an affiliated group, the taxable entity may
payments described by Subsection (j), (g), (g-l), or (g-3) that are made to enttttes 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.
0) 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.
(le) A taxable entity that is a staff leasing services company shall exclude from its total
revenue payments 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)(l):
(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, Occupa.tions Code; and
(B) compensation paid to a sales representative by a principal in an amount that is
based on the amount m'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) produces, imports, distributes, or acts as an 'independent agent for
the distribution of a product for sale;
(B) uses a sales 7'epresentative to solicit orders for the product; and
(C) compensates the sa/.es wholly or partly by sales commi.ssion.
(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 1'eceived from fedeml
obligations.
(m-I) 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 detennined
under Sections 171.1013(a) and (b).
(n) Except as provided by Subsection (0), a taxable entity that is a health C(l;l'e p1'ovide1'
shall exclude from its total revenue, to the extent included undet' Subsection (c)(l)(A),
(c)(2)(A), or (c)(3):
(1) the total amount of payments the health cat'e provider 1'eceived:
(A) under the Medicaid program, Medicare program, Indigent Health Care and
Treatment Act (Chapter 6.1, Health and Safety Code), and Children's Health IIl811l'ance
Progmm (CHIP);
(B) for professional services p1'ovided in relation to a worke1's' compen.sation claim
under Title 5, Labor Code; and
(C) for professional services provided to a beneficimy 1'end6'l'ed ullda the TRICARE
military health system' and
(2) .the a:ctual.cost to t!w h.ealth care provider for a:ny uncompensated cate pro/1i.ded, but
only if the prov.ider records of the '/l,ncompensated care fol' auditing }Ju:rposes
and, if the provtder later rece'I.Ves pay:nentfor all or part of that cc:re, the p1'Ovidei' adjusts
the amount excluded for the tax year tn whtch the payment 'is Tere/.ued.
(n-.1) The comptroller shall adopt rules governing:
11
HeinOnline -- 2007 voL I II 2007
Ch. 1, 5
(l) 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.
(0) 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 oj, 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 u,nder Chapter 24 7, 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 inter/nediate care facility for the mentally 1'etarded or a home and communi-
ty-based services waiver program for persons with mental retardation adopted ill
accordance with Section 1915(c) of the federal Social Security Act (4:2 U.S.C. Section
1396n);
(l) a birthing center;
(J) a nursing home;
(K) an end stage renal disease facility licensed unde1' Secti.an 25.1.0.11, Health and
Safety Code; or
(L) a pharlnacy.
(3) "Health care provider" means a taxable entity that participates in the Medicaid
program, Medicare program, Children's Health Insw'ance Program (CHIP), state work-
ers' compensation progmm, or TRICARE military health system as a provider of health
care services.
(4) "Obligation" means any bond, debentu1'e, security, mortgage backed security, pass-
through certificate, 01' other evidence of indebtedness of the issuing entity. The tel'1/! does
not include a deposit, a repu1'chase agreement, a loan, a lease, a participation ill a l.aan or
pool of loans, a loan collatemlized by an obligation of a United States gover/wlent agency,
or a loan guaranteed by a United States government agency.
(4-a) "Pro bono services" means the direct p1'ovision 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), e:rpenses
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" mea,ns any depa'ltment 01' min-ist1-y of the fedeml
government, including a federal reserve bank. The term does /lot iuclude a state 01' local
government, a commercial enterp1'ise owned wholly 01' paltTy by the United States
government, or a local governmental entity or commercial, enterpri.se whose obligations
are guaranteed by the United States government.
12
HeinOnline -- 2007 voL 1 122007
79th LEGISLATURE-THIRD CAl,LED SESSION
Ch. 1, 5
(6) "United States government agency" means an instrumentality of the United
government whose obligations are fully and explicitly guara1'!'teed as to
payment of principal and interest by the full faith a:nd credzt of the States
government. The term includes the Government Natwnal Mortgage Assocwtwn, the
Department of Veterans Affairs, the Federal Housing Administration, the Farmers
Administration, the Export-Import Bank, the Overseas Private Investment Corporatwn,
the Commodity Credit Corporation, the Small Business Administration, and any succes-
soragency.
(7) "United States government-sponsored agency" means an agency originally estab
lished 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 Farrn 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)(l)(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)(Z)(A),
(c)(2)(A), or (c)(S), 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 9o-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 mef 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. 171.10.12. 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, developmen4 min-
ing, extraction, improvemen4 creation, raising, or growth.
(S)(A) "Tangible personal property" means:
(i) personal property that can be seen, weighed, measured, fel4 or touched or that is
perceptible to the senses in any other manner;
. (ii) films,. sound recordinfls, videotapes, books, and other similar property embody-
zng words, zdeas, concepts, zmages, or sound by the creator of the property for which,
as costs are in:curred i?1' the property, is or is reasonably likely
that any tangzble medzum tn whtch the property ts embodzed will be mass-distributed
by the creator or anyone 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 Sectio?1' 1 014, a taxab0 entity that elects to subtract cost of goods sold for
the purpose of computzng zts taxable margtn shall determine the amount of that cost of goods
sold as provided by this section.
13
HeinOnline -- 2007 vol. 1 13 2007
Ch. 1, 5
(c) The cost of goods sold includes all direct costs of acquiring or producing the goods,
including:
(Z) 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 neces-
sary 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, engineering, and design activities
directly related to the p1'oduction of the goods, including all research or experimental
expenditures described by Section 174, Intenwl 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 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 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 material.s
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 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
14
79th CALLED SESSION
(;11.. 1, {)
(10) licensing or franchise costs, including fees incurred in securin[l the .contractual
right to use a trademark, corporate plan, manufacturing procedure, specwl rectpe, 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 equipmen4 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 tmnsportation 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) interes4 including interest on debt incurred or continued during the production
period to finance the production of the goods;
(10) incorne taxes, including loca4 state, federa4 and foreign income taxes, and fran-
chise taxes that are assessed on the taxable entity based on income;
(11) strike expenses, including costs associated with hiring employees to replace strik,
ing personne4 but not including the wages of the replacement personne4 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:
(AJ "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.
(j) 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 sub}ect 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 (j).
(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.
15
Ch. 1, 5
(i) A ta.xable 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 te'/"ln "maintenance" is defined in 34 T.AG. 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 (cHI3).
(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 [.easing company.
(l) Notwithstanding any other provision of this section, a payment nw,de 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
a'/"ln's length.
(m) In this section, "a'/"ln'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 patty" 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, 01' entity is sub.ject to the tax under this chapter or
not, in which one person, corporation, or entity, or set of related persons, corporations, 01'
entities, directly or indirectly owns or controls a controlling interest in another entity.
Sec . .171 . .10.13. 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 F01'?1L W-2 or any subsequent form
with a different number or designat'ion 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 alld limited liability
companies treated as partnerships for federal income tax purposes, but only if the person
receiving the distribution is a natural person;
(fJ) net distributive income from limited l'iability 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 17.1.1014, a taxable entity tho,t elects to subtract compensation for the
purpose of computing its taxable margin under Section .17.1.101 may subtract an amount
equal to:
16
HeinOnJine -- 2007 voL I 162007
79th. LEGISLATURE-THIRD CALLED SESSION
Ch. 1, I)
(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?y a taxable
entity to its officers, directors, owners, partners, and employees, a taxable enttty 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 17.1.101.
(c-l) Subject to Section 171.10.l4, a taxable entity that elects to subtract compensation for
the purpose of computing its taxable margin under Section 17l.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:
(l) 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.
(j) 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) Sub;'ect 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 prirna1"Y 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 a7med forces of the United
States.
Sec. 171.1014. COMBINED REPORTING; AFFILIATED GROUP ENGAGED IN UN-
IT1RY (a) Taxable entities that are part of an affiliated group engaged in a
umtary busmess 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 States if 80 percent or more of the taxable entity's
and. payroll, determtned by fU?toring under Chapter 141, are assigned to
locatwns outstde Umted States. !n Chapter 141, if either the property factor or
the payroll factor zero, the denommator tS one. The combined group may not include a
taxable entity that conducts business outside the United States and has no prope1iy or
17
HeinOnline -- 2007 vol. 1 17 2007
Ch. 1, 5
payroll if 80 percent or more of the ta..'l;able 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 17UOll(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
17.1.1012 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 c01-responding item of total revenue was
subtracted under Subsection (c)(3).
(f) For purposes of Section 17.1.101, a combined group that elects to subtract compensation
shall determine that amount by:
(1) determining the compensation for each of its l1wmbers as provided by Section
17.1.10.13 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 membe1' 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 PART-
NERSHIP ARRANGEMENT. (a) In this section, "tiered partnership arrangement"
means an ownership structure in which all of the interests in one partnership, trv.st, or
limited liability company that is treated for federal income taxes as a partnership Or a
limited liability company treated as an S cOT'poration 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 dtt1'ibutable 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.
18
HeinOnline -- 2007 vol. I 182007
Ch. 1, 5
(d) The comptroller shall adopt rules to administer this section.
[Ses. 171.1()2. OF T.AY . A.BLE CAPITAL OF CORPORATION IN
PROCESS OF LIQUIDi.tTION. (a) "Corporation in the process of liquidation" means a
corporation that:
[(1) adopts and purS12es in good faith a plan to marshal tho assets of t?O to
payor settle with the corporM;ion's creditors and debtors, and to appornon the remamrng
assets of the corporation among the corporation's stockholders;
[(2) adopts the plan by a resoll1tion approved by the corporation's board of directors and
ratified by a maJority of the stoskholdel's of resord; and
[(3) conoocts 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 liql1idating
dividends paid on the stock.
[(c) The president and the sec:retary of the co:rporation shall fIle an affidavit with the
comptroller con.tainmg information about the amount of liquidating dividends paid and a
statement that the corporation is in the prOQess of liquidation. The plan described by
Subsestion (a) of this sedion for the corporation's liql1idation shall be attached to and be a
part of the affidavit.
[(d) Trus sestion applies only to the computation of a corporation's taxable capital under
Section 171.101 of trus code.]
Sec. 171.103, DETERMINATION OF GROSS RECEIPTS FROM BUSINESS DONE
IN THIS STATE FOR MARGIN [TAY.ABLE GAPIT,.'li.]. (a) Subject to Section .171.1055,
in [In] apportioning margin [taxable capitan, the gross receipts of a taxable entity [eorpora
tiM] 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 Gr shipped to a
buyer in this state regardless of the FOB point or another eonditiGn of the sale, and each
sale of tangible pe:rsonal property shipped from this state to a purehaser m another state in
which the seller is nGt subject tG taxation;
[{2) each service performed in this state;
[(3) each rental of property situated in this state;
[(4) the use of a patent, eopyright, trademark, franehise, or license in this state;
[(5) each sale of real properly located in this state, including royalties from oil, gas, or
other mineral interests; and
[(6) other business done in this state.
[See. 171.1032, DETERMINATION OF GROSS RECEIPTS FROM BUSINESS DONE
IN THIS ST,.L\.TE FOR T,..:\ ... .Y..ABLE EARNED SURPLUS, {a) Except for the gross receipts
of a Qorporation that are subject to the pro'1isiot:ls of Section 171.1061, in apportioning taxable
earned surplus, the gross receipts of a corporation from its bl1siness done in trus state is the
Slllfl of the corporation's reeeipts 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 saleL and each
sale of tangible personal properly shipped from trus state to a purchaser in another state in
which the seller is nGt subjoet to any tax on, or measured by, net income, v.z:ithout regard to
whether the tax is imposed];
(2) each service performed in this state, except that '/'eceipts del'ived jJ'Orn sI'l7icing loans
secured by real property are in this state if the nal 1-l'J"ope'lt!lis locatcd ill this state;
(3) each rental of property situated in this stat.e;
(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 l'oyalties from oil, gas, or
other mineral interests; and
(6) [each partnership or joint venture to the extent provided by Subsection (C)i and
19
Ch. 1, 5
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 pu?-pose of taxation. [A (lQrporation shall dedQst from its
gross receipts computed under Subseetion Ca) any amount to the extent inchlded tn.der
Subseetion of the application of Section 78 or Seetions 951 964, Internal Re'lenue
Code, any amount exclmiabls Qnder Section 171.110(k), and dividsnds reeeived from a
subsidiary, associate, or affiliated gorp oration that does not transagt a substantial portion of
its business or regularly maintain a substantial portion of its assets iB the United States.
[(g) A gorporation shall inglude in its gross receipts gomputed under Subsegtion (a) the
gorp oration's shaFe of the gross receipts of eagh partnership and joint venture of which ths
oorporation is a part apportioned to this state as though the corporation diregtly earned the
receipts, including regeipts from business done l,1lith the corporation.
[Sec. 171.104. GROSS RECEIPTS FROM BUSINESS DONE..JN- TEx"t\S; DEDUC
TION FOR FOOD .'\l).TD MEDICINE RECEIPTS. A corporation may dedugt from-its
receipts iBdQdable under Section 171.103(1) of this gode the amount of the gorp oration's
regeipts from sales ot; the follo\..r..ng items, if the items aFe shipped from outside tills state and
the regeipts would be includable under Segtion 171.103(1) of this gode in the absenge of this
seetiGnT
[(1) food that is exempted from the Limited Sales, Exr:ise, and Use Tax Ast by Beetion
15L314(a) ot; this gode; and
[(2) health CaFe supplies that aFe exempted from the Limited Sales, Exsise, and Use Tax
}..cCt by Bestion 151.313 of this gode.]
Sec. 171.105. [DETERMINATION OF GROSS RECEIPTS FROM ENTIRE BUSI
NESS FOR TAY. ..... 'illLE CAPITAL. (a) In apportioning taxable capital, the gross receipts gf
a gorp oration from its entire business is the sum of the corporation's regeipts from:
[(1) lash sale gf the sorporation's tangible personal property;
[(2) sagh sernes, rental, or royalty; and
[(3) othsr business.
[(b) If a gO!'pGratiGn sells an investment Gr capital asset, the corporation's gross receipts
from its entire business for taxaGle capital inglude only .thB- net gain from the sale.
[Sec. 171.1051.J DETERMINATION OF GROSS RECEIPTS FROM ENTIRE BUSI-
NESS FOR MARGIN [T.h .. ..Y. ... 'illLE E.'\RNIW SURPLUS]. (a) Subject to Section 171.1055
[Except for the gross receipts of a corporation that aFe subjeet tg the provisions of Sestion
171.1061J, in apportioning rnu1-gin [taxable earned surplus], the gross receipts of a taxable
entity [corporation] from its entire business is the sum of the taxable entity's [gorporation's]
receipts from:
(1) each sale of the taxable entity's [gorporation's] tangible personal property;
(2) each service, rental, or royalty; and
(3) [each partnership and joint 'lentUl"e as provided by Sblbsection (d)i and
[(4)) other business.
(b) If a taxable entity [corporationj sells an investment or capit.al asset, the taxable entity's
[corporation's] gross receipts from its entire business for taxable ma.rgin [earned surplusJ
includes only the net gain from the sale.
(c) A combined group shall include iu its gross receipts comput.ed under Subsection (a) the
gross receipts of each taxable entity that t8 a member of the combined group, without regard
to whether that ent'ity has a nexu.s with tins st.atefor the purpose of taxation.
Sec . .171.1055. EXCLUSION OF CERT.4lN RECEIPTS FOR MARGIN APPORTION
MENT, (a) In apportioning 11W?'gin, 1-eceipts e,rciuded from total 'revenue by a taxable
entity under Section .17.1.101.1 may I/ot be included ill either the Tecei1)ts of the taxable entity
from its business doOne in this state as dete/"II1/lled ltndel' Section 17.1.103 or the receipts of the
taxable entity from its enti?'e bw;iness done as dde/'ill ined under Section 171.105.
20
HeinOnline -- 2007 vol. I 202007
Ch. 1, ;)
(b) In apportioning margin, receipts derived from transacti,ons between mem-
bers of a combined group that are excluded under Section 17UOl4(c)(3) may not
in the receipts of the taxable entity from its business done in this as determtned under
Section 17.1.103, except that receipts derived from the sale of tangtble personal property
between individual members of a combined group where one ?nember party to the
tion does not have nexus in this state shall be included in the receipts of the taxable enttty
from its business done in this state as determined under Se?tion,171.103 to the extent
the ?nember of the combined group that does not have nexus tn thts state resells the tangtble
personal property without modification to a purchaser in this state,
(c) In apportioning margin, receipts derived from transactions between mem-
bers of a combined group that are excluded under Section 17.1.1014(c)(3) may not 7.1u;luded
in the receipts of the taxable entity from its entire busi1wss done as determtned under
Section 171.105, [A eorporation shall dedtlet from its gross receipts eompyted ooder
Sybsestion Ca) any amount to the extent indYded in Subsestion Ca) beca:use of the application
of Section 78 or Sestions 951 964, Internal RBentle Code, any amount ooder
Section 171.110Ck), and dividends received from a subsidiary, assoeiate, or affiliated corpora
tion that does not transast a substantial portion of its business or regularly maintain a
stlbstantial portion of its assets in the United States.
[Cd) ..A .. eorporation shall incltlde in its gross receipts eompyted under Subsection (a) the
corporation's of the gross receipts of eaeh partnership and joint vtmttlre of whlch the
corporation is a part.]
Sec. 171.106. APPORTIONMENT OF MARGIN [T.I.I .... y A.BLE CAPIT.tU. AND TAX
ABLE EARNED SURPLUS] 1'0 THIS STATE. (a) [Except as provided by Subsestions (c)
and- Cd), a corporation's taxable sapita! is apportioned to this state to determine the amount of
the ta. .... imposed under Section 171,002(b)(l) by multiplying the eorporation's taxable capital
by a fraction, the numerator of VoLmch is the corporation's gross receipts from bYsrness done in
this state, as determined under Se0tion 171.103, and the denominator of whish is the
corporation's gross reseipts from its entire business, as determined under Section 171.105,
[(bt] Except as provided by this section [Subsections (0) and (d)], a taxable entity's margin
[corperation'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 [0erporatien's) gross receipts from its entire
business, as determined under Section 17U05 [171.1051].
(b) 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
[corperation] 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 ta:t:able entity's [cOl"fH)ratien'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 compytation to allecate taxable capital and earned surplus,]
In this subsection, "regulated investment company" has the meaning assigned by Section
851(a), Internal Revenue Code.
(c) [(dj] A taxable entity's margin [corporatien's ta. .... able 0apital 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
[0orporatien's) total margin [taxable 0apita! 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
21
HeinOnlinc -- 2007 vol I 21 2007
Ch. 1, 5
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 covpovation shall make a sepavate eomputation 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 01' befove January 1, 1998, each enUBr vegistered with the State Securities
Boavd undev The Securities Act U..rlicle 581, Vernon's Texas CiviJ Statutes) that pro,.<1des
management, administration, 01' investment sel".<1ces to an employee retirement plan, must IDe
a report '.vith the comptroller containing such information as the comptrollev deems necessary
in ovde1' to determine the fiseal impaet of Subseetion (d). The State Securities Boavd and tM.
Seeurities Commissionev shall eooperate with the eomptroller in obtaining the information,
The Securities Commissioner shall impose the penalties provided in The Securities Act
(Article 5S1 1 et seq., Vernon's Texas Civil Statutes) against any entity that the comptrollev
eerti.fies is delinquent in the filing of the report vequired by this seetion.
[(f) On 01' before September 1, 1995, the eomptroller shall issue a vepon which evaluates
the statw.vide fiscal impact of Subsection (d). If the comptrollev determines that implement
ing Subseetion (d) will not have a negative fiseal impact on this state, Subsection (d) shall be
effective fov vepons or returns originally due on or after January 1, 1999. If the comptvollor
determines that there 'Hill be a negative fiseal impact, that sQbsection shall not be implement
eQ.
[(g) If this Aet and anothev Act of the 75th Legislature, Regular Session, 1997, make the
same substantive ehange from the current law but differ in text, this Aet pvevails vegavdless
of the relative dates of enactment.
[W] 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) [ ~ ] 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 CERTAlN TAX.'illLE EJ...RNED 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, 01' a
country, other than the United States, cannot tao''; because the activities generating that item
of income do nGt have sufficient unitary connection with the corporatiGn's other actiA<1ties
eonducted within that state or country under the United States ConstitutiGn, is allocated to
this state if the corporatiGn's commercial domieile is in this state. Income that ean only be
allocated to the state of commereial domicile because the income has il1.sufficient unitary
connection with any othev state or country shall be alloeated to this state or another state or
country net of expenses velated to that income. A portion of a corporation's taxable earned
surplus allocated to this state under this section may nGt be apportiol1.ed under Section
171.110(30)(2).]
Sec. 171.107. DEDUCTION OF COST OF SOLAR ENERGY DEVICE FROM MAR-
GIN [T,.& .... XABLE C.AJ='ITA..L OR T.h.X .... WLE 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 [corpovationl may deduct from [its apportioned taxable capital the
amortized cost of' a solar energy de\<1ee or from] its apportioned margin [taxable eavned
~ ] 10 percent of the amortized cost of a solar energy device if:
22
Ch. 1, 5
(1) the device is acquired by the taxable entity [cQrpQratlQn] for heating or cooling or for
the production of power;
(2) the device is used in this state by the taxable entity [cQrpQratign]; and
(3) the cost of the device is amortized in accordance with Subsection (c) [of this seetiGBJ.
(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 [cQrpQratiQnJ 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) l' ... corporation may elect to make the deduction authorized by this section either from
apportiQned ta..xable capital or apportioned taxable earned surplus for each separate regular
annual period. ,1m 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
[TA..Y.ABLE CAPITAL OR T_<\"'Y.ABLE 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 ta..xable ealmed 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:
(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 corpQration may elect to make the deduetion authorized by this sectiQn from
apportiQned taxable capital or apPQrtioned ta..xable earned surplus, but not from both, for each
separate regular annual period. .A...n election for an initial period applies tQ the second tax
periQd 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 eapital. For a
limited liability company, "surplus" means the net assets of the company minus its
m e ~ b ~ r s ' cQntribution.s. Surplus includes unrealized, estimated, or eontingent losses 01"
obhgatlOns or any '.';:ntedown of assets other than those listed in Subsection (i) of this
section net of appropriate income tax provisions. The deflnition under Uris gubdivision does
not apply to earned surplus.
23
HeinOnline -- 2007 vol. 1 23 2007
Ch. 1, 5
[(2) "Net assets" means the total assets of a eorporatio1il mimas its
[(3) "Debt" means any legally enforeeable obligation meastll'ed in a eertam amOtmt of
money whish must be performed 91' paid ';v:ithin an ascertainable period of time or on
demand.
[(a 1) /J. .. legally enforceable obligation that requires the return of a like kind property that
was borrowed will be considered debt if it is a liability aecording to generally aeeepted
aeeounting prineiples and if the rettll'n must be made within an aseertainable period of time or
on demand. The amollnt that will be eonsidered debt is the fair market value meastll'ed on
the last day on '},'hieh the report is based as required by Seetion 171.153. For purposes of
this subseetion, "like bnd properly" means the same quantity, quality, and nature or
eharaeter as the pr9perty borrowed.
[(b) Exeept as otherwise provided in this seetion, a eorporation must eompute its surplus,
assets, and debts aeeording to generally aeeepted aeeGunting prineiples. If glmeraliy aeeept
ed aeeolU1ting prineiples are unsettled or do not speeify an aeeounting practiee for a partieuIar
purpose related to the eomputation of surplus, assets, or debts, the comptroller by rule may
establish rules to speeify the applicable aecounting praetiee for that purpGSe.
eorporation '.hose taxable eapital is less than $1 million may report its surplus
according to the method used ill the eorporatioB's most I'eeeBt federal ineome tax return
origiBally due on or before the date on which the corporation's franchise tax report is
origiBally due. In determining if ta.xable capital is less than $1 million, the eorporation shall
apply the methods the corporation used in eomputing that federal income ta.x return unless
Bnothel' method is required under this chapter.
[(d) l>-.. eGrporation shall report its surplus based solely on its own financial C(mditioH.
Consolidated reporting of surplus is prohibited.
[(e) Unless the provisions of Seetion 171.111 apply due to an election under that section, a
corporation may not change the accounting methods used to eompute its surplus moro often
than once four years without the 'Nritten eonsent of the comptroller. A ohange in
aeeounting methods is not justified solely because it results in a ['eduction of. tax liabilit?,z.
[(t) A corporation declaring dividends shall exdude those dividends from its ta..xable capital,
and a eorporation receiving dividends shall include those dividends in its gross receipts and
taxable eapital as of the earlier of:
[(1) the date the dividends are deolared, if the dividends are actually paid with.iR one year
aft8l' 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 aecording to generally accepted aceounting principles as required or
permitted by this chapter must be reported according to the suecessful efforts or the full cost
method of aecounting.
[(h) A parent or investor corporation must use the eost method of acoounting in reporting
and ealculating the franchise tax on its investments in subsidiary corporations Of'
investees. The f'etained earnings of a subsidiary cOl'Poration or other Hwestee before
aequisition by the parent or investor corporation may not be excluded from the sost of the
subsidiary corporation or investee to the parent or investor corporation and must be ineluded
by the parent or investor eorporation in ealculating its surplus,
Hi) The follo'wing accounts may also be exeluded from surplus, to the extent they are in
conformance with generally aseepted accounting principles or the appropriate foderal income
tax method, whishever is applieable:
[(1) a rosen'e or aUow:ance for uncollectable aecountsj and
[(2) a contra asset aceount for depletion, depreciation, or amortigation.
[(j) A eorporation 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 eRd of the aecounting period on which the taxable capital
component is based, ineluding retirement, medical, insurance, postretirement, and other
similar benefits; and
24
79th LEGISLATURE--THIRD CALLED SESSION
Ch. 1, 5
[(2) deferred invsstmsnt tax sredit;s.
[(Ie) NowtithstaBdil'lg aBy other provision m tws chapter, a sorporation subjest to...the-tax.
imposed by tWs ehapter shall use doable entry bookkeepmg to aSSO!'Ult fur all transaetions
that arfest the somputation of that tax,
[(l.) The "first m first out" and "last in first out" methodB of assounting are acssptable
methods fur somputing surplUS,
[em) A serperation may net use the pHBh dCPNn method of acsounting in eomputing or
reporting its surplus.
[Cn.) A eorporation must use the equity method of awmnting when reporting aB investment
ID-a.-partnersWp or jeint
[See, 171.110. DETER]}.[lN,A ... TION OF NET T,.t\.Y.ABLE EARNED SURPLUS. (a) The
net ta.'(able earned surplus of a eorporation is eomputed by:
[H) determining the sorporation's reportable federal ta.'(able inceme, suhtrastmg from
that amount any amount exshldable under 8ubsedion (k), any amount included in reporta
ble federal taxable insome under: Sestion 78 or Sections 951 964, Internal Code,
and dividends re@eived from a subsidiary, associate, or affiliated serporatien that does oot
transast a slibstantial portion of its business or regularly maintain a substantial portion of
its assets m the United States, and adding to that amount aBy sompensation of officers or
dire@tors, er if a baBic, aBy sompensation of direetors and 9},e@utive offisers, to the extent
exduded in determining federal ta.xable mseme to determine the corperation's taxable
earned surplus;
apportioning the sorporation's taxable earned surplHB to this state as provided -by.
8es1;wn 171.106(b) sr (e), as applieable, to determine the sorpor:ation's apportiened taxable
earned surplusj
[(3) adding the @srporation's taxable earned surplus allosated to tnis state as prwided by
Sestion 171.1061j and
subtraeting from that amount any allo:wable deduetions aBd any business loss that is
earned forward te the tax reporting peried and dedustible under: Subseetion (e),
[(b) Exsept as provided by Subseetion (e), a eorporation is not required to add the
eompensation of omsers or direetors as required by Subsedion (a)(!) if the eorporation is:
[(1) a Clorporation that nas not more tnan 35 shareholders; or
[(2) an S sorporation, as that tenn is defined by Sestion 1391, Internal Revenue Code.
[(c) A subsidiary csrporation may not claim the exclusion under Subsection (b) if it has a
parent e?rporation that does not qualify fur the exehlsion. For purposes of tWs subseetion a
qualifies, as a parent if it Ultimately sont1'ols the subsidiary, een if the contd-ol
arIses through seI'!'es or gFo,up . of other: subsidiaries or entities, Control is presQmed if a
par,ent eorporatlOn dIrectly or mdireetly o:wns, controls, or nolds a majority of the outstandmg
votIng steck of a corporation or ownership interests in anotner entity.
, [(d) A corporation's federal taxable income is the eorporation's federal ta.'(able
meome after Schedule C sfJerna1 deduetions and before net operating loss deductions as
csmputed under the Internal R9'lenue Code, exeept that an S cerporation's reportable federal
taxable il'lcome is the amount of the ineome reportable to the Internal Revenue SeMee as
taxable to the eorporation's shareholders,
[(e) For purpo,ses of tWs a business loss is any negative amount after apportion
ment aBd alloClation . The bUSUleS!! loss shall be carried forward to the year succeed:il'lg the
loss year as a dedustlOn to net ta.xable earned surplus, then sueeessively to the sueeeedil'lg
four taxable years after: the loss year or until the loss is exhausted, 'Nhiche'ler oceurs first but
fur not more t?an five taxable years after the loss year, Notwithstanding the
sentenee, a busmess loss from a tax year that ends before JaBuary 1 1991 may not be used
to net earned surplus. -,:Ox business loss can be only by the
mcuIT9? the loss and cannot be tFansferred to or claimed by any other
entltjr, the SUF\'1'lor of a merger if the loss was incun'ed by the corporation that did
net Slll'Ple the merger:,
25
Ch. 1, 5
79th I,EGISLATURE-THIRD CALLED SESSION
[Cf) A eorporatioB may use either the "Mst m Mgt out" or "last m first out" methgd gf
aeeouIltiBg to eGmpute its Bet taxable earned surplus, bat Gnly tG the exteBt that the
cGrpGratiGn used that method GB its most reeellt federal income tax report originally due 01'1
or before the date Gn 'Hhich the cGrpGratiGn's franehlse tax report is originally due,
[(m For purposes of this seetiGn, aB approved Employee Stock Ownership PlaB eOBtrolliBg
a minoritJr iBterest aBd voted through a siBgle trustee shall be cOBsidered Olle sbarehGIQer.
[Cb) A corporatioB shall report its net taxable earned surplus based solely OIl its (}Vffi
finaneial cOBdition. Consolidated reportiIlg is prohibited.
rei) For purposes of this sedion, aBY person designated as aB officer is presumed to be an
officer if that persGl'l.7
[(1) holds an office created by the board of diredors or under the corporate charter or
bylaws; and
[(2) has legal to bind the corporation '.vith third parties by exeeutiBg cOBtraets
or other legal doctmleBtg,
[(j) A corporation preslmlption deseribed iB Subseetion ei) that a person is
an officer if it eOBelusively shows, thrOUgR tRe person's job description or other dGcumenta
tion, that the person does not partieipate or haNe authority to participate in significaBt PGliey
making aspects of the cGrporate operations.
[(kj- Dividends and interest received frGm federal obligatioBs are nGt iBcltlded in earned
surplus or gross reeeipts for earned surpltls purposes.
[(l) In this seetion:
[g,) "Federal obligations" means:
[CA) stoeks aBd other direct obligatiOBS of, and obligations uneonditionally guaraBteed
by. the UBited States governmeBt aBd United States governmeBt ageBcieSj -an4
reB) direet GbligatioBS of a United States governmeBt spoBsored ageBey.
[(2) "ObligatioB" means aBY bOBd, debeBture, seeurity, mortgage baeked seeurity, pass
tarGugR eertificate, or other e';:ideBce of indebtedBess of the issuing entity. The term does
not include a deposit, a repurehase agreement, a 10aB, a lease, a participation in a loan or
pool of loans, a loan eollateralized by aB obligatiOB of a Unitsd States govsrnmeBt agsncy,
or a lGan guaraBteed by a UBited States government agency.
[(3) "United States government" means aBY departmeBt or ministry of the federal
government, including a federal reserve bank. The term does not include a state or local
gGvernmeBt, a commereial enterprise OloWlsd wholly or partly by the United States
government, or a loeal governmental entity or commercial enterprise whose obligatioBs are
guarantesd by the United States government.
[(4) "UBited States government agency" means aa iastrumentality of the UBited States
government ",those obligatiOBS are fully and explieitly guaranteed as to the timely payment
of prineipal and interest by the full faith aBd eredit of the United States governmeBt. The
term includes the Government NatioBal Mortgags Asociation, the Depal'tmeBt of Veterans
Affairs, the Federal Housing .AA.'Tlinistration, the F[U"IDers Home Administration, the
Export Import Bank, the Overseas Private Investment Corporation, the CommoditJt Credit
Corporation, the Small Business .A .. dministration, and aBy suecessor ageB(!y.
[(5) "United States governmeBt sponsored ageacy" means an agency originally estab
lished or chartered by the United States governmeBt to serve publie pUl'poses speeified by
the United States Congress but whose obligatioBs are not explicitly guaranteed by the full
faith and eredit of the United States gmternment. The term includes the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Assoeiation, the Farm Credit
System, the Federal Home Loan Bank System, the Student LoaB Marketing .4.ssociation,
and aBY successor ageney.]
Sec. 171.111. TEMPORARY CREDIT ON TAXABLE MARGIN. [NET Tf .. X .. A.BLE
EARNED SURPLUS.] (a) Not later than March 1, 2007, a taxable entity [OO2r-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 11/nrgi'/I. The taxable
entity [net taxable earned surplus. The comptroller may not grant an extsnsion. The
26
Ch. 1, 5
corpora.tionJ may thereafter elect to claim the credit for the current year and future at
or before the original due date of any report due after January 1, 2007, 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 fll'st report due under this chapter after January 1, 2007. [;t.992.]
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 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 ta.'"Cable 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
net of any related valuation allowance amount, is otherwise included in the taxable
entity's dedu,ctible 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
J.OOJ.; that is the difference between the basis used for financial acsounting ptu'poses and
the basis used for federal income ta.x purposes of an asset or a liability that at some future
date ,...,ill reverse;]
(2) apportioning the amount determined under Subdivision (1) to this state in the same
manner taxable margin [earned surplus] is apportioned under Section 171106 [171.106(b)
or (c), as applicable,) on the first report due on or after January 1, 2007;
(3) multiplying the amount determined under Subdivision (2) by 10 [fi.e] 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)(I), the corporation ma;>,' not consider
differences that result from deferred investment tax credits, allowances for funds used during
censtruction, or any other timing difference for which a deferred tax liability is not required
under generally assepted ascounting principles.
[(d) After making the election under Subsection (a) the corporation must, for ptu'poses of
computing its taxable eapital under this chapter, use the same accounting methods under
generally accepted accmmting principles to aCSlmnt for the assets -a.nG liabilities that deter
mine the amount of the credit that the corporation uses to compute the credit. Nop.'lithstand
ing 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 eredit during the period the election is
in effect, the election is automatically revoked.
[(etJ 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)(l). 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)(l), or any other matter relevant to the computation of the credit for which the taxable
entity [corporation] is eligible.
(d) A credit a ta.'"Cable entity .is enti.tled to under this section does not convey, and
may not be or transferred, m relation to a tmnsaction in which the taxable entity
is purchased by anothe1' entity,
27
HeinOnline -- 2007 vol. 1 27 2007
Ch. 1, 5
(e) W) A credit allowed under this Bestion may not be carried forward or backvizard or USGd
to create a business loss carryover under Section 171.110.
A corporation may not use a credit allowed under this section in conneetion with the
compGtation of the corporation's tax on net taxable capital.
In addition to the tax imposed by Section 171.00g, an additional tax is imposed on each
corporation dlW-ng each year the corporation takes the credit allowed undel' this section. The
additional...ta&-is equal to o.g pereent of the corporation's net taxable eapital per year of
privilege period.
This section expires September 1, 2026.
[Sec. I71.Ug. GROSS RECEIPTS FOR TA ..Y ..... <\.BLE CAPITAL. ta) For pu,rposes of this
section, "gross receipts" me:ms all revenues that would be recognmed annually under a
generally accepted aecountin!; principles method of aecountin!;J withollt dedHction for tM.-CGSt
of. property sold, materials used, labll!' performed, or other costs incurred, mlless otherwise
specifieally provided in this chapter.
[(b) Except as otherwise prov:ided in this section, a corporation mHst compute grllSS
receipts in accordance 'lJith generally accepted accllHnting principles. If generally accepted
aeeountin!; principles are unsettled Ill' do not specify an accounting praetice for a partiClllar
purpose related to the computation of gross receipts, the comptroller by rule may establish
rules to specify the applicable accmmting praetice.
[(c) A corporation '.1lhose taxable capital is less than $1 millilln may report its gross reeeipts
according til the method used in the ellrpllration's most reeent federal income tax rettrrn
originally due on or before the date Iln whieh the corpllration's franchise ta.x repllrt is
originally due. In determinmg if taxable eapital is less than $1 million, the corporation shall
apply the methods the cllrporation used in cllmputing that federal ineome tax retYrn unless
:mother method is required under this chapter.
[(d) A corporation shall report its grllSS receipts based solely on its own financial condition.
Consoodated 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 accollnting methods llBed til calml1ate grllSS receipts mllre
often-than once every fuur years without the express ",'Fitten consent of the comptroller. A
change in accllunting methods is not justrned solely becayse it res!lJts in a reduction of tax
liability.
[(f) Notwithstanding :my 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 sedion, a eorporation shall use the same
accountrng methods to apportion its taxable capital as it used to compute its taxable capital.]
Sec. 171.1121. GROSS RECEIPTS FOR MA..RGIN EARNED SURPLUS).
(a) For purposes of this section,"gross receipts" means all revenues reportable by a taxable
entity [eorporation] 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 slU'plus. For example, Sched!lJe C speeial dedHdions and any amounts
subtracted from reportable federal taxable income under Section 171.110(a)(1) are not
included in taxable earned slR'plus 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 rnargin [taxable earned surplus] as used in
computing reportable federal taxable income.
(c) A taxable entity [l' .. corporation shall report its gross receipts based solely on its OW'!1
financial condition. Consolidated reporting is prohibited.
[(d) Unless the provisions of Sedion 171.111 apply due to an eledion 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
28
ell. 6
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 that is in the
corpru-ation's federal tar..able imlOme must be used ill the s gross
receipts under this section, Unless otherwise provided by thIS chapter, a corporatlo.n may not
dedQct costs incID'I'ed frQm the corpQration's share of a partnership's grQSS receIpts, The
gross receipts must be apportioned as though the corporation directly earned them.
[See. 171.113, ALTERNATE METHOD OF DETERMINING TLXABLE
AND GROSS RECEIPTS FOR CERTAIN CORPORATIONS. (a) This section applies only
tGT
[(1) a corpgration organized as a close cgrporation under Part 12, Texas BHsmess
Corpgration Act, that has not more than 35 shareholdersj
[(2) a foreign corporation organized \lIlder 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),
reb) l' ... corporation to which this section applies may elect to compHte its SurpJHS, assets,
debts and gross receipts according to the method the corporation \lses to report its federal
incoU:e tax instead of as provided by Sections 171.l09(b) and (g) and 171.112(b). This
seetion does not affeet 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 specif;y the reporting reqmrements
for eorporations to ,..mich this sectiCln applies.
[Cd) This section does not apply to a subsidiary corporation unless it applies to the parent
corporation of the sHbsidiary.
[(e) The election tmder Subsection (b) becomes effective when ',witten notice of the election
is received by the comptI'oller from the corporation. ltn election under Subsection (b) must
99 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 !HICH TAX ON NET Tl'......Y.ABLE CI!..PITAL IS
BASED. (a) The tax co-vering the initial period is reported on the initial report and is based
29
Ch. 1, 6
on the business done by the Gorporation dtlring 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 da:,rs before the original due date of the initial report; 91.'
[(2) if there is no such period ending date in Subdivision U) of this subseetion, then
ending on the day that is the last day of a ealendar m9nth and that is nearest to the end of
the corporation's first year of business; or
[(3) ending on the da:,r after the merger occurs, for the survivor of a merger ',>,'bich ommr.s
after the day on '""bich the tax is based in Subdivision (1) or Subdivision (2), '.bichever is
apfllicable, of Subsection (a) and before January 1, of the year an initial report is due by the
surywor.
[(b) The tax covering the second fleriod is reported on the initial report and is based on the
same business on wbich 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 bHsiness done by the
corporation during its last accounting period that ends in the year before the year in which
the ta.x is due; unless a corporati9n is tho SUrVi'l9r of a merger ""'hich OCCHrs beirlJleen the end
of its last accounting period in the year before the report year and January 1 of the report
year, in y"rhich 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
ta.x 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.
[See. 171.1531. CREDIT FOR SUR'ffiTOR OF MERGER. (a) "Credit period" means
the period from the date of the merger or the date the survivor was required to pay franchise
ta.x, ,.vhichever is latel., through the end of the plivilege period for \\rhich ta.x was actually paid
by the nonsHrvivol'S.
[(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 amOlmt of the franchise tax computed on net
ta.xable capital paid by the nonsurvivors for the credit period, provided the ta.x comp"Uted on
net taxable capital -pai..d- by the survivor for the credit period is based on the survivor's
fu:lancial condition after the merger. Only a survivor that is subject to the franchise tax is
entitled to the merger credit. The merger eredit shall be allocated among SUl'ViV9rS based on
net ta.xable capital reported, and as flrovided by Section 171.153,
[ec) The credit will be limited to the lesser of the amount of tax on net ta.xable capital paid
for. the eredit period by the survivor or by the nonsurvivors.]
Sec. 171.lS32. BUSINESS ON WHICH TAX ON NET TAXABLE MARGIN [E.<tRNED
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 iaxable entity's begiIlning
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 subsertion], 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 ta".:able entity [corporation] during
the period beginning with the day after the last date upon which [net] taxable [earBed
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 ta:mble entity [corporation] on which
a tax is imposed by this chapter shall pay the tax to the comptrollc:>r.
30
Ch. 1, 7
Sec. 171.158. PAYMENT BY FOREIGN TAXABLE ENTITY [CORPORATION] BE-
FORE WITHDRAWAL FROM STATE. (a) Except as provided by Subsection (b) [et-thi&
sefltioo], 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 in this
state unless it has paid, before filing the certificate of withdrawal, any tax or penalty unposed
by this chapter on the taxable entity
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'
(AJ each officer, [and] director, and manager of the taxable entity [eorporation];
(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 pa11,ner; 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 (eorporation] shall file the report on or before the date the payment
is due under Section 171.152(a)
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 taa;able 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 e:>.."lension, 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
31
HeinOnline 2007 vol. 1 31 2007
Ch. 1, 7
(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 greate!' ef;
[W] an amount produced by multiplying the [:aet] taxable margin [eapitaJ), 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[T--GF
[(2) an ameunt p!'e!lliced by mwtiplying the net taxable earned surplus, as reported en
the mitial !'epert 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 "Amich 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 [eorporation] 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
[ eerporation]:
(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 [cerporation]
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 comptrol-
ler; and
(2) remits with the request the difference between the amount remitted under Subsec-
tion (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 enti-
ty [eerporation] that does not owe any tax under this chapter for any period is not required to
file a report under Section 171.201 onT] 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
32
Ch. 1, 7
(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)(l) 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
lmowledge; 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 taxab'le enti
ty that has more than 100,000 employees in this state sha.ll fi'le a report with the comptrol'ler
stating the number of the taxab'le 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) shallfile 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 taxab'le 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 taxab'le entity [corporation) to report or compute its margin [eal"n4
swpl!2s or taxable capital).
Sec. 171.205. ADDITIONAL INFORMATION REQUIRED BY COMPTROLLER. The
comptroller may require a taxab'le entity on which the franchise tax is imposed
to furnish to the comptroller information from the taxab'le entity'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 [oUbis 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],
33
HeinOnline- 2007 vol. 1 33 2007
Ch. 1, 7
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 infonnation 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 [ef....thls
~ ] .
Sec. 171.208. PROHIBITION OF DISCLOSURE OF INFORMATION. A person, in-
cluding 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 [SH..'lliEHOLDER] 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 en-
force 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 infonna-
tion 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 [GORPOR,.:tTE] RECORDS. To determine the fran-
chise 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 ent'ity's [corporation's net] taxable ma1-gin [earned
surplas}.
(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 ta$able 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 [eorporation] 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
34
eh. 1, 14
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 PRMLEGES
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 procedu'r"es 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.
Sec. 171.351. VENUE OF SurT 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.
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.
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 -eOOe] are assessed against the dli'ference between the amount
required to be remitted under [Paragraph (A) of Subdivision (2) of SI-lbsection (c) of] Section
171.202(c)(2)(A) [ ~ ] and the amount actually remitted on or before May 15.
(e) If a taxable entity [corporation] remits the entire amount required by [Subsection (c)
ef] 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
35
Ch. 1, 14
(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 flIed by the taxable entity
[corporation] under this chapter.
Sec.171.401. REVENUE DEPOSITED IN GENERAL REVENUE FUND. The reve-
nue 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 [goof).
(b) Section 313.024(a), Tax Code, is amended to read as follows:
(a) This subchapter and Sub chapters 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 defmed 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 gove1'1'ling 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 prolliding the eC01wmic
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 flIed, unless the Texas
Education Agency's economic impact evaluation has 1wt 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 defmed by Section 171.721;[, Ta..'i: Code,l or
(2) [in] a county:
(AJ [W) that has a popUlation of less than 50,000;
(B) [ ~ ] that is not partially or wholly located in a metropolitan statistical area; and
(C) [(31] in which, from 1990 to 2000, according to the federal decennial census, the
population:
(i) [(At) remained the same;
36
HeinOnline -- 2007 voL I 36 2007
Ch. 1, 18(c)
(ii) [00] decreased; or
(iii) increased, but at a rate of not more than three percent per annum.
(ar-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.
(D 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 0;
(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 othe: than Subchapter 0, P, or Q, Chapter 171, Tax Code, may claim those
unused credlts on or Wlth 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 effedt for
37
HeinOnline -- 2007 vol, 1 372007
Ch. 1, 18(c)
79th LEGiSLATURE--THIRD CALLED SESSION
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 0, 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 0, Chapter 171, Tax Code, had it
continued in existence, or December 31, 2027, and the former law under which the corporation
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
allowed to carry forward unused credits under that SUbchapter, the corporation may continue
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
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
allowed to carry forward unused credits under that SUbchapter, the corporation may continue
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
credits.
(g) The comptroller shall adopt rules to administer this section.
SECTION 19. A written agreement between the Texas Department of Economic Devel-
opment 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-l), 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 01' 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 flle an
annual report due May 15, 2008, based on the period:
38
HeinOnline -- 2007 voL I 38 2007
Ch. 1, 23
(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
(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 I, 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
(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 can-ied on by any of its partners in a
partnership.
(e) For a merger or consolidation of two or more partnerships, the resulting pa.rtnership 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 partner-
ships, 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 I, 2006. The information repOli. 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.
39
HeinOnline -- 2007 vol. 1 39 2007
Ch. 1, 23
(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 reqillred for those entities to fIle their
information reports as reqillred 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 reqillre 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 I, 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
I20th day after the date the challenge is filed.
(c) This section takes effect as provided by Section 27 ofthis 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.
40
Ch. 2, 3
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 the mel?bers
elected to each house, as provided by Section 39, Article III, Texas ConstItUf!on. If this Act
does not receive the vote necessary for effect on that date, that sectIOn takes effect
September 1, 2006.
Passed by the House on April 24, 2006: Yeas 88, Nays 68, 0 n.ot voting; passed
subject to the provisions of Article III, Section 49a, of the Constitution of the of
Texas; passed by the Senate on May 2,2006: Yeas N.ays 14; passed subject to
the provisions of Article III, Section 49a, of the Constitution of the State of Texas.
Approved May 19, 2006.
Effective January 1,2008, except as provided by 1 (c), 27.
CHAPTER 2
H.B. No. 97
AN ACT
relating to prohibiting certain disruptions at a funeral service; creating an offense.
Be it enacted by the Legislature of the State of Texas:
SECTION 1. Chapter 42, Penal Code, is amended by adding Section 42.055 to read as
follows:
Sec . .4-2.055. FUNERAL SERVICE DISRUPTIONS. (a) In this section:
(1) "Facility" means a building at which any portion of a funeral service takes place,
including a funeral parlor, mmt.ua'ry, pl-ivate hom.e, 01' established place of worship.
(2) "Funeral service" means a cerenwny, procession, or memorial service, including a
wake or viewing, held in connection with the burial or of the dead.
(3) "Picketing" means:
(A) standing, sitting, or repeated walking, Tiding, driving, or other similar action by
a person displaying or ca,Trying a banner, placard, or sign;
(B) engaging in loud singing, chanting, whistling, or yelling, with or without noise
amplification through a device such as a bullhorn 01' 1nicrophone; or
(C) blocking access to a facility 01' cemete1'Y being used for a funeral service.
(b) A person commits an offense it: dU1ing the period beginning one hour before the
service begins and ending one hour after the service completed, the person engages in
picketing ,within 500 feet of a facility 01' being used for a funeral service.
(c) An offense under this section is a Cla,ss B misdemeanor.
SECTION 2. Sections 42.04(a) and (c), Penal Code, are amended to read as follows:
(a) If conduct that would otherwise violate Section 42.01(a)(5) (Unreasonable Noise), [w]
42.03 (Obstructing Passageway), or 42.055 (Funeral Service Disruptions) consists of speech
or other communication, of gathering with others to hear or observe such speech or
communication, or of gathering with others to picket or otherwise express in a nonviolent
manner a position on social, economic, political, or religious questions, the actor must be
ordered to move, disperse, or otherwise remedy the violation prior to his arrest if he has not
yet intentionally harmed the interests of others which those sections seek to protect.
(c) It is a defense to prosecution under Section 42.01(a)(5), [w] 42.03, or 4fJ.055:
(1) that in circumstances in which this section requires an order no order was given;
(2) that an order, if given, was manifestly unreasonable in scope; or
(3) that an order, if given, was promptly obeyed.
SECTION 3. This Act takes effect immediately if it receives a vote of two-thirds of all the
members elected to each house, as provided by Section 39, Article III, Texas Constitution. If
41
HeinOnline -- 2007 vol. 1 41 2007
2
Summary of Bill Stages and
Actions on House Bill 3
Texas Legislature Online - 79(3) Bill Stages for HB 3
Texas Online
Bill Stages
Bill: HB3 Legislative Session: 79(3)
Stage 1
Filed
4/17/2006
Legend
" Stage 2
v Out of House
Committee
4/20/2006
Indicates bill passed stage
Indicates bill has not reached stage
Indicates bill failed to complete stage

Stage 3
Voted on by
House
4/26/2006
Stage 4
./ Out of Senate
Committee
4/29/2006
Helpful Links
Legislative process
Introducing a bill
Referral to a committee
Committee reports
Stage 1 Bill filed by Keffer, Jim on 4/17/2006.
' ./
Page 1 of 1
Author: Keffer, Jim
Stage 5
Voted on by
Senate
5/2/2006
.....l
Floor action
Governor's action
Effective date
Legislative glossary
Stage 6
Governor
Action
5/19/2006
Stage 7
,,-?' Bill Becomes
Law
*See below.
Diagram - House
Diagram - Senate
Stage 2 Bill reported out of House committee on Ways & Means with vote of 7 Ayes, 1 Nays, 0 Present Not Voting, 1 Absent.
Stage 3
Stage 4
Stage 5
Stage 6
Stage 7
2006.
Bill passed the House.
Bill reported out of Senate committee on Finance with vote of 11 Ayes, 4 Nays, 0 Present Not Voting, 0 Absent.
Bill passed the Senate.
Bill signed by the Governor.
This Act takes effect January 1, 2008, except Section 1 takes effect January 1, 2007, and Sections 23, 24/ and 25 take effect September 1/
http://www.legis.state.tx.uslbilllookuplBillStages.aspx?LegSess=793&Bill=HB3
7127 120 i 1
Legislative Reference Library I Legislation I Search results
Legislation
Legislative Archive
System
Direct search
AcJVfll1C(!d seal ell
Help
PI oject 6t<ltuS
Bill chiJpter (fOSS
n::lfr."!rcnCi?-
!1)\1e>: t.) Sections

( (;ntelonCi-:
rcp01ts
Coniitiwtional
dmt-;-rl()Il)ents
1"(:11

Eli;(.ti(ln dnte!;
:;\;\)I

O\\;fllddcn VGtCI!:!,
Sl'i.lte
/\Ppt uPI Tallon:; acts.
Redls\:! icnn9

Otllt:1

Il1knt guide
(II In,li
. JR.efereuc;e tihrary
of Texas .
your partner in legislative researcb
Search results
HB 3, 79th 3rd Called Session
Relating to certain ta<es affecting businesses; making an appropriation; providing penalties.
Visit the Texas Legislature Online web site to see the for HB 3, 79th 3rd Called Session with links to the online House and Senate
Journals.
Chamber Action
H Filed
H Read first time
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
11
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
Referred to Ways &. Means
Scheduled for public hearing on
Considered In public hearing
Committee substitute considered In committee
Testimony taken In committee
Amendment(s) considered In committee
Reported favorably as substituted
Comte report flied with Committee Coordinator
Committee report printed and distributed
Committee report sent to Calendars
Considered in Calendars
Calendars Committee rule adopted
Record vote
Statement(s) of vote recorded In Journal
Placed on Major State Calendar
Read 2nd time
Postponed
Laid out as postponed business
Amended
Amendment withdrawn
Amendment withdrawn
Amendment withdrawn
Amendment tabled
Amended
Amendment(s) offered
Amendment amended
Motion to table fails
Record vote
Statement(s) of vote recorded in Journal
Amendment adopted as amended
Amendment withdrawn
Amendment amended
Amendment as amended tabled
Record vote
Amended
Amendment amended
Amendment as amended withdrawn
Motion to table falls
Record vote
Amendment fails of adoption
Record vote
Statement(s) of vote recorded in Journal
Amendment to amendment withdrawn
Amendment withdrawn
Amendment tabled
Record vote
Amended
Amended
Amended
Amendment withdrawn
Amended
Amendment withdrawn
Comments
4/24/051:00PM
I-Otto
Fisc
3-Elland
4-Thompson
S-Callegarl
Arsdale
7-Phillips
a-Phillips
RV#16
7-Phillips

II"Geren
10
RV#19
12-R, Noriega
13-60nnen
Kee!
13
15-Grusendorf
RV#20
15-Grusendorf
RV#21
16-Rodriguez

16-Rodriguez
IS-Menendez
RV#22
19-HIII
20-Otto
21-Hardcastle,

23-McReynolds
24-Hupp
L Date T
04/17/2005
04/17/2006
04/17/2005
04/20/2006
04/20/2006
04/20/2006
04/20/2005
04/20/2006
04/20/2005
04/20/2005
04/21/2005
04/21/2006
04/21/2006
04/21/2006
04/21/2006
04/21/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2005
04/24/2006
04/24/2005
04/24/2005
04/24/2006
04/24/2005
04/24/2006
04/24/2005
04/24/2006
04/24/2006
04/24/2006
04/24/2005
04/24/2006
04/24/2006
04/24/2006
04/24/2005
04/24/2005
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2006
04/24/2005
04/24/2006
04/24/2006
04/24/2006
http://www.lrl.state.tx.us/legis/billsearchiactions_cfm?legSession=79-3&billtypeDetail=HB&billNumber ...
Page 1 of 3
7/27/2011
Page 2 of 3
H Amendment withdrawn 25Seaman 04/24/2006
H Amendment withdrawn 26-Rodriguez 04/24/2006
H Amendment tabled 27-F, Brown 04/24/2006
H Record vote RV#23 04/24/2006
H Statement(s) of vote recorded in Journal 04/24/2006
H Amendment(s) offered l6-Elssler 04/24/2006
H Amendment amended 29-Strama 04/24/2006
H Amendment adapted as amended l8-Elssler 04/24/2006
H Amendment tabled 30-Rodriguez 04/24/2006
H Statement(s) of vote recorded In Journal 04/24/2006
H Amendment tabled 31-Gallego 04/24/2006
H Statement(s) of vote recorded In Journal
04/24/2006
H Amendment(s) offered 32-Anchla 04/24/2006
H Amendment amended 33-Anchia 04/24/2006
H Amendment adopted as amended 32-Anchia 04/24/2006
H Statement(s} of vote recorded in Journal 04/24/2006
H Amendment(s) offered 34-Rose 04/24/2006
H Amendment amended 35-Rose 04/24/2006
H Amendment as amended tabled 34wRose 04/24/2006
H Amended 36
w
Hardcastie 04/24/2006
H NonreC'ord vote recorded In Journal
04/24/2006
H Amendment(s) offered 04/24/2006
H Amendment amended 3BwGrusendorf 04/24/2006
H Motion to table fails 04/24/2006
H Record vote RV#2B 04/24/2006
H Amendment adopted as amended 37
w
Grusendorf 04/24/2006
H Statement(s) of vote recorded In Journal 04/24/2006
H Amended 39"Crownover 04/24/2006
H Amendment(s) offered 04/24/2006
H Amendment amended 41wCastro 04/24/2006
H Amendment adopted as amended 04/24/2006
H Amended 04/24/2006
H Amended 43
w
Swinfard 04/24/2006
H Amendment(s) offered 44-Hill 04/24/2006
H Amendment amended 45-Hill 04/24/2006
H Amendment amended 46-Hill 04/24/2006
H Amendment amended 04/24/2006
H Motion to table fails 04/24/2006
H Statement{s) of vote recorded In Journal 04/24/2006
H Amendment adopted as amended 44-HIII 04/24/2006
H Amended 4B
w
Vltlarreal 04/24/2006
H Amendment(s) offered 49
w
Leibowitz 04/24/2006
H Amendment amended 50-Eiland 04/24/2006
H Amendment adopted as amended 04/24/2006
H Amended SlwColeman 04/24/2006
H Amended 52-Swinford 04/24/2006
H Amended 53
w
Chisum and W 04/24/2006
H Amended Arsdale 04/24/2006
H Amendment(s) offered SS-Hupp 04/24/2006
H Amendment amended S6-Hupp 04/24/2006
H Amendment adopted as amended 5S-Hupp 04/24/2006
H Amendment withdrawn 57-Phillips 04/24/2006
H Amendment(s) offered 58-Merritt 04/24/2006
H Amendment amended 59-Merritt 04/24/2006
H Amendment adopted as amended SBwMerritt 04/24/2006
H Amendment(s) offered 50-Rodriguez 04/24/2006
H Amendment amended 51-Rodrlguez
l
B 04/24/2006
H Amendment adopted as amended 60-Rodriguez 04/24/2006
H Passed to engrossment as amended 04/24/2006
Ii Constitutional three day rule suspended 04/24/2006
H Read 3rd time 04/24/2006
H Passed 04/24/2006
H View House Vote RV#37 04/24/2006
H Subject to Art. III Sec,49a Tx, Constitution 04/24/2006
H Reason for vote recorded In Journal 04/24/2006
H Reported engrossed 04/26/2006
Received from the House 04/26/2006
http://www_lrl.state.tx.us/legislbillsearchlactions.cfm?legSession=79-3&billtypeDetail=HB&billNumber __ _
7/27/2011
Read first time 04/26/2006
Referred to Finance 04/26/2006
authorized 04/27/2006
Scheduled for public hearing on 04/28/2006
Considered in pubhe hearing 04/28/2006
5 Testimony taken in committee 04/28/2006
5 Reported favorably w/o amendments 04/29/2006
5 Committee report printed and distributed 04/29/2006
S Rules suspended-Regular order of business 05/01/2006
S Record vote 05/01/2006
S Read 2nd time 05/01/2006
Point of order 05/01/2006
5 Point or order withdrawn 05/01/2006
Motion to recommit to committee 05/01/2006
Motion tabled 05/01/2006
5 Record vote 05/01/2006
5 Passed to 3rd reading 05/01/2006
Record vote 05/01/2006
5 Statement of Leg Intent Recorded in Journal 05/01/2006
Remarks ordered printed 05/01/2006
5 Motion to suspend regular order fails 05/02/2006
5 Rules order of business 05/02/2006
S Read 3rd time 05/02/2006
5 Passed 05/02/2006
5 Reason for vote recorded in ]ourna I 05/02/2006
H Senate passage reported 05/02/2006
H Reported enrolled 05/03/2006
H Signed In the House 05/03/2006
5 Signed in Senate-Art III Sec 49a Tx. Canst 05/04/2006
Sent to the Comptroller 05/04/2006
Sent to the Governor 05/05/2006
H Statement of Leg. Intent Recorded In Journal 05/15/2006
H Statement of leg, Intent Recorded in Journal 05/15/2006
Signed by the Governor 05/19/2006
See remarks for effective date 05/19/2006
IIM ! Iii SY'i\t:ln 1-, i, \1\)1 111 I!I ()S!f(:i.:, CfJlllj1lt:I,-! lnlmnl,llll)i\ 1$ nQl al! I)lh.1 ;;11 VI:;I!: ttl(; Ar status page
:i)1 (If'.tui!! r'll,il:-;t Lt'Ili-.. It.lUv\ (I,':{mr.nn.: I ibrMf iii <".. 0:1 II y(lu 1l(IVI: .my IlllcSlil)n'l 1!1!r11 mt1tion 011 Il1i'; i$ pro'Jith::(j <1 public. :oe(vico...' tlY Uk
I (:qi:.l<lUn:. 1).('1"(-:1 Ilth i\1 Y I llbr<JTY nv 10 or a(:y ,mt! jlO I'J(lrr(lnty III re;J.lnj t\) iI:5
lr,r:l$ ;,11 n:;l.. Cli 1"I;11t.l1l(C: 011111(: InINniiJlivllll1dUlh.:(\ on -SIte
http://www.lr1.state.tx.us/legislbillsearchiactions.cfm?legSession=79-3&billtypeDetail=HB&billNumber ...
Page 3 of 3
7/27/2011
3
Press Release, Office of the
Governor, Gov. Perry (April 17,
2006)
Gov. Perry Announces Special Session of Legislature
Fril\<'l)I'. March 17,2006 Pless Release
AUSTIN - Gov. Rick Penytoday announced that he will call a special session of the
legislature beginning on Monday, April 17 at 2 p.m.
"The Texas Supreme Court has ruled that Texas' current tax system must be
reformed by June 1," Perry said. "ThIs specIal session provides legislalors of both
parties a rare opportunity to significantly reduce property taxes, make substantial
reforms to the franchise tax so it is fairer and broader, and ensure our schools have
a reliable and constitutional stream of revenue."
The governor will Issue a proclamation oulllningthe specific Issues for the session
at a later dale.
4
Bill Summary of House Bill 3
Legislative Session: 79(3)
House Bill 3 (3rd C.S.)
Effective: See below
House Author: Keffer, Jim et aL
Senate Sponsor: Ogden et al.
Page 1 of2
House Bill 3 amends provisions of the Tax Code to broaden the base of businesses that are subject to the state franchise
tax and to restructure the tax. Under the restructuring, taxable entities include partnerships, corporations, banking corporations,
savings and loan associations, limited liability companies, business trusts, professional associations, business associations,
certain joint ventures, joint stock companies, holding companies, and other legal entities, including combined groups. Entities not
subject to the franchise tax include, among others, sole proprietorships, general partnerships directly owned by individual persons,
certain grantor trusts, escrows, real estate investment trusts, real estate mortgage investment conduits, and certain passive
entities that receive only a limited amount of income from the conduct of an active business. In addition, an entity that is not a
corporation but that, because of its activities, would be exempted under the franchise tax as it existed before the restructuring is
also exempt under the restructured tax, including insurance companies required to pay insurance premium taxes, nonprofit
corporations, cooperatives, and credit unions, among others. However, House Bill 3 does subject certain insurance companies to
the franchise tax for the tax year any portion of which the entity is in violation of final orders issued by the Texas Department of
Insurance in relation to excessive or discriminatory rate practices.
Before changes to Chapter 171, Tax Code, enacted in House Bill 3, the franchise tax was based on a corporation's net
taxable capital (taxed at a rate of 0.25 percent) or on its net earned surplus (taxed at a rate of 4.5 percent). Under House Bill 3,
the franchise tax is paid on an entity's "taxable margin," which is computed using as a base an entity's "total revenue." Total
revenue is generally the business's gross receipts and other income minus items such as bad debt, foreign royalties and
dividends, federal income tax deductions, and distributive income from certain entities. In addition, House Bill 3 lists a number of
expenses and "flow-through funds" (funds that pass through the taxable entity to another entity) that are excluded from the
computation of total revenue. Such expenses and flow-through funds include, but are not limited to, taxes collected from a third
party to be remitted to a taxing authority; principal repayment of loans collected by lending institutions; certain amounts relating to
legal services, including damages due to a legal claimant, reimbursement for expenses incurred specific to the prosecution of a
claimant's matter, and up to $500 of actual out-of-pocket expenses per pro bono case; certain amounts relating to staff leasing
services, including payments received from a client company for wages, payroll taxes, and employee and workers' compensation
benefits for the assigned employees of the client company; and certain health care provider costs and compensation, including
payments received under the Medicaid program, Medicare program, Indigent Health Care and Treatment Act, Children's Health
Insurance Program (CHIP), TRICARE military health system, and certain workers' compensation claims, as well as the actual cost
of any uncompensated care. If the health care provider is a health care institution, the exclusion for provider payments and
uncompensated care is limited to 50 percent of payments received or of the value of the care given.
Under the restructured franchise tax, for an entity to arrive at its taxable margin, the entity calculates its total "margin" as
the lesser of three values: (1) 70 percent of total revenue; (2) total revenue minus costs of goods sold; and (3) total revenue minus
total compensation and benefits, The bill also includes certain deductions for costs and compensation associated with persons
called to active military duty. The entity makes an annual choice to deduct from its total revenue either its costs of goods sold or
its total compensation. The bill specifies criteria used to determine the entity's costs of goods sold (basically all direct costs of
acquiring or producing goods) and its total compensation (basically wages, cash compensation, and workers' compensation,
health care, and retirement benefits), with total compensation limited to $300,000 (indexed for inflation) per employee. On
determining its total margin, an entity then determines its "apportioned margin" by allocating to Texas the proportion of business
performed in the state, From that amount, the entity subtracts any other allowable deductions to determine the entity's "taxable
margin," i.e., the amount on which the entity is taxed. In addition, the bill sets out specific reporting requirements in determining
taxable margin for affiliated groups engagec;l in unitary business and for certain tiered partnership arrangements.
House Bill 3 includes a two-tiered tax rate. A taxable entity engaged primarily in retail or wholesale trade pays, on its
taxable margin, the franchise tax at a rate of 0.5 percent. All other taxable entities pay at a rate of 1.0 percent. The bill sets out
criteria for determining whether a business is engaged primarily in retail or wholesale trade. Any increase in the rates must be
approved by a majority of the registered voters voting in a statewide referendum. No election is required for a decrease in the
rates.
House Bill 3 exempts from the franchise tax those businesses that have no more than $300,000 (indexed for inflation) in
total revenue or that owe less than $1,000 in franchise taxes.
For a taxable entity with more than 100,000 employees in Texas, the bill requires the entity to file an annual report with the
comptroller stating the number of its Texas employees or the employees' family members that receive CHIP or Medicaid benefits.
For enforcement purposes, the comptroller is authorized to forfeit the right of a taxable entity to transact business in the
state in the same manner the comptroller is authorized to forfeit a corporation's corporate privileges in the state.
http://www.legis.state.tx.uslbilllookuplBillSummary .aspx?LegSess=793&Bi1l= HB3 7/27/2011
Page 2 of2
House Bill 3 amends the procedure under the Texas Economic Development Act by which a school district may consider
an application for a limitation on appraised value to require the Texas Education Agency to conduct an economic impact
evaluation on the proposed limitation rather than allowing the district itself to hire a third party to perform the evaluation. The
evaluation is binding on the district and the applicant.
House Bill 3 requires the comptroller to identify and obtain an information report from each of the 1,000 entities that paid or
were required to pay the most franchise tax in calendar year 2005, the 1,000 entities that had the greatest amount of gross
receipts in 2005, the 1,000 entities with the most employees in the state in 2005, and the 1,000 entities with the greatest school
maintenance and operations (M&O) property tax levy in 2005. From the information, the comptroller must report to state
leadership by April 1, 2007, and April 1, 2008, the amount of franchise tax revenue that would have been generated from the
entities if the restructured franchise tax had been in effect on January 1, 2006, and the M&O property taxes paid by the entities in
the 2005, 2006, and 2007 tax years. The provisions described by this paragraph take effect September 1, 2006.
House Bill 3 stipulates that the restructured franchise tax is not an income tax and that the federal law concerning state
taxation of income from interstate commerce does not apply.
In addition, the bill stipulates that the Supreme Court of Texas has exclusive and original jurisdiction over a challenge to
the constitutionality of the bill or any provision of the bill and may issue injunctive or declaratory relief in connection with the
challenge. The court is required to rule on such a challenge on or before the 120th day after the challenge is filed. The provisions
described by this paragraph take effect September 1, 2006.
Except as otherwise noted, House Bill 3 takes effect January 1, 2008.
http://www.legis.state.tx.uslbilllookuplBillSummary.aspx?LegSess=793&Bill=HB3 7/27/2011
5
Act of June 15, 2007, 80th Leg.,
R.S., H.B. 3928, 39
H.B. No. 3928
1 and operations property taxes paid by the entities in the 2005 [T
2 200\3, and 2007] tax year [ ~ ] .
3 SECTION 37. The following provisions of the Tax Code are
4
5
6
7
8
repealed:
2008;
9 and
(1) Section l71.00ll(e), as effective January 1, 2008;
(2) Section 17l.1011(p)(4-b), as effective January 1,
(3) Section 171.1014(g), as effective January 1,2008;
10 (4) Section 171.2035, as effective January 1, 2008.
11 SECTION 38. This Act applies only to a report or iginally due
12 on O.Y after the effective date of this Act.
13 SECTION 39. The taxation method provided by Section
14 171.002, Tax Code, as amended by this Act, and the taxation method
15 provided by Section 171.1016, Tax Code, as added by this Act, are
16 not severable, and neither provision would have been enacted
17 without the other. If the taxation method provided by Section
18 171.002, Tax Code, as amended by this Act, is held invalid, the
19 taxation method provided by Section 171.1016, Tax Code, as added by
20 this Act, is also invalid.
21 SECTION 40. Except as otherwise provided by this Act, this
22 Act takes effect January 1, 2008.
48
6
Affidavit of John Weakly,
7/27/11
1. Checks for PaYlnent of 2008 Franchise Taxes (p.I-2)
ii. Relevant Pages of Allcat's 2008 Fonn 1065 (p. 3-9)
111. Relevant Pages ofMr. Weakly's 2008 Form 1040 (p.
10-12)
IV. Allcat's 2008 Texas Franchise Tax Report (p. 13-14)
v. Allcat's 2009 Texas Franchise Tax Report (p. 15-16)
vi. Allcat's 2008 protest payment check (p. 17)
No.
Allcat Claims Service, L.P. and John Weakly
Relators,
v.
Susan Combs, Comptroller of Public Accounts of the State of Texas, and Greg
Abbott, Attorney General of the State of Texas,
Respondents.
AFFIDAVIT OF JOHN WEAKLY
On this date John Weakly, personally appeared before me, the undersigned Notary
Public, and after being duly sworn stated the following under oath:
l. My name is John Weakly. I am over 18 years of age, of sound mind and fully
competent to make this affidavit. All of the facts contained in this affidavit are
true and within my personal knowledge.
2. I am the Chief Financial Officer and Operations Manager for Allcat Claims
Service, L.P. ("Allcat"). I have held this position since 2001. I am one of the
custodians of Allcat's books & records.
3. I am also an owner of Allcat. I own a twenty-nine and seven-tenths percent
(29.7%) limited partnership interest in Allcat.
4. Allcat is a Texas limited partnership headquartered in Boerne, Texas.
5. Some of Allcat's partners, including myself, are natural persons.
6. Allcat provides insurance adjustment services to several national and regional
insurance carriers that insure real property and improvements.
In re: Allcat Claims Service, L.P. & John Weakly
Affidavit of John Weakly
Page 1 of 5
7. Allcat inspects real property to determine the cause of the damage and the
methods and the cost of the required repairs or replacement. Allcat is also
available to negotiate the costs and methods of repair or replacement with the
insured and the insured's contractor and in many cases, does so.
8. Allcat performs its services using independent adjusters.
9. As part of my duties as Chief Financial Officer and Operations Manager for
Allcat, 1 review and approve all of Allcat's tax filings and payments.
10. During 2008, Allcat paid $27,241 to the Texas Comptroller for Texas franchise
taxes due on the 2008 repOli.
11. Allcat's franchise tax payments reduced my income by $8,091 in 2008. I calculate
this amount as twenty-nine and seven tenths percent (29.7%) of Allcat's 2008
franchise tax payment.
12. I've attached eighteen (18) pages of records to my affidavit. These pages are true
and COlTect copies of:
Two checks written to pay 2008 Texas franchise taxes (pp. 1-2)
Relevant pages from Allcat's 2008 Form 1065 (pp. 3-9)
Relevant pages from my 2008 Form 1040 (pp. 10-12)
Allcat's 2008 Texas Franchise Tax RepOli (pp. 13-14)
Allcat's 2009 Texas Franchise Tax RepOli (pp. 15-16)
Allcat's 2008 protest payment check (p. 17)
Allcat's 2009 protest payment check (p. 18)
13. These documents show how the Texas franchise taxes paid by Allcat during 2008
were proportionately imposed on me, as an individual partner of Allcat:
14. First, Allcat wrote and sent in the two checks written to the Texas Comptroller
which paid the 2008 Texas franchise taxes shown due on Allcat's 2008 Texas
franchise tax repOli. These two checks total $27,241. (pp. 1-2)
15. Next, statement 2 to Allcafs 2008 Form 1065 (page 4) shows that Allcat included
$27,241 in "Texas Margin Tax" as paIi of the $1,450,063 deduction it claimed for
"Tax Expense."
117 re: Allcat Claims Sen'ice, L.P. & John W e a k ~ ) )
Page 2 of 5
16. Next, Line 14 of Allcat's 2008 Form 1065 (page 3) shows that Allcat deducted the
$1,450,063 as "[tJaxes and licenses" from its total income in alTiving at Allcat's
ordinary business income.
17. After claiming all of its federal deductions, which included $1,450,063 for taxes
and licenses, Allcat repOlied ordinary business income of $6,074,230 on line 22 of
its 2008 Form 1065 (page 3).
18. If Allcat had not paid the $27,241 in franchise taxes, Allcat would have reported
$27,241 more ordinary business income on line 22 of its 2008 Form 1065.
19. Line 1 of Schedule K to Allcat's 2008 Form 1065 (page 5) repOlis Allcat's
ordinary business income of $6,074,230 as one of the components of each
partner's distributive share of Allcat's income.
20. Line 1 of my (John Weakly) Schedule K-l repOlis $1,804,046 as my propOliionate
share of Allcat's ordinary business income. (page 8).
21. Attached to my Schedule K-l is a statement that repOlis $1,749,413 as my
propOliionate share of the flow-through items from Allcat. (page 9). This amount
includes my propOliionate share of Allcat's ordinary business income
($1,804,046) as shown on that same statement (page 9)
22. Statement 11 to Allcat's 2008 Form 1065 reports a summary of the partners'
capital accounts. (page 7). I am partner number 3. My capital account summary
repOlis the $1,749,413 amount for my propOliionate share of flow-through items.
Statement 11 repOlis my ending capital account balance as ($192,021). My ending
capital account balance reflects the liquidation value of my interest in Allcat.
23. If Allcat had not paid the $27,241 in franchise tax, my share of Allcat's ordinary
business income would have been $8,091 higher. I calculate $8,091 by
multiplying my ownership percentage (29.7%) by the $27,241 in franchise tax that
Allcat paid during 2008.
24. If Allcat had not paid the $27,241 in franchise tax, my ending capital account
balance and liquidation value would have been $8,091 higher.
25. Statement 22 to Schedule E of my 2008 Form 1040 reports my propOliionate share
of Allcat' s ordinary business income ($1,804,046). (page 11). This figure is
included in my total Nonpassive Income of$1,944,703. (page 12).
111 re: Allcat Claims Sen'ice, L.P. & John W e a k ~ y
Page 3 of 5
26. I repOlied the amount of my total nonpassive income ($1,944,703) on Schedule E,
Line 29a. (page 10). This amount was calTied to page 1 of my 2008 Form 1040
where it was included in my computation of federal taxable income.
27. The total federal taxable income I repOlied in 2008 would have been $8,091 higher
if Allcat had not paid the $27,241 in franchise tax during the 2008.
28. Allcat timely filed its 2008 and 2009 Texas Franchise Tax RepOlis (pages 13-16)
and timely paid the tax shown due on those reports.
29. Allcat wrote and sent two checks to the Comptroller paying the Comptroller's
franchise tax assessments for 2008 and 2009 (pages 17-18), along with protest
letters. These protest payments total $96,039.
111 re: AI/cat Claims SelTice, L.P. & John 'Weakly
Page 4 of 5
Further Affiant Sayeth Not.
STATE OF TEXAS
COUNTY

(
SUBSCRIBED AND SWORN TO BEFORE ME on J4.,V "'28, 'ZDI!
PHIWP R. HALL
MY COMMISSION EXPIRES
Januruy 31, 2014
Printed Name of Notary
My commission expires: __ __
111 re: Allcat Claims Sen'ice, L.P. & John Weak(v
Page 5 of 5
Amount.: $24,740.56
/U::count.:
Capture Dat.e:
Ba.nr. IOumber: lll00002
Check Number:
ClaIms ServlcB, L.P Operating Acct
113 Falls Court, Sulte BOD
Boerne, TX 7BDDB
State
06/19/2008
2355
Bnnk of M1DIICll' DpDlPllng Actount
:lDD CDnvent. 61h Floor
:rC!aJS 782DS
CHEeR IilO.
2355
I:'
t TweJityFqur Thol,lsand Seven Hunclred Forty and
TeXas Compt.roller of Public ACCDunts
lORDER .lIusI:.i.n, TX -OlOD
AMDUNTii
""24,740.55
D
,;?F:

')
IlUnlORtzEO SIGlUl1UnE
.. --I
i. ____ _
,
;.

4
BndDrsements,
Dace Set;uence Bank
06/1 a/zoos OOR900626336 1 HODOOS)
06/19/2008 003592761199 11lO1.2B1l2
06/19/2009 llQ OD0093
-- -------_________ M_

c I
I! I
1 e I
I ... ,
, !
i I
' ::
" I
Ii; :
!
! 04
I
ill

I ,
.... ----- --..
'<j-!
Bndrs Type TRJI TIP.!: Bon1: [IOniC
Undetermined N !HE FROST Ii!ATl O!'!AL 8
Undetermined N OF NA
Rtn Loc/BOFD Y THE: FEOST L;7\T!ON}jl, B
-----
1><
I
I
I
i
I
I
J
j
I
,
!
I
1\mount: 92,500.11
1\ccountl
Bank Number: 11lOQOD2
I
cbeci; i9l!!"ber I
Meat Cia Ims Service, L.P OperlltJ 0,9 Acet
113 Falls Court, Suite aDD
Boeme, TX 7!lDD6
Comptroller at PUblic Accounts

26?4
ElM\{ DI Amorica .OpDrollnB Account
3DD CDnvenl51h Floor
San Anlonlo, 'fe,b. 76205
CHECK NO,
2684
Two Thousand Five Hundred and 11/1DDc_ ... """ .,." ...... = .....
MJJOUNTS
"2,500.11
o D9{22120DB
IHll. Colnptrollet of pl.lblio ilccounts
r., Jll.Rli'. 0, Box
-j Austin. Teitas
(.,

i
r,------
.4?
%0':1
----------------
Electroni.c Endorsements:
Dat'" Secpen""
09/25/2006 009092670029
09/35/3000
13o.nk II Endrs 'I.'ype 'IP.N
111012822 UndetermlnBd "
1119D0057 Undetermined ,.
'-:)-_J
Ban], Name
JPJ10RGAH CHIISE SAN!I,
r
I
I
I
i
,
I
FOTm
1065
Doplll'1mont 01 tho iraosury
Intomnl Aovonuo SOlVtC.
A PnnclPol bu.lnos. nGllvliy
INS CLAIMS
BPnnr;tpo\ produot Dr DorvltoO
WIfHl.
print
SERVICE. _____
C eUOIOD!lS OOdD numbor
524290
G
'--
LCAT,CLAIMS SERVICE LP
Numpnrl olmotl nhd roem Dr sullo no. Ira p.o bOX. liDO tho Inn\lUcllDna
E Dnto buolnG Dlnnod
BTE BOD
02 01 20Q"L
F iotnt=.IG
$ 4 389,587,
Name change (4)
Address change (5) 00 Amended rcturn
Check applicable boxes: (1) Inilial relum (2) _ Final return (3)
(6) 0 Technical termination' also check (ll or (2)
Ii Checl<accounling method: (1) 0 Cash (2) 00 Accrual (S) 0 O1her(specily) I> _____ ., __________ _
Number 01 Schedules K1. Mach one for each person who was a partner al any lime during the lax year P , __ _________
Check II Schedule M3 atlached ....... , .. " ... "., ... , .. ", .... " ............ , .. " .................. " ....... "" ...... " .. " .............. ".,." ... , ...... , .. , ... , .. " ....... " ...... " .. ,... [[]
Caulion, Inolude Dnly trade or business Inoome and expenses on lines 1a through 22 below. See the Instruotions for more information,
Q)
E
o
o
.!:
'iii
c:

...
,g
III
1 a Bross receipts or sales
2
3
4
5
!l
b Less returns and allowances
Cost 01 goods sold (Schedule A, line 8)
Gross profit. Subtract line 2 from line 1c
Ordinary Income (loss) from other partnerships, eSlales, and lrus!s (attach statemant) ..
Nel farm prom (loss) (attar;h Schedule F (Form 1040)
/'lei gain (loss) trom form 4797, Pari ii, ilne 17 (attach Form 4797)
7 Other income (loss) (attach statement)
9
SalarIeS and wages (other than 10 parlners) (less employmenl credits)
10 Guaranteed payments to partners
11 Repairs and maintenance
12 Bad debts,
13 Rent
c:
14 !axes and licenses . Z

2
15 Inlcrest ,
iii
16 B Depreclallon (if required, attach Form 4562)
E:
(])
bLess depreclallon reporled on Schedule A and elsewhere on relum
:5
IV
w
.,!!!.
11\
c:
0
:;:;
tJ
::l
'0
Q)
CI
Slon
Here
17
1B
19
20
Paid
Prepnrer's
Use Only
Depletion (Do not deducl oil and onu depletion.)
Retlroment plans, ele. " .
Employee benefit programs
Other deducllons (attach statement) .
For Privacy Act and Paperwork Reduction Act Notice, see separate Inslrucl!ono,
811001 lHA
12-21-00
J
Form 1065 (200S)
ALLCAT CLAIMS SERVICE LP
FORM 1065
DESCRIPTION
UNCLAIMED PROPERTY INCOME
RENT
TRAINING INCOME
OTHER INCOME
INSURANCE
ADJUSTER SUPPLY INCOME
MISCELLANEOUS
T O T ~ ~ TO FORM 1065, LINE 7
FORM 1065
DESCRIPTION
LICENSES
PAYROLL TAXES
TAXES-CALIFORNIA MINIMUM TAX
PROPERTY TAXES
SALES TAX
TEXAS MARGIN TAX
TOTAL TO FORM 1065, LINE 14
FORM 10S5
DESCRIPTION
AUTO EXPENSE
BANK CHARGES
CALL CENTER EXPENSE
COMPUTER SUPPLIES
CONTRACT LABOR
DUES & SUBSCRIPTIONS
DELIVERY & POSTAGE
INSURANCE
LEGAL AND PROFESSIONAL
OFFICE EXPENSE
SHIPPING
TELEPHONE
TRAVErJ
UTILITES
MANAGEMENT FEES
11161016 758098 ALIJCATCLAIMS
OTHER INCOME
TAX EXPENSE
OTHER DEDUCTIONS
STATEMENT 1
AMOUNT
7,124.
S,DDD.
50,767.
5,658.
13,643.
1,420.
691.
85,303.
STATEMENT 2
2l..MOUNT
5,771.
105,457.
800.
7,793.
1,303,001.
27,241.
1,450,063.
STATEMENT 3
AMOUNT
47,533.
22,266.
5,000.
8,007.
36,011.
31,991,
3,224.
77,476.
98,879.
67,243.
15,380.
100,093.
259,367.
15,271.
360,000.
14 STATEMENT(S) 1, 2, 3
2008.04040 ALLCAT CLAIMS SERVICE LP ALLCATCI
ill

Q)
E
o
o
.E

o
:g
.g
Q)
o
2l
'6
Q)
U
til
t:
o
'1$
ro
[q
ro
t=
t:
[l)
'Pl
o
u.
t:
o
.""
nl
E
o
:E
'-
OJ
.r::
o
g:;;; ; PaOD 4
Partners
l
Distributive Share Items Total amount
1 Ordinary business income (loss) (page 1,IIne 22) .. .... . ...... '. 00." ... .. ....... _
2
2 Net renlal real estate Income (loss) (attach Fonn 8825) - '" .. , .. " ............. r ... 'j" .
3 n Otner gross rental income (loss).. ... .. ". ". .. _ . ... ". 1-=3=-8..,.' _______ ._ .._ "-::'::'
b Expenses lrom olher rental aclivllles (attach statement) .,. . .".' ..... 1t....:
3
.:,b ..JI _______ --l
n Olher net renlallncome (loss). Subtraclllne 3b trom line 3a. . . .... .." .... '" ., ... ".' .
3c
4 Guaranleed paymenls . . ....... .... . .. .
5 Inleresllnoome . _ . . . .. S S.'r.4. 'r.:s.w::s.N'r ;;.

5 5,673.
6 Dividends: n Ordinary dividends -I' 6b" 1
b Oualified dividends 1- . ..:.:...J. ________ --l
6a
7 Royalties
7
B Wei shorHerm capital gain (loss) (attach Schedule D (Fonn 1065)
---------_.-
9 a Net long-Ierm cepllal gain (loss) (attach Schedule D (Fonn 1065)
b Dollectibles (28%) gain (loss) .. " .......
c lJnrecaptured saellon 1250 gain (attach statement)
9n
l..fr ___ .._____ -I
10 Wet section 1231 gain (Ioss)(attach Fonn 4791) . ..
10
_____________________________ . ___________ ..
12 Section 179 deducllon (attach Fonn 4562) . f-.1L:-. 170 , 420 ,
13 n Conlrlbutions .... '" --.-.-----
b Inveslmenl Interest expense . '.. -1ll.!L _____ . ___ _
o Section 59(e)(2) expenditures: (1) Type I? ___________ (2J Amount lJ? 1-1-"'3""cl.!:J:2\'-t-_____ __
d Other deducllons (seB instructions) Type IP _______ . ____ . _________
14 n Wei earnings (loss) Irom self-employment ..... " .. . . '" .... ____ --"60..;0(...1..., 7.!....:=4c.2!..!...
b Gross larmlng or fishing income 14b
o GrosS nonlarm Income ......................... , ............................ ,=, ............................. "" .. , ... , ... , .. , ............ .
15 n Low-Income housing credil (section 420)(5))
14L f--- lOB, 9 5 6
15a
b Lowincome hous1ng credit (other) .....
r 1""5b""'-t ___ .. ______ .
o OualiOed rehabllilation expenditures (rental real estate) (attach Form 3468)
16c
d Other renlal real eslate crodlls (see instrnctlons) Type ll> ________________ _ 1Ed
e Dlher renlal credits (see instructions) Type \'i> ____ .. _________ .____ r--lli-.. ,.-.-------
f Other credits see Instructions Type!?- _____ !--' 51-+ __ . _____ _
16 n Name of country or U.S. possession _________ . _______ _
b Gross Income Irom all sources .'
1Sb
c Gross Income sourced at partner level
160
Foreign gross income sourced at partnership level
d !? _ e General category
I> ________ I Other
___ . ___ ._
Deductions aUocated and apportioned at partner level
9 Inlerest expense _ h Other I'? I--'t""S,,-h -1--.--------
Deductions aliocated and apportIoned at partnership level to foreign source incoms
I !P- I General calegory .... Il>- ________ 1\ Olher
I 10lallorelgn taxes (check one): Ii> Paid 0 Accrued 0
____ _
161
m Aeduellon in \axes available lor credll (attach stetement) .
16m
n other lorel n lax information attach statement .................................................... ,"' .. ""' ... "-'- .. :.:.; ... ""' .. "' ... .;:. .. :.:. ... "' .. -'-' .. "' ... .;:. ... !.!. .. """. +....:......:...j.. ________ _
17 a Post-1986 depreclallon adJustmenl 17e 10 / 179
b Adjusted gaIn or loss ., .. .. ..' 17b
c Depletion (other than 011 and gas).. . .. ........ .. .. .' \-1"""70"--1-____ . ____ _
dOli, gas, and geothermal properlles gross Income .................. ,.... . 1--'1""7d'--+_. ______ .. __
e Oil, gas, and geothermal properties' deductions , .... ".. . ....... . ..
f Other AMT lIoms (attach statement) ............. =:.:........................................................................... 171
18 n Tax .. exempt inlerest Income _____ _
b Olherlax'cxempt Income .... .' .. .. .. ... ........ /-'1.:.:Bb<-t ______ . __ _
c Nondeductible expenses ... S.:)j!,lj; .. R . lOc 19 206.
19 a Oislrlbu\lons 01 cash and marketable securllies _.--,6!..L'
b Distrlbu\lons 01 other properly 19b
20 a Inveslmenllncome !-f
Oa
5 / 673
b Inveslmenl expenses 20b
c Olher Itoms and amounls fi1ttach stafemef1!L ..................................................................................... ,.'-' .. ""' .. ..L __ .......l....c.. ___ .._-<---'- '''':''''''''!';''
Form 1065 (2DDB)
BnOlli
1Z3106
4
11161016 758098 ALLCATCLAIMS 2008.04040 ALL CAT CLAIMS SERVICE LP
ALLCATC1
Form 1065 (200B) ALLCAT CLAIMS SERVICE LP
p-jialysis of Net Income [Loss)
1 NDllncomD (1 OtIS) Comblno Schodule I( IlnG.9 '1 Uuouoh 1'. From thll rD!>ult Dub1rnc1 tho Dum oJ Schodulo\( ilnr:s ,2 Ihrouoh
2 Analysis by (II) Individual (Iii) Imlivitlual
13d,ohdl01 .......... ,"'::' .. .::: .. -I.....!-...I--, ...::5!...!...::.,9.l,;O:.".9:...L..,Li
a
-.::8,.::3:..e,o
(v) Exempl
(I) Corporale (iv) Part
partner type:
(active) (passive)
-
nership organization (vi) Nominee/Olher
1"----
n General partners
-
. _-2.9
5 8SD 38B.

b limBed parlners
Balance SheetslQer Books
.-
. --------;--._----- .,
ADsels
BeplnnlnQ of laxvear '-c-' End of taxvear
(al (Ill (n\
(dl
1 Cash
:.';,H.,,' ;:;;{ :;: .. :: 1" . ., .. !:
259 977.
";::' f i ::. -:1;'; :,:.: ... .:- j';
'"
1,337,794, ., ..
"
-.
20 Trade notes and aocounts receivable 606.390, 9.98 459.
b Less allowance lor bad debls .,
"" 1--------
'----
G06 390.
-
___ 998,459.
3 Inventories ..
1----,-
4 U.S. government obllgalions
--
5 Taxexempt securllles
STATEMENT
-'--'-

6 Dlher curren! assets (attach statement) 7 14 301-
:---

':: I")
7
Morlgage and real estate loans
..
STATEWENT
_._-----
'-'1,054
8
Dlher Inveslments (attach statement) B
,--
480.
9a Buildings and olner depreciable assets
'--"
940
1
457. 1 108 441.
b Less accumulated depreciation
"
----"
205,374. 7351 083. 460.[..453.
647.L988.
10s Depletable assets
--
b Less accumulated deplellon .
."
, ,
--
._._-
11 land (nel 01 anyamorliZllllon)
----------,
lZa Inlanglble assels [amortizable only)

480.
1-._---
480.
bLess accumulaled amorllzation _. 4BO.
.
.- -
480_.!. .
13 Dlher assets (attach statement)
f-.-
14 Tolal assels , 1,615,751.
Liabllllles nnd Capital
15 Accounls payable 573 752,
... .:
,
16 MortgagoE, nolO:l. bonds pnYDbl1l In Ic.us thon , Y0nI

252 74 B,.!.
:
17 Dlher curreniliabllilles (attach statement) STAT,EMENT 27 535.
18 All nonreCDurse loans . " .. ...
.,},
,
.' .
,
19 MOr1gDgOD. 110\o.s, bondD pDynblD In 1 yont or morn
--
,
.. , ,
20 Dlher lIab\Jltles (attach statement) STA"T. T;' 10'. 54,567.
:y
,
:-' ;.;. ':'; I .. ' ':
, ,
707 149.
21 Parlners' capital accounts
. ''''
.
22 Tolaillabllllies and captlal ................ ...... ... " f ,..: .' 615 751- "
" ..
I Schel.'li.JleI\ll".1J Reconciliation of Income per Books With Income per Return
Note. Schedule M3 may be required Instead of SchedUle M'1 (see Instructions)
--- '--
1 Nellncome (loss) per bOOKS
,....---
6 Income recorded on bODKs this year nollncluded
2
Income Included on Schedule K, lines I. 2, 3c, on SchedUle K, lines 11hrough 11 (ilemlze):
5, 6a. 7.6. 9a. 10, and", not recorded on books a Tax-exempt Inlerest $
lhls year (lIemlze):
--
-_. .
3 Guaranleed paymenls (olher lhan neallh 7 Deducllons included on Schedule K, lines 1
Insurance) .
1-'
through 13d. and' 61, nol charged agalnsl
4
Expenses recorded on boDIes lhls year nol book Income lhls year (itemize);
Included on Schedule K, lines 11hrough
n Deprecla\lon $ __________
l3d, and 161 (llemlze):
a Depreciation $
b Travel amI enlertalnmenl $
--------
0 Add lines 6 and 7
.'

'----.. ______ ._ 9
Income (loss) (Analysis 01 Nellncome (l.oss),
5 Add lines 11hrough 4 .................................... line 1), Sublraclline 8 from line 5 ..................
I Analysis of Parmers' Capjtal Accounts
1
Balance at begInning 01 year ,", .
2 Capital contrIbuted: n Cash
" .
b Property
..... .,'
3 Net Income (loss) per books
.... "
4
Dther Increases (itemize): ________
5 Add linns 1 Ih]ough 4
n,'042
'2,3,08
........................... , ........
11161016 758098 ALLCATCLAIMS
707,149. 6 OIstrlbulions: n Cash
". '.
, ..
--
b Properly
. .. ..
200,200. '{ Olner decreases (llemlze): ______
r-_
h89O 277.
-------
-------_.-
0 Add lines Band 7
' .. . ' '"" . , '
LJ..97,626. 9
BalonCD ill cnd of yon:. Bub1rilcllino n from JiI"\Q 5
. .....
5
2008.04040 ALLCAT CLAIMS SERVICE LP
--_.
4 389,587.
17,583.
12,080.
4 315 A89.
1---_._---
!----_,_. 3 0 , 4 8 7 0
f-.... _. 13,948.
4 389 587.
-
c---------
_._L.783, 678.
(5
-----_ ..-
783 678.
13,948.
Form 1065 (2008)
ALLCATCl
SCHEDULE L OTHER CURRENT LIABILITIES
DESCRIPTION
SALES TAX PAYABLE
PAYROLL TAXES PAYABLE
EMPLOYEE BENEFITS PAYABLE
ACCRUED PAYROLL
ADJUSTER COMMISSION PAYABLE
ADJUSTER HOLDBACK PAYABLE
COMMISSION PAYABLE
AlP ALLCAT CLAIMS LP-CA
TOTAL TO SCHEDULE L, LINE 17
SCHEDULE L
DESCRIPTION
NOTE PAYABLE-NIXON STATE BANK
TOTAL TO SCHEDULE L, LINE 20
OTHER LIABILITIES
OF
TAX YEAR
7,017.
4,554.
2,791-
13,173.
o.
o.
D.
27,535.
BEGINNING OF
TAX YEAR
54,567.
54,567.
FORM 1065 PARTIQERS' CAPITA.L ACCOUNT SUMMARY
PARTNER BEGINNING CAPITAL SCHEDULE M-2 WITH-
NUMBER CAPITAL CONTRIBUTED LNS 3, 4 & 7 DRAWALS
1 <18
/
335.>- 60,060. 1,749,412. 2,047,393.
2 3,665. 60,060. 1,749,413. 2,021,000.
3 1.9,061- 60,060. 1,749,413. 2,020,555,
4 615,883. 20,020. 583,136. 694,686.
5 86,875. 58,903. 44.
TOTAL 707,149. 200,200. 5,890,277. 6,783,678.
STATEMENT 9
END OF TAX
YEAR
41.9,315.
50.
O.
O.
2,133,741.
825,938.
898,535.
37,910.
4,315,48.9.
STA.TEMENT 10
END OF TAX
YEAR
30,487.
STATEMENT 11
ENDING
CAPITJI.L
<256,256.>
<207,862.>
<192,021. >
524,353.
145,734.
13,948.
17 STATEMENT(S) 9, 10, 11
11161016 758098 ALLCATCLAIMS 2008.04040 ALLCAT CLAIMS SERVIC.E LP ALLCATCl
3
6.51108
Scbedule IH
(Form 1D6S)
2 8
Fat r:D1ondm yow 2000., OJ to!'
Unformetion About the Partnership
A Partnershlp's emplDyer loenlificaliDn number
B Partnershlp's name, address, city, slate, and ZIP cDoe
BlnlaraSI lncomc_
1--..1.' ___ ._-.;1=--'"'-'=-,-6.::::;8..=5""'0'-1-_"-__ . ________ .1
ALLCAT CLAIMS SERVICE LJ? SBo]nllnatYdlvltlenrlS
113 FALLS COURT STE BOO 1--'---------117 AUemallvemio lax {AMT)llems
___________ __16bD1falJned divictends -l..... 02 3
C IRS Center where partnershIp lIIed return .1
__ - _____ --------_-_l --
1--'--,--------1 16 Tax-exempt income and
IJ short-lerm capUal gain (loss) nondeduclible e):penses
, C* BTMT
D 0 Checl{ If this Is a publicly lraded partnership [PTP)
Part 1/
Information Aboui the Partner
9n Nj IOIlIl-lerm capital (Jain (loss)
--+------._--------
E Partner's ioenlllying number 9b Coneclibles (2B%) pain (loss)
19jiSlriVUllons

I _
__ . .:..-.---___i 9tU'l0recaPlured sec 1250 gain

_.- 1--'----------.----
F Partner's name, address, city, slale, and ZIP code 2D Dlher inlormatioll
if) NJBl ser;lion '231 gain (loss) 1&-1--.. __ .. 1 r (; 8 2..!.....
WEAKLY 1-:""--:---------1-.-1-------__
11 Olher Inuoma (loss)
...- ----_._-_._--
G
General parlner or LLC =:;..:..-,=OO=--U-m-lIe-d-pa-rj-ne-r-or-o-th-er-I.-LC--;--t---------.j-.--I--.--------l
r--t-----------------"r--r---------_____ .. _
member-manager member
H 00 Demeslle parlnar D Foreign partner
______
12Secllon 179 deduction
I Whal type of antity Is this partner? IND IV! DUAL
_ r ___
13 D1hal deductions
J Parlner's share Df proflt,loss, and cap!!al;
__________ . ___ _
BeginnIng Endinl1 r-" --.---------!---1-----_____ _
PrDm 29. 100000 Do/, TL.----=2.::..9..:... .,!..7.::..D0"-,0::;...:0::;..::0...,0"",,,,% ..-o--_ ,,-
loss 29.7000000% 29.7000000% 14SrenoemPIDymen!earnlnOS(IOsS) ._-
GaDUal 29.7000000%/ 29.7000000% i1. _ O.
K Partner'S share Dr lIabllllles at year end:
Nonreoourse .' .. ,_ .
QuannetJ nonrecourse financing
Recourse o. "_ ... -,
L Par1ner's capllal accovnlanalysls:
BeginnIng capllal account . , .....
Gapllal cenlrlbuled during Ihe year
Curren! yenr Increase (decrease)
Wilhdrawals & dlsllibutlons .
Ending caplla! accounl
DGAAP
_____ ____ _____
$ __________ r_ ... S""ee"-!a""'Il""ac""h""'ell""'s""ta""le!.,!!m""en!!.l!,!'IDwT _____
. .. ,. :;;
$ _--:l:o:...L...:c 2,.",9:..;.:4
w
,.:::3,-=4=3
.. "' ..... $
$
$
$f
$
z,
c:
19,061. 0
60,060. :3
1 r 749 L 413. !Q

<192,021.p.1.i..
o SecUon 704(b) book 00 Tax basis
o Other (explain)
!:l:_='--__ . ___________________ --'-__________ ._. _______ . ___ . __
LHA for Paperwork ReductlDn Acl UoUcer sec In&trucllofls for form 1065. Schedule I(-j (Form 1065) 2DDB
25
1"'0 n (Hl li,T,LCATCLAIMS 2008.04040 ALLCAT CLAII1S SERVICE rJP
3
ALLCATCI
SCHEDULE K-l NONDEDUCTIBLE EXPENSES, BOX 18, CODE C
DESCRIPTION
EXCLUDED MEALS
ENTERTAINMENT EXPENSES
NON-DEDUCTIBLE EXPENSES
PARTNER FILING INSTRUCTIONS
NONDEDUCTIBLE PORTION
PENALTIES
OTHER NON-DEDUCTIBLE TAXES
TOTAL TO SCHEDULE K-1, BOX 18, CODE C
SCHEDULE K-l CURRENT YEAR INCREASES (DECREASES)
DESCRIPTION
ORDINARY INCOME (LOSS)
INTEREST INCOME
SCHEDULE K-l INCOME SUBTOTAL
SECTION 179 EXPENSE
SCHEDULE K-l DEDUCTIONS SUBTOTAL
NONDEDUCTIBLE EXPEliJ"SES
OTHER INCREASES OR DECREASES
TOTAL TO SCHEDULE K-l, ITEM L
AMOUNT
1,804,046.
1,685.
-50,615,
-5,703.
AMOUNT
2,823.
260.
2,618,
2,
5,703,
TO'rF.LS
1,805,731.
-50,615.
-5,703.
----
1,749,413.
26 PARTNER NUMBER 3
11040609 758098 ALLCATCLAIMS 2008.05070 ALLCAT CLAIHS SERVICE LP ALLCATCl
Al10chmnnl SnQuonc" No.13 Pogo 2 Schedule e (Form 1040) 200B
NllmE!(n) Ghown on rellHn DD nol cnlof oeme and social SDCUrlly number II shown on PDDI! 1
I
Your social seourlty number
JOHN T & KELLI R WEAKLY __ __ ____________
Caution, The IRS compares amounls reported 00 your lax return wilh amounls shown on Schedule(s) 1(- 1.
Income or Loss From Partnerships Cllndl S Corporations Note. If you report a loss irom an airlsk activity fDr whioh
any amount is nDt at risk, you must checll cDtumn (e) on line 28 and attach Form 6199, Sea page E-1.
2.7
Are you reporting any loss nol allowed In a prior year clue 10 Ihe at-risll Dr basIs Iimllallons, a prior year unallowed loss Irom a
passive aclivity (If thai loss was nol reported on Form 8582), or unreimbursed partnership expenses?
D Yes [X] No
\I you answered "Yes,' see E-? belore completing Ihis secUon.
(b)EnICIPIOI (e) Chock
Id) Employer
idenlihcalion number
28 (a) 1\ 1010lgn
,_______ 101 SeOlpora on pllJ1ncrohlp ___ _
(e) II
ony ombunl tt
n01 Dl ril:k
BEE ___________
_____ . Passive Inoome and Loss Nonpasslve Income _____ _
(f) Passive loss allowed (0) Passive income (hi Nonpassive loss (il Section 179 expense (l) NDnpassive income
(al1ach Form B5B2 i! requIred) lrom Schedule K1 from Schedule 1(1 deduction Irom Form 4562 from Schedule ((-1
.219.n1TotaIS -.---=-----E-- _. 2 - - __ -_--_-+r--:: .. --.:-=-----+------------
---3 .-2 -; :s;s: 1------:-----;---=----1-: 9--y----4 -,--,--7 -D 3-,
I> Tolals, ________ -"E ____ --'-=-->::.."'--L(..;:::...:-==-'!... '----,--------11---,.------.--
30 Add columns (g) and (I) of line 29a 30 1 94,7 5.9 7
31 Add columns (h), and (i) 01 line 2gb 31 ( 40lz B 51.")
32 Tlltalpartnershlp Dnd S corpornlion Income Dr (loss). Combine lines 30 and 31. Enler Ihe
resull here and Include In Ihe lolal on line 41 below .... , ............................................ , .................. =,..... ............ 32 1 54,3 7_46 ,
, Pal't'1II , Income Dr Loss From Estates and Trusts ____ , _________ _
33 (n) Name
jff.+--------- .------------------
(v) Employer
iiJentification number
.---- .---f---------
._--------
Passive Inooms and Loss Nonpassive Inoome and Loss

{ej Passive deduction Dr loss allowed
(aUach Form 8582 If required)
(d) Passive Income
kom Schedule 1<-1
fej Oeducllon Dr loss (\) Dlher income from
from Schedule 1<-' Schedule 1(-'

34n Tolals ,_ _ _____ _
]3 E ----:=---------j
b Tolals _________ . _____ ._"' _________ -!-_-, _______ _
35 Add columns (d) and (f) 01 line 34a 35 -1-______ _
B6 Add columns (o) and (e) of line 34b 36 ___ I
37 Tolal esla\e and lrusllncome or loss. Combine lines 35 and 36. Enler the resull here Bnd inclUDe In Ille lolal on line 41 below 37
Income or Loss From Real Estate Mortgage Investment Conduits (REMICs) - Residual Holder-----
.' ..
(b) Employer (c) Excess InclUSion from
Id) Taxable Income (net
(e) Income 110m
38 (n) Name
ioenllficalion number Schedules Q, line 2c
oss) lrom Schedules a,
Schedules Q, line
line lb
"_. 1-'------
-
3b
---
--
f--_ .. --
39
Combine columns (dl and (el onlv. Enler Ihe resull here and include in Ihe lolal on lIne 41 below " ....
'1 .. ,,,
39
r Part v Summary
*
ENTIRE DISPOSITION OF ACTIVITY
-"-" '-----..
Nellarm renlallncQme or (loss) Irom Form 4835 Also, complele hne 42 below _ 40 40
41
42
Total Income or (loss) Combmollncs ZO, n, 37. 3B, ond 40 Enler tho lo,ull horn ond on Form l040,I,n, \7 or Fo"" 100DI<R, IIno 10 '." .. ..1::.._
i
--'4..:.1---'---'1"-1-.""5.:.:4"'3=-..1.(
Reoonoillation of farming Dno fishlno Income. En\er your groee larming and [ishlng income
leporled on Form 4635, line 7; Schedule I( -1 (Form 1065), box 14, code B; Schedule K-I
(Form 11205), box 17, code T; and Schedule K-l (Form 1041), line 14, cooa F (see page E"8) ____ . 251 ,
43 Reconciliallon 101 real estate proleeslonals. II you woro 0 IDol c,lolo plo'o,"ionol (soe pogo E 21,
ollter tho nul Incomo. OJ (losS) you Itlpor1ed nnywhcro on Form 1040 or Form 1Q.I)DHA from ot! ronlol TOul ostn\o
Ilcllvlllos 1n WhIch you pilJilClpolod Linder 'ho pn!l .... lvD Dc\I ....lly rule.!) 43
-_._----,---'--
-------
BZ1501
11,10,06
11131013 758098 WEAKLYJOHNT
23
2008.D4040 WEAKLY, JOHN T
Schedule E (form 1040) 2000
NEAKLYJl
JOHN T & KELLI R
SCHEDULE E INCOME-OR (LOSS) FROM PARTNERSHIPS AND S CORPS
STATEMENT 22
NAME
ANY
NOT X
EMPLOYER AT IF PASSIVE
ID NO. RISK FRN CODE LOSS
PASSIVE NOlifPASSIVE SEC. 17.9 NDNl?ASSlVE
INCOME LOSS DEDUCTION INCOME
----- - - - -------------------------
PI
0.
,'V::.
l?
SERVICE Ll?
p
l?

P ir
IO!;jj!E
l? \\"
l? *
P
-7"
p
l?
*
p
*
p
g
l?
'I:
P
P
P
P
l?
P

42
-
tti Jlfii!W,* I

.,
- WEAKLYJOHNT 2008.04040 WEAKLY, JOHN T
1,804,046.
STATEMENT(S) 22
WEAKIJYJl
I I
T & KELLI R WEAKLY
om t .* , -mil
2,6.94.
TOTALS TO SeE. E, LN, 29 2,310, 2,9.94. 401,541.
* ENTIRE DISPOSITION OF ACTIVITY
SCHEDULE F OTHER EX1?EliJSES
DESCRIPTION
TOTAL TO SCHEDULE F, PART II, LINE 34
SCHEDULE 11' OTHER INCOME - CASH If.ETHOD
DESCRIPTION'
TOTAL TO SCHEDULE F, PART I, LINE 10
FORM 4797
DESCRIPTION
It[ 7
:
I
J
UD
PROPERTY HELD MORE TIDU!J ONE YEAR
DATE DATE
ACQUIRED SOLD
SALES
PRICE DEPR.
1,.944,703.
STATEMENT 2:3
elAP
STATEMENT 24
Al-iOUNT
-
ill
'M m
1&
iii

@
STATEHENT 25
COST GAIN
OR BASIS OR LOSS
----- -------
TOTAL TO 4797, PART I, LINE 2
- - - ---- ...........
STATEMENT(S) 2 .. ;a, 23, 24, 25
WEAKLY, JOEN T WEAKLYJl
\ ,...r
05156 A :XAS, FRANCHISE TAX REPORT - Page
(Rev 1D812)
IlTcode 13250 Annual
S Repol1 year Due date Privilege period covered by thIs report
__ J [!Y27/2008] G1/01/ 200 B 12/31/200';]
-
-'----."-'''--, -. -'--, --, --
Taxpayer name
Secretary of State file number
ALLCAT CLli.IMS, SERVICE Ll?
or Complroller file number
.'---'-
,- ._-
Malling address '
113 FALLS COI:JR'I' STE BOO 0800651171
City I State 11 Country
I ZIP Code
E __ ..
Check box lithe

BOERNE TX United States
78006 address has chElnged
Checll bor. If th,ls Is a combined report
'0 -, Check box If Tolal Revenue is adjusted for
I!!I Tiered Partnership Elecllon, see 171.1015. ImD I
---
ChecK box if this is an Entity olh;;' than e Corporation
Check box If this Is a Corporalion or Limited LIability Company
0 89
..
-
Dr limited Llabillly Company
-..=.;
SIC code NAleS code
Accounting year ,[-
begin date !liI 010107
-'-I Accounting year l _ "] r- -'J
clOd date __ Eli 6411 tal2.24290 __
:=:::===::======::=::!
REVENUE (V\Ihote only)
1. receipts or sales
2. Dividend?
3. Intere!?t
4. Rents
5. Royalties
6. Gains/losses
7. Other Income
B. Total gross revenue (Add Items 1 Ihru 7)
9. DedUl;tlons from gross revenue
10. TOTAL REVENUE
(Item B minus Item 9)
(If less than zero, enter D)
COST OF GOODS SOLD (Whole ,dollars only)
11. Cost of goods
12. Indirect or administrative overhei:ld costs
(Limited 104%)
13. Other (See Instrucllons)
1. ------.------- 319203001
2,. m [--- :=.....;.:.;;.;;=====::= 0 001
,3. m )=1 ===========================16:::2:=7
4. [3 \.......l : ===========-========= 0 00 I
5. IE C ---0 J)Q]
6. rn [=.......:.= 0
7. rn I 11971323 001
B'IllC 12306798001

10.\B 1'--__ 5010568001
11.1l! :=[='
I 0001
1Z.,1il
13. rn :=' ==========
14,gL
14. TOTAL COST OF GOODS SOLD
(Add lIems 11 Ihru 13)
-------
COMPENSATION (Whole dollars only)
15. and cash c;ompensatiDn
16. Employee
1'7, Oth\,r (See IpstruCliops)
18. TOTAL COMPENSATION (Add Items' 5 thrl! 17)
r- 2220;95010
15.111L____ )QI
16.rsC--- 66206001
[

17. Ell __ l ____ ,.------.=========D=QQ]
18.illC---.1;l;--.,.
Page 1 of2 1022

05-158-8 I...A.$ FRANCHISE TAX REPORT - Page L
(Rev 10812)
s Tcocle 13251 .P..nnual
iii Report year Due dale name
Go 0 _--_ "] [ 11/1 7/ 0 8 I .... 1...:1ILL=;.=:C:;.:A'I';::..- __
(Whole dollars only)
19. Revepue
20. Revenue
21. ReVenue
22. MARGIN
(Item 10X70%)
(Item 10 minus Item 14 COGS)
(liem 10 minus lIem 1 B Compensation)
(Enter the lowest amount
from lIems 19. 20 or2i)
19. III [ ------;507398001

20, m I 5010568 001

21.
22. s L______ 2724067001
APPORTIONMENT FACTOR
23. Qros!;; in Texas (Whole dollars only) 23, El I 501.0 56 8

24. Gross receipts everywhere (Whole poliars only) 24, 1:2[ ____ .,-_._ 5010568 001
25, APPORTIO!'lfillENT FACTOR (Divide lIem 23 by Item 24) (Round to A decimal places)
25. a [ '---1-.- OOOJ
T AXA!3LE, MARGIN (Whole dollars only)
26. ApportIoned margIn (Multlpl \lem 22 by Item 251 26. 2724067 OQJ
27. Allowable deductions 27.
28. TAXABLE MARGIN (Item 26 minus Item 27) 2B.
TAX DUE
29. Tax rate (See Instructions for determining the approprtale tax rate)
30.
Tax due (Ivlultiply flam 28 by the tax rale in lIem 29)
(Dollars and cents)
TAX AD.)USTMENTS (Dollars and cents)
31. Tax credits (llem 23 irom Form 05-160)
32. Tax due before discount (Item 30 minus Item 31)
33. Discount (See InslrucUons)
30. tll L _____ , ___ _
32. c :====
33. tll
TOTAL TAX DUE (Dollars and cents) r--
34. TOTAL TAX DUE (llem 32 minus lIem 33) 34. " L
(Do nollncluda paymenl If this amDunt Is less than $1,000) ----------
If the amount In Item 34 is $1,000 or more, you must complete Form 05170.
______
001

Print Dr type nalT)e
ALLCAT GP LLC
--------------------_.. -----------._--
--------,-----------, Area code and phone
830-331-1700
I declare Ihal!he Informalion In Ihis documenl and any ollnchments is lrue ond correct 10 tho beGI of my knowledge and beltsf Mail original to:
COMPTROLLER OF PUBLIC ACCOUNTS
signt...--- IDate ---- PO, Box 1493118
hereP'_ OB/20/2008 Austin, TX78714-9348
If yO\! have any quesllons regarding franchise tax. you conlact \he Texas Slate field ofiice in your area of call (800) 252-1381. loll free nallonwide
The Austin number Is (512) 463->1600.
For Inslructlons on compl..,Ung the francn!se tax repori forms. see Form 05-392.
VEJDE
o
PM Date
I I I I I
i II III III
1022
Page 2 o[ 2
.8B071 1 DS-flSpe
Ver. 1 2 (Rev. '06/")
III T code 3 2 5 0
TEXAS FRANCHISE TAX REPORT - i
JI-$!.\lV J>...,L,
I Report year Due date
Privilege period covered by this report
2009 05/15/2009 12/31/2009
.
""payer name Secretory of Stoto file numbor
CLlI_IMS SERSVTEI CES OLO P __ ..__ " .. --.----._-, .0
0
'
ALLS. COURT _. __ _
I'"""Y . '1 STIIOXII. . I countrY"I_1 ' !';ode Chncil box If Ill. . -0--
BOERNE 1 --.l 78 006 _.J.. _______ Dddrnss has changod 1lI __
. 0, I boX II Tol'l Revenue Is adlusled for . D I
ff Is a combined fi1 see 171.:.0"'::_-_'ri' Jill ._. . ______ .....,. ____ __
Chet:lt box If this 15 a Oorporation Of LimBed UabJllly Compnn.y 0 Che:!1 box II this Is an Entity other than a Oorporallon or 'xl
Limited Liability Oo,npony LAJ
Accounting yellr
begin date mOl 0 lOB
Accounting year
end date
!il 123108
REVENl.It:: (Whole dollars only)
1. Gross receipts or sales
2. Dividends
3. Interest
4. Rents
5. Royalties
6. Gains/losses
7. Other income
B. Total gross revenue (Add Items 1 thru 7)
9. Deductions from gross revenue
(Item B minus Item 9)
10. TOl AI. REVENUE (If less than zero, enter 0)
i. !!l
2. t3
3. m
4.0
5, t!l
6. III
7. 13
8. III
9. Iii
10. IJ
-" - .------..
COST OF GOODS SOLD (Whole dollars only)
11. Cost of goods sold
12. Indirect Dr administrative overhead costs
(Limited to 4"(0)
13. Other (Sse instruptions)
14. TOTAL COST OF GOODS SOLD
(Add items 11 thru 13)
11. E3
12, ro
13. [;l
14. El

III 6411
NAICScode
EI 524290
34:08 4: 5 9 8 00
0,00
5673,00
0.
00
0,00
0,0
0
85303. QO
341 7 5574: 00
0,00
3 41 7 5 5 7 4 00
0.
00
0.
00
0,00
0,00
---------------_._----------...
COMPENSAT,C?N (Whole dollars only)
15. Wages and pash compensatlon
16. Employee benefits
17. Other (See instructions)
18. TOTAl. (Add items 15 thnJ 17)
15. III
16. El
17, m
18. f:l
Comptroller <?fiic;lal Use Only
257 4: 4 6 3 0 00
143195.00
0,00
25887825.
0
0
t;;:J. I 1 rJ
1IIIIIm I
. . '" . 1019 . . , .
6ao712 05-Q?-09
TX2D09 05-158-9
Ve" 1.2 (Fioll.1-0012)
TEXA$ FRANCiiiSE TAX RE.PORT -
B Teode 1. 3 251 A111W2UJ
!3 Taxpayer number III Report year DUe Tal;payer name
I1Z p ,1 .... 2009 05/15/2009
ALLCAT CLAIMS LP
MARGIN (Whole dollars only)
19. Revenue (/tell? 10 X 70%)
20. ReventJe (Item 10 minus Item 14 COGS)
21. Revenue (Item 10 minus Item 18
22. MARGIN (Enter the 10WE1st amount
from Items 19,20 or 21)
APPORTIONMENT FACTOR
23. Gross receipts in Texas (Whole dollars only)
24. Gross receipts everywhere (Whole dollars onM
20.111
21. III
22. fiI
23. El
24. m
25. APPORTIONMENT FACTOR (Divide Item 23 by Item 24) (Round to 4 decimal places)
TAXABLE MARGIN (Whole dollars only)
26. Apportioned margin (Multiply Item 22 by Item 25) 26. m
27. MOlfl/able deductions 27. !3
28. TAXABLE MARGIN (Item 26 minus Item 27) 28. III

3 4;L 7 5 5 7 4 00
8287749.
00
8287749.
00
18778667.
00
3 417557 4 00
0.5495
00
0.
00
4554118.
00
----- ,-----'--_ .. _-------,--------
TAX DUE
29. T aJ( rate (See instructions (or detennining the appropriate tax rate)
30. Tax due (Multiply Item 28 by the tax rate In Item 29)
(Dollars and cents)
TAX ADJUSTMENTS (Dollars and cents)
31. Tax credits (Item 23 from Form 05-160)
32. due before discount 30 minus Item 31)
!!l
31.1i1I
32. L1l
33. Discount (See instructiDns) 33. III
0.0100
45541.18
0.00
45541.18
0.00

..,,---,
TOTAL TAX DUE (Dollars and cents)
34. TOTAL TAX DUE (Item 32 minus /tern 33) 34. Iil
(Do not Include payment If this amount is less than $1 ,000)
45541.18
, If the amount in Item 34 is $1,000 or more, you must complete Form 05-170.
n'r.f:, n""'o""r"'ly""pc=. ------.--. ,-, -, n""""'mb"".-;-!-.-.----
-"----------- --7""-----"----,-------------1----- ---------
nonl. la Irue nnd corracllo 1110 baSi of my knoy;la:Jgo and balio!. Mail original to:
," -----.. COMPTROLLER OF PUBLIC ACCOUNTS
sIgn - :IDa,o / I' , P.O, Box 149348
here i.",,- fA __ L I'D L]6 oq __ _ __ TX 78714-9348
,I , ,., ---
II you have anY9lJ"stions regarding ax, Y04 may c9ntact the Texas troller's field office in your area or call (800) 252-1381, toll free natiQnwide.
The Austin number Is (512) 163460D.
r Instruc\lcins on completing repqrt forlTls, see form .
. : ", :. , . :. . .,
T!xas Qomp!roller Official Only
1019
Sta,te ComptrolJ,f?,r r \;: if-, , :'
::: I ;;,
t
Ailcat Claims Service. l.P. Q Operating Acct
State Comptroller
2008 ASE;essment
Received
MAY 2 7 2011
Audit Division
of Public Accounts
$**4,115.12
i ] 05/25/2011
Date: (}5/25/2011 Check #: 5483
512512011 .
4,115.12
AI!Ci'llt Claims Service
r
L.P. a Operating Acct
State Comptroller
':; ",:!
: i
t
::;:::{! ::;:
2009 Assessment
ReceHved
MAY 2 7 2011
Audit Division
Comptroller of Public Accounts
$ * * 9 1 ~ ,924.13
o OS/25/2011
Date: 05125/2011 Check #: 5484-
5/251;2011 .
91,924.13
7
Election Details Report
regarding Bullock Amendment
Legislative Reference Library I Legislation I Search results http://www.lrl.state.tx.us/legis/billsearch!amendmentDetails.cfin?ameH .
I of 1
Legislation
Legislative Archive
System
Direct search
Advanced search
Help
Project status
Bill-chapter cross
reference
I ndex to Sections
Affected
Conference committee
reports
Constitutional
amendments
Search
Analysis
Election dates
Sources
Vetoes
Overridden vetoes
State budget
Appropriations acts
Redistricting
Legislation
Other states
2001 - 2003
Signed copies
Statutory revision
Texas law tlmeline
Water law timellne
Legislative intent guide
Intent research firms
Legislative Reference Library
of Texas
your partner in legislat"ive
LRL Home - Legislation - Legislative archive system - Direct search T Search results
Search results
SJR 49, 73rd Regular Session
Help I S\9tUS
Proposlf,g a constitutional amendment prohibiting a personal Income tax wfthout voter approval and dedfcatlng the proceeds of the tax, If
enacted, to education and property tax relfef.
Proposition Prop. 4 - The constitUtional amendment prohibiting a personal Income tax without voter approval and, if an Income tax Is
enacted, dedicating the revenue to education and limiting the rate of local school taxes.
Outcome: Adopted
Election date: 11/02/1993
Votes for: 775,622
Votes against: 343,636
Enabling legislation No enabling legislation required
Articles affected Article 6 : Amends 1 (c) Adds ill
Analyses of proposed amendments:
House Research Organization AJILend.llle!l\sJ:[QQQs_e_Q for the November 2, 1993 election
Texas Legislative Council l\oalyse"_OLELQPQseJLC.9_ns1ltuHOlli!Ll\men9m!l.!l\s for the November 2, 1993 election.
Effective dates
Unless otherwIse specified, an amendment takes effect as part of the constitution on the date of the
showing adoption of the amendment
The Legislative Archive System is a work In progress Complete Information Is not available for all bUls and aU sessions VIsit the Legislative Archive System status oage for
details Please contact the Legislative Reference library at 512'463-1252 If you have any questions. Infonnatlon on this website Is provided as a publiC: service by the Legislative
Reference library The Legislative Reference Ubrary makes no representation as to its completeness or accuracy and makes no warranty In regard to Its use Users assume all
risk of reliance on the Information mcluded on this site
7/28/2011 12:29 PM
8
Letter from Carole Keeton
Strayhorn to Rick Perry (May
15, 2006)
Letter to Governor Rick Perry fi'om the Comptroller http://www.window.state.tx.us/news/60515Ietter.html
10f2
Susan
I.Jetter From Comptroller Carole Keeton Strayhorn to Governor
Rick Perry regarding the Perry Tax Plan
May 15,2006
The Honorable Rick Perry
Governor, State of Texas
Capitol Building, Room 2S.1
Austin, Texas 78701
Dear Governor Perry:
The Legislature is concluding its work on your tax plan. Your plan is fiscally irresponsible --
it includes an unconstitutional income tax on partnerships and unincorporated associations,
the largest tax increase in Texas history and leaves the largest hot check in Texas history.
What you should do is show true leadership and veto this legislation.
As the state's chief fiscal officer, it is my responsibility to spell out exactly what the Perry
Tax Plan means to our state's fiscal integrity. As you have known since it was made public,
your plan simply does not pay for itself. As of this moment, this legislation is a staggering
$23 billion short of the funds needed to pay for the promised property tax cuts over the
next five years.
In 2007, your plan is $3.4 billion short; in 2008 it is $4.3 billion short; in 2009 it is $5.4
billion short; in 2010 it is $4.9 billion short; and in 2011 it is $5 billion short. These are
conservative estimates.
At best, your plan is a prelude to another huge tax bill in the next regular session, one that
will not only be heaped on Texas businesses but will fall heavily on the same taxpayers you
claim to be helping now. At worst, it will relegate Texans to Draconian cuts in critical areas
like education and health care for at least a generation. This is not a victory for taxpayers. It
is a sham, and Texans will see it for what it is.
There is no economic miracle that will close the gap your plan creates. Even if every single
dollar of the current $8.2 billion surplus was poured into the plan, it would not cover the
plan's costs for more than two years, 2007 and 2008. The gap is going to continue to grow,
year by year. There are only two ways to close a chasm of that magnitude -- future tax
increases that you are hiding from Texans now or massive cuts in essential state services --
like public education -- already devastated by your past fiscal indifference.
I have outlined $7.7 billion in long-term "Strayhorn Solutions" to fmance needed programs,
such as a significant teacher pay raise, real property tax cuts and fully restoring the
Children's Health Insurance Program. Those solutions include reinstating e-Texas
Performance Reviews and the Texas School Performance Reviews to the Texas
7/2812011 12:31 PM
Letter to Governor Rick Perry fi'om the Comptroller http://www.window.state.tx.us/news/60515IetteLhtml
20f2
Comptroller's office, implementing video lottery terminals, closing corporate loopholes in
the franchise tax, eliminating the taxpayer-funded Texas Enterprise Fund and Emerging
Technology Fund, and a $l-a-pack increase in the cigarette tax tied to vital health-related
programs.
Texans deserve relief from high property taxes, but they do not need it at the expense of
future tax hikes and more cuts in public education. Educators are justifiably skeptical of this
program because they know that when the state controls the purse strings, rather than
locally elected school boards, the result will be devastating to our schools.
The property tax relief contained in the bill, if it can be financed past 2008, will be quickly
eroded by rising property values, and increases in local tax rates forced on local school
districts struggling to keep up with rising costs. In as little as five years, the state could be
right back in court.
Finally, your plan represents the largest tax bill in Texas history, includes an
unconstitutional income tax, represents a 200 percent tax increase on Texas businesses at a
time when the state has taken an $8.2 billion surplus out of the pockets of hardworking
Texans, and does not pay for itself as required by the spirit of our Texas Constitution's
"pay-as-you-go, no-deficit-spending" provision. That is unconscionable.
Governor, we should be working to improve state services for Texans and to reduce the
burden of government on businesses and individuals. This plan creates a rolling mess that
will take 20 years for future leaders of the state to untangle. Texans will recognize this plan
for what it is -- a short-term, smoke-and-mirrors patch at best.
I urge you to show true leadership and veto this legislation. Texas needs a school fmance
plan that provides long-term, pay-as-you-go solutions for education.
Sincerely,
Carole Keeton Strayhorn,
Texas Comptroller
c: The Honorable David Dewhurst, Lieutenant Governor
The Honorable Thomas R. Craddick, Speaker of the House
Members of the 79th Legislature
7/28/2011 12:31 PM
9
Letter from. Carole Keeton
Strayhorn to Rick Perry (May 2,
2006)

FAX, &12/,j63-4%[,
p,O, !Box 13528
A\JSTIN, TEXAS 78711-3;;28
Governor
State of Texas
C&Jr<ele Keet<en tJr&yb.<eJrn
Te:%& Cl(]Jm]ll>hI(]JHen' iO)i AlClCilJl1UlllJl.t
May 2, 2006
Capitol Building, Room 2S.1
Austin, Texas 78701
House Bill (HB) 3 will be the largest tax increase in Texas history at a time when Texas has a record
surplus, and before you sign it into law I want to make clear to you at least some of the ramifications of
this ill-conceived legislation.
First and foremost, the Bill will require 200,000 Texas businesses that currently do not pay taxes to either
file or pay taxes. Most of that astounding number of Texans will not realize they are in this group of new
taxpayers until they are told before the tax is due in May of 2008.
Among others, this group includes dry cleaners, lawn services, barbers, beauty shops, janitorial services
and doctors.
As Comptroller, I will be drafting rules to implement this plan, and I can tell you most taxpayers will find
the measure very complicated. Business owners will have to calculate their tax three different ways
before they can determine exactly how much they owe.
Portions of the measure are unconstitutional. Taxing income from partnerships is strictly prohibited by
the Texas Constitution, and I believe when this portion ofHB 3 is challenged in court, the State will lose.
And what do Texans get for this? Not much. HB 1 will attempt to reduce property taxes by 11 cents this
fall, but with rising property valuations, much of that reduction will evaporate,
Governor, just getting something done to say you got something done is shOltsighted at best and
irresponsible at worst. I urge you to go back to the drawing board, come up with a long-term plan that
makes sense, and present the Legislature with a fiscally-responsible proposal.
I have offered a fiscally responsible plan with my long-term Strayhorn Solutions.
Texans are not going to understand why you signed into law the largest tax increase in Texas history,
taxing the very service industries that are driving this economy in an incredibly complicated plan, while
the State was enjoying an historic $8,2 billion budget surplus.
Sincerely,

Carole Keeton Strayhorn @
Texas Comptroller
10
Letter from Carole Keeton
Strayhorn to Greg Abbott (Apr.
21,2006)
Letter to Attorney General Greg Abbott fi'om the Comptroller http://www.window.state.tx.us/news/60421Ietter.html
1 of"
Susan
Letter to Attorney General Greg Abbott from the Comptroller
April 21, 2006
The Honorable Greg Abbott
Attorney General
State of Texas
Post Office Box 12548
Dear General Abbott:
I respectfully request your official opinion on the question of whether the revised Chapter
171, Tax Code, as proposed in House Bill (H.B.) No.3, filed by Chairman Keffer for
consideration by the 79th Texas Legislature during its 3rd called session, will require
submission to the voters under Article VIII, Sec. 24(a), Texas Constitution.
I request that you expedite your opinion so that I can provide the most dependable
information to the members of the Legislature as they consider this bill. If the legislation is
unconstitutional without voter approval, it will significantly impact the revenue from the
legislation and, therefore, the spending decisions made by the Legislature. It is my duty to
ensure that the State's pay-as-you-go requirements are met, and I have grave concerns over
any provision that could undermine the integrity of our State's finances.
I note that your First Assistant has recently issued an infOlmalletter on this subject, which
should facilitate issuance of an expedited opinion. However, regardless of his views, I am
persuaded that this proposal raises obvious and fundamental questions and concerns to the
extent it is proposed to be applied to any type of unincorporated association, and I
respectfully request that you consider the following.
Background H.B. 3 as filed would revise the CUlTent corporate franchise tax law to enact a
form of a business tax (described as a "margin tax") to be predicated on the taxpayer's gross
receipts minus either (i) cost of goods sold; or (ii) compensation (payroll and employee
benefits, subject to per employee limits). The legislation would tax unincorporated
associations other than general partnerships whose entire direct ownership is held by natural
persons.
The requirement for voter approval Article VIII, Sec. 24(a), commonly known as the
Bullock Amendment, provides in pertinent part: "A general law enacted by the Legislature
that imposes a tax on the net incomes of natural persons, including a person's share of
patinership and unincorporated association income, must provide that the portion of the law
imposing the tax not take effect until approved by a majority of the registered voters voting
in a statewide referendum held on the question of imposing the tax." (Emphasis supplied).
Article VIII, Sec. 24(a) resulted from Senate Joint Resolution (SJR) 49 in the 73rd
7/28/2011 12:31 PM
Letter to Attorney General Greg Abbott ii-om the Comptroller http://www.window.state.tx.us/news/60421Ietter.htrnl
? of'i
Legislature to ensure against a state income tax without a referendum of the Texas voters.
The resolution caption, and the ballot language, both reflect that a prohibition against "a
personal income tax" without voter approval was the proposition submitted to the voters.
SJR 49 was approved by 70 percent of the electorate in 1993.
Though neither the com1s nor the Attorney General have interpreted Article VIII, Sec.
24(a), Texas law is clear-the Bullock Amendment must be construed giving its words their
natural and ordinary meanings as they were understood by the average voter who voted for
or against it. See City of Beaumont v. Bouillion, 896 S. W. 2d 143 (Tex. 1995); Armbrister
v. Morales, 943 S. W. 2d 202 (Tex. App.-Austin 1997, no pet.); Op. Tex. Att'y Gen. No.
JM-666 (1987), quoting from Opinion 0-5135 at pages 4-5 ["In construing a constitutional
provision it should be construed as it was understood by the average voter when he cast his
ballot for or against it."] In short, the words used are to be understood as people generally
understood them. Spradlin v. Jim Walter Homes, Inc., 34 S. W. 3d 578 (Tex. 2000); Stringer
v. Cendant M0l1gage Corp., 23 S. W. 3d. 353 (Tex. 2000).
Literal Reading The literal wording of the Bullock Amendment is that a tax on the net
income of natural persons, including a person's share of partnership or unincorporated
association income, must include a statewide referendum. The phrase "a person's share"
logically modifies the words "income of natural persons" and read literally and as an
average voter would understand it, this provision would mean that, unless approved by the
voters, no tax may be levied on any income that a person receives from any unincorporated
association. That interpretation is entirely consistent with the caption and ballot language of
SJR 49, which refer to a prohibition against a "personal income tax."
"A person's share" of the income of an unincorporated association, whether it be a limited
partnership or a professional association, is determined first by the agreement between the
principals, and absent one, is governed by the statutes that apply to those entities. The
"share" does not have to be predicated on the "net income" of the unincorporated
association. However calculated or derived, the share received by the natural person that
becomes a pm1 of his or her "net income" cmIDot be taxed without voter approval, period.
Alternative Net Income Interpretation An alternative interpretation of the
pm1nership/unincorporated association proviso for which supporters of the legislation may
contend would read into the proviso the word "net" so that, they would say, to trigger the
referendum the tax would have to be on a person's share of partnership or unincorporated
association "net income." In other words, under this much more restrictive interpretation,
only a tax on the net income of a partnership or unincorporated association, from which a
natural person received a share, would trigger the required referendum. Interpolation of
words into a constitutional provision should not be utilized where it would defeat the
overriding intent evidenced by the provision. Mauzy v. Legislative Redistricting Board, 471
S. W. 2d 570 (Tex. 1971). Interpolation of the word "net" in this proviso materially changes
its meaning and would not be consistent with the caption and ballot language. The electorate
voted on whether a personal income tax was to be approved by the Legislature without
voter approval, and nothing suggests that it is only taxation of "net income" of the
unincorporated association that was so objectionable as to require further voter approval.
And even if it were otherwise, the restrictive Texas law is that constitutional amendments
such as Article VIII, Sec. 24(a) are adopted with reference to the law in effect at the time
the amendment is adopted unless they are inconsistent with the constitutional provision. See
7/2812011 12:31 PM
Letter to Attorney General Greg Abbott from the Comptroller http://www . window . state. DC l1s/news/60421 I etter, htInl
10f5
Collins v. Tracy, 36 Tex. 546 (1872). Chapter 141, Texas Tax Code, adopts the Multistate
Tax Compact, and was in effect at the time the Bullock Amendment was adopted. Article II,
Paragraph 4 of the Compact defines "income tax" as follows:
"Income tax" means a tax imposed on or measured by net income including any tax
imposed on or measured by an amount arrived at by deducting expenses from gross income,
one or more forms of which expenses are not specifically and directly related to particular
transactions.
This provision means that if the tax is determined by deducting from gross income any items
of expense that are not specifically and directly related to transactions that created the
income, it is an income tax. And, if it is an income tax, it is within the Bullock Amendment.
Proposed Section 171.1012 (relating to the cost of goods sold deduction) and 171.1013
(relating to the compensation deduction) clearly include indirect and overhead costs of
production and/or compensation that make the margin tax an income tax under this
preexisting Texas defmition found in Chapter 141, thereby invoking the Bullock
Amendment.
Fmiher, if the more restrictive view of the Bullock Amendment were to be applied, a much
less technical defmition of "net income," and one more likely to have been within the
average voter's frame of reference, is that provided by Black's Law Dictionary, Fifth
Edition, which defmes "net income" as "income subject to taxation after allowable
deductions and exemptions have been subtracted from gross or total income." The "margin"
that is the tax base under the proposed legislation, whether resulting from deduction of cost
of goods sold or labor related charges, may reasonably be said to be within the Black's Law
Dictionary definition of "net income," because it results from income subject to taxation
after some "allowable deductions" are subtracted.
There is no reference in the Bullock amendment that links its application to any specific
external standard. The presence of any "allowable deduction" will result in a "net" income
tax. Thus, using this defmition the margin tax would fall squarely within Article VIII, Sec.
24(a). Absent a referendum it cannot be adopted to the extent it purports to include
unincorporated associations of any kind.
Certainly it is the case that not all expenses are deducted under the margin tax concept, and
thus under some technical accounting defmitions the margin tax would not be on "net
income" as that term is sometimes used in accounting parlance ( i.e., the concluding item on
an income statement). But the amendment contains no link to accounting standards or
definitions and it hardly could be said that an average voter in 1993 knew about, or cared
about, the teclmicalities of accounting defmitions-no tax on his or her net income,
including on income that is received from patinerships or unincorporated associations, was
what was being prohibited, technicalities aside.
Entity Concept Does Not Insulate Margin Tax Proponents of the margin tax will no doubt
assert that the margin tax does not invoke Article VIII, Sec. 24(a) because the tax would be
assessed against entities, not against individuals, and particularly entities that under the law
provide liability insulating protection to their owners or investing principals just like
corporations. But as noted, the partnership/unincorporated association proviso of the
Bullock Amendment refers plainly and simply to "a person's share" of the income of an
unincorporated association as triggering the referendum. Whether the tax is directly on an
7/2812011 12:31 PM
40f5
entity is ilTelevant if the only inquiry is whether there is ultimately a tax levied on "a
person's share" of some distribution.
All words in constitutional provisions are presumed to have been used for a purpose, and in
construing them all words must be given meaning and effect. Eddins-Walcher Butane Co. v.
Calvert, 298 S. W.2d 93, 96 (Tex. 1957); see also Cameron v. Terrell & Garrett, Inc., 618
S.W2d 535, 540 (Tex. 1981). The careful effort made by the Legislature to expressly refer
to "a person's share" of income of unincorporated associations in SJR 49 and ultimately in
Article VIII, Sec. 24(a) as adopted by the voters, had to have a purpose and the obvious
purpose was to make sure all voters understood, and that the law became crystal clear, that
the prohibition and referendum provisions also applied to any tax on the receipts a natural
person receives as a result of being a partner in a palinership, a limited partner, or a member
of a professional association. The express reference to "a person's share of partnership or
unincorporated association income" would not exist and would be unnecessary surplusage if
it were not so.
And, further answer to the proposition that taxation of insulating entities is permissible
without triggering the Bullock Amendment is that the entity concept of partnerships in
Texas was enacted in the Texas Revised Partnership Act by the same Legislature that
passed SJR 49. Its action in adopting the entity concept for partnerships in the 73rd Session
and contemporaneously in that same session sending to the voters a proposed prohibition
against any tax "including on a person's share of palinership or unincorporated association
income" (i.e., including on money received from an unincorporated entity) demonstrates
that what was presented to the voters included a prohibition against a tax on a natural
person's income, regardless of whether the tax was on the entity from which the natural
person's income is derived. The Legislature well knew that palinerships and unincorporated
associations were entities when it chose to make a special recognition that "a person's
share" of those entities' income was also included.
Moreover, any attempt to avoid Article VIII, Sec. 24(a) by clainling the tax is at the entity
level could not survive the economic substance of the tax. Compare Suburban Utility
Corporation v. Public Utility Commission of Texas, 650 S. W. 2d 358 (Tex. 1983) [allowing
inclusion of taxes of a Subchapter S utility in the rate base even though passed on and paid
by the SUbchapter S shareholders predicated on the economic substance of the transactions,
not the taxing formalities]; and Gragg v. Cayuga Independent School District, 539 S. W. 2d
861 (Tex. 1976) [construing a "natural persons" constitutional provision to include net
income of a partnership]; Bishop v. District of Columbia, 401 A. 2d 955 (D. C. 1979)
["nature and effect of the tax, not its label, determine if it is an income tax or not" and
concluding that a tax on an unincorporated business is a tax on the associates or partners
who run the business.].
Past business tax legislation considered by the Legislature that included non-corporate
entities has been accompanied by resolutions recognizing the applicability of the referendum
requirements of Article VIII, Sec. 24(a). H.B. 4 and House Joint Resolution 4, 75th
Legislature, Regular Session, which would have extended the franchise tax to partnerships
and other unincorporated entities except proprietorships are clear evidence of the
Legislature's own past recognition that any tax on the income of an unincorporated
association is a tax on the income of a natural person, and requires voter approval.
I believe the proposed margin tax would likewise require a referendum under Article VIII,
7/28/2011 12:31 PM
50f5
Sec. 24(a), precluding any adoption absent voter approval.
Other Concerns I also seek your opinion of whether the disparate tax rates found in this
legislation as proposed are permissible. As presently conceived, retailers and wholesalers
would pay the margin tax at the rate of Y2 of 1 percent on their chosen tax base, and all
other taxable entities would pay at the rate of 1 percent.
An obvious issue is whether any rational basis exists for taxing retailers and wholesalers at a
rate substantially different from the rate that would apply to all other businesses. I question
whether this approach is valid based on fundamental principles of equal treatment under the
law. I recognize that as a very general matter, the Legislature has significant discretion to
create exemptions and to create differences in treatment, but the requirement nonetheless
remains that there be a rational basis for the distinctions. See Kahn v. Shevin, 416 U. S.
351,355 (1974); Hurt v. Cooper, 110 S. W. 2d 896, 901 (Tex. 1937); Bullock v. ABC
Interstate Theatres, Inc., 557 S. W. 2d 337, 341 (Tex. Civ. App.-Texarkana 1977, writ
refd n.r.e, cert. denied 439 U. S. 894 (1978). No basis has been provided, and none is
apparent, for the disparate treatment of businesses from the standpoint of tax rates.
Sincerely,
Carole Keeton Strayhorn
Texas Comptroller
7/28/201112:31 PM
11
BLACK'S LAW DICTIONARY (8th
ed. 2004) ("income tax" and
"net income")
1497
not subject to taxation, 3. A tax levied by an officer
who lacks authority to levy the tax. - Also termed
illegal tax,
estate tax. A tax imposed on th!,! transfer of prop-
erty by will or by intestate succession, - Also
termed death tax; death duty. Cf inheritance tax,
[Cases: Internal Revenue ():::>4145; Taxation
():::>856.1. C.JS. Internal Revenue 500-502; Taxa-
tion 1783-1785, 1792,]
estimated tax. A tax paid quarterly by a taxpayer
not subject to withholding (such as a self-employed
person) based on either the previous year's tax
liability or an estimate of the current year's tax
liability, [Cases: Internal Revenue ():::>4827 , 4832,
5219.40; Taxation ():::>1096. C.j.S, Internal Revenue
725-726,733,821; Taxation 1777-1778.]
excess-profits tax. A tax levied on profits that are
beyond a business's normal profits. CD This type of
tax is USl\, imposed only in times of national
emergency (such as war) to discourage profiteer-
ing. [Cases: Internal Revenue ():::>4130-4136, C.J.S ..
Internal Revenue 670 .. ]
excise lieu property tax. A tax on the gross premi-
ums received and collected by designated classes of
insurance companies. [Cases: Taxation ():::> 140.
C,JS, Taxation 217.218,]
excise tax. See EXCISE.
export tax. A tax levied on merchandise and goods
shipped or to be shipped Ollt of a country,
flat tax. A tax whose rate remains fixed regardless
of the amount of the tax base, CD Most sales taxes
are flat taxes. - Also termed proportional tax, Cf..
progressive tax; regressive tax, [Cases: Taxation
,<1;::>1281. C.jS, Taxation 2035-2036.]
floor tax. A tax imposed on distilled spirits stored
in a warehouse. [Cases: Internal Revenue ():::>4314.
.S.Internal Revenue 597.]
tax. A tax imposed on the privilege of
on a business (esp. as a corporation), usu ..
by the business's income. See FRANCHISE.
Taxation ():::>1l7. C..J.S. Taxation
177-180,199]
tax. 1. A tax that returns no special benefit
yer other than the support of govern-
programs that benefit all. [Cases: Taxation
22. C.J.S. Taxation 1-3, 5-6.] 2. A proper-
or an ad valorem tax that is imposed for no
except to produce public revenue.
assessment under ASSESSMENT.
:on"slltpPI:nl! transfer tax. A gift or estate tax
",n,_o"',,' " .... n transfer or a
"""JJJJllll! trust. - shortened
tax; transfer ta."" IRC (26
See DIRECT SKIP; GE.NERATION.
generation-skipping trust under
E. DISTRIBUTION. [Cases: Internal Reve-
tax
nue ():::>4220-4228. G.JS. Internal Revenue
576-578.]
gift tax. A tax imposed when property is voluntari-
ly and gratuitously transferred. CD Under federal
law, the gift tax is imposed on the donor, but some
states tax the donee, [Cases: Internal Revenue
():::>4200; Taxation ():::>906.10, G.JS. Internal Reve-
nue 493-494, 499, 557-565, 573-575; Taxation
1783-1784.]
graduated tax. A tax employing a rate schedule
with higher marginal rates for larger taxable bases
(income, property, transfer, etc.) - Also termed
progressive tax,
gross-income tax. A tax on gross income, possibly
after deduction for costs of goods sold, rather than
on net profits; an income tax without allowance
for expenses or deductions. See gross income under
INCOME. [Cases: Internal Revenue ():::>3110; Taxa-
tion ():::>979 , 1202,5, CJ.S, Internal Revenue
59-60; Taxation 1991.]
gross-receipts tax. A tax on a business's gross re-
ceipts, without a deduction for costs of goods sold,
or allowance for expenses or deductions. See GROSS
RECEIPTS,
head tax. 1. See poll tax, 2. HEAD MONEY (3).
hidden tax. A tax that is paid, often unknowingly,
by someone other than the person or entity on
whom it is levied; esp .. , a tax imposed on a manu-
facturer or seller (such as a gasoline producer)
who passes it on to consumers in the form of
higher prices,
highway tax. A tax raised to pay for the construc-
tion, repair, and maintenance of highways, [Cases:
Highways ():::>123 . .J
holding-company tax. A federal tax imposed on
undistributed personal-holding-company income
after allowing deductions for such things as divi-
dends paid. IRC (26 USCA) 545. - Also termed
personal-holding-company tax. [Cases: Internal Reve-
nue ():::>3850.1-3858, C.JS. Internal Revenue
383-386.]
illegal tax. A tax that violates the law, esp. the
constitution . For an example, see poll tax, See
erroneous tax.
income tax. A tax on an individual's or entity's net
income. 0 The federal income tax - set forth in
the Internal Revenue Code - is the federal gov-
ernment's primary source of revenue, and most
states also have income taxes, Cf. property tax; EX.
CISE. [Cases: Internal Revenue ():::>3065-4122; Tax-
ation ():::>931-1104 C.JS, Indians 131; Internal
Revenue 12-14, 16-492, 501, 638-639, 670-
673,797-800; Taxation 1693-1782,]
indirect tax. A tax on a right or privilege, such as
an occupation tax or franchise tax. It An indirect
tax is often presumed to be partly or wholly
passed on from the nominal ta.xpayer to another
person. [Cases: Licenses ():::>1. C,JS. Architects 8;
L.icenses 2-4,]
inheritance tax. 1. A tax imposed on a person who
inherits property from another (unlike an estate
tax, which is imposed on the decedent's estate), CD
9
decedent was a cash method taxpayer (versus an accrual
method taxpayer), that earned but unpaid income would not
ro erly be shown on the final income tax return filed for
lh/decedent, for that taxable period ends with the date of
death Rather it is I.R.D. that becomes taxable to the estate
I the decedent" John K. McNulty, Federal Estate and Gift
in a Nutshell 89 (5th ed. 1994).
illvestment income. See unearned income.
lIet income. Total from all sources rr:inus
deductions, ex.emptlOns, and other. tax reductIOns.
InC01l1e tax IS computed on net Income. - Also
. termed net earnings. [Cases: Taxation @:::>980. GJS.
(Taxation 1715-1716.]
-'lIet operating income. Income froJ? operat-
a business, after subtractmg operatmg costs.
income. Business income derived
investments rather than operations.
income. See ordinary incorne (l)
income. 1. For business-tax purposes,
from the normal operations or activities
business. - Also termed operating income. 2.
individual income-tax purposes, income that is
from sources such as wages, commissions,
(as opposed to income from capital
[Cases: Internal Revenue @:::>32301-3257;
996. CJ.S. Internal Revenue
29, 131-145,490-491; Taxation 1724,
733.]
income. Income not derived from an entity's
business, such as earnings from divi-
and interesL
income. Income derived from a business,
or other income-producing activity that the
does not directly participate in or has no
control over. See PASSIVE ACTIVITY. Cf.
im1esltmlmt income. Investment income that
involve or require active participation,
receipts from royalties, rental in-
interest, annuities, and gains
.sale or exchange of securities. IRC (26
1362(d). [Cases: Internal Revenue
The total income received by an
all sources.
Income not derived in the ordi-
a trade or business, such as interest
sav!ngs, dividends, royalties, capital
Investment sources .. ,. For tax pur-
activities cannot be used to
income. Cf. passive income.
Income received but not yet
termed deferred revenue.
An S corporation's undis-
Income taxed to the shareholders
of the corporation's tax year. .,
usu. be withdrawn later by the
tax consequences. PTI has
accumulated adjustments
income averaging
real income. Income adjusted to allow for inflation
or deflation so that it reflects true purchasing
power.
regular income. Income that is received at fixed or
specified intervals.
split income. An equal division between spouses of
earnings reponed on a joint tax return, allowing
for equal tax treatment in community-property
and common-law states .
taxable income. Gross income minus all allowable
deductions and exemptions . ., Taxable income is
multiplied by the applicable tax rate to compute
one's tax liability. [Cases: Internal Revenue
@:::>4529; Taxation @:::>980. GJS. Internal Revenue
644-645; Taxation 1715-1716.]
unearned income. 1. Earnings from investments
rather than labor. - Also termed investment income,
2. Income received but not yet earned; money
paid in aclvance. C[ earned income,
unrelated-business income. Tax, Gross ll1come
earnecl by a nonprofit corporation from activIties
unrelated to its nonprofit functions. @II A nonprofit
corporation's income is tax-exempt only to the
extent that it is produced by activities directly
related to its nonprofit purpose. - Also termed
unrelated-business taxable income, IRC (26 USCA)
512(a)(3)(A) .. [Cases: Internal Revenue @:::>4068.
C.j.S. Internal Revenue 473--47'LJ
"The [Internal Revenue] Service has justified the unrelated
business income tax as a means of preventing unfair com-
petition between tax-exempt and for-profit providers. Thus,
part of the analysis of whether income from a business
venture is unrelated business taxable income focuses on
the impact of the activity on competitors by inquiring wheth-
er the activity at issue is one generally offered by commer-
cial enterprise. The categorization of a business activity of
an exempt organization as related or unrelated to the
exempt purpose of the organization follows very few bright-
line rules. Approaches to the question of exempt purposes
within the context of unrelated business income differ sub-
stantially from those used in the context of the qualification
of an entity for exempt status itself." Barry R Furrow et aI.,
Health Law 8-1, at 419 (2d ed .. 2000).
income-and-expense declaration. Family law. In child-
support litigation, a document that contains infor ..
mation on a parent's income, assets, expenses, and
liabilities. - Also termed financial statement ..
income approach. A method of appraising real prop-
erty based on capitalization of the income that the
property is expected to generate. Cf. MARKET AP-
PROACH; COST APPROACH. [Cases: Taxation @:::>348(5).]
income averaging. Tax. A method of computing tax by
averaging a person's current income with that of
preceding years. [Cases: Internal Revenue @:::>3092.
CJ.S. internal Revenue 334.]
"A distinct departure from the strict annual system of taxing
income is the concept of averaging income, allowed until
repeal by the 1986 TRA. [T]he rate at which the item
was taxed was made to depend not only on the rates and
level of income for that year, but upon the taxpayer's
experience over the past four years. The item was (some-
times) taxed as if it had been received over a four-year
period. Especially for authors, actors, athletes, and other
taxpayers who' have fluctuating or bunched income and
face graduated tax rates that apply on an annual basis,
income averaging was most important" John K. McNulty,
Federal Income Taxation of Individuals in a Nutshell 353 (5th
ed.1995).
Wisconsin Tax Bulletin 156 - Aprii 2008 7
Wisconsin Tax Treatment of the New
Michigan Business Tax and Texas
Margin Tax
Effective January 1, 2008, the Michigan single business
tax is replaced by the Michigan business tax. The
Michigan business tax is imposed on persons or unitary
business groups doing business or having business
activity in the state of Michigan. The tax has two
components: (1) a 4.95% tax on business income, and
(2) a 0.8% modified gross receipts tax.
Also effective January 1, 2008, the Texas franchise tax
is significantly revised. The revised franchise tax is also
called the "margin tax." The tax base for the Texas
margin tax is the taxable entity's margin. "Margin"
equals the lesser of three calculations: (1) total revenue
minus cost of goods sold, (2) total revenue minus
compensation paid, or (3) total revenue times 70
percent.
Maya corporation deduct the Michigan business tax
or the Texas margin tax?
A corporation may not deduct any component of either
the Michigan business tax or the Texas margin tax for
Wisconsin franchise or income tax purposes.
Corporations compute their Wisconsin net income under
the Internal Revenue Code (IRC) as defined for
Wisconsin purposes, with certain modifications. One of
the modifications is sec. 71.26(3)(g), Wis. Stats. (2005-
06), which provides that IRC sec. 164(a) is modified so
that state taxes and taxes of the District of Columbia that
are value-added taxes, single business taxes, or taxes on
or measured by all or a portion of net income, gross
2008 Stimulus Payments
Note: This article is provided courtesy of the Milwaukee
office of the Internal Revenue Service.
Starting in May, the Treasury will begin sending
economic stimulus payments to more than 130 million
people. Most payments will go out through the late
spring and summer. Payments will continue through
December 31st for returns filed after April 15th.
Most Americans who qualifY for the stimulus payment
will not have to do anything other than file their 2007
tax returns to receive their payment this year.
Stimulus payments will be direct deposited for taxpayers
selecting that option when filing their 2007 tax returns.
Taxpayers who have already filed with direct deposit
income, gross receipts, or capital stock are not
deductible. Similar statutory language applies to tax-
option (S) corporations.
Do the Michigan business tax and the Texas margin
tax qualify for the credit for net income tax paid to
another state?
Both the Michigan business tax and the Texas margin
tax qualifY for the credit for net income tax paid to
another state, if the other requirements of the credit
provided in sec. 71.07(7), Wis. Stats. (2005-06), are
met. For the Michigan business tax, the business income
component and the modified gross receipts tax
component both qualifY for the credit. For the Texas
margin tax, the credit applies regardless of which of the
three computations is used to compute the "margin."
Section 71.07(7), Wis. Stats. (2005-06), provides that if
a resident individual, estate, or trust pays a net income
tax to another state, that resident individual, estate or
trust may credit the net tax paid to that other state
against the net income tax otherwise payable to
Wisconsin on income of the same year. The credit may
not be allowed unless the income taxed by the other
state is also considered income for Wisconsin tax
purposes.
A Wisconsin resident shareholder, partner, or member
may also claim a credit for his or her pro rata share of
the Michigan business tax or the Texas margin tax paid
by a tax-option (S) corporation, partnership, or limited
liability company treated as a partnership, provided the
income taxed by Michigan or Texas is also considered
income for Wisconsin. -<&
won't need to do anything else to receive the payment.
For those who haven't filed yet for 2007, we remind
them that direct deposit is the fastest way to get both
regular refunds and stimulus payments.
The Internal Revenue Service (IRS) will use the 2007
tax return to determine eligibility and calculate the
amount of the payment. In most cases, the payment will
equal the amount of tax liability on the return with a
maximum amount of $600 for individuals ($1,200 for
people who file a joint return) and a minimum of $300
for individuals ($600 for people who file a joint return).
Even people who have little or no tax liability may
qualifY for the minimum payment if their tax return has
$3,000 or more in qualifYing income. Qualifying income
includes:
13
KS DOR Opinion Letter No. 0-
2008-004 (Sept. 2, 2008)
o
Le tie r N umbe r. 0-2008-004
Tax Type: Individual Income Tax
Brief Description: Regarding the revised Texas franchise tax.
Keywords:
Approval Date: 09/02/2008
c .----------------.-J
Body:
xxxxxxx
XXXXX.XX
Re: Kansas Income Tax
Dear: Mr. XXXXX
Office of Policy & Research
September 2, 2008
Your correspondence of June 13, 2008 has been referred to me for response. Thank you for
your inquiry and please accept my apologies for the delay in responding.
Your e-mail notes that in Opinion Letter 0-2003-001 the Kansas Depmiment of Revenue
ruled that the Texas franchise tax was a state franchise tax and not a state income tax. You
also note that since the issuance of that ruling the Texas franchise tax has been replaced with
the revised Texas franchise tax which is characterized on the Texas web site as "a privilege
tax imposed on each taxable entity chartered/organized in Texas or doing business in Texas."
By your e-mail you ask whether Kansas considers the revised Texas franchise tax to be a
franchise tax or an income tax with respect to Kansas partnerships, S corporations and
individuals for purposes of (1) adjustment for taxes on or measured by income or fees or
payment in lieu of income taxes and (2) credits for taxes paid to other states.
In response to your inquiry, please be advised the Department has considered this matter and
has determined the revised Texas franchise tax is based on income and is therefore in the
nature of an income tax. Accordingly, the revised Texas franchise tax will be an addback
modification for Kansas corporate income tax purposes. It could also be claimed as a credit
for taxes paid to another state.
I trust this information is of assistance. If I can be of further service, please feel free to
contact me.
Sincerely,
Jim Weisgerber
Attorney
Tax Specialist
JWjw
NOTE: This opinion letter is based solely on the facts provided in your request for advice.
If material facts or information were not disclosed this letter is null and void. This letter
wi II be revoked without further action by the Department zf the statutes, administrative
regulations, published revenue rulings, or court decisions that materially affect this
opinion are changed.
Date Composed: 09/04/2008 Date Modified: 09/04/2008
14
KS DOR Opinion Letter No. 0-
2009-005 (Mar. 2 ,2009)
http://rvpolicy.kdor .state.l<s. us/Pi 1 otsiNtrntpil/IPlLv 1 xO .NSF / ae2ee3 9 ..
o inion Letter
Letter Number: 0-2009-005
Corporate Income Tax Tax Type:
Brief Description: Deductibility of certain items for corporate income tax purposes.
Keywords:
Approval Date: 03/24/2009
Body:
XXXXX
XXXXX
XXXXX
XXXXX
Office of Policy & Research
March 24, 2009
Re: Kansas Income Tax
DearXXXXX:
Your correspondence of January 9, 2009 has been referred to me for response. Thank you
for your inquiry and please accept my apologies for the delay in responding.
In your e-mail you inquire as to the deductibility of certain items for corporate income tax
purposes. Your questions, and our responses, are set forth below.
Per KSA Sec. 79-32,13 8(b), state and local taxes imposed on or measured by
income or fees in lieu of income tax are not deductible for Kansas corporate
income tax purposes. To the extent such taxes are deducted on the federal return,
they must be added back to arrive at Kansas net income. Some state taxes from
other jurisdictions do not neatly fall into this description. I would like to know
whether the following taxes are deductible for Kansas corporate income tax
purposes:
1) Ohio Franchise Tax
net worth portion - deductible
income based portion - not deductible
(,/9/2011 10:33 AM
http://rvpolicy.kdor.state.ks.us/Pilots/Ntmtpil/IPILvlxO.NSF/ae2ee39f. ..
2) Ohio COlmnercial Activity Tax (CAT)
deductible
3) Michigan Single Business Tax (SBT)
deductible
4) Michigan Business Tax (MBT)
income based portion-not deductible
modified gross receipts portion-deductible
5) Texas Franchise Tax, KS Opinion Letter 0-2003-001
deductible
6) Texas Revised Margins Tax, KS Opinion Letter 0-2008-004, 9/2/08
not deductible if determined by deducting cost of goods sold or
compensation from gross receipts
I trust this information is of assistance. If I can be offurther service, please feel free to
contact me.
Sincerely,
Jim Weisgerber
Attorney
Tax Specialist
NOTE: This opinion letter is based solely on the facts provided in your request for
advice. Ifmaterial facts or information were not disclosed this letter is null and void.
This letter wi II be revoked without further action by the Department if the statutes,
administrative regulations, published revenue rulings, or court decisions that materially
affect this opinion are changed.
Date Composed: 03/30/2009 Date Modified: 03/30/2009
619/2011 1 :33 AM
15
MO DOR Letter Ruling LR
5309 (Dec. 12, 2008)
vl;ssouri Department of Revenue http://dor.mo.gov/rulings/show.php?num=5309
issouri De artment of Revenue
Jay Nixon, Governor
Alana M. Barragan-Scott, Director
Jasper Cou nty Disaster Recovery Assistance
LR 5309
Credit for State Income Tax
December 12, 2008
Dear Applicant:
This is a letter ruling issued by the Director of Revenue pursuant to Section 536.021.10,
RSMo, and the Missouri Code of State Regulations 12 CSR 10-1.020 in response to your letter
dated October 15, 2008.
The facts as presented in your letter ruling request are summarized as follows.
The applicant is a Missouri limited liability limited partnership that derives substantially all of
its income through its ownership interest in a limited partnership. The limited partnership
operates and conducts business.
The majority of states allow partnerships flow-through treatment, by which state income is
reported at the individual level and state income taxes are paid at the individual level by the
partners of the applicant. Certain states assess an entity level tax on the applicant and/ or
limited partnership. In which case, certain state income taxes are paid at the partnership
level. The recently enacted Texas Margin Tax, effective for Texas Franchise Tax Reports filed
on or after January 1, 2008, and the Michigan Business Tax, effective January 1, 2008, were
paid by limited partnership at the partnership level during its calendar year ending December
31, 2008.
ISSUE 1:
Will individual partners of applicant be allowed to claim a credit on their Missouri individual
income tax returns for their proportionate share of the Texas Margin Tax paid directly by the
limited partnership?
RESPONSE 1:
Yes, individual partners of applicant will be allowed to claim a credit on their Missouri
individual income tax returns for their proportionate share of the Texas Margin Tax ("TMT")
paid directly by the limited partnership.
6/9/2011 10:46 AM
Viissouri Department of Revenue http://dor.mo.govlrulings/show.php?num=5309
20f4
In Missouri a partnership is not subject to income tax, but the individual partners are liable
for paying the tax. Section 143.401, RSMo. In this fact situation, there are two tiers: one is a
limited partnership, which operates and conducts business; applicant is a limited liability
limited partnership, which has an ownership interest in the limited partnership. Many of the
partners of applicant are individual Missouri residents. The income of the limited partnership
would pass through the applicant down to the individual Missouri resident partners and be
taxed to those individuals pursuant to Section 143.401, RSMo.
Many of the individual partners of the applicant are residents of Missouri who are required to
report their distributive share of the applicant's income on their Missouri individual income
tax returns. A partner who is a Missouri resident individual is allowed a credit against his or
her income tax for the amount of any il]come tax imposed on him or her for the taxable year
by another state. Section 143.081.1, RSM6: .. --'
The TMT is the recently enacted tax for corporations and other business entities that do
business in Texas. Limited and limited liability partnerships are taxed at the entity level. The
tax is computed by determining the total revenue of the taxpayer using various revenue
amounts reported on the taxpayer's federal income tax return. The taxable margin for the
taxpayer is computed one of three ways: (1) total revenue times 70 percent; (2) total
revenue minus cost of goods sold; or (3) total revenue minus compensation. Texas assesses
the tax using varying tax rates.
In the case of Herschend v. Director of Revenue, 896 S.W.2d 458 (Mo. banc 1995) the Missouri
Supreme Court found that the Tennessee excise tax was an "income tax" paid to another
state which was creditable against Missouri income tax due. The court in Herschend applied
two tests, the "based on" test and the "object" test, to determine whether another state's
tax is an "income tax" for which Missouri residents can take credit when computing their
Missouri income tax for a given tax year.
The Herschend court first analyzed whether the tax was "based on" federal taxable income.
The Tennessee tax at issue in that case was based solely on federal taxable income and was
calculated just like the Missouri income tax, at a fixed percentage of total income. Unlike the
previous Texas excise tax analyzed by the court in Brennan v. Director of Revenue, 937
S.W.2d 210 (Mo. banc 1997), which included both an income and a capital component, the
new TMT is based solely on various types of income reported on the federal income tax
return. In this respect, the TMT meets the "based on" test in Herschend and would be
considered an income tax for purposes of the credit provisions in Section 143.081.1, RSMo.
The second test applied in Herschend is the "object" test. The TMT is called a franchise tax.
The "object" of a franchise tax is to impose a tax for the privilege of doing business in the
state whereas and the "object" of an income tax is to pay compensation for benefits, such as
roads, police and fire protection that are provided by the state. The "critical distinction"
between the operation of a tax as a franchise tax or as an income tax is that a franchise tax
is payable in advance for the privilege of exercising the right to do business in the future,
whereas an income tax is compensatory for benefits received and is due even if the corporate
entity ceases to exist and discontinues doing business in the state. Herschend v. Director of
Revenue, 896 S.W.2d at 460. Although the TMT is called a franchise tax, before a corporation
doing business in Texas can dissolve it must satisfy all tax liabilities. In other words, the
6/9/2011 10:46 AM
\1issouri Depar1ment of Revenue http:// dar .rno.gov Imlings/show .php?num=5309
corporation must pay the TMT due even if the corporation ceases doing business in the state.
The TMT is a compensatory tax that "operates" as an income tax. Per the Herschend
"object" test, the TMT is an "income tax" for the purposes of Section 143.081.1, RSMo.
The TMT would be considered to be an "income tax" in Missouri. Therefore, individual
partners of the applicant are allowed to claim a credit on their Missouri individual income tax
returns for their proportionate share of the TMT.
ISSUE 2:
Will individual partners of the applicant be allowed to claim a credit on their Missouri
individual income tax returns for their proportionate share of the Michigan Business Tax paid
directly by the limited partnership?
RESPONSE 2:
Yes, individual partners of the applicant will be allowed to claim a credit on their Missouri
individual income tax returns for their proportionate share of the Michigan Business Tax
(UMBT") paid directly by the limited partnership.
The MBT is the recently enacted business income tax scheme for corporations and other
entities in Michigan. The MBT replaces the Special Business Tax in Michigan.
There are three components to the tax: (1) the business income tax, (2) the modified gross
receipts tax, and (3) the annual surcharge. The business income tax component and the
modified gross receipts tax component are calculated and apportioned separately. The total
of the two taxes is multiplied by the surcharge. One component cannot offset the other, but
a taxpayer can owe zero for one component and still be liable for the tax and surcharge. The
tax is one amount based on the sum of the three parts.
The business income tax and the modified gross receipts tax are based on an income base
similar to federal taxable income. The surcharge then is also based on net income, since it is
simply an arithmetic function of the business income and modified gross receipts components
of the tax. Pursuant to Herschend v. Director of Revenue, supra, the MBT would be
considered to be an income tax in Missouri because it is essentially "based on" federal income
tax.
Michigan considers the MBT to be an income tax and enforces the tax as an income tax. It is
not intended to be a business privilege or franchise tax. The "object" of the MBT is to
operate as an income tax and be compensation for benefits received. Under the "object" test
in Herschend, the MBT would be considered an income tax for purposes of the credit
provisions in Section 143.081.1, RSMo.
The MBT fits the definition of the term "income tax" as applied to Section 143.081.3.
Individual partners of the applicant are, therefore, allowed to claim a credit on their Missouri
individual income tax returns for their proportionate share of the MBT.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for
6/9/2011 10:46 AM
\1issouri Department of Revenue http:// dor .mo.gov/rulings/show .php?num=53 09
lof4
three (3) years from the date of this letter and subject only to statutory changes by the
General Assembly and to changes in the interpretation of the law by the courts or
administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated
interpretation may be subject to additional taxes, interest and penalties, which may be
imposed prospectively from the date of the change. For this reason, the interpretation set
forth above should be reviewed on a regular basis. Please note that any change in or
deviation from the facts presented will render this ruling inapplicable.
Should additional information be needed, please contact Senior Counsel Jan Pritchard, Office
of the General Counsel, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone
573-751-0961), or me.
Sincerely,
Omar D. Davis
6/9/2011 10:46 AM
16
SC Rev. Rui. 09-10 (Jui. 17,
2009)
Department of Revenue
301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214
Website Address: http://www.sctax.org
SUBJECT:
EFFECTIVE DATE:
SUPERSEDES:
REFERENCES:
AUTHORITY:
SCOPE:
Background Information:
SC REVENUE RULING #09-10
State Tax Add-Backs
(Income Tax)
Applies to all periods open under the statute.
SC Revenue Ruling #03-6 and all previous advisory opinions and
any oral directives in conflict herewith.
S.C. Code AIm. Section 12-6-1130 (Supp. 2008)
S. C. Code Ann. Section 12-4-320 (Supp. 2008)
S. C. Code Ann. Section 1-23-10(4) (2008)
SC Revenue Procedure #09-3
The purpose of a Revenue Ruling is to provide guidance to the
public and to Department personnel. It is an advisory opinion
issued to apply principles of tax law to a set of facts or general
category of taxpayers. It is the Department's position until
superseded or modified by a change in statute, regulation, court
decision, or another Departmental advisory opinion.
The purpose of this advisory opinion is to provide written guidance from the Department
concerning certain taxes that are not allowed as a deduction from South Carolina taxable income.
Initially, this project began as an informal response to a Bureau of National Affairs, Inc.
("BNA"), survey of state tax departments covering numerous questions on corporate income tax
related issues. Because of the number of questions received by the Department concerning
whether state, local, and foreign taxes deductible under Internal Revenue Code Section 164 are
deductible for South Carolina purposes, the Department is issuing its responses to the BNA
survey as an advisory opinion that reflects the Department's official position regarding these
specific tax modifications.
Law:
Code Section 12-6-1130, providing for modifications to South Carolina taxable income,
reads, in part:
South Carolina taxable income is computed by making modifications to
deductions provided in the Internal Revenue Code as follows:
* * * *
(2) The deduction for taxes permitted by Internal Revenue Code Section 164
is computed in the same manner as Section 164 except there is no deduction
for state and local income taxes, or state and local franchise taxes measured
by net income, or any income taxes, or any taxes measured by or with respect
to net income. In addition, if a taxpayer elects, pursuant to Section 164, to
deduct state and local sales taxes instead of state and local income taxes, the
taxpayer may not deduct state and local sales and use taxes ....
* * * *
State Tax Add-Hack Survey Responses:
Below is a summary of selected taxes which are allowed or disallowed as deductions under
SC Code Section 12-6-1130(2) in arriving at South Carolina's taxable income, assuming they
are allowed as a deduction under Internal Revenue Code Section 164.
Deduction Allowed Deduction Disallowed
(no add-back required) (add-back required)
1. State income-based taxes imposed by South Carolina
r rv
2. State income-based taxes imposed by other states
r rv
3. Local income-based taxes imposed by South Carolina
local governments!
r
r-
4. Local income-based taxes imposed by out-of state
r rv
local governments
5. Foreign taxes (other countries)2
r r
6. State franchise taxes based on capital stock or net worth
p-
I
7. State gross receipts taxes
3
p-
r
8. District of Columbia Unincorporated Business Tax
r
p-
9. Kentucky License Tax
p-
r
I South Carolina does not have any local income-based taxes imposed by South Carolina local governments, but if it
did, the deduction would be disallowed.
2 The treatment of foreign taxes depend on facts.
3 Gross receipts taxes are not state sales and use taxes.
2
10. Michigan Business Tax
4
- modified gross receipts tax
p-
11. Michigan Business Tax - business income tax
r
p-
12. New Hampshire Business Profits Tax
r'
p-
13. Ohio Commercial Activity Tax
5
F r
14. Texas Margin Tax
6
r
p-
IS. Washington Business and Occupation Tax
P" r
16. West Virginia Business and Occupation Tax
F r
SOUTH CAROLINA DEPARTMENT OF REVENUE
July 17 , 2009
Columbia, South Carolina
s/Ray N. Stevens
Ray N. Stevens, Director
4 The Michigan Business Tax is the successor to the Michigan Single Business Tax.
5 The Ohio Commercial Activity Tax is the successor to the Ohio Franchise Tax
6 The Texas Margin Tax is the successor to the Texas Franchise Tax.
3
17
CA Tech.nicalA.dvice
Memorandum 2011-03 (Apr.
13,2011)

of California
,<:wtFranchise Tax Board
chair John Chiang I member Jerome E. Horton I member Ana J. Matosantos

Legal Division MS A260
PO Box 1720
Rancho Cordova, CA 95741-1720
tel: (916) 845-7965 fax: (916) 845-3648
ftb.ca.gov
Date: 04.13.11
Technical Advice Memorandum: 2011-03
Requested By:
Requested Date:
TAM Author:
Phone Number:
Fax Number:
Residency Program, Audit Division
01/12/2011
Jenna Mayfield
916-845-7965
916843-6085
SUBJECT: Availability of the Other State Tax Credit for S Corporation Shareholders for the
Revised Texas Franchise Tax Cost of Goods Sold Method, The Ohio Commercial Activity Tax
and the Michigan Business Tax
QUESTIONS PRESENTED
Whether the shareholders of an S corporation engaged in manufacturing are entitled to an
other state tax credit (OSTC) for the following taxes paid for the 2008 tax year:
1. The Revised Texas Franchise Tax (RTFT) under the cost of goods sold (COGS) method
2. The Ohio Commercial Activity Tax (CAT)
3. The Michigan Business Tax (MBT).
CONCLUSIONS
S corporation shareholders are entitled to an OSTC for the RTFT computed under the COGS
method and the business income tax portion of the MBT, which includes the portion of the
annual surcharge attributable to the business income tax. However, S corporation
shareholders are not entitled to an OSTC for the Ohio CAT or for the modified gross receipts
portion of the MBT, which includes the portion of the annual surcharge attributable to
modified gross receipts.
ANALYSIS AND DISCUSSION
S corporation shareholders are generally entitled to an OSTC for their pro rata share of taxes
paid by the S corporation to another state if the tax is on, according to, or measured by
FTB 9525 PASS (REV 12-2009) Legal Project\ Reports\TAM - Other State Tax Credit
04.13.11
TAM 2011-03
Page 2
income or profits paid or accrued.
1
Accordingly, each tax listed above must be analyzed to
determine whether it constitutes an income tax under California law. While the term
"income" is not specifically defined in the California Revenue and Taxation Code, the
relevant case law indicates that a tax is an income tax if the base does not include a return
of capital.2
The California courts have generally used gross income as the base line for identifying
various taxes.
3
Gross income is broadly defined to include "all income from whatever source
derived," unless otherwise provided.
4
Applying these principles, the California Supreme
Court has stated that a gross receipts tax is a tax imposed on gross income and a return of
capital, whereas a gross income tax is a tax imposed on gross income only, with any return
of capital excluded from the tax base.
5
A net income tax is a tax imposed on the income
that remains after gross income is reduced by deductions, credits, or exemptions.
6
The United States Supreme Court and the California State Board of Equalization have also
analyzed value added taxes (VATs).7 Although there are various methods used to compute
value added, it is generally defined as the increase in the value of goods and services
brought about by what a business does to them between the time of purchase and the time
of sale.
B
Unlike a corporate income tax, a VAT generally has no correlation to the taxpayer's
ability to pay.9 Accordingly, a VAT is not an income tax.
iO
A. The RTFT COGS Method
To determine the RTFr liabilit.y, each taxpayer computes its "margin" under three different
methods and the lowest margin becomes the taxable margin.
ii
One of these methods
consists of total revenue less COGS ("COGS method").12 To calculate total revenue, the
taxpayer adds its gross receipts or sales, less returns and allowances, plus additional
1 Rev. & Tax. Code 18001, subd. (b); 18006, subd. (b). Hereinafter, a tax on, according to, or measured by
income or profits paid or accrued as described in California Revenue and Taxation Code section 18001(b) will
be referred to as an "income tax."
2 Scott Beamer v. Franchise Tax Bd. (1977) 19 Cal.3d 467 (Beamer) citing 1 Mertens, Law of Federal Income
Taxation (1974) 5.10, p. 36, fn 18.1; Eisner v. Macomber (1920) 252 U.S. 189, 208; United States v. Safety
Car Heating & Lighting Co. (1936) 297 U.S. 88, 99.
3 See. e.g., Beamer, supra, 19 Cal.3d 467; Harry J. Gray v. Franchise Tax Bd. (1991) 335 Cal.App.3d 36, 42-43
(Gray).
4 Int.Rev. Code 61; Rev. & Tax. Code 24171.
5 Beamer, supra, 19 Cal.3d 467.
6 Gray, supra, 235 Cal.App.3d 36, 41-42.
7 Trinova Corporation v. Mich. Dept. of Treas. (1991) 498 U.S. 358 (Trinova); Appeal of Dayton i-iudson
Corporation, 94-SBE-003, Feb. 3,1994; Appeal of Kelly Service, Inc. and Subsidiary Corporations, 97-SBE-
010, May 8, 1997.
8 Trinova, supra, 498 U.S. 358, 362.
9 Ibid.
10 Ibid.
11 Tex. Tax Code 171.101. Under Tex. Tax Code 171.1016, there is a fourth method, which can be used by
taxpayers with $10 million or less In total revenue.
121d.
FTB 9525 PASS (REV .12-2009) Legal Project\ Reports\TAM Other State Tax Credit
04.13.11
TAM 2011-03
Page 3
income, and subtracts various items such as bad debt expense, foreign royalt.ies and
dividends, and Schedule C dividends and income from a related ent.ity.13
Under Texas Tax Code sect.ion 171.1012(c), COGS includes all direct cost.s of acquiring or
producing goods, including labor costs, depreciation, and costs of materials.
14
Accordingly,
any return of capital is removed from the tax base under the COGS method. Therefore, the
tax computed under the COGS method qualifies as an income t.ax and an S corporation
shareholder would generally be entitled to an OSTC for his or her share of taxes paid by the
S corporation to Texas. 15
B. The Ohio CAT
The Ohio CAT is calculated by taking a percentage of taxable gross receipts less the
applicable exclusion amount.
16
Gross receipts is defined as the total amount. realized by the
S corporation, without deduction for COGS or other expenses incurred, that contributes to
the production of gross income of the S corporation, including the fair market value of any
property or services rendered, and any debt transferred or forgiven as consideration,17
Since the tax base includes a return of capital in the form of COGS, the tax is not an income
tax. Therefore, an S corporation shareholder is not entitled to an OSTC for his or her share
of the CAT paid to Ohio.
C. The MBT
The MBT includes two separate taxes on S corporations.
18
The business income tax is 4.95
percent of the business income tax base.
19
The business income tax base consists of the
taxpayer's business income with certain adjustments.
2o
Business income is defined as the
part of federal taxable income derived from business activity.21 Since none of the specified
adjustments include the addition of a return of capital, the business income tax is an
income tax. Therefore, an S corporation shareholder would generally be entitled to an OSTC
for his or her pro rata share of the business income tax paid to Michigan.
The modified gross receipts tax is 0.80 percent of the modified gross receipts tax base,
which generally consists of a taxpayer's gross receipts less purchases from other firms.22
Purchases from other firms includes inventory acquired during the year, depreciable or
amortizable assets acquired during the year, and other materials and supplies.
23
Since this
13 Tex. Tax Code 171.1011.
14 Tex. Tax Code 171.1.012, subds. (a), (e).
15 Texas does not provide for an S corporation election. Therefore, the OSTC would be allowed under RTC
section 18006(b)(2)(A).
16 Ohio Rev. Code 5"751.03.
17 Ohio Rev. Code 5'151.01, subd. (F).
18 Mich. Compo Laws 208.1201; 208.1203.
19 Mich. Compo Laws 208.1201.
20 Mich. Compo Laws 208.1201, subd. (2).
FTB 9525 PASS (REV 12-2009) Legal Project\ Reports\TAM - Other State Tax Credit
04.13.11
TAM 20U-03
Page 4
computation is measuring the increase in the value of the goods brought about by what the
S corporation did to the goods between the time of purchase and the time of sale, it is
properly classified as a VAT. This is supported by the fact that the amount of tax is unrelated
to the taxpayer's ability to pay. Therefore, the modified gross receipts tax is not an income
tax and an S corporation shareholder would not be entitled to an OSTC for his or her pro rata
share of the modified gross receipts tax paid to Michigan.
Additionally, for the years at issue, the MBT includes an annual surcharge in addition to
these two taxes.
24
The surcharge is generally equal to 21.99 percent of the business
income tax and the modified gross receipts tax liabilities.
25
Therefore, the portion
attributable to the business income tax constitutes an income tax and the portion
attributable to the modified gross receipts tax does not. Accordingly, S corporation
shareholders would be entitled to an OSTC for the portion of the surcharge attributable to
the business income tax, but would not be entitled to an OSTC for the portion attributable to
the modified gross receipts tax.
Tax Counsel
24 Mich. Compo Laws 208.1281.
25 Mich. Compo Laws 208.1281, subd. (l}(a).
FTB 9525 PASS (REV 122009) Legal Project\ Reports\TAM - Other State Tax Credit
18
Minutes of the August 2,2006
Board Meeting on Potential
FSP: Texas Fran.ch.ise Tax
MINUTES
To:
From:
Board Members
Project Team-McGrath (ext. 443)
Financial Accounting
Standards Board
Subject:
Minutes of the August 2, 2006 Board
Meeting on Potential FSP: Texas
Franchise Tax
Date: August 2, 2006
cc:
Bielstein, Smith, MacDonald, Leisenring, Polley, Gabriele, Golden, Beswick,
Sutay, Carney, Allen, Intranet
The Board meeting minutes are providedfor the information and convenience of constituents who
want to follow the Board's deliberations. All of the conclusions reported are tentative and may be
changed at future Board meetings.. Decisions become final o n ~ y after a formal written ballot to
issue afinal Statement or Interpretation.
Topic:
Basis for Discussion:
Length of Discussion:
Attendance:
Board members present:
Board members absent:
Staff in charge of topic:
Other staff at Board table:
Outside participants:
Potential FSP: Texas Franchise Tax
Board memorandum dated July 28, 2006
10:45 a.m. to 11 :00 a.m.
F ASB: Herz, Batavick, Crooch, Linsmeier,
Seidman, and Young
IASB: Leisenring
Trott
Beswick
Smith, Golden, McGrath
None
Summary of Decisions Reached:
The Board decided not to add a project to its agenda that would provide guidance on
whether the recently enacted Texas Franchise Tax is an income tax that should be
accounted for in accordance with F ASB Statement No. 109, Accounting for Income
Taxes.
Objective of Meeting:
The objective of this meeting was for the Board to consider whether to add a project to its
agenda that would provide guidance on whether the recently enacted Texas Franchise
Tax is an income tax that should be accounted for in accordance with Statement 109.
This objective was accomplished.
Matters Discussed and Decisions Reached:
1. Mr. Beswick opened the meeting by explaining that on May 18, 2006, the Texas
Governor signed into law a Texas Franchise Tax, which restructured the state business
tax by replacing the taxable capital and earned surplus components of the tax with a new
taxable margin component. The new franchise tax is effective for returns due on or after
January 1, 2008. The staff received technical inquiries from constituents requesting the
staff s opinion on whether the Texas Franchise Tax was an income tax that should be
accounted for under Statement 109. After discussing the issue with constituents, the staff
concluded that the Texas Franchise Tax is an income tax because the tax is based on a
measure of income.
2. Mr. Beswick stated that the staff received an agenda request from a constituent
requesting that the Board add a project to its agenda to provide guidance on whether the
Texas Franchise Tax is an income tax that should be accounted for in accordance with
Statement 109. The issue was discussed with the TA&I Committee on July 28. At this
meeting, the staff reported on the results of the research it had performed during the
technical inquiry process and its previous conclusion on the issue. The staff also reported
that it had had discussions with the national accounting firms and other interested parties,
which had concluded that the Texas Franchise Tax was an income tax. At the meeting,
2
the Committee concluded that the Texas Franchise Tax was an income tax that should be
accounted for under Statement 109 and that there would not be diversity in the
conclusions reached by preparers, auditors, and regulators on whether the Texas
Franchise Tax was an income tax.
3. The Board unanimously decided not to add a project to its agenda that would
provide guidance on whether the recently enacted Texas Franchise Tax is an income tax
that should be accounted for in accordance with Statement 109.
4. Mr. Linsmeier expressed concern about whether the Texas Franchise Tax was
sufficiently different from the Michigan Single Business Tax. One of the consituents'
letters suggested that the Michigan Single Business Tax, which is similar in nature to the
Texas Franchise Tax, is not always considered an income tax. Although Mr. Linsmeier
agreed that the Board did not need to address the Texas Franchise Tax specifically, he
was concerned about diversity of implementation in comparable circumstances.
Follow-up Items:
None.
General Announcements:
None.
3
19
Comptroller Letter No.
201008001_ , "Franchise Tax
and the Construction Industry"
201008001 L [Tax Type: Franchise] [Document Type: Letter/Memo] http://aixtcp,cpa.state.tx.us/opendocs/open32/20100800 1 Lhtml
lof2
Texas Comptroller of Public Accounts STAR System
201008001L
Franchise Tax and the Construction Industry
This month we'll discuss franchise tax as it relates to the construction
industry. In the coming months, we will highlight other industries.
Tax Rate
The tax rate is 1 percent for entities in the construction industry, as defined
in Division C of the 1987 Standard Industrial Classification Code.
Total Revenue
Revenue reportable for franchise tax purposes equals the amounts entered on an
entity's federal income tax return, to the extent the amounts entered comply
with federal income tax law. Texas Tax Code Section 171.1011(g)(3) allows an
exclusion from revenue for certain flow-through funds that are mandated by
contract to be distributed to other entities. The specified exclusions include
subcontracting payments handled by the taxable entity to provide services,
labor or materials for the actual or proposed design, construction, remodeling
or repair of improvements on real property or the location of the boundaries of
real property.
This exclusion is allowed only when the taxable entity has a contract with its
client that states that the taxable entity will subcontract out a specified
portion of the work. A general statement saying only that some of the work may
be subcontracted out is not sufficient. As provided in Tax Code Section
171.1011(j), any amount excluded from revenue cannot be included in the
determination of cost of goods sold or the determination of compensation.
Cost of Goods Sold (COGS) Deduction
Generally, the COGS provisions apply only to entities that sell real or
tangible personal property in the ordinary course of business. If not for an
exception to the general COGS provisions, most contractors would only be
allowed a cost of goods sold for construction materials provided and not for
labor. This exception, found in Tax Code Section 171.1012(i), states that " ... A
taxable entity furnishing labor or materials to a project for the construction,
improvement, remodeling, repair, or industrial maintenance of real property is
considered 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." The caveat
is that, to be eligible under this provision, the entity furnishing the labor
or materials for a construction project must be physically working on the real
property and effecting a change to that property.
Example 1
A general contractor is hired to construct a private residence. The general
contractor's contract with his client states that he will subcontract out all
7/28/2011 12:24 PM
201008001 L [Tax Type: Franchise] [Document Type: Letter/Memo] http://aixtcp.cpa.state.tx.us/opendocs/open32/20 I 00800 Il.html
20f2
electric, plumbing and HVAC work on the project. The general contractor,
therefore, may exclude from revenue the subcontracting payments made to the
electrician, plumber and HVAC technician. Once these particular subcontracting
payments have been excluded from revenue, they may not be included in the
determination of cost of goods sold. Payments made to subcontractors for work
not specified in the contract and the costs of direct labor and materials may
be included in the cost of goods sold deduction.
Example 2
An architecture firm is hired to provide all of the design work for a
construction project. The architecture firm's contract with the customer says
that it will subcontract out the engineering work on this project. Based on
this contractual provision, the architecture firm is allowed to exclude from
revenue the amounts paid to an engineering firm for work on this project. The
architecture firm, however, only produces the plans for the construction
project. The architecture firm does not construct, improve, remodel or repair
the property (physically work on the real property and effect a change to that
property). As a result, the architecture firm is not eligible to take a cost of
goods sold deduction for its services.
Example 3
A general contractor is hired to construct a commercial building. The general
contractor hires a transportation company to bring materials to the
construction site and haul debris away from the site. The general contractor,
who physically works on the real property and effects a change to that
property, can include these trucking costs in the cost of goods sold deduction.
The transportation company, however, is not allowed a cost of goods sold
deduction. A transportation company is a service provider and does not sell
tangible personal property in the ordinary course of business. Transporting
materials to or from a construction site is not effecting a change to the real
property and does not qualify for the COGS deduction. Also, the transportation
company cannot subtract from revenue any subcontracting payments made to
independent truckers. The exclusion from revenue for subcontracting payments is
allowed only for entities that provide services, labor, or materials for the
actual or proposed design, construction, remodeling or repair of improvements
on real property or the location of the boundaries of real property.
ACCESSION NUMBER: 201008001L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 08/01/2010
TAX TYPE: FRANCHISE
7/28/2011 12:24 PM
20
Texas Open Records Act
Request Response
Response to Open Records Request # 7470690074 from Martens, Seay & Todd
SIC Code
6411
NAICS Code
524291
Number of Taxpayer Submitting Franchise Tax Reports
Privilege Period
2008 2009 2010
7,550 7,829 5,234
477 485 321
Response to Open Records Request # 7470700346 from Martens, Seay & Todd
Number of Taxpayer Submitting Franchise Tax Reports
Privilege Period
SIC Code 2008 2009 2010
1521 13,739 13,375 7,878
1522 2,499 2,393 1,329
1541 1,492 1,523 965
1542 3,958 3,953 2,556
1611 710 688 481
1622 85 97 63
1623 997 979 596
1629 1,438 1,409 906
NAICS Code
236115 8,459 7,820 4,571
236116 888 836 457
236118 2,975 3,135 2,014
236210 710 710 450
236220 4,637 4,655 2,929
237110 740 743 501
237120 336 348 211
237130 423 449 289
237310 1,041 1,020 693
237990 1,037 1,051 639
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of this Appendix to Original Petition
has been sent by hand delivery on July 29, 2011 to:
Susan Combs
Comptroller of Public Accounts of the State of Texas
Lyndon Baines Johnson State Office Building
111 East 17th Street
Austin, Texas 78701
Greg Abbott
Attorney General of the State of Texas
Price Daniel Building
209 West 14th Street, 8th Floor
Austin, Texas 78701
lsi James F. Martens
James F. Martens
------
No. 11-0589
_______________________________________________

In The

_______________________________________________

Relators,

RELATORS SUPPLEMENTAL APPENDIX

James F. Martens
Michael B. Seay
mseay@textaxlaw.com
Lacy L. Leonard
Amanda M. Traphagan
Austin, Texas 78701
Tele: (512) 542-9898
Fax: (512) 542-9899

AND JOHN WEAKLY
No. 11-0589
_______________________________________________

In The

_______________________________________________

Relators,

RELATORS SUPPLEMENTAL APPENDIX

James F. Martens
Michael B. Seay
mseay@textaxlaw.com
Lacy L. Leonard
Amanda M. Traphagan
Austin, Texas 78701
Tele: (512) 542-9898
Fax: (512) 542-9899

AND JOHN WEAKLY

TABLE OF CONTENTS

1. Tex. Gov't Code 22.002

2. TEX. CONST. art. V, 3

3. A&T Consultants, Inc. v. Sharp, 904 S.W.2d 668 (Tex. 1995)

4. J. Michael Kennedy, Doomsday Budget Shows Texas the Cost of Not
Raising Taxes: A Huge Deficit Looms as a Result of Court-Ordered
Funding of Social Services. The Unthinkable May Occur: An Income Levy,
L.A. Times, May 22, 1991

5. Bullock Details Tax Plan, Income Levy Could Reduce Other State Fees,
Proposal Says, Dallas Morning News, Mar. 29, 1991

6. Clay Robison, Income Tax Bill Would Lift Burden From Poor, Legislator
Says, Houston Chronicle, Apr. 24, 1991

7. Mark Tatge, Corporations Brace for State Income Tax, Dallas Morning
News, Mar. 23, 1991

8. Ross Ramsey, House Leaders Study Variety of Possibilities for New Tax
Plan, Houston Chronicle, Jul. 31, 1991

9. Ross Ramsey, Taxes for Cigarettes, Gas May Be Increased/Hybrid
Corporate Levy Also Considered, Houston Chronicle, Aug. 8, 1991

10. Ross Ramsey and R.G. Ratcliffe, Grapping with Texas Finances/Senate
OKs State Budget, Tax Measure/Deadline Looms Tonight for House to
Follow Suit, Houston Chronicle, Aug. 13, 1991

11. Michele Kay, Tax Issue Drawing Little Agreement, Austin American-
Statesman, Mar. 24, 1991

12. Franchise Tax on Small Firms Opposed, Dallas Morning News, Jul. 25,
1991

13. Tax Reform: Lawmakers Should Revamp the Franchise Tax, Dallas
Morning News, Jul. 31, 1991

14. Laylan Copelin, Tax Bill Heightens Old Fears, Austin American-
Statesman, Aug. 4, 1991

15. House Committee Report on HB 11, 72
nd
Legislature, First Called Session,
1991

16. Bob Bullock, et. al. to Ann Richards and Gibson Lewis, Jul 23, 1991, Bob
Bullock Collection, Lt. Governor Series, 1991-1992, Correspondence,
Elected Officials, Gov. Ann Richards, Baylor Collections of Political
Materials, Baylor University, Waco, Texas

17. Bob Bullock to Ann Richards, Jul. 19, 1991, Bob Bullock Collection, Lt.
Governor Series, 1991-1992, Correspondence, Elected Officials, Gov. Ann
Richards, Baylor Collections of Political Materials, Baylor University,
Waco, Texas

18. Bob Bullock, Corporations and Partnerships Should Not Be Taxed the
Same, Austin American-Statesman, Aug. 1, 1991

19. Bob Bullock, Leave Corporations Alone, Dallas Morning News, Aug. 4,
1991

20. Ross Ramsey, Legislators OK $34.6 Billion Budget, Houston Chronicle,
Aug. 11, 1991

21. TEX. CONST. art. VIII, 24

22. Press Release, Office of the Governor, Gov. Perry Names 24-Member
Texas Tax Reform Commission (Nov. 4, 2005)

23. Texas Tax Reform Commission, Tax Fairness: Property Tax Relief for
Texans, March 29, 2006

24. Draft legislation proposed by Texas Tax Reform Commission

25. Love v. Wilcox, 28 S.W.2d 515 (Tex. 1930)

26. Tex. Tax Code 141.001, art. II

27. Multistate Tax Commission, Member States

28. Jack P. Friedman, ed., Barrons Dictionary of Business Terms 429 (2d ed.
1994)

29. BLACKS LAW DICTIONARY 1136 (8
th
ed. 2004)

30. Tex. Tax Code 171.101

31. Tex. Tax Code 171.1011

32. Tex. Tax Code 171.1012

33. Tex. Tax Code 171.1013

34. Instructions for Completing Franchise Tax Reports Originally Due on or
After January 1, 1992 and Before January 1, 2008

35. Financial Account Standards Board, Summary of Statement No. 109

36. NEV. CONST., art. 10, 1

37. Julia Rathgeber and Richard P. Sanchez, Senate Research Center, to John
Keel, Lt. Governors Office, Apr. 23, 1993, Bob Bullock Collection, Lt.
Governor Series, 1993, Issues, Revenue Income Tax, Baylor Collections
of Political Materials, Baylor University, Waco, Texas

Tex. Gov't Code 22.002
APPELLATE COURTS
ch. 22
86. - Appeal bonds, affidavits
Affidavits were received to show that the
amount of the penalty and the condition in the
appeal bond had been changed after it was filed
in the court below, the bond at the date of its
filing being, in point of fact, blank, and the case
was dismissed for want of a bond. Hart v. Mills
(1868) 31 Tex. 304.
Affidavits were received to show that an ap-
peal bond was not filed within the time pre-
scribed by law (Harris v. Hopson, 5 Tex. 529);
that at the time of the execution of the appeal
bond the obligee was dead. Dial v. Rector
(1854) 12 Tex. 99; Johnson v. Robeson (1864)
27 Tex. 526.
87. - Record of lower court, affidavits
Affidavits are inadmissible to supply defects in
the record of an inferior court, or to ascertain
the jurisdiction of such court. Chrisman v.
Graham (1879) 51 Tex. 454.
22.002. Writ Power
22.002
A record of the proceedings of the court be-
low cannot be impeached by affidavit. Johnson
v. Robeson (1864) 27 Tex. 526.
88. -- Statement of facts, affidavits
A statement of facts or bill of exceptions can-
not be supplied by affidavits in the supreme
court. Live Oak County v. Heaton (1873) 39
Tex. 499.
Affidavits will not be heard to show that a
paper indorsed, approved and signed by the
judge was intended thereby to be certified as a
statement of facts. Renn v. Samos (1875) 42
Tex. 104.
On appeal the supreme court cannot try on
affidavits the question whether the bill of excep-
tions was in fact signed and filed after the term.
Von Boeckmann v. Loepp (Civ.App. 1903) 73
S.W. 849. Appeal And Error<?;::::> 670(2)
(a) The supreme court or a justice of the supreme court may issue writs of
procedendo and certiorari and all writs of quo warranto and mandamus
agreeable to the principles of law regulating those writs, against a statutory
county court judge, a statutory probate court judge, a district judge, a court of
appeals or a justice of a court of appeals, or any officer of state government
except the governor, the court of criminal appeals, or a judge of the court of
criminal appeals.
(b) The supreme court or, in vacation, a justice of the supreme court may
issue a writ of mandamus to compel a statutory county court judge, a statutory
probate court judge, or a district judge to proceed to trial and judgment in a
case agreeable to the principles and usages of law, returnable to the supreme
court on or before the first day of the term, or during the session of the term, or
before any justice of the supreme court as the nature of the case requires.
(c) Only the supreme court has the authority to issue a writ of mandamus or
injunction, or any other mandatory or compulsory writ or process, against any
of the officers of the executive departments of the government of this state to
order or compel the performance of a judicial, ministerial, or discretionary act
or duty that, by state law, the officer or officers are authorized to perform.
(d) Repealed by Acts 1987, 70th Leg., ch. 148, 2.03.
(e) The supreme court or a justice of the supreme court, either in termtime or
may issue a writ of habeas corpus when a person is restrained in his
hberty by virtue of an order, process, or commitment issued by a court or judge
on account of the violation of an order, judgment, or decree previously made,
rendered, or entered by the court or judge in a civil case. Pending the hearing
of an application for a writ of habeas corpus, the supreme court or a justice of
115
22.002 JUDICIAL BRANCH:
Tide 2
the supreme court may admit to bail a person to whom the writ of habeas
corpus may be so granted.
Acts 1985, 69th Leg., ch. 480, 1, eff. Sept. 1, 1985. Amended by Acts 1987, 70th Leg.,
ch. 148, 2.03, eff. Sept. 1, 1987; Acts 1995, 74th Leg., ch. 355, 1, eff. Sept. 1, 1995.
Revisor's Note
(1) The revised law in Subsection (c) omits "the Board of County and District
Road Indebtedness" because the board was abolished by V.A.C.S. Article
6674q-7, Subsection (b-1).
(2) The revised law in Subsection (d) omits "or any other mandatory or
compulsory writ or process" because in Love v. Wilcox, 28 S.W.2d 515 (Tex.
1930), the Texas Supreme Court held that the legislature had no authority to
confer a jurisdiction not permitted by the constitution. Article V, Section 3, of
the Texas Constitution states: "The Legislature may confer original jurisdiction
on the Supreme Court to issue writs of quo warranto and mandamus in such
cases as may be specified, except as against the Governor of the State." The
court held that that portion of V.A.C.S. Article 1735a that attempts to confer on
the supreme court the power to issue "any other mandatory or compulsory writ
or process" violates the constitution and is void.
Historical and Statutory Notes
The 1987 amendment, to conform to the re- Acts 1881, p. 7.
peal of the law from which it was derived by Acts 1892, p. 19.
9(a)(5) of Acts 1985, 69th Leg., ch. 211, re- Rev.Civ.St.1895, arts. 946,949,4861.
pealed subsec. (d) relating to the issuance of a Acts 1905, 29th Leg., p. 20.
writ of mandamus by the supreme court against Rev.Civ.St.1911, arts. 1525, 1526, 1528, 1529,
a public officer, an officer of a political party or 5?32.
an election judge or clerk to compel perform-
ance of a duty in connection with the holding of Acts
19
13, 33rd Leg., P 107.
an election or convention of a political party. Acts 1917' 35th Leg., PP 140, 141.
The 1995 amendment, in subsecs. (a) and (b), Acts
1930

4
lst Leg., 4th C.S., P 4, ch. 4, 1.
inserted "statutory county court judge, a statu- Acts 1943, 48th Leg., p. 354, ch. 232, 1.
tory probate court judge, a". Acts 1967, 60th Leg., p. 1932, ch. 723, 76.
Acts 1981, 67th Leg., p. 773, ch. 291, 19,
Prior Laws:
P.D. 1579.
Rev.Civ.St.1879, arts. 1011, 1016.
G.L. vol. 10, p. 383.
20.
Acts 1985, 69th Leg., ch. 211, 9.
Vernon's Ann.Civ.St. arts. 17.33 to 17.35a,
1737.
Constitutional Provisions
Article 5, 3 reads: courts and the Justices thereof may issue the
writs of mandamus, procedendo, certiorari and
such other writs, as may be necessary to enforce
its jurisdiction. The Legislature may confer
original jurisdiction on the Supreme Court to
issue writs of quo warranto and mandamus in
such cases as may be specified, except as
against the Governor of the State.
"(a) The Supreme Court shall exercise the
judicial power of the state except as otherwise
provided in this Constitution. Its jurisdiction
shall be co-extensive with the limits of the State
and its determinations shall be final except in
criminal law matters. Its appellate jurisdiction
shall be final and shall extend to all cases except
in criminal law matters and as otherwise pro-
vided in this Constitution or by law. The Su- "(b) The Supreme Court shall also have pow-
preme Court and the Justices thereof shall have er, upon affidavit or otherwise as by the court
power to issue writs of habeas corpus, as may may be determined, to ascertain such matters of
be prescribed by law, and under such regula- fact as may be necessary to the proper exercise
tions as may be prescribed by law, the said of its jurisdiction."
116
2.
TEX. CONST. art. V, 3
Art. 5, 2 JUDICIAL DEPARTMENT
Library References
Courts e=>50, 101, 102.
Judges e=>3 to 5, 7, 8, 22.
Westlaw Topic Nos. 106, 227.
C.J.S. Courts 106, 1.37 to 138.
CJ.S. Judges 20 to 50, 54 to 77, 181 to
206, 330.
Research References
Encyclopedias
61 Am. Jur. Trials 1, Considering Appeals.
TX Jur. 3d Courts 16, Supreme Court.
TX Jur. 3d Criminal Law 2031, Qualifica-
tions.
TX Jur. 3d Elections 336, Canvass by Legis-
lature.
TX Jur. 3d Judges 1, Generally; Appellate
Judges.
TX Jur. 3d Judges 11, Length of Term of
Office, Generally.
TX Jur . .3d Judges 12, Effect of Expiration
of Term.
TX Jur. 3d Judges 13, Tenure of Replace-
ment Judges.
Treatises and Practice Aids
McDonald & Carlson Texas Civil Practice
7:6, Express Jurisdiction of the Texas Su-
preme Court.
McDonald & Carlson Texas Civil Practice
33:21, Petition Filed, Petition Granted.
Brooks, 35 Tex. Prac. Series 3.2, Special
and Local Laws.
Notes of Decisions
Eligibility qualifications 1
1. Eligibility qualifications
Where Constitution declares qualifications for
office, it is not within power of Legislature to
change or add to these unless Constitution gives
that power. Dickson v. Strickland (Sup. 1924)
114 Tex. 176, 265 S.W. 1012. Officers And
Public Employees e=> 19
A candidate for the Supreme Court of Texas is
required to have been a practicing lawyer, or a
lawyer and judge of a court of record together
at least ten years at the time of the judicial
election. Sears v. Bayoud (Sup. 1990) 786
S.W.2d 248. Judges e=> 4
If appointee meets all of the eligibility qualifi-
cations enumerated in the Texas Constitution
for appointment to the office of a Justice of the
Supreme Court, he is not ineligible for such
appointment because his son is a member of the
Texas House of Representatives; and Vernon's
Ann.P.C. art. 432, the Anti-Nepotism Act, is not
applicable, since the legislature had been given
no authority to add to or alter the eligibility
qualifications prescribed by the Constitution
which created such office. Op.Atty.Gen.1970,
No. M-728.
3. Jurisdiction of Supreme Court; writs; clerk
Sec. 3. (a) The Supreme Court shall exercise the judicial power of the state
except as otherwise provided in this Constitution. Its jurisdiction shall be
coextensive with the limits of the State and its determinations shall be final
except in criminal law matters. Its appellate jurisdiction shall be final and
shall extend to all cases except in criminal law matters and as otherwise
provided in this Constitution or by law. The Supreme Court and the Justices
thereof shall have power to issue writs of habeas corpus, as may be prescribed
by law, and under such regulations as may be prescribed by law, the said courts
and the Justices thereof may issue the writs of mandamus, procedendo, certio-
rari and such other writs, as may be necessary to enforce its jurisdiction. The
Legislature may confer original jurisdiction on the Supreme Court to issue
writs of quo warranto and mandamus in such cases as may be specified, except
as against the Governor of the State.
412
JURISDICTION OF SUPREME COURT Art. 5, 3
(b) The Supreme Court shall also have power, upon affidavit or otherwise as
by the court may be determined, to ascertain such matters of fact as may be
necessary to the proper exercise of its jurisdiction.
Amended Aug. 11, 1891; Nov. 4, 1930; Nov. 4, 1980, eff. Sept. 1, 1981; Nov. 6, 2001.
INTERPRETIVE COMMENTARY
The Constitution of the Republic simply provided that "[t]he Supreme Court
shall have appellate jurisdiction only, which shall be conclusive, within the
limits of the Republic." Since that time the constitutional history of the
jurisdiction of the supreme court has, in general, been narrowed and restricted.
The main purpose of such restrictions being to relieve the court from being
overburdened.
The Constitution of 1845, beginning this process of restriction, gave appellate
jurisdiction only, but jurisdiction in criminal cases and in appeals from interloc-
utory judgments was made subject to such exceptions and such regulations as
the legislature should make. This instrument, however, did empower the courts
and judges to issue writs of habeas corpus, and, under regulations prescribed by
law, writs of mandamus and such other writs as might be necessary to enforce
the court's jurisdiction.
The Constitution of 1866 broadened the constitutional appellate jurisdiction
somewhat by permitting the legislature to regulate criminal appellate jurisdic-
tion in cases below the grade of felony only. The Constitution of 1869 limited
appeal in all criminal cases unless a judge of the Supreme Court, after
inspection of the transcript of record presented within sixty days from the date
of the trial, believed error of law had been committed by the trial judge. This
restriction was removed in 1873 by constitutional amendment.
The Constitution of 18 7 6 restricted the supreme court's jurisdiction to civil
cases and restriction was further placed on this civil jurisdiction. Under the
terms of this instrument, appeals in all criminal cases and in civil cases tried in
county courts were to be taken to the court of appeals. It was also provided
that the court and its judges, under regulations as prescribed by law, possessed
powers to issue all writs necessary to enforce the jurisdiction of the court.
The amendment of 18 91 was adopted to relieve the congested dockets of the
supreme court. Restriction of the appellate jurisdiction of the court as to civil
cases was continued, but again this civil jurisdiction was limited.
The Courts of Civil Appeals were created, and all civil appeals from district
and county courts were to be tal\:en to these courts. In certain types of cases,
the decision of a court of civil appeals was to be final. In certain other limited
instances, cases were permitted to go to the supreme court for further review.
Under the amendment of 1891 the present appellate jurisdiction may be
outlined as follows: this jurisdiction is restricted to civil cases; it is restricted to
questions of law; it is limited to appeals from the court of civil appeals; and it
is limited to appeals in cases of which the courts of civil appeals have appellate
jurisdiction. This jurisdiction is made subject to such restrictions and regula-
tions as the legislature may prescribe.
An important further change incorporated in this amendment was that
empowering the legislature to confer upon the supreme court original jurisdic-
413
Art. 5, 3 JUDICIAL DEPARTMENT
tion to issue writs of quo warranto and mandamus in such cases as may be
specified, except as against the governor of the state.
Prior to this amendment the constitution did not give the supreme court
original jurisdiction in quo warranto or mandamus, and it could issue manda-
mus only for the purpose of effecting its appellate jurisdiction. See Wells v.
Littlefield, 62 T. 28 (1884). See also Pickle v. McCall, 86 T. 212, 24 S.W. 265
(1893).
The power of appointment of a clerk has been vested in the supreme court in
all state constitutions, although constitutions prior that of 1869 specified the
plural, "clerks", while that instrument and the present section provide for the
appointment of "a clerk". The clerk collects the fees and costs in cases in the
courts and files and preserves the records and papers.
Historical Notes
This section, as originally adopted, read as
follows:
"Sec. 3. The Supreme Court shall have ap-
pellate jurisdiction only, which shall be co-ex-
tensive with the limits of the state; but shall
only extend to civil cases of which the district
courts have original or appellate jurisdiction.
Appeals may be allowed from interlocutory
judgments of the district courts, in such cases
and under such regulations as may be provided
by law. The Supreme Court and the judges
thereof shall have power to issue, under such
regulations as may be prescribed by law, the
writ of mandamus, and all other writs necessary
to enforce the jurisdiction of said court. The
Supreme Court shall have power, upon affidavit
or otherwise, as by the court may be thought
proper, to ascertain such matters of fact as may
be necessary to the proper exercise of its juris-
diction. The Supreme Court shall sit for the
transaction of business from the first Monday in
October until the last Saturday of June of every
year, at the seat of government, and not at more
than two other places in the State."
The 1891 amendment, proposed by Acts 1891,
22nd Leg., S.J.R. No. 16 and adopted at the
Aug. 11, 1891 election, made changes as to the
jurisdiction of the court, and its power to issue
writs, required it to sit only at the state capital,
instead of at the seat of government and not
more than two other places in the state, and
added the provision as to the clerk, which had
previously been covered by section 4 of this
article.
41st Leg., S.J.R. No. 2 and adopted at the Nov.
4, 1930 election, repealed the last sentence of
the second paragraph, which formerly read:
"The Supreme Court shall sit for the transaction
of business from the first Monday in October of
each year until the last Saturday of June in the
next year, inclusive at the capital of t h ~ State."
66th Leg., p. 3223, S.J.R. No. 36, 3 and
adopted at the Nov. 4, 1980 election, effective
Sept. 1, 1981, rewrote the first paragraph,
which prior thereto read:
"The Supreme Court shall have appellate ju-
risdiction only except as herein specified, which
shall be co-extensive with the limits of the
State. Its appellate jurisdiction shall extend to
questions of law arising in cases of which the
Courts of Civil Appeals have appellate jurisdic-
tion under such restrictions and regulations as
the Legislature may prescribe. Until otherwise
provided by law the appellate jurisdiction of the
Supreme Court shall extend to questions of law
arising in the cases in the Courts of Civil Ap-
peals in which the Judges of any Court of Civil
Appeals may disagree, or where the several
Court of Civil Appeals may hold differently on
the same question of law or where a statute of
the State is held void. The Supreme Court and
the Justices thereof shall have power to issue
writs of habeas corpus, as may be prescribed by
law, and under such regulations as may be
prescribed by law, the said courts and the Jus-
tices thereof may issue the writs of mandamus,
procedendo, certiorari and such other writs, as
may be necessary to enforce its jurisdiction.
The Legislature may confer original jurisdiction
on the Supreme Court to issue writs of quo
warranto and mandamus in such cases as may
be specified, except as against the Governor of
the State."
77th Leg., H.J.R. No. 75, 2.03 and adopted at
the Nov. 6, 2001 election, inserted subsection
designations and deleted the sixth sentence,
which previously read: "The Supreme Cou.rt
shall appoint a clerk, who shall give bond m
such manner as is now or may hereafter, be
required by law, and he may hold his office for
3.
A & T Consultants, Inc. v.
Sharp, 90 .W.2d 668 (Tex.
1995)
A & T Consultants, Inc. v. Sharp, 904 S.W.2d 668 (1995)
23 MediaL Rep. 2281, 38 Tex. Sup. Ct. J. 1071
KeyCite Yellow Flag- Negative Treatment
Distinguished by Texas Dept of Public Safely v Abbott, Tcx.App.-Austin, April29, 2010
904 S.W.2d 668
Supreme Comt of Texas.
A & T CONSULTANTS, INC., Relator,
v.
John SHARP, Comptro1ler of Public Accounts of the State of Texas, Respondent.
No. 94-1024. Argued Jan. 18, 1995. Decided July 21, 1995.Rehearing Overruled Sept. 14, 1995.
Corporate franchise taxpayer petitioned for writ of mandamus to compel Comptroller of Public Accounts to disclose infonnation
under Texas Open Records Act (TORA). The Supreme Court, Gonzalez, J., held that: (I) the Supreme Court had jurisdiction
to decide issues presented in the case; (2) law enforcement exception to TORA applied to infonnation derived during audits
which would reveal deliberative processes of comptroller; (.3) infonnation obtained from taxpayers' records, employees, and
officers was confidential; and (4) remaining information sought should be disclosed.
Ordered accordingly.
Hecht, J ., dissented and filed opinion in which Cornyn and Gammage, JJ., joined.
West Headnotes ( 17)
2
3
Records Matters Subject to Disclosure; Exemptions
"Public information," within meaning of Texas Open Records Act, (TORA) included infonnation within possession of
Comptroller of Public Accounts concerning fianchise taxpayers, including dates on which corporations' charters were
revoked or dissolved, generation list dates and assignment date of completed audits, list of completed audits resulting
in deficiency or refund, and refund warrant numbers and dates of issue, regardless of whether requesting party could
deduce confidential information about taxpayers by combining knowledge about changes in the law with information
disclosed. V.T.CA. Government Code 552.00 I-552.353; V.T.C.A., Tax Code I I l.CJ06, I 71.206.
3 Cases that cite this headnote
Courts Public oftlcers, boards, and municipalities, acts and proceedings of
The Supreme Court was proper fomm for mandamus action against Comptroller of Public Accounts for failure to
disclose infonnation requested under Texas Open Records Act (TORA). Vernon's Ann. Texas Const. Art. 4, l; Art.
5, 8; V.T.C.A., Government Code 24.011,552.001-552.353.
Courts Appellate or Supreme Courts
The Supreme Court has exclusive original jurisdiction over mandamus proceedings against executive officers
except the governor; thus, district comis generally have no jurisdiction over executive officer respondents. Vernon's
Ann.Texas Const Art. 5, 3, 8; V:LC.A., Government Code 22.002(c).
.I'}
23Media l.Rep. 2281, 38 Tex .. Sup. ct J 10?1
4
5
Records Judicial enforcement in general
Action for writ of mandamus to compel Comptroller of Public Accounts to release information regarding corporate
franchise taxpayers did not require Supreme Court to make findings of fact, for purposes of detennining whether
Supreme Court could exercise jurisdiction over the case; determining whether information requested was confidential
solely involved construing the Tax Code and Texas Open Records Act (TORA). V.T.C.A .. Government Code ~ ~
552.00 1-552.353.; V.T.CA .. Tax Code ~ ~ Ill .006, I 71 .206.
Records Exemptions or prohibitions under other laws
Confidentiality provisions of tax code do not preclude disclosure of otherwise public information on grounds that
someone could deduce confidential information from it in light of publicly known changes in the law; changes in the
law are matters of public record, and confidentiality under the tax code turns on whether information was obtained or
derived from taxpayers. VTC.k, Tax C o d e ~ II 1.006, 171.206.
I Cases that cite this headnote
6 Records . Matters Subject to Disclosure; Exemptions
7
9
Although starting and ending dates together may indicate seriousness of an audit, they are not confidential under Tax
Code and should be released under Texas Open Records Act (TORA). VTC.A., Tax Code 11 L006(a)( l ); VTC A,
Government C o d e ~ 552.001-552.353.
Records
Records
Matters Subject to Disclosure; Exemptions
In general; request and compliance
Texas Open Records Act (TORA) compels disclosure of public information that exists but does not require govemment
entity to prepare or assemble new information in response to a request. VTC.k, Government Code 552.021.
Records Matters Subject to Disclosure; Exemptions
Dates of terminations of corporate charters for nonpayment of franchise taxes are public information under Texas Open
Records Act (TORA ); charters or certificates of incorporation are recorded public documents, charters may be revoked
or dissolved for nonpayment of fees, franchise taxes, or penalties, comptroller's reports regarding nonpayment oftaxes
are completed reports, audits, or evaluations made by and for governmental body, and secretary of state thereafter
assembles, issues, and maintains certificates or decrees of dissolution. V.A.T.S. Bus.Corp.Act, arts. 3.03, subd. a(3),
7.01, 9.05; V.T.C.A., Government C o d e ~ 552.022(15).
Records Investigatory or law enforcement records
Dates on which corporate taxpayers' names appeared on generation lists and dates on which audits were assigned
by Comptroller of Public Accounts were confidential under law enforcement exception to Texas Open Records Act
(TORA) to the extent that such audits were not complete, because dates revealed decision points and deliberative
processes regarding upcoming or ongoing audits which would be very infonnative to the affected taxpayers; however,
23 MediaL. Rep. 2281, 38 Tex. Sup. Ct J. 1071
10
11
12
1.3
14
15
as for audits that were complete, revelation of preaudit generation dates and assignment dates were oflittle consequence
and would be ordered released. V.T.C.A., Government C o d e ~ ~ 552.001-552 . .353.
Law enforcement exception to Texas Open Records Act (TORA) protects infonnation regarding audits of corporate
franchise taxpayers which have not been completed by office of Comptroller of Public Accounts. VTC.A.,
Govemment Code 552.108.
Law enforcement exception to Texas Open Records Act (TORA) applied to Comptroller of Public Accounts' reasons
for auditing corporate franchise taxpayers; accordingly, comptroller was not required to disclose reasons for auditing
taxpayers. VTC.A., Government Code 552.108.
Records Investigatory or law enf(.)rcement records
Audit methods and groups used by Comptroller of Public Accounts with regard to corporate franchise taxpayers were
exempt from disclosure under law enforcement exception to Texas Open Records Act (TORA); as revelation of audit
groups would allow taxpayers being audited to ascertain, based on which group audited them, why they were being
audited, disclosure of audit methods and groups would jeopardize Comptroller's effectiveness. V.T.C.A., Government
Code 552.108, 552.116.
Taxpayers' errors discovered during audits were "derived from" taxpayer records and were, therefore, exempt from
disclosure under Texas Open Records Act (TORA) by virtue of confidentiality provisions of Tax Code. V T.C.A., Tax
Code lll.006(a)(2); V.TC:A, Government Code 552.001-552.353.
l Cases that cite this headnote
Corporate taxpayers' responses to audits amounted to "infonnation obtained by the comptroller during the course of
an examination of taxpayer's officers or employees," within meaning of Tax Code and were therefore not subject to
disclosure under Texas Open Record Act (TORA). V."LC.A., Government Code ~ 552.022; V.TC.A., Tax Code ~
1 I L006(a)(2).
Records Internal memoranda or letters; exe<:utive privilege
Texas Open Records Act (TORA) did not compel disclosure of audit assignment codes used by Comptroller of Public
Accounts; to someone who knew them, assignment codes would reveal comptroller's deliberative processes regarding
law enforcement and prosecution" VTC.A, Government C o d e ~ 552.108.
23 MediaL Rep. 2281, 38 Tex. Sup. Ct ,J: 1071
16
17
Records
Records
In general; freedom of information laws in general
Exemptions or prohibitions under other laws
In determining whether deficiency assessments and refunds are public information, court gives narrow reading to Tax
Code's confidentiality provisions and liberal reading to Texas Open Records Act (TORA). V.T.CA, Tax Code
111.006; VTC.A.. Government Code 552.001.
Records
Records
Matters Subject to Disclosure; Exemptions
Exemptions or prohibitions under other laws
Amounts of corporate franchise tax deficiencies and refunds were derived from taxpayer-furnished information and
were, thus, confidential under Tax Code and not s u ~ j e c t to disclosure under Texas Open Records Act (TORA);
however, fact of deficiency of refund revealed nothing about taxpayers except that they had miscalculated their tax,
and, therefore, deficiency assessments and refimd warrants were subject to disclosure. V.T.C.A., Government Code
552.022( I, 3), V :r.C.A., Tax Code I ll.008(a).
Attorneys and Law Firms
1
'670 Troy L Voelker, Round Rock, for relator.
John Sharp, Sandra Conditt Joseph, Christopher Johnsen, Austin, for respondent.
Opinion
GONZALEZ, Justice, delivered the opinion of the Court, in which PHILLIPS, C.J., and HIGHTOWER, ENOCH, SPECTOR,
and OWEN, Jl, join.
In this original proceeding, the relator, A & T Consultants, Inc., seeks a writ of mandamus directing John Sharp, the
Comptroller of Public Accounts of the State of Texas, to disclose certain information in his possession regarding the state's
franchise taxpayers. We conditionally grant mandamus relief compelling disclosure of some of the requested infonnation
because it is public infommtion under the Texas Open Records Act
In June I 990, pursuant to the Texas Open Records Act (TORA), TEX.GOV'T CODE 552 00 l-.353 ( 1994 & Supp.l995),
A & T requested the comptroller to fumish a list of all franchise taxpayers in the state subjected to an audit resulting in a final
detennination of a tax deficiency assessment or refimd since September I, 1983. A & T asked for the list to include not only
the taxpayers' names, but also their taxpayer numbers, full mailing addresses, the amount of tax deficiency assessed against
them or the amount of tax refunded to them, and the relevant periods or dates involved in their audits. The comptroller agreed
to provide some of the information that A & T requested, but not the actual amount of tax assessments or refimds or the names
of taxpayers who received refimds.
The comptroller later declined to provide the information A & T sought because he believed that some of it was exempt from
disclosure, either as exceptions to TORA, see id. 552.101-.12.3, or under the Tax Code's confidentiality provisions. See
TEX.TAX CODE II 1.006, 151.027, 171.206. In this circumstance, TORA required the comptroller to seek an opinion
23 MediaL. Rep. 2281,38 Tex .. Sup. Ct ,L 1071
from the attorney general regarding whether A & T's request for public infonnation included infonnation made confidential by
statute. See TEX.GOV'T C O D E ~ 552 .. 30 I. In June 1990, the comptroller asked the attorney general to render an open records
decision regarding A & T's request and similar requests from other parties not involved in this suit.
The attorney general issued his decision regarding A & T's request for tax information in June 1994, but withdrew the opinion
pending the present litigation in October 1994. The attorney general concluded, among other things, that the confidentiality
provisions of the Tax Code protected the amounts of any tax deficiency from disclosure under TORA, but not the amounts
of refunds or the identity of taxpayers who received refunds. The comptroller apparently disagreed with the attorney general's
opinion, because he requested the attorney general to reconsider its opinion in July 1994.
1
Also in July, A & T filed two
additional requests with the comptroller. It expanded the scope of its request to include taxpayer and audit records since 1979.
It also requested additional categories of infonnation, including franchise taxpayers' standard industrial classification (SIC)
codes, the reason for their audits, the taxpayers' primary and secondmy errors, taxpayers' responses to audits, the audit method,
the "assignment code" (the basis for the comptroller's decision to assign an audit), the audit office, and the auditor's number
and group. The comptroller again offered to comply partially with A & T's request. In a Jetter to A & T in August 1994, the
comptroller stated that he would provide the following information: franchise taxpayers' names, taxpayer numbers, full mailing
addresses, SIC codes, the audit office, audit period, auditor number, and the audit periods and starting dates.
2 Because A & T had not obtained all the infomwtion it sought despite four years of effort, it tiled a motion for leave to file a
petition for writ ofmandamus with this Court, asking us to direct the comptroller to release all the infonnation it had requested.
The comptroller urges us not to exercise jurisdiction, arguing both that A & T's petition presents unresolvable fact issues and
that a district court is the proper forum for TORA-based mandamus actions. We disagree on both points.
n.
District courts are always the courts of exclusive original jurisdiction for mandamus '''6 72 proceedings unless the constitution
or a Jaw confers such jurisdiction on another tribunaL See TEX. CON ST. art V, 8; TEX.GOV'T CODE 24.011 (conferring
mandamus authority on district courts). TORA does not specify which courts have jurisdiction over mandamus proceedings
initiated to enforce the Act. See TEX.GOV'T CODE 552.321. Neither the constitution nor any other statute outside TORA
discusses what courts have jurisdiction over mandamus actions to compel disclosure of public information under TORA.
Consequently, district courts ordinarily will have jurisdiction over TORA-based mandamus actions. See, e.g., Texas Dep't
c1jPub. Saj'erv v. Gilbreath. 842 S.W.2d 40l\ (Tex.App.----Auslin 1992, no writ) (involving a TORA-based mandamus action
against a state department); Johnson\' Lynaugh, 789 S. W .2d 704, 706 (Tex.App.-1-Jouslon [I st Dist]J990, orig. proceeding)
(involving a TORA-based mandamus action against the director of the department of criminal justice, an official who is not
an executive officer within the constitution).
3 The problem with jurisdiction arises when the respondent is an executive officer named by the constitution. Among the
heads of state departments and agencies, the constitution identifies seven officials as executive officers. See TEX. CON ST. art.
IV. L These are the governor, the lieutenant govemor, the secretary of state, the comptroller of public accounts, the treasurer,
the commissioner of the general land office, and the attorney generaL ld For mandamus proceedings against executive officers,
sections 3 and 8 in article V ofthe constitution allowed the legislah1re to create an exception to district courts' ordinmy exclusive
original jurisdiction. See id. art V, 8 (providing for exclusive original district court jurisdiction over "all actions, proceedings,
and remedies, except in cases where exclusive ... original jurisdiction may be conferred by this Constih1tion or other law"); see
id art. V. ~ 3 (stating that the "Legislah1re may confer original jurisdiction on the Supreme Court to issue writs of ... mandamus
in such cases as may be specified")_ Under the authority ofthese two sections in article V, the legislature conferred exclusive
original jurisdiction on this Court over mandamus proceedings against executive officers, except for the govemor, in section
22.002(c) of the Government Code. That section states:
Only the supreme court has the authority to issue a writ of mandamus or injunction ... against any of the officers of the
executive departments of the government of this state to order or compel the performance of a judicial, ministerial, or
discretionmy act or duty that, by state law, the officer or officers are authorized to perfonn.
A 8, T Consultants, Inc. v. Sharp, 904 S.W.2d 668 (1995)
23 MediaL. Rep .. 2281,38 Tex. Sup. CL J. 1071
TEX GOV'T 22.002(c). Thus, district courts generally have no jurisdiction over executive officer respondents. Any
exception to this rule would require express statutory authorization by the legislature naming district courts as the proper fora.
See id 552.353(b)(3).
Under the cmTent statutory scheme, when a relator seeks to compel an executive officer to perform duties imposed by law,
generally this Court alone is the proper fonun. We have long followed the dictates of section 22 .002( c) of the Government
Code by exercising ourjurisdiction in mandamus proceedings in which an executive officer has allegedly failed to perform his
legal duties. E.g, I!on1ton Chronicle Puh. Co. v. Mattox, 767 S.W.2d 695 (Tex.I9R9) (orig. proceeding) (seeking to compel
the attorney general to render an open records opinion); Jessen Inc \'. Bullock, 531 S. W.2d 593 (TexJ 975) ( orig.
proceeding) (seeking to compel the comptroller to issue a warrant for payment of architects' services); Bullock v Cal\'im, 480
S.W.2d 367 (Tex. 197?.) ( orig. proceeding) (seeking to require the comptroller to pay the costs of a party primary election);
Trinitv River Aut h. v Carr, 3S6 S. W.2d 790 (Tex. 1 965) (orig. proceeding) (seeking to force the attorney general to approve a
river authority's revenue bonds); G'ordun v. Lake, 163 Tex. 392,.356 S.W.2d !.38 ( 1962) (orig. proceeding) (seeking to compel
the secretary of state to file a corporate charter); Countv (>/Cameron v. Wilson, 160 Tex. 25, 326 S.W.2d 162 ( 1959) ( orig.
proceeding) (seeking to require the attorney general to approve the issuance of county revenue bonds); Union Cent. L!le Ins. Co
v. Afann, 138 Tex. 242, 158 S.W.2d 477 (194 I) ( orig. proceeding) '''6 73 (seeking to force the attorney general and comptroller
to refund illegally-assessed taxes the petitioner had paid on policy premiums it received); Manion v. Lockhart. 131 Tex. 175,
I 14 S.W.2d 216 ( 1931\) (orig. proceeding) (seeking to compel the treasurer to pay escheated funds to an heir); Corsicana Cotton
Afil!s, Inc. v. Sheppard, 123 Tex. 352, 71 S.W 2d 247 ( 1934) ( orig. proceeding) (seeking to compel the comptroller and treasurer
to ref1md erroneously paid franchise taxes); Jemigan v. Finley, 90 Tex. 205, 38 S.W. 24 ( 1896) (orig. proceeding) (seeking
to force the comptroller to issue a warrant for county school funds). If A & Thad petitioned for mandamus relief against the
comptroller in district comi, that court would have had little difficulty in determining that it should dismiss the petition for want
ofjurisdiction over the comptroller pursuant to section 22 002(c) of the Government Code.
In this case, we alone have jurisdiction to hear A & T's petition to compel the comptroller to perform his duties under TORA
and to disclose public records pertaining to corporations which pay franchise tax. The comptroller is one of the officials the
constitution identities as an executive officer. TEX. CONST. art. IV, I. He is also the officer TORA directs to comply with
requests for public records. TORA states:
The chief administrative officer of a governmental body is the officer for public records .... [who] shall promptly produce
public information ... on application by any person to the officer.
TEX.GOV'T CODE 552.20 I (a), 55L22 1 (a). The chief administrative officer must produce public records upon request or
he will be subject to TORA's penalties for non-compliance. See id. 552.203. Thus, A & T has petitioned for relief against the
proper pmiy, the comptroller, who has the legal obligation to perfonn the duties under TORA. Mandamus is the proper remedy
under TORA to compel disclosure of records. See id. .552 . .32 1. Therefore, it follows that this Court alone has jurisdiction. See
Pickle v. McCall, 86 Tex. 212, 24 S.W. 265, 266 ( 1 f\9.3) (orig. proceeding) (stating that if mandamus is the proper remedy and
if the respondent is an executive officer, we have original jurisdiction).
We have long recognized that when the legislature authorizes us by statute to exercise original jurisdiction in mandamus
proceedings involving the comptroller, we will do so in accordance with the principles oflaw governing the writ For example,
in Pickle, we stated:
The statute
2
authorizes this court to issue writs of mandamus against any officer of the state government except the governor,
and ... it must be presumed that the legislature, aware of the rules of law applicable to the subject, intended to confer such
jurisdiction as was necessary to that end. The power to do this the constitution gave, and it is evident that in the enactment
of the statute in question the legislature intended to exercise that power.... [T]here can be no doubt that the comptroller of
public accounts is a state officer ... of the executive branch of the state govemmenL. The statute under consideration was
evidently intended to COI?f'er, and does COI?/er, upon this court, an original jurisdiction such as it was intended the legislature
should have power to confer.
23 MediaL. Rep.2281, 38Tex. Sup. Ct. ,L 1071
Jd a! :?.65-66 (emphases added). We follow the rationale of Pickle and similar cases, see Jessen, 531 S.W.:?.d at 602, Bullock.
480 S. W.2d at 368. Corsicana Cotton, 71 S. W .2d at 251. and Jernigan, 3 8 S. W. at :?.5. and exercise jurisdiction over the present
mandamus action involving the comptroller.
Section :?.2.002(c) of the Government Code states, "Only the supreme court has the authority to issue a writ of mandamus ...
against any of the officers of the executive departments .... " The legislative intent evinced by the plain language of this section
supports our decision to exercise jurisdiction in A & T's mandamus action against the comptroller. See Moreno v Sterling
Dmg, Inc, 787 S.W.2d 348. 352 (Tex.l990) (asserting that when a statute is unambiguous, this Court detennines legislative
intent by reference to the "plain and common" meaning of its language). Our original jurisdiction exists when there is "some
special reason for its '"674 exercise," Betts l' Johnson, 96 Tex. 360,73 S.W. 4, 5 (1903) (orig. proceeding), and to preserve
the separation of powers between the branches of state government. We have been empowered to grant writs against executive
officers because a mandamus proceeding against one of them ordinarily involves questions of general public import. See id
The dictates of section 22. 002( c) of the Government Code cannot be ignored. We conclude that the legislature intended this
Court to exercise its jurisdiction over executive officers, in part because an open records request that an executive officer has
resisted may well have general signitlcance and require a speedy remedy.
III.
4 A & T asks us to compel the comptroller to release information about corporations which have paid franchise taxes since
1979 (or as far back as the comptroller retains records), condensed as follows:
I) Taxpayer identity:
(a) the taxpayer's name, taxpayer number, and the full address of each taxpayer which paid franchise tax and as to which the
comptroller assessed a deficiency or issued a tax "warrant" or refund,
(b) the taxpayer's SIC code, and
(c) the date the taxpayer's charter was terminated or cancelled.
2) Audit information:
(a) the audit period (including the date the taxpayer's name appeared on the list of prospective audits, the date the audit was
assigned, the date it began, and the date it was completed),
(b) the reason for the audit,
(c) the audit method,
(d) the audit group,
(e) the taxpayer's primary and secondary errors,
(f) the assignment codes,
(g) whether the taxpayer agreed, disagreed, or was non-committal about the audit result,
(h) the audit office, and
(i) the auditor's number.
3) The amount oftax deficiency assessed or the amount of tax refunded. lf refunded, the warrant number and its date of issue.
3
; I',' \(
23 Media Rep. 22B1, 38 Tex. Sup. Ct. J. 1071
A & T also requests the identities of taxpayers targeted for prospective audits in the comptroller's "generation list," presumably
seeking as much of the foregoing information as is available on these taxpayers. The comptroller argues that even if we have
jurisdiction over this mandamus proceeding under section 2L002(c) of the Government Code, we lack jurisdiction to resolve
fact issues raised by A & T's request. We disagree with the comptroller's reasoning that leads him to conclude that A & T's
petition necessitates findings of fact.
A
A & T's request does not raise factual issues about the nat11re of the information sought. Determining whether the infommtion
A & T requests from the comptroller is confidential or public information solely involves constming the two statutes at issue,
the Tax Code and TORA. TORA excepts from disclosure information which the constitution, a statute, or a judicial decision
has declared confidential as a matter of law. TEX.GOV'T CODE ~ 552.101; see Spurgin, The Texas Open Records Act, 50
TEX.BAR J. 596, 596 ( 1987) (stating that TORA makes all records not specifically exempted by law available to the public). The
questions for each category of information A & T seeks are: Is the information public under TORA? If so, has the constitution,
a statute, or a judicial decision expressly declared it confidential? These are questions of law.
In constming the two statutes, we must give effect to the legislature's stated intent on how cont1icts between TORA's open
records mandate and the Tax Code's confidentiality '"675 provisions should be resolved. See Industrial Found v Texas Indus.
Accident Bd. 540 S.W.2d 668, 67.5 (Tex.l976) (stating that "the task of balancing the public's right of access to govemment
records against potential abusers of the right has been made by the Legislature; the court's task is to enforce ... the Act"), cert.
denied, 430 U.S. 93 L 97 S.Ct. 1550, 51 L.Ed.2d 774 (1977). In 1973, beginning with the predecessor statute to TORA, the
legislature enacted a scheme for detennining what information is confidential and what is public. See Acts of June 14, 1973,
63rd Leg., R.S., ch. 424, 1973 Tex.Gen.Laws 1112-18 (enacting the Open Records Act of 1973, TEX.REV.C!V.STAt. ART
6252--17A (REPEALED 1993)). UNDER THE PRIOR ACT AND NOW UNDER TORA, INFORMATION COLLECTED
OR MAINTAINED BY A GOVERNMENTAL BODY IS PUBLIC INFORMATION, INCLUDING COMPLETED AUDIT
REPORTS, INVESTIGATIONS, AND VOUCHERS RELATING TO THE EXPENDITURE OF FUNDS CONTROLLED
BY THE GOVERNMENT. Tex.Gov't Code 552.021, 552.022( l ), 552.022(3). MOREOVER, TORA FORCEFULLY
ARTICULATES A POLICY OF OPEN GOVERNMENT. THE ACT DECLARES:
[I]t is the policy of this state that each person is entitled, unless otherwise expressly provided by law, at all times to complete
infonnation about the affairs of government and the official acts of public officials and employees .... The provisions of this
chapter shall be liberally construed to implement this policy.
!d. 552.00 I (a). This section concludes that TORA "shall be liberally construed in favor ofgranting a request for information."
Id 552.001(b).
On the other hand, the Tax Code's confidentiality provisions expressly make certain otherwise public infom1ation confidentiaL
Section I 11.006 of the Tax Code states that "all information secured, derived, or obtained by the comptroller" fiom an
examination of a taxpayer's records and business affairs is confidential. (Emphasis added.) Also, section 171 .206 of the Tax
Code states that franchise tax information "is confidential and may not be made open to public inspection" (except for data in
a public information report, see TEXT AX CODE 171.203). Specific franchise tax information that is confidential includes:
(I) information that is obtainedfiom a record or other instrument that is required ... to be filed with the comptroller; or
(2) information, including information about the business affairs, operations, profits, losses, or expenditures of a corporation,
obtained by an examination of the books and records ... of a corporation ....
Jd 171206 (emphases added).
Under the foregoing standards, this Court can determine what mandamus relief A & T is entitled to, and which categories of
the requested information should be disclosed by the comptroller under TORA.
r-le:<t
23 MediaL. Rep. 2281,38 Tex. Sup .. Ct J. 1071
B
The comptroller argues that A & T's staff can deduce confidential infonnation about taxpayers by combining knowledge
about certain changes in the law with information about franchise taxpayers the comptroller would otherwise release as public
infonnation.-+ The comptroller points out that tax laws change on occasion, and that knowledge of a changed law in conjunction
with data on the amounts of audits and refunds would allow A & T to make estimates about franchise taxpayers' financial
condition and business affairs. The comptroller points to a 1991 change in the tax law, for example, which made the buyers
of certain "machinery, equipment, and replacement parts or accessories" eligible for a twenty-five percent refund on the sales
taxes they paid in 1990. See TEX.T A X CODE ~ 151.3 l8(g), (h). He reasons that if A & T knows of this change in the law, it
could use a taxpayer's name and refund amount to calculate the extent of the taxpayer's investment in manufacturing machinery
and equipment, even though this information is made confidential by the Tax Code. The comptroller says that there is a fact
question in each taxpayer's instance-whether information which should be confidential can be deduced by combining it with
'''6 76 known changes in the law. Although we understand the comptroller's point ofview, he errs in his construction of the
Tax Code's confidentiality provisions in light of TORA's open records mandate.
5 The Tax Code prevents the disclosure of data "obtained" or "derived" from a taxpayer. id s ~ 111.006, 171 206.
Confidentiality under the Tax Code thus turns on the identity of the source of the information. It makes confidential the
information obtained or derived from taxpayers. The flaw in the comptroller's reasoning is that lmowledge of changes in the
tax laws is not information obtained or derived from taxpayers. A change in the law is a matter of public record. Its source is
the legislature or the courts, not taxpayers' books or records. The Tax Code does not preclude the release of otherwise public
information because someone can make deductions from it in light of publicly known changes in the law.
Moreover, neither the comptroller nor this Court may inquire whether A & T intends to use the information it requested to
deduce otherwise privileged information about taxpayers. Under TORA, we may not consider the requesting party's purpose or
use for the information. See TEX.GOV'T CODE ~ 552.222. The legislat11re enacted TORA to confom1 loosely to the federal
Freedom of Information Act (FOIA). 5 U.S.C. 552; Keeling, Attempting to Keep the Tablets Undisclosed: Susceptibility
ojPrimte Entities tu the Texas Open Records Act, 41 BAYLOR LREV. 203, 203 (1989). FOIA bars the government from
examining the motives or interests of the patiy requesting the release of public infon11ation. I DAVIS, ADMINISTRATIVE
LAW TREATISE 5:6, at 321 (2d ed.l978) (stating that under FOIA the "required disclosure does not depend on the interest
or lack of interest of the party seeking disclosure"). In sum, if the requested information is public under TORA and its source
is not the taxpayer, the Tax Code cannot preserve its confidentiality, regardless of the requesting party's purpose for seeking it.
TORA precludes a factual inquiry into what the party intends to do with disclosed information.
c
The comptroller informed A & T in August 1994 that the following items are not confidential and would be released: records
containing each franchise taxpayer's name, taxpayer number, full address, and SIC code; the audit period and starting date of
audits; and the audit office and auditor number. We have two points to make about the items the comptroller has conceded
are public information.
6 First, among other dates, A & T has requested the starting and ending dates for audits. The comptroller said he would
provide the audit period, but now argues that providing both the statiing and ending dates of an audit will reveal the audit's
length and therefore indicate its seriousness. We doubt that the only reason an audit may take a long time is because of its
"seriousness," since a prolonged audit would not be necessary to discover a relatively simple error resulting in a large or
"serious" tax deficiency. Even assuming that an audit's length indicates its seriousness, that an audit may be serious reveals
nothing about a taxpayer's business affairs, operations, or profits or losses. Thus, although the starting and ending dates together
may indicate the seriousness of an audit, they are not confidential and should be released. See TEXT AX CODE 111.006(a)(l).
A & T Consultants, inc. v. Sharp, 904 S.W.2d 668 (1995)
23 MediaL. Rep. 2281,38 Tex .. Sup. Ct. J. 1071
7 Second, TORA compels disclosure of public infonnation that is in existence, but it does not require a government entity to
prepare or assemble new information in response to a request. See TEX.GOV'T CODE 552.021 (defining "public information"
as that "collected, assembled, or maintained" by a government body); Economic Opportunities Dev. C01p. v. Bustamante, 562
S.W.2d 266,268 (Tex.Civ.App.-San Antonio 1978, writ dism'd) (ruling that a government agency could not be required to
make copies of documents no longer in its possession). Therefore, the comptroller can release only those records presently
in existence.
The comptroller should immediately release the existing infonnation it offered to A & T in August 1994, if not yet furnished.
However, he may condition the release of information upon A & T's advance payment
1
'6 77 or upon its posting of a bond
for payment of the costs. See rEX.GOV'T CODE 552.263 (allowing the officer for public records to require a bond or cash
prepayment if the records request will be "unduly costly" and would "cause undue hardship" ifthe costs are not paid).
The comptroller challenges the remaining categories of information requested by A & T and listed below.
I) The date the taxpayer's charter was terminated or cancelled,
2) The date the taxpayer's name appeared on the list of prospective audits (the "generation list") and the date the audit was
assigned (the "assignment date"),
3) The reason for the audit,
4) The audit method,
5) The audit group,
6) The taxpayer's primary and secondary enors,
7) The agreement code indicating whether the taxpayer agreed, disagreed, or was non-committal about the audit result,
8) The assignment codes,
9) The amount of tax deficiency assessed or refunded (if refunded, the warrant number and its date of issue), and
I 0) The generation list of future audits.
TORA identifies public information by categmy. See id 552.022 (entitled "Categories of Public Infonnation; Examples").
Accordingly, we examine each category of information requested by A & T below. See DAVIS, supra, 5:27, at 386 (quoting
Bell \' United States, 563 F.2d 484, 487 (1st CirJ 977)) (rejecting an in camera review of specific documents under FOIA
in favor of an "affidavit demonstrat[ing] by its sufficient description [that] the contested document logically falls within the
categmy of the exemption indicated").
8 Date of termination of taxpayer charters. The secretary of state issues charters or certificates of incorporation, which
are recorded public documents. See 'rEX.BUS.CORP.ACT arts . .3.03(A)(3), 9.05 (1980 & Supp.l995); TEX.GOV'T CODE
552.022(15) (classifying as public information those matters which an agency's policies regard as open to the public). A
corporation is subject to having its charter revoked or dissolved if the comptroller reports to the secretary of state that it has
failed to pay "fees, franchise taxes or penalties." TEX.BUS.CORP ACT art. 7.()1. The comptroller's reports are a "completed
report, audit, [or] evaluation" made by and for a governmental body, and thus are public under TORA. TEX.GOV'T CODE
552.022(1 ). The secretary of state thereafter assembles, issues, and maintains the certificates or decrees of dissolution.
TEX.BUS.CORP.ACT art. 3.03(A)(3), 7.0l(E). These documents are thus public infonnation. See TEX.GOV'T CODE
552.021 (a). Neither the constitution nor any statute or judicial decision makes the corporate charters or the certificates and
decrees of dissolution confidential. Therefore, the comptroller should produce from his records the date on which corporate
charters have been revoked or dissolved, or the most comparable date he has in his possession.
23 MediaL. Rep. 2281, 38 Tex. Sup. Ct. ,J 1071
9 Date the name appeared on a generation list and the assignment date .. A & T has requested specific dates within
the overall audit period. Although the comptroller conceded that he would provide information about the audit period, he
specifically offered to fl.!rnish only the date on which audits begatL The comptroller argues that the dates when a taxpayer's
name appeared on the generation list and when an audit was assigned are confidential, because they ret1ect internal deliberations
within the comptroller's office, an agency charged with law enforcement. We agree.
The generation list date and the assignment date reveal decision points in the comptroller's deliberative processes regarding
audits. When an audit is planned or in progress, these decision-point dates are contained within an "audit working paper," and
are thus exempt from disclosure under TORA. See id 552 .. 116 (excepting from disclosure "[a]n audit working paper of the
state auditor").
I 0 In addition, release of these pre-audit dates would be very infonnative to taxpayers facing an upcoming audit Their
disclosure could well thwart the purposes of a subsequent audit and would seriously interfere with the comptroller's efforts to
investigate ,.,.6 78 and enforce the tax laws. Taxpayers that learn they are likely subject to an audit in the near future could
easily tamper with, cover up, or "lose" corporate records to prevent an audit from detecting wrongdoing. Section 552. I 08 of
TORA specifically excepts from disclosure information which would reveal law enforcement techniques to the public, unduly
interfere with law enforcement, and make it more difficult for an agency to do its job. Id. 552.1 08; Morales ,, Ellen, 840
S .. W.2d 519,526 (Tex.App.-El Paso 1992. writ denied); see llous!On Chronicle Puh. Co. v. Citv 531 S.W.2d
177, 185 (Tcx.Civ.App.-Houston [14th Dist.] 1975) (ruling that an offense report was a confidential internal record of a law
enforcement agency), writ refd nr.e., 536 S.W.2d 559 (Tex. 1976) (per curiam).
Although the attorney general has constmed section 552. I 08 narrowly, so as to except from disclosure only the records of
governmental agencies engaged in criminal law enforcement, we have not had the opportunity to construe the breadth of
TORA's law enforcement exception. In doing so today, we are mindful that "franchise taxes paid by corporations constitute an
important item in the revenue collected by the State for the maintenance of the State government and its institutions." Isbell
v. Gu(/ Union Oil Co., 14 7 Tex. 6, 209 S.W.2d 762, 765 ( 1948); accord State v. Wvnne, 134 Tex. 455, 133 S. W .2cl 951, 956
(1939), cert. denied, 310 U.S. 659, 60S Ct. 1094, 84 LEd. 1422 (1940) .. In addition, we note that section 552.108 serves
the same function as an exception to the open records mandate in section 552(b)(7) of FOIA.
5
5 U.S.C. 552(b)(7). FOIA's
law enforcement exception prevents the disclosure of investigatmy records which would reveal law enforcement methods,
techniques, and strategies, including those the IRS uses to collect federal taxes. See Pope v.. United States, 599 F.2d 1383, 1386
(5th Cir.1979); IVilliams ''IRS. 479 F.2d 317,318 (3d Cir.), cert. denied sub nom., Donlon v !RS, 414 U.S. 1024,94 S.Ct.
448, 38 L.Ed.2d 315 ( 1973); DAVIS, supra, 5:39, at 429-35. Since TORA and FOIA share a presumption in favor of open
government records and yet both except from disclosure those records that must remain confidential for effective enforcement
of the tax laws, we construe section 552.1 08 of TORA to have the same scope as section 552(b )( 7) of FOIA. Therefore, we
conclude that section 552. I 08 excuses the comptroller from releasing the generation list date or the assignment date of audits
that have not yet been concluded. We overmle A & T's request for mandamus relief seeking the disclosure of these dates.
As for audits that are complete, revelation of the pre-audit generation dates and assignment dates are oflittle consequence, and
the comptroller should release them to A & T. Once audits are completed, it would no longer serve the purpose of TORA's
"audit working paper" exception to keep the scheduling of past audits confidentiaL Also, it would not serve the purpose of
TORA's law enforcement exception. TEX.GOV'T CODE 552. I 08. The release of the scheduling dates in past audits cannot
provide other taxpayers, who are unaware that they will be audited in the future, with any information that they could use to
thwart the comptroller's enforcement of the tax laws.
11 Reason for audit. A & T requests the comptroller to disclose the reason it conducts each audit. The comptroller can select
*6 79 from several reasons for doing so. For scheduled upcoming audits and those in progress, these reasons are part of audit
working papers, exempt from disclosure until the audits are completed. See TEX.GOV'T 552.116. More importantly,
the reasons for performing an audit ret1ect that the comptroller uses audits to further his law enforcement objectives. They are
thus made confidential not by the Tax Code, but by section 552.108 of TORA, which excepts from disclosure those records
generated by the comptroller in the process of enforcing the tax laws. See id. 552.108.
23Media L. Rep .. 2281, 38 Tex .. Sup. Ct. J. 1071
TORA does not require the comptroller to disclose the reasons for auditing franchise taxpayers, since revealing this information
not only reflects the internal deliberative processes of the agency but also "tips his hand." The comptroller's efforts to enforce
the tax laws are successf1Ii in part because taxpayers do not know what provokes an audit and what does not. The comptroller's
effectiveness will decrease if the reasons for conducting an audit are disclosed to the public. Therefore, the comptroller should
disclose the fact of completed audits, see id. 552Jl22(1 ), but A & T's petition for mandamus relief to compel the disclosure
of the reasons for which audits were conducted is ovem!led.
12 The audit method and the audit group. The audit method and audit group remain confidential before, during, and after the
comptroller undertakes taxpayer audits. See id 552.108, 552.116. Selecting an audit method constitutes the comptroller's
choice about the strategy that he will use in an audit Similarly, the basis for an audit's assignment to a certain group involves the
comptroller's decision on how to maximize staff resources for law enforcement. Auditor groups within the comptroller's office
specialize in certain types of audits. Consequently, revelation of the groups would allow taxpayers to ascertain, based on which
group audits them, what they are being audited for prior to the completion of an audit. Effective enforcement of the tax laws
rests in part on a taxpayer's inability to predict the approach of a tax examination and the focus of an audit. Therefore, since
disclosure of the choice of an audit method and the audit group willjeopardize the comptroller's effectiveness, these categories
of information are excepted from release by TORA. See id. 552.108.
13 Prim my and secondmy errors of a taxpayer. The data an auditor uses to calculate the proper amount of tax is "obtained
fl-om" and "derived" from an examination of confidential tax records. An auditor next identifies the taxpayer's primary and
secondary errors. The primary error reflects "the source of the largest portion of the tax acijustment," and the secondary error
reflects the "second largest portion of the tax adjustment." Thus, an auditor's error designations are short-hand descriptions for
specific aspects of the taxpayer's business affairs which it failed to accurately report. For example, a taxpayer may have failed
to report all of its sales, viewed certain items as nontaxable which were subject to tax, omitted a report of items given away for
promotional purposes, or failed to report taxable purchases. Disclosing the precise nature of the errors will reveal information
"derived from" the taxpayer records, and will thereby violate the Tax Code's confidentiality provision. See TEX.TAX C O D E ~
111.006(a)(2). We overrule A & T's petition for mandamus relief to compel the disclosure of taxpayers' primary and secondary
errors.
14 The taxpayer's response to an audit. Whether a taxpayer agreed, disagreed, or was non-committal about an audit's results
is not among TORA's categories of public information. See TEX.GOV'T CODE ~ 552.022. In addition, whether a taxpayer
is pleased or unhappy with the results of an audit is unquestionably "infonnation ... obtained by the comptroller ... during the
course of an examination of the taxpayer's ... officers, or employees .... " TEX.T AX CODE lll.OOo(a)(2). The sole method
by which a corporation can express an opinion about an audit's results is through its officers or employees. Therefore, because
TORA does not make this information public and the Tax Code mandates its confidentiality, we overrule A & T's request for
mandamus relief to compel the disclosure of taxpayers' responses to an audit.
'"680 15 The assignment codes. A & T requests the code assigned to each audit out of nine possible options for why the
comptroller assigns an audit. Two options identify when the comptroller has assigned an audit to investigate for civil tiaud.
A third option reflects the comptroller's assignment of an audit to investigate for criminal prosecution. For two reasons, these
codes and the information represented therein is not public infom1ation. First, source code and documentation geared to a
specific computer program is not subject to TORA's provisions. The numbers 01 through 09, which mean nothing in themselves,
are codes used in the comptroller's internal audit fon11 and are geared to the assignment field in the comptroller's computer
programs. TORA does not compel the codes' disclosure.
Second, the codes' meanings are confidential. To someone who knows them, the assignment codes reveal the comptroller's
deliberative processes dealing with law enforcement and prosecution. See TEX.GOV'T CODE ~ 552 I 08. Because TORA
precludes the disclosure of law enforcement information which a government agency internally represents by a code, both the
infon11ation and its representative code are confidentiaL We overrule A & T's request for the assignment codes.
A & T Consultants, Inc, v. Sharp, 904 S,W.2d 668 (1995)
23 MediaL. Rep .. 2281, 38 Tex. Sup. CL J. 1071
16 Amount of tax dejlciency assessed or amount oltax re.fimded; !l re.fi111ded, the vvarrant number and date ()/issue.
TORA exempts from disclosure information made confidential by statute, as well as by the constitution or judicial decision.
TEX.CiOY'T CODE .. I 0 I. The Tax Code is such a stahJte, It protects from disclosure to the public all infonnation
obtained or derived from an examination of a taxpayer. See TEXT AX CODE 111.006. TORA directs that its provisions be
liberally construed. See id 552.00 I. The Tax Code contains no such instruction. Therefore, we determine whether deficiency
assessments and refunds are public infonnation by giving a narrow reading to the Tax Code's confidentiality provisions and
a liberal reading to TORA.
17 If TORA's descriptions of what constitutes public infonnation stood alone, we would conclude that the tax deficiency
assessments and refund warrants are public records. A deficiency assessment is the result of a completed audit by a state agency,
and a refund warrant is a voucher relating to the disbursement of funds by the government
On the other hand, an auditor relies upon infom1ation furnished by a taxpayer in order to compute the amounts of deficiencies
or the amounts of tax which was overpaid. Section lll.008(a) of the Tax Code states that "the comptroller may compute and
detennine the amount of tax to be paid from information contained in the [taxpayer's] report." Sections Ill.! 04 and II 1, I 05
of the Tax Code direct the comptroller to calculate an excess amount of tax, entitling a taxpayer to a refund or a credit against
tax due, based on the written grounds submitted by the taxpayer and on evidence the taxpayer presents at a tax refund hearing.
Therefore, the amounts of assessed deficiencies, refunds, or credits are derived from taxpayer-furnished information, and are
thus confidentiaL However, we cannot overlook that TORA expressly states that "a completed report, audit, evaluation, or
investigation" and related vouchers for the expenditure of government-controlled funds are public information. See TEXGOV'T
CODE (.3). We conclude that it strikes the proper balance between the Tax Code and TORA for the comptroller
to disclose that audits resulted in a deficiency assessment or refund warrant, but not to disclose the amounts of an assessment or
refund. The fact of a deficiency or a refund reveals nothing about taxpayers except that they miscalculated their tax.
6
Therefore,
the comptroller should release a list of taxpayers whose audits resulted in a deficiency assessment or refund. However, we
overrule A & T's request for mandamus ''681 relief to compel the comptroller to disclose the amounts of deficiencies or refunds,
The comptroller should also disclose refund warrant numbers and their date of issue to A & T, since these items are in no sense
information derived from taxpayers. See TEX GOY'T CODE 552.022(3). Although A & T may later request the comptroller
to reveal the amounts of the refunds represented by each warrant number, as stated, this information is confidential.
Generation list offiiture audits. The comptroller's "generation list," the working list of taxpayers prospectively to be audited,
captures a policy-based deliberation in the making. Disclosure of the generation list would profoundly interfere with the
comptroller's law enforcement and tax collection efforts for obvious reasons. We ovem!le A & T's petition for the disclosure
of the comptroller's generation list of f11h1re audits. See id. 552.108.
In conclusion, we hold that the comptroller should produce the categories of franchise taxpayer information made public by
TORA. We anticipate that in accordance with this opinion the comptroller will disclose, in addition to the information which
he has agreed to provide, the following information: the date on which corporations' charters were revoked or dissolved (or
a related date in his possession), the generation list date and the assignment date of completed audits, and a list of completed
audits since 1979 that resulted in a deficiency or a refund (including refund warrant numbers and date of issue). Should the
comptroller fail to disclose this information to A & T, a writ of mandamus will issue.
We otherwise overrule A & T's petition for writ of mandamus against the comptroller. The comptroller need not disclose the
generation list dates or the assignment dates for audits which have not been completed, the reasons for any audits conducted
since 1979, the audit method and group, taxpayers' primary and secondary errors, the taxpayers' responses to their audits, the
assignment codes, the amounts of assessed deficiencies or refunds, or the generation list of prospective audits.
IV.
A & T Consultants, Inc. v. Sharp, 904 S.W.2cl 668 (1995)
23 MediaL. Rep. 2281, 38 Tex Sup. Ct. J .. 1071
Although we were able to resolve the issues raised in this proceeding, we encourage the legislature to take another look at the
civil enforcement provision of TORA. See TEX.GOV'T CODE I. Currently, section authorizes mandamus
actions against a governmental body, although TORA imposes the duty of compliance upon the public records officer. See
id 552.20 I (a), 552.221 (a). A literal application of the mandamus provision is thus unworkable. A governmental body has
no duty to perform what a writ of mandamus would order-the disclosure of public records in compliance with TORA. This
discrepancy can be overlooked in most cases, and courts can treat petitions for writ of mandamus against governmental bodies
and against public records officers interchangeably. However, as this case illustrates, in a few proceedings the exact identity
of the respondent matters for purposes ofjurisdiction.
As explained in Part II of this opinion, section of TORA triggers this Court's exclusive original jurisdiction in actions
against executive officers because it names mandamus as TORA's sole civil enforcement remedy. We invite the legislature to
consider whether mandamus is the appropriate remedy against a government officer or agency, or whether a court order and/or
judgment declaring the requested records to be public information would be adequate. We further suggest that the legislature
exercise its constitutional authority to specifY which courts are to have jurisdiction over remedial actions to enforce TORA.
See TEX. CONST. art V, 3, 8.
We hold that a writ of mandamus will issue should the comptroller fail to furnish public infonnation in accordance with this
opinion.
HECHT, Justice, joined by CORNYN and GAMMAGE, JJ., dissenting.
The threshold issue is whether this Court, the Supreme Court of Texas, is the only court in the State which can review refusals of
officers of the Executive Department to disclose information requested under the Texas Open Records Act, '"682 TEX.GOV'T
CODE 552.001-.353. As the Court reads the Act:
#<Only the Supreme Court can review nondisclosure decisions by six State officers-the Lieutenant Governor, Secretary of State,
Comptroller of Public Accounts, Treasurer, Commissioner of the General Land Office, and Attorney GeneraL
# This is appropriate "because an open records request that an executive officer has resisted may well have general significance
and require a speedy remedy." Ante at 674.
#A district court (or county court with concurrent jurisdiction) may review nondisclosure decisions of evety other governmental
body subject to the Act.
#Nondisclosure decisions of the Governor may be reviewed only by a district court (or county court with concurrent jurisdiction),
or not at all (the Court does not say which), even though the Governor must comply with the Act and could be charged with
a misdemeanor for failure to do so.
# The Legislature really ought to reconsider all this.
In other words, the "general significance" of a few state officers' refusals to disclose information requires "a speedy remedy"
that only the Supreme Court of Texas can provide, but the Governor's refusal to disclose information is either beyond review
altogether or is less significant and can be dawdled over-and while the Legislature clearly intended this scheme of review
and even had a good reason for it, the Legislature ought to try something different. These are but a few of the anomalies in
the Act as the Court sees it.
I do not agree that the Court's constmction of TORA is reasonable or even plausible. It is certainly deplorable policy. This
Court has plenty to do without taking upon itself sole responsibility for reviewing every open records dispute involving six
large state offices. Even if we needed this extra burden (which cannot seriously be suggested), there is no reason why the
Court should assume it for these six offices and not for everyone to TORA. TORA, as the Court p01trays it, is a freak,
but not because it was misbegotten by the Legislature; rather, because it has been tortured by the Court. I would hold that all
i!'
A. & T Consultants, Inc. v. Sharp, 904 S.W.2d 668 (1995)
23 MediaL .. Rep. 2281,38 Tex Sup.Ct. J. 1071
refusals to disclose information made public by TORA may, and should, be reviewed by the district court, or a county court
with concurrent jurisdiction. I therefore respectfully dissent.
TORA declares "the policy of this state that each person is entitled, unless othetwise expressly provided by law, at all times
to complete information about the affairs of government and the official acts of public officials and employees." TEX.GOV'T
CODE ~ 552.001. The Act defines "public infonnation", id 552.021-.123, designates the chief administrative officer of
a governmental body as the officer for public records, id 552.201, and requires that officer to "promptly produce public
information for inspection, duplication, or both, in the offices of the governmental body on application by any person to the
officer", id. 552.221 (a). If a governmental body wishes to withhold infonnation, it must timely request the Attorney General
to opine on whether the information is subject to disclosure, id. ~ 552.30 I (a), failing which the information is presumed public,
id. 552.302. The Attorney General is required to "promptly render a decision", id. 552 . .306(a), and if he refuses to do so
he may be compelled by mandamus. See I !oust on Chronicle Publishing Co. v. lv!attox. 767 S. W.2d 695, 697-69R Cfex 19R9).
If the Attorney General rules that information is public, the officer for public records or his agent must make it available to
a person requesting it. Failure to comply is both official misconduct and a misdemeanor punishable by a fine of up to $1,000
and confinement for not more than six months. TEX.GOV'T C O D E ~ 552.J53(e) & (f). However, the officer or agent has an
affirmative defense to prosecution if he "reasonably believed that public access to the requested records was not required" and-
not later than the 1Oth calendar day after the receipt of a decision by the attorney general that the information is public, filed
a petition for a declaratory judgment, a writ of mandamus, or both, against the attorney general in a Travis County district
court seeking relief from compliance '''683 with the decision of the attorney general, and a petition is pending.
Jd. 552 . .35.3(b)(3). It is also a defense to prosecution that someone other than the officer or agent (such as a person who
supplied the information to the governmental body) has a pending "cause of action seeking relief from compliance with the
decision of the attorney general". Jd 552.353(c).
TORA also provides for civil enforcement:
A person requesting information or the attorney general may file suit for a writ of mandamus compelling a governmental
body to make information available for public inspection if the governmental body refuses to request an attorney general's
decision ... or refuses to supply public information or information that the attomey general has determined is a public record.
Id. * 552.321. Section 552.323(a) provides that "[i]n an action brought under Section 552 . .321 or Section 552.353(b)(.3), the
court may assess costs oflitigation and reasonable attorney fees inctmed by a plaintiff or defendant who substantially prevails."
Jd 552.323(a). In exercising this discretion, "the court shall consider whether the conduct of the governmental body had a
reasonable basis in law and whether the litigation was brought in good faith." Jd 552.323(b).
The tenn "governmental body" is used not only in the civil enforcement provisions but throughout the Act. TORA defines a
"govemmental body" as:
(1) a board, commission, depmiment, committee, instit11tion, agency, or office that is within or is created by the executive or
legislative branch of state government and that is directed by one or more elected or appointed members;
* * * * * *
(I 0) the part, section, or portion of an organization, corporation, commission, committee, institution, or agency that spends
or that is supported in whole or in part by public funds.
Jd. 552.003(a). It is important to note that a "governmental body" is an entity, not an individual. Thus, for example, the Office
of Comptroller of Public Accounts is a "governmental body" within the meaning ofTORA, while the Comptroller himself is not.
23 Media L. Rep. 2281, 38 Tex. Sup. Ct. J. 1071
II
As I have already observed, TORA permits either the person requesting information or the attorney general to file suit for a
writ of mandamus compelling a governmental body to make infonnation available for public inspection. !d. 552.321. But
nowhere does the Act prescribe where such suit must be filed. Thus, it may be filed in any court with jurisdiction.
A
The district court has "exclusive, appellate, and original jurisdiction of all actions, proceedings, and remedies, except in cases
where exclusive, appellate, or original jurisdiction may be conferred by this Constitution or other law on some other court,
tribunal, or administrative body." TEX. CONST art. 5, * 8; see TEX. GOV'T CODE 24.007. As part of this general grant of
authority, district courts have jurisdiction to issue writs of mandamus "not dependent on the necessity to enforce a jurisdiction
otherwise acquired." Love " Wilcox, 119 Tex. 256, 28 S.W.2d .515. 519 (1930). Thus, the district court has jurisdiction
to entertain mandamus proceedings brought under section 552.321 unless that jurisdiction is otherwise restricted by law as
permitted by the Constitution.
The working assumption in a host of TORA cases has been that jurisdiction lies in the district court. See, e.g., Shacke(j'ord v.
City c1j Ahilene, 585 S . .W.2cl665 (Tex.\979); Industrial Found. c1jthe South v. Texas Indus. Accident Bd, 540 S.W.2d 668. 672
(Tex.l976 ), cert. denied, 430 U.S. 931, 97 S.Ct. 1550, 51 L.Ecl.2d 774 ( 1977); Collins, 897 S.W.2d 496,498 (T ex.App.
-Houston [ l st Dist.] 1995. no writ); Citv q/ San Antonio v. Texas General, 851 S. W.2d 946, 947 (Tex.App.-Austin
199.3, writ denied); Hancock \' Stale Bd of Ins, 797 S.W.2d 379, 380 (Tex.App.-Austin 1990, no writ); A.H Belo Corp. v.
Southem Methodisl Univ., 734 S.W.2d 720, 721-722 (Tex.App.--Dallas 1987, writ denied); lluberl v. 1/arle--!!anks Texas
Newspapers, 652 S W.2d 546, 54 7 (Tex.App.------Austin 1983, writ ref'd n.r.e); :c684 Houston Chronicle Puhlishing Co. I' City
of /Joust on, 531 S.W.2d 177, I R2 (Tex.Civ.App.-Houston [14th Dist.] 1975 ), writ ref'd n.r.e., 536 S.W .2d 559 (Tex. 1976)
(per curiam). One court has specifically held that the district comi is the appropriate forum for a mandamus under the Act.
Johnson v Lyrzaugh. 7}39 S.W .2d 704, 706 (Tex.App.--1-Iouston [I st Dist] 1990, orig. proceeding) (mandamus relief sought
against Executive Director of Texas Department of Criminal Justice); see also Texas Dep't ofPuhlic Sq(etv 1' Gilhreath, 842
S.W.2d 408,410-411 (Tex.App.-Austin 1992, no writ); Morales 1'. Ellen, 840 S.W.2d 519,522-52.3 (Tex.App.-El Paso
1992, writ denied).
The Court holds, however, that the district court's jurisdiction to issue mandamus under section552.J21 ofTORA is limited
by section 22.002(c) of the Government Code, which states:
Only the supreme court has the authority to issue a writ of mandamus or injunction, or any other mandatory or compulsory
writ or process, against any of the officers of the executive departments of the government of this state to order or compel
the performance of a judicial, ministerial, or discretionmy act or duty that, by state law, the officer or officers are authorized
to perform.
This provision does limit the mandamus jurisdiction of the district court, but only as "against any of the officers ofthe executive
departments", not the executive depmiments themselves. It is not clear who these officers are. See Gordon v. Lake, .356 S.W.2d
13R (Tex. 1962) (Secretary of State); United Production Coi{J v. Hughes, 152 S.W.2d 327 (T ex.l941) (Land Commissioner);
Herring\'. Houston Nat'! Bank, 11.3 Tex. 264,253 S.W. 813, 815-816 (1923) (similar language in another statute not
limited to officers listed in article 1, section 4 of the Constitution); see also Texas Liquor Control Bd v. Continental Distilling
Sales Co., 199 S.W.2d 1009, 1012-1013 (fex.Civ.App.-Dallas 1947, writ rd'd n.r.e.) (limiting officers of the state to those
listed in article L section 4 of the Constitution). In any event, section 552.321 ofTORA authorizes suits for mandamus against
governmental bodies, not against government officers. As already noted, the tem1 "governmental body" defined in TORA does
not include individuals. TEX.GOV'T CODE 552.003.
This distinction is significant. Section 22.002(a) of the Government Code states:
23 Media L. Rep. 2281, 38 Tex. Sup. Ct J. 1071
The supreme court or a justice of the supreme court may issue writs of procedendo and ceiiiorari and all writs of quo warranto
and mandamus agreeable to the principles of law regulating those writs, against a district judge, a comi of appeals or a justice
of a court of appeals, or any officer of state govemment except the governor, the court of criminal appeals, or a judge of
the court of criminal appeals.
We held long ago that "any officer of state government" does not include a board of officers, and therefore this Court lacks
jurisdiction to mandamus such a board. Betts v Johnson. 73 S.W. 4 (Tex.l903). The district court, however, may mandamus
state boards. Industria! Found of the South, 540 S.W.2d at 672.
Thus section 22J)02(c) does not limit the district court's constitutional jurisdiction over mandamus proceedings against
governmental bodies, as distinguished from government officials. Inasmuch as section 552.321 ofTORA authorizes mandamus
suits against governmental bodies, section 22. 002( c) does not preclude such suits from being filed in the district court. Though
TORA imposes responsibilities on public records officers and their agents as well as governmental bodies, it authorizes
mandamus suits against governmental bodies only. The Legislature must be presumed to have recognized the distinction.
In fact, it has. When the Legislature has adopted a scheme of substantive rights and remedies, and conferred as part of that
scheme original jurisdiction upon this Court, it has done so expressly. See, e.g. TEX.AGRICCODE 57. I 03(b) (refusal by
the Agricultural Development Board to approve a bond issue "solely on the basis of law" may be challenged by mandamus
action in the Supreme Court); id 58.036 (payment of Texas Agricultural Finance Authority bonds or duties of Agriculture
Commissioner with respect to those bonds may be enforced "in ~ ' 6 8 5 the state supreme court by mandamus or other appropriate
proceeding"); TEX.ELEC.CC>DE 273.061 ("performance of any duty imposed by law in connection with the holding of an
election or a political party convention" may be enforced by mandamus in the supreme court or a court of appeals); TEX.GOVT
CODE 404.126(d) (payment of tax and revenue anticipation notes and duties associated therewith "may be enforced in the
state supreme court by mandamus or other appropriate proceeding."); id 465.028 (payment of Texas National Research
Laboratory bonds and associated duties of commission "may be enforced in the state supreme court by mandamus or other
appropriate proceeding").
Allowing review of nondisclosure decisions in the district court is consistent with the general scheme of the Act As already
noted, section 552.J5.3(b )(3) contemplates actions in the district court by government officers against the attorney general to
avoid having to disclose information. Section 552.32.3(a) provides that "the comi" may assess costs and attorney fees "[i]n
an action brought under Section 552.321 or Section 552.35.3(b)(.3)". In juxtaposing actions brought by governmental litigants
resisting disclosure, and by litigants seeking to compel disclosure, and treating them alike for purposes of considering and
awarding attorney fees, the statute implies that both types of actions can and should be brought in the same court
B
The jurisdiction of this Court, the court of appeals, and constitutional and statutmy county comis to entertain original actions for
writs of mandamus is prescribed not by the Constih1tion but by statute. TEX. CONST. art V, 3 ("[t]he Legislature may confer
original jurisdiction on the Supreme Court to issue writs of quo warranto and mandamus in such cases as may be specified,
except as against the Governor of the State"); id. art. V, 6 (besides appellate jurisdiction, the courts of appeals "shall have such
otherjurisdiction, original and appellate, as may be prescribed by law"); id art. V, 16 ("[t]he County Court has jurisdiction
as provided by law", and "County Court judges shall have the power to issue writs necessmy to enforce their jurisdiction");
id art. V, I ("[t]he Legislature may establish such other courts as it may deem necessary and prescribe the jurisdiction and
organization thereof'). The Legislature has not conferred on the courts of appeals or the constitutional county courts, or on the
statutmy county courts in general, the broad mandamus jurisdiction necessary to review nondisclosure decisions under TORA.
TEX.GOV'T CODE 22.221 (courts of appeals); id. 25.0003 (statutory county courts); id. 26.050-.051 (constitutional
county courts). The jurisdiction of some statutmy county courts is concurrent with that of the district court, however, and in
those instances, the county courts would have jurisdiction of mandamus actions under TORA. E.g., id. 25.07.32 (EI Paso
county courts at law).
23 MediaL. Rep. 2281,38 Tex. Sup. CtJ .. 1071
This Court's mandamus jurisdiction, as it pertains to reviewing nondisclosure decisions under TORA, is found in section
22.002(a) of the Government Code, which, as noted above, authorizes the Court to issue writs ofmandamus against "any officer
of state government except the governor". This Court has long limited its construction of an "officer of the state government" in
this provision to the heads of state departments who are charged with the general administration of state atiairs and must keep
their offices at the seat of state government. See Chemical Bank & Tmst Co. v. Falkner, 369 S.W .2d 427, (Tex.l963)
(mandamus granted against state banking commissioner, citing Betts). The Court's jurisdiction does not extend to govemmental
bodies, as opposed to government officials. Betts, 73 S .. W .. at 5. If section 552.321 of TORA means that TORA decisions can
be reviewed only in mandamus actions against governmental bodies and in no other way, then the general grant ofjurisdiction
in section 22.002(a) could not apply and this Court would have no jurisdiction in this case.
I think section 55L.32l rather clearly imposes no such limitation. It is entirely permissive: "[a] person ... may file suit for a writ
of mandamus ... [against] a governmental body .... " There is no reason to limit review to one means, especially when
other interested parties are not similarly limited by the Act. See TEX.GOV'T CODE .552.353. Neither the language nor any
apparent purpose of section 552.321 prohibits a person from filing suit for a writ of mandamus against a govemment official.
If the official is "an officer of state government" within the meaning of section 22.002(a), then this Court has jurisdiction to
grant relief
As a rule, however, this Comi does not exercise its mandamus jurisdiction when the same relief can be obtained in a lower court,
unless the necessity of immediate relief or the importance of the issues to the State as a whole justify this Court's intervention.
County Water Improvement Dis!. No.2 v. Blalock, !57 Tex. 206,301 S.W.2d 593,594 (1957); Love, 28 S.W.2d at
52!; see also LaRouche\' .. I fmmah, R22 S.W.2d 6.32, (Tex.l992). Because nondisclosure decisions under TORA can
be fully reviewed by the district court, this Court should not exercise its original jurisdiction.
III
Just as section 552.321 is permissive rather than exclusive and does not prohibit mandamus actions against individuals, it also
does not prohibit remedies otherwise available.
The Texas Uniform Declaratory Judgments Act provides that "[a] person ... whose rights ... are affected by a statute ... may
have determined any question of constmction or validity arising under the ... statute ... and obtain a declaration of rights ...
thereunder." TEX.C!V.PRAC. & REM 37.004(a). Litigants have used declaratory judgments in open records suits
since TORA's inception. Persons seeking information under TORA have sometimes sued for declaratory judgment rather than
mandamus. E.g., City of San Antonio, 851 SW.2d at 947; Citv c1jAbilene v. Shackelji:Jrd, 572 S.W.2d 742,743 (Tex.Civ.App.
-Eastland 1978), rev'd on other grounds, 585 S.W.2d 665 (Tcx.l979); Houston Chnmic!e Publishing, 531 S.W.2d at 18 I
Others have sued for declaratory judgment in addition to mandamus. Ellen, 840 S.W.2d at 519; Southem Methodist Univ v.
Times Herald Printing Co., 729 S W.2d 129 (Tex.App.-Dallas 1987, no writ); Call'ert 1'. Emplovees Retirement Svs., 648
S.W.2d 418 ( Tex.App.-Austin 1983, writ rcf'd n.r.e.). Suits for declaratory judgment clearly afford disputants a means of
resolving controversies under TORA.
In fact, TORA envisions suits for declaratory judgment as part of its general scheme. Section 552.353(b )(3) allows a public
records officer or his agent to sue for declaratory judgment in a Travis County district court to establish an affirmative defense to
criminal prosecution for ref11sing to release records. There is little question that a person requesting information will obtain it if
successful in a declaratory judgment action, as the government official's continued failure to disclose the information following
final judgment would result in criminal penalties under TORA. TEX.GOV'T CODE 552.353. Moreover, it may generally be
supposed that state officials will follow the law. Te.Yas Educ. Agem.v v. Leeper, 893 S.W.2d 432, 446 (Tex.l994 ).
The availability of review of a nondisclosure decision by action for declaratory judgment would ordinarily preclude relief by
mandamus action. To effectuate its strong policy of openness in government, TORA gives litigants a choice of remedies. The
availability of relief by action for declaratory judgment, however, is a further reason why this Court should not exercise its
jurisdiction in this case.
A & T Consultants, Inc. v. Sharp, 904 S.W2d 668 (1995)
23 MediaL Rep. 2281, 38 Tex .. Sup. Ct. J 1071
IV
TORA's review scheme as I have described it has the virtue of simplicity. Every refusal to disclose information can first be
reviewed in the district court by suit either for mandamus or declaratory judgment, or both. Any factual issues raised can
readily be resolved. Full appellate review can be afforded. See Anderson v. City of Sel'en Points, 806 S. W .. 2d 791, 792 n. I,
794 (Tcx.l991 ).
The Court's view of TORA's review scheme is complicated and confused. Review of the decisions of six state officials-
the Lieutenant Governor, Secretary of State, Comptroller of Public Accounts, Treasurer, Commissioner of the General Land
Office, and Attorney General-can be had only in "''68 7 this Court. This isjustitied, according to the Court, because of the
"general significance" of these officials' decisions and the necessity of a "speedy remedy". Review of the decisions of every
other state official is committed to the district court. The Comi makes no attempt to justify its generalization that refusals of
the Comptroller to release public infonnation are of more "general significance" than refusals of, say, the Commissioner of
Education. Nor does it explain why one decision requires a speedier remedy than another, or why relief in this Court is speedier
than relief in the district court Certain issues under TORA are clearly committed to the district court. TEX.GOV'T CODE
552.353. District courts are quite capable of reviewing significant open records decisions as well as insignificant ones, and of
doing so as expeditiously as this Court.
The Court is not clear on whether nondisclosure decisions of the Governor can be reviewed only in the district comi or not
at all. If the fonner, the Court fails to explain why decisions of the Comptroller are of more "general significance" than those
of the Governor, so that review by this Court is necessary in one case but not the other. If the latter-that is, if mandamus
is the exclusive means of reviewing nondisclosure decisions, and mandamus does not lie against the Governor-the Court
construes TORA to afford no relief except criminal punishment against one very large component of the Executive Department,
the Governor's Office.
The Court's view is incongruous with TORA's scheme of judicial review. TORA allows government officials to sue the Attorney
General both for a writ of mandamus and a declaratmy judgment. TEX.GOV'T CODE 552.353(b)(3). Persons seeking
infonnation from some governmental bodies may obtain judicial assistance from district courts.Id. 552.32 .1. Others, however,
according to the Court, can obtain relief only from this Court.
In the Court's view, the Comptroller could sue the Attorney General in district court to avoid release of information. The
Attorney General, however, could not countersue in district court, but only in the Supreme Court. The Court would also subject
the Attorney General to concurrent suits in the district court and this Court based on different parts of the same controversy
-depending on what party initiated the proceeding. If, for example, the Comptroller disputed part of an Attorney General's
decision deeming some infonnation public, and sought to avoid disclosure of that infonnation, the Comptroller's remedy would
be by a suit in district court in Travis County. If, however, the party requesting the decision was also unhappy with the Attorney
General's decision, deeming other related information to be confidential, that party would be obliged to seek review by a
mandamus action against the Comptroller in this Court The Attomey General potentially could be a petitioner and a respondent
in simultaneous actions, arising out of the same controversy and open records decision, in two separate courts. No logic supports
splitting review of open records decisions between the district court and this Court. See Kidder v. Hall, 113 Tex. 49, 251 S.W
497. 498 ( 1923) (dismissing, on several grounds, a mandamus proceeding seeking to compel Commissioner of Banking to allow
a claim against an insolvent bank; although statute did not specify in which "court" to bring n ~ j e c t e d claims, "[w]e know of
no reason why the Legislah1re should have permitted contests of approved claims in one court, and have prescribed another
court to establish rejected claims").
Perhaps most puzzling of all is the Court's Janus-faced view of whether TORA's review procedures are appropriate. Justifying
this Court's exclusive review of nondisclosure decisions, the Court says:
Our original jurisdiction exists when there is "some special reason for its exercise," ... and to preserve the separation of
powers between the branches of state government We have been empowered to grant writs against executive officers because
A & T Consultants, Inc. v. Sharp, 904 SW.2d 668 (1995)
23 MediaL Rep. 2281, 38 Tex. Sup. CtJ. 10?1
a mandamus proceeding against one of them ordinarily involves questions of general public imporL. We conclude that the
legislature intended this Court to exercise its jurisdiction over executive ofticers, in part because an open records request that
an executive officer has resisted may well '''688 have general significance and require a speedy remedy.
Ante at 673-74. A few pages later the Court requests relief from the Legislature:
We invite the legislature to consider whether mandamus is the appropriate remedy against a government executive or agency,
or whether a court order and/or judgment declaring the requested records to be public information would be adequate. We
further suggest that the legislature exercise its constitutional authority to specify which courts are to have jurisdiction over
remedial actions to enforce TORA.
Ante at 681. I am at a loss to understand why the Court thinks the Legislature should reconsider a statutory scheme ofjudicial
review when the Court believes that the Legislature intended to adopt the scheme, and also believes that the scheme serves
an important purpose.
Construing TORA need not deform it. The Court's construction does just that, and for this reason alone is unjustified.
v
The Comptroller's Office has refused to disclose all the information requested by A & T. As required by TORA, the Comptroller
requested an Attomey General's opinion, which was at least partially favorable to A & T. After A & T filed this proceeding, the
Attomey General withdrew his opinion, apparently in accordance with a policy of withdrawing open records opinions when
litigation is pending. This Court casts itself in the position of reviewing A & T's requests without a factual record, relying
solely on the briefs of counsel and oral argument I do not believe TORA imposes upon this Court responsibility as sole arbiter
of open records disputes involving the Lieutenant Governor, Secretary of State, Comptroller of Public Accounts, Treasurer,
Commissioner of the General Land Office, and Attorney GeneraL
I would deny the petition for writ of mandamus. Accordingly, I respectfully dissent.
Parallel Citations
23 MediaL. Rep. 2281, .38 Tex. Sup. Ct. J. 1071
Footnotes
The comptroller took no other action, but has continued to resist disclosing the information he believes is confidential. We note that
the legislature recently enacted two TORA provisions. They state that a governmental body may file suit against the attomey general
in order to resist the disclosure of information that the attorney general has opined to be public information, but that no such suit
may be brought against the member of the public requesting the infonnation. See Act of June 14, 1995, S.B. 636 I, 74th Leg., R.S.
(to be codified at TEX.GOVT CODE 552.324, 552.325). Because the two provisions are not effective until August 28, 1995,
they have no bearing in the present mandamus proceeding, nor would they have affected our disposition if they bad been in effect
2 TEXREYCIV STAT. ar!. 1012 (IR92) (current version codif1ed at TEX.GOV'T C O D E ~ 22.002(a)).
3 Correspondence from the attomey general's office to the comptroller mentions that A & T also may have requested the names of
franchise taxpayers assessed a penalty and the amounts of penalties assessed. Because the record does not include such a request,
we do not examine the issue.
4 According to the comptroller, A & T's stall' includes a former senior staff auditor from the comptroller's oflice.
5 This section states that FOIA "does not apply to matters that are":
records or il?formation compiled for law el?forcement pwy;oses, but only to the extent that the production of such law
enforcement records or information (A) could reasonably be expected to inte1jere with el?fbrcement proceedings, (B) would
deprive a person of a right to a fair trial or an impartial adjudication, (C) could reasonably be expected to constitute an
unwarranted invasion of personal privacy, (D) could reasonably be expected to disclose the identity of a confidential source,
including a State, local, or foreign agency or authority or any private institution which furnished information on a confidential
basis, and, in the case of a record or infonnation compiled by a criminal law enforcement authority in the course of a
criminal investigation, .... infom1ation furnished by a confidential source, (E) would disclose techniques and procedures for
A & T Consultants, Inc, v. Sharp, 904 S.W.2d 668 (1995)
23 MediaL Rep. 2281, 38 Tex. Sup. ctJ. 1071
law eJ?fbrcement investigations or proseclflions ... !/such disclosure could reasonably be expected to risk circumve111ion cJ/Ihe
law, or (F) could reasonably be expected to endanger the life or physical safety of any individuaL ..
5 U.S.C. 0 552(b)(7) (Supp.l995) (emphases added).
6 We overruled A & T's request for disclosure of taxpayers' primary and secondary errors because they arise flom taxpayers'
miscalculations about specific aspects of their business affairs. By contrast, the mere fact of a deficiency or refund docs not disclose
specific information about aspects of taxpayers' financial condition or business activities,
J. Michael Kennedy, Doomsday
Budget Shows Texas the Cost of
Not Raising Taxes: A uge
Deficit Looms as a Result of
Court-Ordered Funding of
Social Services. The
Unthinkable May Occur: An
Income Levy, L.A. Times, May
22, 1991
; ANGELES
-Natao n;
Doomsday Budget the Cost of Not Raising_Taxes
A huge deticit looms as a result
of court-ordered funding or
social services .. Th.c unthinkable
AUS'i'!N, lex -In Texas. cns1s tunc ts
apprnacmng -
improvements. Texas still ranks ncar the
bottom of the list in almost. all social
services. As Leslie Lemon starrarrecto"r
of the Texas Senate Hum;1n Services
Committee. put it 'We're at the bottom
of.t.ha ban'<lt ,.
Crowded Agenda
lf.'hc kC")'-qucstimnshow to come! Up
with the money The an5wer has been
delayed by a I,cgislature that faces
rcdistrirtmg. changes 111 the JUdtcia!
selccuon process. ethics
legi!:'latton parity tn funding among the
staw'::; disrrictS arid- inuch mOrC
MEXICO
the figure in Dallas is $2.12. .
- -"'"""TeMsnasfhe
in property ta....: reliance in the nation,"
said Daryl Dorey, the House Speaker's
The state's coffers are about to be
depleted and the state wt!! .soon face a
prOJt...>.cled $4 6-bil\1on debt over the
two years And thatts if the projeCted
stale expenses of $52 4 bJ!I!on over the
nexnwo years are on th(.!Tiark ---
l----(;>ne-<JH1er-tl<,m-en <he
an.: as
Among the key Items that would go
... -..
G$900 mJ!hon 1n commJtrncnts to pubhc
sc-hools
o$496 mlilwn to and JUniOr
colleges
o$197 rmlhon to open and run
that would house 14.000 umwtcs
Gov Ann Richards has urged a state
lottery to help balance Texas budget
So far, the idea IS going nowhere
G$1 17 billion m welfart program::;
Putttng that J.g_ytj_,
iCV.r-oUTd mean lowering the monthly acreptrd
payment under the Atd t{) FamJ!tcs With For TPxas routinely scnmpc'tl on
Dependent Children program to $4.1 from son a\ scrvtrcs cvPn when the state
$57 per chtld. reducmg payments for treasury was 111 good shape from taxt\s on
nursmg home care and cutting follow up tht ad It 1::; a trad1Uon m Texas
serv1ccs for abused chLidrcn to negiC'<'t thC' poor and th6sr 111 pnson
No one really expc('ts such a sccnano smd Tom Sm1th of the Austin -based
to actually take place But It docs Public Ctt!zen watchdog orgam?.atiOn It
underscore the to ra1se new monev has been the traditiOn that we should not
once again That has happened a lotm - mvestmthctr future
Texas recently. In 1987 Gov Btll Succe:-;sfu! lawsUits over the last
Clements signed a $,1) 7 btl lion tax decade chargmg neglect have resulted 111
another one for $628 _Judges .._
m.Jhoo la;L doctors must staffa mental hospital. how
commg due m the cducal!orrand welfare- must be spent on each of the :1
system nu!\10n school children in the stale and
Courts Order Reforms
What separates Texas from other
StiltC.'i facmg fiscal dJ.-;<J..'llCr 1:-. that much
of money problems swm from
court mandated Hnprovement:-; 111 a!'tas
lll wh1ch the had lagged far behmd
how much space a pr1son Inmate must
have The state 1.s now spendmg hliltons
mental health. pnsons and
education than 1l had expected And1.he
legal problems do not seem destined lo
stop LhNe. gwen Texas' bleil'k htstory tn
other arc;1s such as the cnvtronnwnt
}!;yen Wllh these court mandated
--N. "C--
orees.
No Points.
lottery. proposed by the state s ncv:
governor Ann R1charcts. hut so far gomg
nowhere'
The lengthy list of 1ssucs caused state
lasl tv. a scries_nJ . .sJ.nrics an I
.<>t'l"f'ntl that .grappling with
tht uorsl ftscal rns1s for "tatrhou'\rs
SHift' the Gnat
-----

Governor: Ann Richards, 57
D('mocrat
!990!'opulatlon:-16.986J>ll}.:.:. __
Key Industries: trade services.

Per capita Income ( 1989), S 1.518.1
_____ _
oil industry brought home the
inadequacy of the tax structure,''
He said a personal income tax
passed only in combination with relief i
other areas, such as a reduction in.sales
- .. an&ppepe!'t;tl"""'"------- --
Montford agreed. '
"!think the focus ought to be on tax
reform. The tax system is unresponsive
to economic change, "-he said, tguess--
thebottomJineJS.lhat.we.need ta.geU<
smart and not tax emotional "
Srn fohn Montford chan man of thP
SPnatf' Fmancc Committee. to rail thts
Sf'Sston of 1 hP Legislature one of the
tmporl<lnt m memor.Y Part\)' bcrausC' of
the budget \:Vi_ll .. j
a .lui.;.-- Connally. for his part. said that "we
Jth1nk 1l will he o srnous sr1 irs of can't be blind to the fact that people
spec tal Montf01 d satd aren't the least bit interested in having
nv thr time July rolls around. two their ta.xes raiSed by any device."
thmgs Will havf happrned: The state mcornc tax nnl have a chance dunng: J-lc said that, at a hearinfl.on the
('Omptrolicr will havr fmtshed hts study this go-around Lt Gov. Bob Bullock has possibility of an income tax, a scenario
of T<'xas govrrnmcnt agencies. 111 whtch raHcd for one And Connallv said it is was laid out in which one would be
morL' 100 audttor.-; have fannrd out qu1te poss1blc that hts task.force will passed. But it not only had t<tprovid,e tt
to .. bureaucratic fat, and a task recommend
01
W relief clsewhert', it had to dedicate the
forl'c headed by former Gov John B The rca!' on a pos::;tble mcomc tax 1s money raised to two things: cducatlOtl
Connally wtll have made tls gcttmg more attention i:-; that the and publlc"S<i.fety, Connally said. il was
tccommrndauons on revtstng the statr"s I ,cgJsiaturc and local governments have cleat to him that the public was no lonE
ant1quated tax structure. So fa1, the ..
.. they can using other devices state govc
1
nmcnt, that public also
that could tnm about $.100 null!on from The sates ta.x mlarger metropolitan wanted control of where its dollars wet
the areas t.s hovering at 8% and mmc, a going.
Debate on an Anathema
When the debate does bogin it Will
almost snrcly revolve around taxes,
mcludmg the kmd that has always been
anathema to Texans-a p('rsonal income
tax. Although mo:tl tux experts believe nn
f1gure legislators do not think they can !'All this means.is that there is an ...
mcrcasc much without howls of protest
0
f.t]Jg_kegjslature,"
Meanwhile. the statl"''s .toea_! g()VCrnm ..en.ts CQll!1H!IY)I;thl
and school districts Whatever the case, July should marl
raise property taxes to a point where the beginning of a long budget deba.(l!Ti
homeowners feel they me being milked the Texas Legislntme.
In Houston. for example, the property . .
taxe,c;nre $1:'66 pet"SlOO ev-atliatim1; ahi:l" hot summer."
___________ ._
be bought
for$39?
A;Ye
Rill Most people perceive that fashion
NoClosingCDsts.
costs big money. To some, it isn't fashion-
able if it didn't come with a high priae tag.
That's why a lot of people have trouble with the
whole Frame-n-Lens concept. When they see the
$39 price tag they can't it's true. Or they
mistakenly assume that our quality is inferior.
Our $39 glasses (price includes
quality frames and single vision lenses!) are
eauai to, or better in quality to glasses costing .
1
Baek to Original
Doomsday Budget Shows Texas the Cost of Not Raising Taxes: A huge deficit looms as a
result of court-ordered funding of social services. The unthinkable may occur: an income
levy.
STATES' FISG1L CRISES .. This is the last in a seties ofslories on scveml states that ore grappling with the worstjiscal crL<;isfor
statehouses since the Great Depression.
May 22,1991 I J. MICHAEL KENNEDY I TIMES STAFF WRITER
In Texas, crisis time is approaching.
The state's coffers are aboutto be depleted and the state will soon face a projected $4.6-billion debt over the next two years. And that is if the projected state
expenses of $52-4 billion over the next two years are on the mark.
A doomsday budget, prepared recently to show taxpayers what the state could not afford without new revenues, offered some sobering projections in a
number of areas.
Among the key items that would go unfunded were these:
* $goo million in commitments to public schools.
* $496 million to universities and junior colleges.
* $197 million to open and run prisons that would house 14,000 inmates.
* $1.17 billion in welfare programs.
Putting that on a more personal level, it would mean lowering the monthly payment under the Aid to Families with Dependent Children program to $45 from
$57 per child, reducing payments for nursing home care and cutting follow-up services for abused children.
No one really expects such a scenario to actually take place. But it does underscore the need to raise new money once again. That has happened a lot in Texas
recently. In 1987, Gov. Bill Clements signed a $5.7-billion tax increase. He signed another one for $628 million last year to talte care of bills coming due in the
education and welfare system.
Courts Order Reforms
What separates Texas from other states facing fiscal disaster is that much of its money problems stem from court-mandated improvements in areas in which
the state had lagged far behind accepted standards.
For years, Texas routinely scrimped on social services, even when the state treasury was in good shape from taxes on the oil industry. "It is a tradition in
Texas to neglect the poor and those in prison," said Tom Smith of the Austin-based Public Citizen watchdog organization. "It has been the tradition that we
should not invest in their future."
Successful lawsuits over the last decade charging neglect have resulted in judges' deciding how many nurses and doctors must staff a mental hospital, how
much must be spent on each of the 3 million school children in the state and how much space a prison inmate must have. The state is now spending billions
more on mental health, prisons and education than it had expected. And the legal problems do not seem destined to stop there, given Texas' bleak history in
other areas, such as the environment.
Even with these court-mandated improvements, Texas still ranks near the bottom of the list in almost all social services. As Leslie Lemon, staff director of the
Texas Senate Human Services Committee, put it: "We're at the bottom of the barrel."
Crowded Agenda
The key question is how to come up with the money. The answer has been delayed by a Legislature that faces redistricting, changes in the judicial selection
process, much-needed ethics legislation, parity in funding among the state's school districts and much more. One other item on the agenda is a state lottery,
proposed by the state's new governor, Ann Richards, but so far going nowhere.
The lengthy list of issues caused state Sen. John Montford, chairman of the Senate Finance Committee, to call this session of the Legislature one of the most
important in memory. Partly because of that, the budget will not be debated until a special session in July.
"I think it will be a serious series of special sessions," Montford said.
By the time July rolls around, two things will have happened: The state comptroller will have finished his study of Texas' government agencies, in which more
than 100 auditors have fanned out to identify bureaucratic fat; and a task force headed by former Gov. John B. Connally will have made its recommendations
on revising the state's antiquated tax structure. So far, the auditors have come up with reductions that could trim about $500 million from the budget.
Debate on an Anathema
When the debate does begin, it will almost surely revolve around taxes, including the kind that has always been anathema to Texans-a personal income tax.
Although most tax experts believe an income tax does not have a chance during this go-around, Lt. Gov. Bob Bullock has called for one. And Connally said it is
quite possible that his task force will recommend one.
The reason a possible income tax is getting more attention is that the Legislature and local governments have squeezed out about as many dollars as they can
using other devices.
The sales tax in larger metropolitan areas is hovering at 8% and more, a figure legislators do not think they can increase much without howls of protest.
Meanwhile, the state's local governments and school districts have continued to raise property taxes to a point where homeowners feel they are being milked.
In Houston, for example, the property taxes are $1.66 per $100 evaluation, and the figure in Dallas is $2.12.
"Texas has the fastest rate of increase in property tax reliance in the nation," said Daryl Dorey, the House Speaker's director of research for policy
development. "That has been true for the last four years."
Dorey said he believes a combination of factors might get Texas over the hump this time-perhaps a slight sales tax increase, expanding the state franchise tax
and college tuition hikes, if coupled with trims recommended by the comptroller's office. But, in the end, he sees a need for a major tax overhaul.
"We have a state tax system that is stagnant," he said. "The collapse of the oil industry brought home the inadequacy of the tax structure."
He said a personal income tax could be passed ouly in combination with relief in other areas, such as a reduction in sales and property taxes.
Montford agreed.
"I think the focus ought to be on tax reform. The tax system is unresponsive to economic change," he said. "I guess the bottom line is that we need to get tax
smart and not tax emotional."
Income Tax Scenario
Connally, for his part, said that "we can't be blind to the fact that people aren't the least bit interested in having their taxes raised by any device."
He said that, at a hearing on the possibility of an income tax, a scenario was laid out in which one would be passed. But it not ouly had to provide tax relief
elsewhere, it had to dedicate the money raised to two things: education and public safety. Connally said it was clear to him that the public was no longer willing
to just hand over tax money to state government, that the public also wanted control of where its dollars were going.
"All this means is that there is an inherent distrust of the Legislature," Connally said.
Whatever the case, July should mark the beginning of a long budget debate in the Texas Legislature.
As Dorey said, "It's going to be along, hot summer."
Texas Profile
Capital: Austin
Governor: Ann Richards, 57, Democrat
1990 Population: 16,986,510
Key Industries: trade, services, manufacturing, petroleum
Per capita income (1989): $15.483
U.S. average: $16,490
Sales tax: 6%, plus optional1% local, 1% transit
Income tax: none
Fiscal1992-93 budget: $52.4 billion
Shortfall: $4.6 billion
[os Angeles <rimes copyright 2011 Los Angeles Times Index by Keyword I Index by Date I Privacy Policy I Terms of Service
Bullock Details Tax Plan,
Income Levy Could Reduce
Other State Fees, Proposal
Says, Dallas Morning ews,
Mar. 29, 1991
1-nday, Marrh IV. IY'YI 15 B
GOLF TEXAS & SOUTHWEST/LEGISLATURE 'G1
First--round leaders at TPC Bullock details tax plan
do not reflect 'major' gain Income levy could reduce other state fees, proposal says
Put tht
ll!IJ :o r-. 111 the "-t1fh1 tht"
l:>esl lh!hl uti thl fo, c I[ OtL urth
lin' }till Ptnlft lul!t'd n
011 tllt lw..,, I P<. lOilfW
and "'but d11 >u bu\""'
:\Ill' I 1Jllt dit} u ltl.ldt:l lkJUft.l lhul
rnurt: ltkt' Huu:k {
!hl.lll lht' 11\ll)uf Wllll
known t1:-. l'hc Plti)"L'I'o l hum
ptnn,llq.'
On t1Jj! tlllt'r uuc rouutl Hoi'
I Wll)' !he lVKl'l Pt.ir\ lllampton whu
lt.-J the Wll) >'dilL 11 ::.cVell under pur
65 Hut nl{ht bt'tnnd r.-; u ltJur mttll
group ut b6 thut llldUths Hob
WtJt)d Hu:--.:, lVlhrun Ptlcr Pero;on::.
ttJaJ Slt"\L' Twu
hill }1. tlt t.:' urc l'uul Mrkt"
Smith I
1
1Uil11 I) A Wctllflug
Blttlrtt Md Jay D\llt Blukt:
tllal Pill! Hlu\'ll.flllH
It' l.'LLrly At.IHKt'l 'tttd rlu:'
llt'tllll rlw:-. ltJ tht IPJI lm Hoi ltlk
!Uf: illl}'!htiiX IIWLL}' lfOIIJ lht' ol
tht llJIIIJcrt: hut ytJu Jitfl t .,..tit
u to\Jf!Htmtltt II I!! huh::. lou \t:
).(<){to Will\
i'<jA !om !>ciJill"
HcmuH huJ 14"1lllt:d t"llUUI'(b lu
\ta:.tn., .. tnl J>ultq tliiJt
ull .. w\ the (jl vtl:l}
o,q1fllllH ul t!ttll llt' ul
ltl!t"d "l"'li'"'' (")(t'lllj!l\'11 ..
I hu' muu 14ho l!l.l\ JIU!>bcJ
l.n tlt\' pn'>l It) tu lllUl\t the
IJ>t u tilth JllUJUI )o\01 lbt
<HI ll\L' !,.<)N\"
v,.111 lc! ... i ulcJq Oluuthtll
unt! \O..oot"IIUIIl ;o.lc. Y IUtdlc::.lt'fUSI
unU W Bc.:rrdwrd l..n11ger' 11, gu
Willi ."i" 4 (ifCI-( :--Jurmun twd Nu 6
Ot ltlLLI t:rou)l tl!ll} AI.
!.., IHl :\IBt'rh 1.111
\\."u:-, tht!- lhl' ;'..,1lf \Itt ll't
tJktl U !lHIJUI'
011 Thursduy ord} tilt' Ellropcuu
r-.u .. runl<t'll Mttrk ul
Elt!otilllh.J hrukt J't1T
Fu!du t11Hl WIX.I'ollttfii 111! 'ohut
pur .,., IIIII' OlttUI!ltd lwd II "'-I tlllll

(hlt h
Wllut dhl ut!J II'Uit- hi'>
"') \u Shoollf1g .. '\ lu '>Uid t uri I)
lt-11\ IIIIo; I Itt" !01.. kt'f rtJUII\
"I!Jl'fl wu:-. JeiJII} 1111 t:Xill\t"' lUI
!/H' !11r t"IK!l t I nt t ht 111 :>1
llfllt" Ill J'Jil' 1111 Wth
t ltl'td [!JI otOt t.ll:l\ II !hi.'> \qll
It r tllld ull I !u'ol wtt"l< htlurt" llu
lu\lfUII!IIlflt fIll l>:KJ..', '>I llLLIIKt
hn ... tJc't'll 111 thl' h wen
111\f Ut 1 \<J 1111 ffltllliL I! l Y.l!//1 do""' IL II! H) ')'lknl 'v t' l t l \
111 k luldu \(\1:' ltll; IJI'Il \ttl! llwl HttHI) t>t'l} pl11)t!
V.'oo.,num LL/11J U!ulnhul t\Llltllt:d l!ltll! I'IIIIHJ" I.')) lilt
lht: hllll lhtHII\Ill!ldtllld lht (:IJfl, 111"-;l/JJ)U"I\t/ I[HJI btl' ll"f 'tltll
pt"IIIJ\ J/, IW!J Y.h)> t/)r 1/lli\t'i\tht \1/Jt \:Ill\ 'ttJt:tLIL ,11 tiLt. llt\1.1).{1
IJIJILHI V.ln'IL tilt" Wllu.l Jllc 11p II
t'll.11"111\ I> dJIIII ul!
lk ... 1"w11y v.hu tw ... WIIIJ
)1()})-\0 tin:. .. !tll\::0 llt't:tktJ IL
it;:\ ltlH/ 1-(l\IJc !11 ftto:Uft' UUI ltlh
tuq rutHJtl u 10rc:ur >tl
erau whu ltt::.l Wllll Ollhe I Byron
:"lt"htJil WUII ..J"'I,IJ I lU tit-:ht
t\tJih Ill 11,.\IXI Pt:f'>Oll.\ bll!l wuu
.S.ll'l llC:. 111 JU ( od11 !IlL wt;n
SHU kY"' tun 111 lti::i \u:.l lhfl't..
hr llll'>!>t:tl thl' tl.l the Huutla flu
..,.Jlti Ill !tit ;.lc.>;llc lli\l!llltlilUUl
twd wtllH.ICt.:w Ill Ntw c r
E!k!ngluu uu :\u:.-trallurt W!tu
tH rltr' 1.11 Hou:.-WJL
bu ... Y.OJIL $St:40illt ]JI, flfll, Hll
li>\11
Mu .... l!} llw t"llll'="'"l.'ll!ur \uqlo,
uthtOL!IlY,t ul lht whit:!;
IW\t )..\lllll ben! to
H(L ptfll'lll 1'11!1 I ll lllllft
I If Ill I! JILl '>Jtlkt<; U)t UJHJ
luthh f!lort 'huh I Wll)'" n.;um led
th4. 1.1;1!\ wn!t ... h!ldh:'." ;u,JuJ
lllf< n!.t I n. Ill) tht Jml"-! Hili
I i\rt til'> 111 lltc pust lLil\t' /lnl
II 11 hu II I" Ill} )l}Ollj.( (
, l!!ut1 '>dtd l"ltq 1111 H111
h<n 1 ll)' hy 1 lllllHt( hiJL
1!11 tlllr(b Ul>nl!HJ l!tt Ill o.,;,,.,.,. !Itt\
J.,", u' roHJ/1 111111 ht
<ILIJ< tit i I/! wdl }lot)
I ill Ill< II"'' !II IIIII V."lllllt\11 Wtlrt
Weibring blocks out aches, fires 67
o:"-. n \ EIJH \ Hu -\I .. I Ill llllthdH} j) ,\,
\\cthllltiidldttl io1111W Y<liiJ\ !oct :qwtl X \0 Itt );.HI,,
!\tilt I 1dt II
\.1., l'lhriHf, ]Hrdlllllllt ltr-...t \WII 11! !Itt h
( !JitHipiPll'>llltl tl/ltl ''I ll11 hIJ' !ttl II fl\t' lllttlt"J tJUl n.'
I but Ill! . ., htl11 tw11 'oho1b ltchtJuJ ltr-.t rouruJ il'litlt"l lldt
l'wu} II muh !tnl tht." )'IHJI': rt,,ll!t 111..., llt '>I r11UtHI '"
!ht }t'Uf \\hit It pttdlLthl}"t'>Ul 'oli)lllg llllltlt tl!/l'>ldt"l
Wt.tlHilli.; <llll}l'!ttyr:J tlll1111r prt!.,.tcltt..,l \I' HI:,
Wt:tllllttg htl<;llll Ill:- )t:UI "'I til tt ">lilt' It'll :-;houlth r
olltU nn..._.,,.d tiLt t 111 LLI Pthhh: thtlllll'tl1ut t:tn.l
a\ 'iuu ()tq . .(IJ l!t"t.l !ttl 11'>1 ntn.l lilt" lhHtd/1 ( U1ttl
l:t:d ]HI l.,,'fh Ill lht fl.llll IIJ\IIUIIIIILid
t\loo Y.u:k:-o UJ.\1 \ lllfKt!IIJI)Il fl'llf !ur. t:XIt.ttl l111
, IJLIII!lnl.!, ln., -.nll /JIIh YM< :\ /111:-lolhuJI
1111111 til il t!ttrd 1'1111 t" l!tll\lt IlL tht \ M{ A C >1/Jh
ltHH!lolllli/J!
l'u/1 ol tbt ptthh Ill htTh I he ;111111!dt'f lltj\11}
Y.I.J !J ltltrlhllln! ('llr\ltt!li loliYILIX 10
\lo 111! .,., t 1'1 lfljlllll /1 W y1 It/' Ill lf)'lltg In I olrl
jtt ll'>lllt /111 fhl ,l!cJUit.IL'r Wt:!h/"lflg '>Wlllg ..:ot I lUI ul
W[tHO. f
\I! l!wl' htt1!
1
(tl!lll.,l Wt"t} Wllh II !1-w ',!; .',JI!{J, ...-1\IL
H}ul lit:mltlfll Hulld}' 'if!J\Ih
\,_,WI<{ Hundy noll) ltt'!Jttd 1/Lt: '>bill I
J. 1d 11 1/lltJ '>'illll hud lwhlh bctilU:it' ol 'oiJoul
d1, Hm1d} wt mt '" wtthlt my 'itttllt.t u11d Jt<ll Wtlff)
, IIIII It ultoul 1111 >1101\llthl ! Vt -;till I<> 1-(11
Hut I 111 llut!JtfJI{ '>IIIJ!t g11xJ hltx li.'o/1111
GOLF RESULTS
POA Pl.AYEAB
CHAMPIONSHIP
!Alf'Dnt.v.,a, fL&I
lttLIIHSOAT'Q fUUil
p,.
!Ja(IU....,..I
OOIIUI"Id+IL
C)'ll ............ l
, .... ., ...... .
, .... t 1>""11'
.......... .,. .......
.,,,.,,...,...1
II" ,....,,,1,
U,.AIh'l"
'lo, ''''" Hl1
J ......... '\1.
"''"'1\.,.::.1, ..,,.,._.I
11'11 ..... ,

'"""'"" h ld ,..,.
I"J>"
li, , .. ....
,; .,.....
,.,,,
CJI
,.II
Ill)
t'.Jl
""
l<.illt-"-'\1' .... ''
JJ ....J""""""""
-.,,,,_ U-J-1
IJ<IV1't"'"'" ..... lll
,., ...... 11.......
,, .. ,""'""*"'
.. I)""-
,,,.,_, ... _
il<>lfiiM

,..........
........ ,,..
!t< .. lll"'
hUt llt
I' .toto /JIIllort...,
I .,.1 'II
... .. u ....... , .....
..... ,,11_,
.. ,._ .....
"' """"""'-
"'
.... 11 , .... _,. ...
'" ..
;;:,/,
Al,t4"1"
n'\1"11""1""'
1/)(
H )I
""
'"" )/l-'
""' If
TPC UPDATE
a
lam Wit\!11111 1/J+IIl.tl l'l!tli/Jolll
,!( IJH l 'o] td t I II \1 Y. ( )J Jt o!IJ" 1'.11", II" llJtflt IJt 'I! II tl
!Ill :;:,,h J t'': hil tnrdi1, ;11 !11tlll\i.; ,,,,,,If d
I '"''!1111
I 11t jllllh 1 ltll< \1t>ht \\uhttLL '.1.1\lL llo
\ld Nh:kfouldn'h''"lut
,!l.d ! 'u.Jh, II 1 butt 1" .tujt 111\ Jl,g !tt, !11:uJ dt
HLL!:" 1 tll!d ],!1 t/llutqds l)Lt liuJJ \ <J\]11 J!)ll/ L }If"
I t.ll \1. aL,tJil .,.,.a'iftl t-:"llt 1; I d: \.\u-... 'oYIIfl It
111 j'lllltJ V.uhiJLt'oltLd ht !rL.tl111ttt!Llh duc
Ht>: 1 -,c .,.,\,11 Y.J\h lhrtJO Ndsun at l'tt 'It >II I r uti 1111tl
lw-.hlp!tktil"ll''lii':,J!Ltt
I! If W/1:-. UJ Ito IIH I wou!tl h,IIJ ll1 llJ \\I',' I.: .,It\]
1111 tt., flit!'' .rr .. \11 .. r,: .. n J', t1.t1t Jnl
1i1!1 llltlul!:- liJkt ll11 pu11tt htnk ltlo !lwt autl ltl
II 'Y.Itn: IIIII >V.lt Hlllllt!IH/111 !1
tln Lltl\1111! lllt/1 I d1111! t!wl, lull tol 111:/11 Hull
1.0.' !
JJn,., tIll/<. Wil ll!tll',dil\ l,JJI I +II lilt I !)!ill :"41'111
!]11 tt'.ii!J l111dllll( LlPotH', I.O.ILIIHL !Ill' llill
IL<.ttl llu rIll")'' 11/1 II ot\\V..C lf\1!1 ..... \1)," 11/11 llhth f jliiJ
I *H'> ,,J!j,il lhur din t1 IJdlll Mllu
lhtd Y.lt11 ""'lllnl!1 Y. ""Ill! I llrt 1/ljlll\ olfltl ]Ioiii Jl"'
fl//l!ftt..l IIH "111'1 ,1\1 W\t k !Iii l"lilll/ll/]t)ll I'
lt/L l>td lltftiii)J!I<t]lll[i; I HI! ,.,llLIIJit
11L<llt th1111 r,n rutll!"!L i" 111"1t Ilia I !111 1. ho "II rll
d llfiHJIHJlJl ltLolld \Ill oll'i;.'\ /IIJ/ r\tl!1 .JIId J11h11
r.vt"fhon tliP' 1"' "' Itt 1/rJcl, lJ! t 111 I tlf
LPOA DINAH IUiORE

- n
/lot'") A"""

.'"1': ..
...... u ........... .
'-'"V'J'" ... "'
'-
..
,,,,, ............ .
,, "
111"
t)uloolkl"-'
If><'
Ill-'
. ,."-"'I
,,.,,. fl"'
76j(und<o>J
0 '111,1 I "''"'
,.,. ........ "

,, ........ .
.. "'""".
!<... !, ....
'">J, ...
o,.,oJ,o
I ',.,.,
..':":.::.
}ll'u .. l
llill 1
.:: ._"
' ""' .
'-'''"'".',.,
. ........ , ... .
,_ ............ !1
......... "., -
O"J
'"
AI\"! It\ 11 lr\ Hlll
Lllltdul t.hlbiJ, tl lth 1ru)Jtl'led
)'1 I \tlltU\ L!l'.. lilt IIIli. "J l1 \II !1),
j>fljt 1 \lUll) IJiUf (!
1111\1:: mnrt lhttlt SL' ht:::u11 !til
gn\cltlll1t'l/fllllWoi1,1S
liulll>tlt lliJ!> <:>turt
hoth IH.IolliJillll!H.ltillpti/0\1.' lt1
( cr
lflune)" lur u -'>111\l.'
huUf(el t!lur
l"j JlfiiJtl t1:d tu rw,
'f!J ill 0 hi]
lllml.. lluh 'h!tf\ \(lf
l!lll':'il 1 .' IW]-Yi
; , But Auu
.&..\" hurd..:. '>tJtd
UKUJn 'i'llUf!'>tlb)
!Iilii 11 t!> 110 tn Ut\k lli'MHJI IIIJt
llnrt:II:W ... llt'>t'>llll, tllul
v. ill! 111f LLHdll"r' \r) t:umph'tt: 1.1
111 '>t>t"tllltu;.: und
/tit 11 Jllllltl ul t"'Xptrl'> t.t malo:.t tux
J'L tt/OII!t"IHIUllull'
llellll) tlttnk :t \'> Jl!"t.:ntiJI\Jit fc
bt IU)klltg tlbnul lift) of lt!XU
llfllt Hlllll lhu'lt' two t1rt r
,, l\1 d 'ol!t "lttd
:\q.toftl1llJ< 111 u drutt ul tn;.;
pluo Bll!llt k' I'T"fllt\ltl '"11:U
Spill cleanup
bi II is signed
by Richards
fh \ruh" M.trtt Kild.n
\I\"}!.\ It tl1ill
Y.oJilld' lttllo U!llll'lll 1tllld
h, II <til llj> 11 'Pill' tltiLJ: /}"
], \il I ill\! i lllq \lil t!
rJilt Ju'.l. lllltr">dil"w t\ i11> \Ill<
Ill !111/th
1
'l'"''"nr d In "lt t1 l <If I I'1L1
ft f j) l't 1 .\11/tllf UILd l!t J
I H >lf"J'll
l !. ! I'll J Ill< !J< '' lilY. [t II
I ltl !1'1 hill flf Ul.'( 1>/! tt: If /Ill'>
\Hithd it'XIt.,v.ll\1
I !11 Jdau lthll lin
t,tllt/HliHti.J IH!IIt iL p1:
!!t-tl\ iiJ..;t In> It '\"t:'l!tlt !111
tin
t .. qj tll!'
Hit ltlrfd 111 I l!tt
1111 IILiltll. 11/lt ol lll 1<1m
l'llhlt 1>H!HIt 'I Ulld '!11 t I d
111 d l-o111d ( lrJIJJlll't":t J t,ur! \
\1.tl11" wi]/J ,;clll!n 1!11 hJ;JI,!
11111)111
\,1;, ho ,<, !.ol c 1:n !It I 1[;
t:lill I"'*'' 1111 II \111<11''
\It \t tl.l lit:
1 h , ., , , ,, -11d ,\It \I tlll
,l.r'l[lltl I!Jt I 't!:;,l:HIL 1II tiiHt lof,dt I
it 1111 r hi> !1 1 llod .,,.,.,
], II' I l I 1 , t\ , ; I I 1 I' ,:I !111 I '
1 11 ;I '.: Ill I t-tl d '
lltf [I 1 t tlo' I !.rt.l:tUHI).
Jolo'tl !let I ftll>lo
'I: l'rd I- 1: lo.! 1!1 ,. \I
)I lyltl' ! " I H' (d 1 I lq! .
11 '!, ., )ul llt!dl -tl \ I
l!tt l ' >.! \ ,]:,J ,' !! Jdl 11
L!t ,,.,, 1 \! I,Lt .,.,hit It
',Ill < rJ Ill 1 1 I II o!tll/1 U!ul
IIIIIIJI
... 1'1"1 l.tl\1 ,,,..
llo!, llutol',
'>lilt'>IIIX hOI} (:J;,:
)talll
t I' tlnl ltl,:t r, 111. llfllf 'l rdll'
! " I -., I I .c t! ; I j >t I 1\ l \ I !;'., I t: .' 1.:
pit tlth) 1 lHII!/J,rh IIJt
fltt/H Jht lilA
I l,t 111"11 !In 1 I
1!1 -tulr v. Ill prtn tdt- b lbtrtr
lit.'l !lit"' Hilt' q/ It >.It"
tfu plllll\l!l 11tltllll)\ il1/ll o!. ::1
I lil::t ({I )I .... Y. 1\t, \ht
... tah .., '' "!lllll} ,,ot.J h-r:: :11ort"
lfnl/1 t!H 'Ill It ttl
,, II!IL Ill llh It""-
1.0.!\li lltllllt I II \tf\UI/1.1] ILH
/uti 111o.tiiTh !t:\) I{U't""fllffit:IJI
rt!LL!> 1111 ILlttllt'/ttU' hL\C!I lll\'Jih1\lt6
1!:t '1/dt' ltHa\ t,t>lji'JIIfll
tux uttLl :-t t"llll;tt'ln:r.r:>lli JJI ul!ll
,;.t j'l llo. :t
Bui
I.' [rllltt u Jll let /JI 'llhlt tUX trl
,,,,iJ!tll \lh lllllt /thtt\ t
[l{.io,) Ill! ll
lu:1.tl} ,,J /l'llf .,.,,,\dU T11Lw S)i) hit
tl1 Y I .ttlll Sl.
1
t htliLtlll \11
lWII,l'i
(/H jlllliHI'Ilil Y.UU}t) l"':>iLtnjl ]fti!Jl
IH>.II{)t>Ll jt/11 hf/llllll/11 '">liiLO)
tiL{''\ ,/J'I,Jbtli!\ !JH<Iftlt
.11 'I t:- pa\
11 tax
u !Itt;: llldillh
'.o'\ 1\lJ! 1 : :.1 tJooJ ll!X.e:.
I """uld tlt JtJU.wd !fl
.,: \t 1 111 JW.i twd
,111 )I :11 111 IWO, '>bid HJ1:,.
tdtJdt"t
f<t:tlltl'l ""liUitl bi. l{tYt;l J
]'1/!11 :JI ]'t"l h 1tlX I /tlllt
ll.l 11 Vt J, II.! ""''
:!1._;, liJ>. W!IUirJ rtll)tll:t tilt' t.ltfftt I
1u1'l I!> ptlld tJ) V!l
d '>I .tilt".,
( ! t 1 1: :n
\lt Hulhlk vr.,j)()Sl!! t:.SII!H.!!ltC
t!JUll' t ,,/ nit: lfl): Wt;UI'
t,ltl'l' So' I h:llwtl lrJ 1992-9.1 h
tlllllthil tit" l!tJ tllt"Omt wuuicl bt
"n!:, S4tJCi Jllllitofl bt:l ul !Lt
d:!l.tiJUILIHt 11! !ht' lt>\t
...,,, r'll!I/Lllh llltHlt! fur till
1VIrl4'-l.\ '"'':lllillt: tux Mr Grt:enlt'l
.\Uid
I t11 )'r<J)t'otll rt't.:ommcnd!i !.tL
u lm;:l ''IL lh ul !>t.:huul propt'rh
lll:\r..., uf 11 !t'\ 1 I htdHV. where thl:"\
V.11UJJ lit tdt \t pi I 19C:JI ll
, ttllhlln 1! ll!Jl11 I ult proprrt;
IIL"t"
\:td Jl tht uptllln vt
lt'dotlll<l! lla 'iJTft'lll or., pt'rl"cld
'\tilt -.uh' '''' 11_1 l'Lfla.r one fourlh
Ill II!H Jdr)\ 11 l11 "Jt IH} 1111 lUll c)ltiJUI'o
to tJII'Itl !HI II 'olll\t ltlltl lttll!UJ 11/
lulnh 'lttd 1 hiH,dll)
(,Jihtrt i 1!11HJtiJ/td lttud oil lht
lltll rtrl lltL!Iroud r\dlfi!ILI..,Irll\ltlll
Jh d !/11 1--{ll\t I /)!Ill :Jl ' lid]! 111 a
It lllf !11 llll l !Jl.IIIIHUIJ til !llt 1tXO'I
'\ptql :\ulhllf\1}" u:IJlLh l>
ll"!dtll!-1 th hrU..., !nf !he
llttlll
IL1 !Itt ( ltll!lh
It II: ul rll: tuh WHitl nt'>l'l lh11l
!lotlli jllhiJJ 111nl J+rt\lllt tw
H" 1! Ill il pr11)1'1 l hchJI"t' 11
1 ltd !f Jldtfti) U'!>l'l!IJ/111'
1\111 11, /niJJIIf/ Lllllllllt:'fi('HII \WIJ
l:ur"i""l>lt t{!!Jll{l' btth lnr /J JniiiLI!t
lt'>.tn llllt)' 1 o.l!ln .\ir ( ltf
!LLll IIIII l tlhl lio! II} I hill .,ltl11
lu>. d>!l>1J, ,.,,,llhl hhLt !Hill
op!ldJI\ I I It d1 11.1! I{/ IIIII'
Hllll lljlj:h ,/Jld tilt luh1u:
h '' 1 llliH 111 Jtlt "'
"'"''!' Ill!'! I< It I' \II I '1uhlJ'oh t!Jt !111
I r l If,, ], t I 1111 I 1 he It'\
I t I II I tJ" \\ ! 1 'ot 1111 \ll ' t \ l r It I Jt' 'l
I. 1'. Jlllt!L( nl
lo,t.;lt "J'ttd lUI!
I 111h: It xa n" muut}
t t<ll !11 ll'ol d 1t 'llh,hlL/t ,
\ltr ,tlll nl /IlL! 111 Kq
l1il\, \l!hl l11111 o<iht'r
J t,/IL ltl/uh \Ill ltHilllt{ it'thraJ
1.:1 11J1h ll,.ultl fu 11\t d to huthJ
11,1 'o 1>11; u hJ lliJII )'111)1 1 I
Ill l11 u: Ill" Wtl.:'k till'
itr!.th )l).II'>Tt;\
\q,JIId It I) till ['II t!lt 11\Uil.t) !u )IIIII
!Itt I Jill lit' l1f1 \\unh Uft'1 W\11\
IJtJLI'IliH UW\111/,L:I I Yd!h U }()(J.
mp!t lfl\11: l'ln (;crmao gntup
11 l11.., J ''" 'llUU 11 wtntltl
II , LIIUhL!llt\!ttiL 11! 1>11\'bll rnutH'}
urul' II) , M:J lldt:rul t..!t>l
ill/"
.\1t ( Ul f!lh Jwl'l tiUitU thut !>Idle
-.uppurt uta! prnuh
lun1 lu lw IHtluJcd In lht:
tlt \ tlqHilL 1,1 ttl l"t.'XIJ'i
]1\1\lttl!llll,
Htbt:tt
111 tht Hurl 1\tt
th11tl!} 'IIHJ rJu demon
'oiJidnJ "'lJ'i"''' h) tnttttnJ; lht>
IIIHI !tLullt lllio: 1b enrly Jlllllt
111111; llu1 h
lit" 1M1 t'urllllllJutll tlunk:.:
It XI' tl11 \ tuble pro jell
/Ht'.l. uuJ till <l)'f!orlUIHty to
)II
Mr !\ttl) o,uJtJ
Ml t utmlt lwt'l sntd Ttlll:ll> li!UIJ
qunlll} lur rtllllton!. 111 y,rnntl> tllul
/rt t ol lttntl along mtcrstult
tu lldpt!iulottlltt' rllll I liLt
hil\lblt
\ lll){l"lliiiJ' Ill Ill lilt
li/JY.ll}' UiiJ til lll;l,hWUY'> HI 11111)0!
ltlltltl; .ullltiJf'o l.'o u/
h, tin mohilll) IH!
:\rr
IIHll'ol.l Jim l'arkt"f o.;u1LI ILr wttnttd
t" "'"'di 1111 JIIUJ'"'tll lllrthcr ht:'fnft
tlllllflllll1:11h Tlu UHllllt II'
\"'"' d 1111.1 pub! It tuod:. /111 InK:
\)tt't'tlrull
Teacher agency accused
of extravagant spending
-,\It Ill n!t!ll:tt 11-cloj t" tll.! 1
l (.d 1\\ I d I h I'd] I It,: !L
1111\.J llhllt y, \tilt 1\!Ul/'oii/Ld' \II II
!:II d II 11 Ill 1 111\d '' /ttltl[ IIIli' I I\
' ' .Ill j)\ Itt,: II}' I'll u f '> '>IIIII II
"' Jtllnrc 1:1 Ill Illite Ht Sill/
".11 d;ut 1 . ,11d Ill will )"It "I
Archives 1 The Dallas Morning News, dallasnews.com http://nl.newsbank.com/nl-searchlwe/ Archives?p _ action=doc&p _ doci ...
I of2
Web Search by Yahoo!
!search dallasnews com ~
News Sports Business Entertainment Life Health Travel Opinion Autos Homes Jobs Shopping/Ciassifleds
Weather Traffic Obituaries Celebrations Photos VIdeo Newsletters Mobile/Alerts Contact Us Subscribe
New Search Return to results Printer Friendly
About your archives purchase:
Your purchase of 25 articles expires on 09/10/2011 5:00PM,
You have viewed 3 articles and have 22 articles remaining
DALLAS MORNING NEWS
Bullock details tax plan Income levy could reduce other state fees, proposal says
Associated Press THE DALLAS fy'IORtJING NEWS (DAL}
Published: MARCH 29, 1991.
AUSTIN-- Lt Gov. Bob Bullock unveiled details of his proposed personal income tax Thursday, wilh
projections showing that It could raise more than $12 billion for state government in 199495 Mr Bullock
has proposed starting both personal and corporate income taxes to raise additional money for a stale
budget !halls projected to run at least $4 6 billion short for 1992-93
But Gov. Ann Richards said again Thursday thalli is too soon to talk about tax Increases, insisting !hal
lawmakers wail for state auditors to complete a study of government spending and for a panel of experts to
make tax recommendations "I really think it is premature to be talking aboul any kind of taxation until those
two Issues are resolved,' she said
According to a draft of his tax plan, Mr Bullock's proposal could reduce the stale sales tax levy, limit local
property taxes, give homeowners and renters income tax credits for school property levies they do pay and
eliminate the corporate franchise tax "The net effect of this proposal is that the state will provide a fairer
lax base for the citizens of Texas,' the proposal says, adding that an income tax would grow with the stale's
economy and be more stable than the current lax system
According to the draft of Mr. Bullock's plan, a 5 percent state tax on personal income above $25,000 for a
family of four would raise $8 2 billion In 1992-93 and $12 1 billion In 1994-95
The proposal would exempt from laxation any retirement, Social Security and disability income, plus armed
services pay
II would give property tax payers a direct credit against their income tax bill for local school taxes paid That
would be phased in, beginning at 33 3 percent in 1992 and rising to 100 percent in 1996, said Rafe
Greenlee, Mr Bullock's press secretary Renters also would be given a form of property tax credit
The B percent corporate earnings tax would replace the current franchise tax, which is paid by only some
of the stale's businesses, - Mr Greenlee said
Mr Bullock's proposal estimated that a corporate earnings tax would gross $2 1 billion In 1992-93, although
the net Income would be only $400 million because of the elimination of the franchise levy
No estimate has been made for the 1994-95 corporate tax, Mr Greenlee said
The proposal recommends setting a limit on local school property taxes at a level below where they would
be on !3ept 1, 1991, plus a combined limit on all local property taxes
And It suggests the "option' of reducing the current6 1/4 percent slate sales tax by either one-fourth or
one-half a cent
PHOTO(S}: Bob Bullock
PHOTO LOCATION: Bullock, Bob
8/1 1/2011 4: I 0 PM
Archives I The Dallas Morrung News, dallasnews.com http:/ /nJ.newsbank.com/nl-search/we/ Archives?p _ action=doc&p _ doci ...
2 of2
1991 Copyright The Dallas Morning News Company
Home 1 Contact Us 1 Help Center 1 Advertising 1 Site Map 1 Find Dallas Jobs 1 News Feeds 1 Subscriber Services 1 Get the Newspaper 1 Special Offers
2011, The Dallas Morning News, Inc All Rights Reserved 1 Terms of Ser\Ace 1 Privacy Policy
8/11/201 I 4:10PM
6.
Clay Robison, Income Tax Bill
Would Lift Burden From Poor,
Legislator Says, Houston
Chronicle, Apr. 24, 1991
...------------------
Settlemenfboosts
minorities in HFD
up 65 promotions
lllttJIM ZOO
Houston f;hroniclo

ctlminaUon suit asalnot the city
of Houston opens the way for 65
promotlona ol black and Hispanic
fireflghtel'll.
U.S. District Judgo Sim Lalte
ro]ected some white firotlghtera' ..
objecUons In approving the con
sent decree, bammered out In
February by the city and the
HoustorfBlack Firefighters Asso-
ciaUOII-
The minority
claimed civil wvlce testa used
for promotions between the ranks
of and iadderman and dis
Lrlct chief were discriminatory.
Based on the racial makeup of
past promoUona. Lake accepted
the plalnllt!s' claim the tesli had
lnfllcl<!d a "disparate impact" on
white, black and Hispanic llre-
llghle!ll.
Under the sottW\nent, Sf chauf
leur and II juiiiQr captain p<i

lions will come open as the
department moves from a
to a lour-shill schedule, a cbaage
in its early stages.
Minority llrellghters will not
rocelve any o! the back pay or
residual ptomoUons they luid
wugbt.. j
The settlement has essentially
polarized the deparlment's rank'
and-file along racial lines, a point
acknowledged privately by sev
era! llre!lghters at Tuesday's
hearing,
Thai was made evident by the
lael the M llroiiRhtera In allen
danre sal In al1-whlte or aU
minority groups.
Fire Chief Robert L. Clayton
acknowledged this Is a "hl&hlY
emotional, l.ssoo that
has bred some resentment In the
deparlm<!nl but thet he supports
tbe setUemenl
'1 fell like
the compro-
mise we
came up
w!thtslalrt<>
both the de-

:ens," Clay
too tesW!ed,
A Horney
Gregg Ro
Clayton seoberg, who
represented

concerned they would be "ad
versely allected" by the decroe.
"The concern was that
whom (my clieolll) have IW&ed
up In past promotions, wlilte or
would now be on equal
looting with them, when their test
scores would Indicate they
shouldn't have been,'' Rosonberg
aaJd, His clients Included "a lew
non-whites."
R.C. Sims. usoclal!on preol
said Lake's ruling starta the
nerl phase or reform lor hla
group.
"We have won this battle, but
the war romalns to be fought,"
Sims said. "We must go back to
the stations and work on race
consdousnes.s."
Monorail Team parley
emJ9iasizes rail safety
IIIW TAIIA.PARIU!R 1'01'1!
Houston Chroniclo
The Houston Monorail Team
kicked oil a public relations cam:
palgn promoting the rail technology
Tuesday, emphasizing the safety of
the system and experience of the
firms that eventually will build It
Officials with Transportation
Inc. of Orlando, Fla, and
Kiew1t Construction of Omaha, Neb.,
said during a news conference that
they want to pro'l'ote the facts about
monorail.
''There are no secrets here," sald
TGI President Tom Stone "This Is
open. This Is public We have a
system that Is going to make Hous
ton proud!'
The news conferente was the first
In a series of public appearances by
the team aimed at countering recent
negative reports about the monorail
The Metropolitan Transit Authorll)',
board voted In March to negotiate a
contract with the team to begin
designing the 22mlle, f1.2 billion rail
system.
Aller the vote. a stall report sur
faced that ranked the monorail as
Inferior to tL automated rail com

other report emerged that stated lhe
monorail was lll<!<JUipped to with
r;tand a crash
Metro board members have since
they were well aware of the
staffs concerns about the monorail,
but financial guarantees and the fact
that the system Is attractive and
quiet prompted them to support It
On Tuesday, Stone used two small
models of the monorail frame to
demonstrate how the vehicle wou14
withstand a crash He aLso empha
sized that TGI'5 parent company,
BombanUer, is the largest rail vehi-
cle supplier In North America and
that the entire team has t'Xten;dve
experience building and supplying
rail systems.
In addition to the crashworthlne33
demonstration, Stone said it is lmn
portant to note that the chances or a
monorail crash arc negligible, be-
at
"Monorail Is Incredibly safe,"
Stone oald. "In the history of carry
lng billions of passengers ... there
has never been a passenger fatality."
Metro board Chairman Anthony
Hall said the safety .demonstration
was given when the board toured the
monoraJl system ln Orlando.
1'he demonstration makes it very

made aware of," Hall said ''We
talked about It In a very thorough
manner."
Stone sald the monorail technology
Is safe and reliable, but !hat It has
been caught up lnlhe debate around
the controversial rail project
"We've lnadvertenlly been caught
in the middle over a larger battle
over the project," Stone said. "There
are various folks who would like to
see Metro not go ahead wlth this."
Metro union workers file $6 million suit
Metro union workers have filed a
$6 million lawsuit against the transit
authority alleging Jhey were ha

ol!lces.
Shortly arter the August Incident,
Metro chalnnan Anthony Hall apol<>-
gized to union olllclals, saying that
even Lhough the police were within
!heir legal rights, entering the union
olllces was "an Imprudent thing 1<>
do:
Members or the Transport Work
ers Union Local 260 say they were
assaulted and unlawrully detained,
and as a result. suUcred humiliation,
emotJonal distress, pain and suffer-
Ing and other damages Metro olfi
<:ial! have declined comment
WedM!Iday, April24, 1991 Houston Chroniclo *** 23A ..
...
Income tax Dill would lift burden from poor, legislator says
' . L

Houaton ChtonicJo Austin Bureau
I\
I \
Gov. Ann Rlchardll and legislative regresalve tax uyslem In tbe coontry
leaders plan t<> postpone final deci- because of the ibeence o1 a state
olen> on and tax issues until Income tar and heavy reUIUlC< on
a session this sUOllller. sates. and excise t.ueo that
Democratic Rep. Garlteld Thomp- ' hll the poor bardet than the rich.
son's bill would. tax only those mak Thompson's bill would Impose a 3
inB more than $50.000 a year. !:'!,
gradually would be lncreued - but
try to take away this -1ve Ol)ly up to the $:00,000 Income level
,.,;;."'tar and to rolleve th;"O.xpay
eru be said.
Cill1ens for. Tax Justice, a Ia< in 11193. That sum would be consider
reform group, .. Jd in a report Moo ably less than the 812 billion that
dlly that Te.us has the second most Gov. Bob Bullocb has esUmal<!d hls
income tax propOsal would ralK: per
biennium by
Bullocb has a !lot ;,.;.
cent pers.t>flal income ta.x on annual
income over $15.000 ror a family pf
tour and an 8 percent tax on
rate earnings. Bullock also '1001!1
the corporate francbiso UIX
and offer properly tar reltel ln. the
form of income tax .tor
residential taxpayers.
The state Ia facing a projecl<!d $4.6 \,
billion revenue shorUall over the
ne:d two yean.
1619 =urserf
Is ita girl ora be
a twiQ? That's liill!iiagiC)oo disc01tr
with Newborn Magic N=ry. Each
newbomat"l'h'CS wilh its 0\\lliD
disappearing homecoming
rube. surprise ouilh and more.
,.. ....
19.71
UlMiss
Magic
Makc,hairstyling colorfuL ]llll brush
her hair and it changes to spectacular
minbowcolors.Jirush and ils
hack 10 beautiful blonde You can
L'\m decorate her hain,ith 11'Carts
'
Income tax bill would lift burden limn poor, legislator says 04/24/ I 99 I ... http;/ /www.chron.com/CDA/archives/archive.mpl?id= 199 I _778629
I of2
"" rchroll1 i Houston Chronicle Archives
NEWS SPORTS BUSINESS ENTERTAINMENT LIFE TRAVEL BLOGS JOBS HOMES CARS BUY & SELL
Income tax bill would lift burden from poor,
legislator says
CLAY ROBISON, Houston Chronicle Austin Bureau Staff
WED 04124/1991 HOUSTON CHRONICLE, Seclion A, Page 23, 2 STAR Edition
Share
Ci Share
AUSTIN- A legislator from Fort Worth Tuesday told the House
Ways and Means Committee his proposal for a personal income tax
would lift an unfair tax burden from the poor and help state
government out of a financial jam
6
lll Del.lclo.us
Twitter
His bill was endorsed by two public interest groups and one labor
union but didn't attract much of a crowd The committee tool< no
action on It
[il Facebool<
StumbleUpon Gov. Ann Richards and legislative leaders plan to postpone final
decisions on spending and tax Issues until a special session this
summer
Democratic Rep Garfield Thompson's bill would tax only those making more than $50,000 a year
"We're taxing the people who can afford to pay these taxes, and we are trying to take away this regressive sales
tax and to relieve the taxpayers somewhat," he said
Citizens for Tax Justice, a tax reform group, said in a report Monday that Texas has the second most regressive
tax system in the country because of the absence of a state Income tax and heavy reliance on sales, property and
excise taxes that hit the poor harder than the rich
Thompson's bill would Impose a 3 percent tax rate on annual income between $50,000 and $65,000 The rate
gradually would be increased- but only up to the $200,000 income level
The measure would raise about $950 million when fully implemented in 1993 That sum would be considerably less
than the $12 billion that Lt Gov Bob Bullock has estimated his income tax proposal would raise per biennium by
1994-95
Bullock has proposed a flat 5 percent personal income tax on annual income over $25,000 for a family of four and
an 8 percent tax on corporate earnings Bullock also would repeal the corporate franchise tax and offer property
tax relief in the form of income tax deductions for residential taxpayers
The state is facing a projected $4 6 billion revenue shortfall over the next two years
Copyright not leo: All materials In this archive ara copyrighted by Houston Chronicle Publishing Company Division, Hearst Newspapers
Partnership, L P., or its news and feature syndicates ond wire services No malorials may bo directly or lndirec\ly published, posted to Into mot and
lntronet distribution chonne!s, broadcast, rewritten for broadcast or publication or redistributed in any medium Neither these materials nor any
portion thereof may be slored In a computer except ror personal and non-commercial use
$79/HR Job- 476 Openings
Make $79/hr Working From Home Requirements:
Computer. As Seen On MSN.
www .selectonlinejobs com/
Mortgage Rate at 2.370/o
Get the Best Mortgage Rates Refinance & Lower
Your Mortgage Payment I
Mortgage . .LeadSteps com
Money Merket Accts
Find the best yields In the US Plus calcs, news,
tips & more
www bankrate com
chron.com
Home
Houston & Texas
Nation
Busmass
Spar is
Entertainment
life
Tra\\31
Blogs
Ct1ron Commons
Weather
Traffic
Topics
Petstrouston
MarnHouston
HoustonBelief
Houston gnrderl!ll::J
Marketplace
Jobs
Homes
Cars
Shoppln[l
Personals
Post an acJ
Contests
Services
Help
Gusiness 0Jrer:lory
Contact us
Send us !1ps
Ctuomcre In Education
About the company
Horne delivery
Advertise with u5
Buy a h<.Wner ad
Privacy stBtement J 1i?rrns of service
Copyright 2009 The Houston Chronicle
Not Logged In Login/ Sign liP
NOW
90'
Mobile ISMS
Search advanced search I archives
m
;\ Chron com :) Web Search by YAHOO!
Bodies of two infanls found in Tarrant Co
Man dies in crash on tollway in NW Harris Co
Michael Jacl<son's death called homicide
Melanie Griffith checks into rehab
Malaysia delays caning of woman who drank
beer
Obama to health care critics: end 'phony
claims'(654)
More advertisers ditch Becl< after he calls
Obama racist( 50S)
Deal on jail, stadium, Dome in home
stretch'(17B)
Try to envision this: a world with $20a-gallon
gas(155)
County puts more heat on adult
businesses(155)
Membership
up
,;troady rcgis\Qr.Jd7 Log m
Other editions
Mobilo
11SS leeds
eEdtlion
E-mal!
8/11/2011 10:4 I AM
7.
Mark Tatge, Corporations
Brace for State Income ax,
Dallas Morning ews, Mar. 23,
1991
TOOAY'8 COLI.IMH8
FINANCIAL
WHATNYS010 .. 11-71'
FUTUA8 PRICES. . . . . . II'
WHAT AMEX OlD--. -. -. -.-.-:-:Iii
.. tii-11F
Congress orders
funding for V"22

By Martin Zimmerman

AJ Copeland Inc. snid
It filed sult FridAy against Merrill
Lynch & Co., which provided 5141
mUtton In interim financing for
I he company's troubled 1989acquJ
slUon of Church's Pried Chicken
Inc.
The su.lt, Uled in LousloiUI SUite
Court In suburban New Or)e.ms,
where C<Jpel.ond Enterprises b
bAst.'d, Also nlltnes MerrUI Lynch
C&p1Ul1 Mru'kcts as n defendant.
Modem operandi
In a news release, Copeland en
terpriscs, wWch also flpcrlltes the
J:\lpeyes Famow Frlcd Cblcken
chAin, SAJd It ls occus!ng the Mor-
rill Lynch enUties oS
their fldudfll'Y duUes toward Cope
lond Enterprts.es In conne-ction
with the Church's ocqulshJon. Cork Computer works on Maclike machine that's compatible
The suit contends that Merrill
By Tom StelnertThrelkeld
!k(I\MI.Pf/T'boiD&U&IUcotaU,tlm
IBM amons tbe nation's producers of pe:roonaJ Lynch. while ae1lng M tbe com
computers. Apple has jealously euarded Jts pany's Investment bonlter, failed to
lneompatlbUlly, preferring to maintain a monopoly sell $200 million In s.ecuriUes tb.ol
oo wbal Jl believes is a Juperlor product kept would have refinanced some of the
superior by light Integration hardware 1nd Church's acqul..Sitlon debt ot a
Copeland Enterprises ... b $60
million In dlululges from Merrtll
l.ynch - the amount the company
says me the Increased interest ex
peoses incurred.
Merrill Lynch, wWch provtded
bridge: financing for the Cbuf(b's
ucqulshlor:., filed suU ag.a.\nst Cope-
land Enterplses last NovemOOr In
New York In connection witb the
acqu.LSIUon
Merrilll.ynch officials couldn't
be reached for comment late Prl,
day. Copeland Enterprises o!flclals
decUn.OO 10 comment beyond their
brt!.!l lle'm release.
Cope:lend Eau:rprJHJ saJd Pri
day 1t Is atlll .auempting to re-
structure S:U9 mUIJon In sonlor
bank debl arising from tbe $449
million Church'& acquJshioit In
oil, Copelbnd Enterpr!BOI bu de-
faulled on Uill million ID
Church's.rela!ed debt
Company orf!cllls have BAld the
company IDJI)' have to file for bank
ruptcy proU."Ctlon If It C4ll't restroc
lure the debt
A
vsnn .-The capital of 1bt Lot18 Star IJtltG
baa been 1 crocJie for creating eun In the
clone computer buslnets.
Tbloi.J the city that produced Michael DtlJ, tbe 25-
yaar-old formc:r Unlvcr:ity of Texu medtea.J tcbool
81udent who bet.ametamousand wealtbyNUin& bla
own ventona of pebonaJ eompiten by phone. 8111
Ktyden, an oldJter at .U, pve birth to bls personal
by DCUJoc par11 out of tho b&c:k of
bil Cbevene In Industrial parks. Dell Computer Corp.
and Mr. Hayden' CompuMd Corp. eacb sene rate
more than b.atrbllllon dol1111 lo aooual ules now
software lower Interest rale
r"Kwtde range o!manuf..cturera baV"e been allowed f--------------------""'-::_---J.
Corporations brace
for state income tax
Kevin Corcoran my be I be nex11umtnary to
emerge from Ibis CApitAl at clone atau.
''There mutt b4t &Dmelblng tn the water bore," he
quips.
Only, unUb Met&Bn. Dell and Hayden, Mr.
Corcoran ls not trying to buttd a tnato by m..oklng
penol141 computen lhlt duplicate the func:Uonlllty
of machines made by IJlternaUona.l Bualneu
J.UcbJnaa Corp. lnrtud, Ur. Corcoran wants his COrk
Computer Corp. to be the tlrat firm to deUver 4elk1op
macblnetlbat function tdentJcally to tbe MtcintOih
computer, 11 machine tbat lllloc:ompattblewltb tbe
JBMatarulard.
Tbe Uaclntotb c:omputen: bava bHn su.cceaful
enoua!). In tho past seven yean to make tbelr
"'"'tfacturor, Apple Computer Inc., 111<011<1 only to
to provide dlllk drives and other equipment tblt
attach to tho machines. A wide range of
&al'tware developen also produce program that run
on I be macblnet. adberlns to guidelines that
m.elntlln aatdct con.tl.ttency Jo the way usertlnvoke

But tho lhclptoab lttelf and the operating
soflware that tells U how to run and provides lls
menus of options and Ohscreen symbols have bun
Jnvtolato Apple Compu10r Jnc hu bun thrlaola
supplier
Mr. Corcoran lnten4Jro cbanao tbal Jn June, be
oxpecu tG begin sblpplng bla Cork Sylltem 30, a SJ,OOO
macbtne that b dealgnod toprovldethe cap.bllltlos
of tj'jtemt that coa1 nearly twice u much.
His company bas contracted out the production of
the main circuit bolrd, wblcb will bo tba guts or the
machine. Programmtn employed by lhe flrm also
are worldng on Cork' own operating tu)ftwar,
which provide-a the color, print drlvlns and screen
preunttlon capabUIUes or moro powerful
MlclntoJb machines.
To avold lo!rlnglna: on Apple palantl, one put
Pltue Mt COJUt Oil P&lt ;W,
By Mark Tatge

Texas businesses are bracing
for the lncvJtab)e- a stole corpo-
rate Income taK - says Brad
Gabm, vice president ot govern
monta1 affairs with the Texa.s AJ;.
socla11oo of Business.
WUh the state factng 11 SS bH
lion budget dcflcll, are
looking at a variety of new taxes
to rAise revenues. But "the whole
Issue that Ill at !be Up of every
ont''ts tongue Ill whether there
will be 11 state Income tax," Mr
Gabmsatd.
"I think the chance of some
type or corporate Jocome lax
btlog enacted Is grentcr thnn 50
percent, he SAid Avoiding a
personollncome tox U a blgb prl
ortty,''
Mr Oahm, wbo to TAB
members at a Nonb Dolias lunch
con Prtduy, SAid he expecl9 11. re
structuring or tbc &tate'& tax .li)'&-
tem. Among the po55lble chllnges:
II The !rancblse tax of
55 2S per UOO of capital asset
VlllUC Will bt: CUJ to S4 per $100 of
The rrancb.lse t.a.x Is
paid by blg cnpital soods
producers, sucl1 as manufactur
ers, ond bas been criUclted llS
being regressive
Under proposed by
Rep. James Uury. 0-Galveston,
PluM 1et COlPORATIONSoo Pact 1F
. High"tech industry execs
push for new trade pact
Falling short of 20% share
Innovation key to U.S. chipmakers fi'?-ding success in Japan
By TYJ"OIU' Mdi!lw>
...,.....,..,,,..DIIIIIIUnil!fMm
WASI!IHOrotl- Two promln>DI
hJ&b-tecb Industry executlvee from
TeXas urpd Constltlll FrlcU!y 10 IUP'
pon a new U.S. .JaJ:all semJc:onduc-
IOr trade aareemont tbat would sfva
US manulacturtnl more OCU*!I to
!oretgn DW'IteU.
"We 1111 convinced that the
United States and J1pan 1bould no-
eotiJte 1 new agreemtnt on reml
conductor ttadt," utd .acd Canioo,
praidtnt and chlo! ex.ecutiv. olll
cor ollfollllo!>buod Calppoq Com
pu .. r Corp. "W< ...., "'uaiiY COD
vln<:e<J !hat ID bo .-ui, tha

Computer S)'B1em& PoUcy Project, a
t:!t
marke1 computer and soft
wara. Jerry R. Ju.okint. cbllrman,
president and cb.ttf ex.ecudvo ofll
ar ol o.llaf.bued Teul lnnru
menu Inc., rtpttHDtod l.hf Semi
CO!lllll<torlndllllr}'.loooclotloc.
TbD two Texas exo;uUvn pre--
sented their plAn for 1 new U.S..J

a rue joint eflon by tha compllter Merry II. Junld111
:b!cb

port of ttust aareemonl c.allod for 20
computer chip uade apvmeou. percent foref.an aales In tbt Jpa
1bD UDJtod Stataa and Japaa eur new narke1, aDd U.S. lndllltl')' olll
... _.a, _ ........... ""A.."' ,.,. t:t....1,....,_ clals contend Japan hu only al
Jf at flm you don't uccoed,
If)', try, optn
Amer1ctn mwn of micro-
chips thoua!llthey were going
to make bl& lnro.dl Into tho
Japanese market for their
when U.S. and J1pa
nese otncJalJ In 1Sl86 noaoU \
TOM
Spoclfloolly, !hey tho!Jibt BTIIINIIIRT
they ....,.lvod clear commit THJIIILKILD
""'nt to doublllli tha U.S. TECHNOlOGY
lhilro or lbe Jlpe.llCID chip .;.;; ___ ;.;.._
mnrbt from 10 percent to 20 perctnl
nte a&r.ment ru011 out tbtltulllmCir
AndgueJIJWhll1
The US. share hAll not reoched 10 porcont The U.S.
hr" h ... nnt r-.r.hM I" Th.a US. lhAna h.u
Inc. went to WAShington Prldlly to terUfy before the
lntornatlonal Trtdc Subcommittee of the Sctlltc Com,
mttteo on Finance to addrtss what !ollowup actJons
are needed now
Aho testlfytng wu Joseph R "Rod" Canton, presJ
dunt of CoJDpaq Computer Corp., the Houtton ptrtOnal
computer mWr The joint of tbo two Ttx
ans slgtulled a much different plclure th.ll limo
around
Mr Junkins represented the SemJconductor Indut-
try .o\s$0Ciatlon, which In turn repr.-ou the U.S. chJp
Industry. Mr. Canlon represented the Computer Syf.
terns Polley Projecr
ThAt dlflen from 1U111me: arouod, when cb1p and
computer compnles lpAl about 1ucb bu1c matttrt as
whether dumplns helped or bun U.S. IBdUitt')', Com
puter rlrt1111, or coune, benefit from lower cbJp prkol.
Out lower prlca hurt cbJp m.&nu!actutll'l.lod.Md, Ule
trade aareomcnt came bocou.ae Jl\Oit U.S. flnlll dropped
iving U.S. direct mail marketers a line Europe

ropGIIIl rceoiVCI45
pJccoS of dinct
IIW1 each you.
'!bat compues
with 20! t- for
the 8\'Cn!IO Amerl"
can and 106 t-
PAT*.
: =odd::
. MAIU<ETING - be opportun!
ties lor .AJnet1un
complnlea In the InternationAl market
: pll<o.
: At 1-' thAI'a tho WOI1l from Till' 14ail
: faU. a Ol:rden City, N.Y . firm that would
: like to not you a porn ofifee bolt in one or
all of 110m1t .0 conntrlu.
'Tbl comJ*1Ys latest expmaioo came
with tho-- of. 'l'N'I'post oflko
: bolt In - for rceo!pt of SOViet re-
._to U.S. d.lnct awbtlll& ellorts.A!J
. portolthe""'U:o, Tlll'wlllcWlvettheSO
VlOt mall bock to U.S.bued compan.tes vlo

ln esaanoo. 'l1fl' a local/over:ecJ
ocSdNia tor U.S. bll!l!DCSIOJ!I or IIIU'Vl.cctl, ec
cordllli to IIIII llLa, eenior VU:e prosldant
oiTm'lllll/&tt.llelaldalocaloddreos cao
help l!!lmul.at& ,__, lo Virtu&lly IDY
llllll campalin- a way
to "tm the wa:ten.''
- OlliDg tho euvlcol D1r.ct
I!Wia!ters,calalogen,publtJhe:ra, """""'"'
ers aDd mADufecturtmt, Nt. KAtn uJ.d. Vol
Ull1eexceedsmorethd.b

..,., behind tho post offices of tho UnU<d
Stoles, tbe Unl..., Klogdonj.l'ranoe and J
PM
By lhe end ol the month, TNT pllm to
odd poilloJ box - In CzechDalovald.a,
Pobu>d, Hunaary and Yugaolavlo.
..
Settlll& tlul record lrtiolgbt no
longer "WARM" - It's l.tte. To ba euct.
IU.JVt.nt Uormerly !Utlftl.PII) 1!1 now
known AS Ute 97"9 - wUb call lettern ro-
gret!ully misidentified In thlll apoca last
week.
'I'b.& mtiOl:l, wh.leb fettures con adult
contemporary mwdc, ctut.ngN Its CAll lat.
ters artor byC:U
of Atlanta.
..
b.u n..w &U.!tO>mtl.tC!'I
at U.s One DAllas Centre omcet Now under
the .a.ame roof wtlh 1-I&K are Focus Coam.u--
nJe:&co Orcup. o.n Afr1cm Amertcm pub-
lic rela.UOIUI, marketin3 llld tdvertis:Ulg
firm b......, by !WI c.vtu, and Ly4.1&
PUw4eo Turll.u Alaoda1N, IUipanle
cowling film h..ood l>yl ..
Tba firms will con>Ult on mlliU..UUU.
olthoiJih each - will COil
tinue toopenrte auton.om.otWy
..
Dtroc1:or/camuaman RHut L4tone
says IIlli I OOlJIS has-. "bls pOnd" In
the flhn lndustt)'. so. parbapo IIXJl"'OOnnl
IW amb!Uoos, l!r. LAtorre has fortoad Ills
Fiah Ft1ma, a fUm production c;:ompaoy, at
21111 MtJOnoey Avo.
Othe< lllllll" In IIlli catcll: RDbe1t WU.
..._ _, __ Jtal.

dU<er; Lyuo JohMoa, llno producet; lock
bt4, SliM raprooen..Uve: Bruoo llaU,
Baleo roprtNli.,Uvo: and Lnrlo Pconoa,
ollU:o l!Wl.lpl". (S).>ealdng o! talents, Ills
!'WllogoCl"Oill.,gotollobY-of
JtraOM 111 v-. To """"'' dlrcct ma11
p!ec:os, T-ohlru and custom-made ll!lh
ptna.t
..
Jlldumy np: Uouston oUm.an Odc:ar
Wyan- descr!bad" "me.mu than ajunl:
yard <los"- Is wuloubtodly the...,. .. cur
renUy "bot" med.l.a sur foll!lwing hJs res-
cue or COUtal Corp. work.enl from Iraq. A
mustreed In Vanity Fair. nien cateb the
cover piece of April's Texu Atontldy.
rrAllllly, my dear, be dot:m't "afve a damn."
... ltldJ.anlllW. --lac. has par.
cl1Med Pro- lliC.,. S.,...,-.old-
tlop that...- light, sound and p>jo<<lon
for D1Uooal111<111tlll&J throiJihout tho COOII
try . 11WII4tlJ>tli'Ul.!llll!wiiCa""has
opened at 134 P1tt!bur& St , .. NcC4nn: El
1c1:ooa DoJlu 1.1 tholooalocalwlnoor (for
client 1'ltmlia lac.) camana: tho
2f7 ProComm Award wln.nenJ to AD annual
compoUtloospocaored by the -A4
onhllla -tloa .. ' o-n Pullllc ..
l&llou bu boon ratala<l>)' tho -...o
&:bocl ollh<t Arta at lloothtnl lktbodJJt
Vlllml'1 . Tbe Han ApDcy bM boon
nAJDod ag<!llC)I or record by TaDIIWical
Ill< Tho DoJlu c.::: .. L=tlc:t Cclm
d1 bas O!!abll!hed. corporate ma ... /Well
""" Pr<J8".111 with l'rooll4ull'l lloallh Ill
ita<qu.1kll Club- for DCC lllllllben and
their employees. For more tnlormAUon,
call eon.o To.,.,.,S$1627.
..
Bold Doaruo Golno bas booo ap.
pointed u mana,gcr of the- Ddlas ctrloo ol
the ManiD Aa1JK.'7 and aonJor acoount ex
ccutlve for lhe Bank Ono TUU DCCO\lDt
Uti. Guinn was formerly dlrtctorofm.artst
lng At Bank One In Au.rtin." ..
based photognopbor l!lwart c.b4ll b,.
publl&btod a bound collection p! pbat<>
graphs .... to be as a sellpromotiona.l
- 'tll.);an from his rooent journey to
'"
Plnl.lh u...: l!ull4tlJ>tl ..-nob ...
dl&ctplloolhllt I.II:Oillctl.,..dU!lcult to gel
)'OW'" 41'm! !J'OUDd lf yot1 ar6 6
kid.
v.tcrll. e.,.rooenUy .. v-.ppad'"
his OOD and IODI.O frlendJ wete exch.I.Da1n&
ill!Of111DtiOD about lhetr !Gtbm' octDpi-
UOIIS. l!r. e.,. .. prosldent ot llall<4dlla
aad RcoMrdl CotuiNlon lliC., a aubdd!Ar)l
of tha WAIRIC Gloup. wbtcll. AliiOilll othor
c:Uents, Nlprt19C!Dll HoiDL
Doclot. LIVI}'Cr. Accountant Tbe c:on
vomtlon wc.nt etSUy until U ws the
younaor ll<Jda's turn, "I'm DOl ...ny
!Unl," he eon.feseed. "BUt ho dON fll:)mb-
lhiDSwitb ketchup."..,..
Sial/ wrUu Pal ,;;at4wln rfPOIU M ..-w
dJa ond marlutl"l (or Tba Dalllfornln3
N<W11.
HBGHIST MONEY MAIKIIII'I' Yllii.DS
Rehab center seeks (ar"flung reputation
IIJRIEFINQ
By Joe Slmnacher
1\tDI&IIImllf""'
The Dallas Reb.abiUtAtlon In
SIHUie abd tbe Un.IVUSI1Y of
Ttxu Soutbwcstern WedJcal Cen
ler Friday announced 1 joint ef
fort to make o.lla.t an Intern.
tlonal !oc.al point of pAralysil r&-
rJe.arch.
Wllb a SSOO,OOO cbmUena;e
grant to the Southwestern UedJ
cal FoundaUon, the D4llas Rtha
btlltaUon Institute funded the
first of four d1Uingutshed pro!eJ>
sorsblps Jn rebab111l&Uon re-
search at trr Southwestern Yt>di,
c:al School By meeting the c:hll
lengc grant, the lnslilutc broua:bt
Ill PJobiUty Center's tot4l endow-
ment to S1 mtlllon, an amount of
flclals called unpan.Jioled, And,
they said they are confident the
center wJU blliVo a $20 mlllion CD
dowment by 1995
DAllas Rehab medlcol dlroctor
Dr George W Wbar1on IUild the
Paralysis research targeted
current endowment 1s bel!tvfld to
be not only the largast for ro-
acarc.b Into mobWty lmpoJrm.ent,
but abo the only 1nterd111clplt
nary resoa.rcll center for aovart
porAlyzlng 11\lurleolnd.u.o-.
The chlir funded Priday is ror
orthopodlc rehabUitalion re-
saarch to lncru.ae mobiUt)' or pA
tlenu. WJ.lllam B. Neaver, dean of
lbc Southwestern Medical School,
said lbc search hi under way to
fUl the new chalr,
Subsequent cbalrs wJU be In
tb.c field$ or pb}'llctl medh:tnc,
nourocdenco 1ncl buJc
reseucb into repa.lrtng nerve U.S.
sue, One fJf !our c.b.aln1 wJII
ee1 u director or the Mobuuy
Center for RehabiUtaUon Re-
search The addtUonal tbaJn wlll
be ClUed M the chollonge &ra.ntu
ore met
Wbile tbe CGntcr'u toog:term
QO-Ilis to cure p.sralyaiB, ttB tm.me-
diato go.alis tc tho qu.al
lty o! lifo fO< mobUitylmpalrecl
peUants, Dr" Ne.ave:a aa.ld...
Rese.archel'll will wort With pe.
tlenta at tbe Rehab!UtaUon lnlti
tute and tho hospltall cl0141t to
the medJe.al center, :za.te Upsh)'
Unjvenlty Hoap!Wand Parldond
UemorialHoapttAt
'1'hcse pitlentl Will be looked
at by fotlul from dttfcront"penpeo--
tlves, but wnh a t:ommon S:Oil,"
Or. Wharaonaaid
"We're not juat goiQ.g to wAlt
ror yean while we trY to chip
away at the Jong-tenn solution to
tha problem," but to lmmcdlately
begin finding so1uUonD to prob-
lem!IIS$0Clated wtlh peralyal.s, be
said.
A.ssoc:tated problems Include
those relating to bowol and
biJd.der cobtrol, aoxu.al dyafunc-
Uon, skin condltloil!l and arm and
leg motor control.
''We are detarm.J.ned to
redefine the word
'robabllltatton,'
11
Dr, Wharton
said. we wm 111ppon the ,...
84alc.h ueedod to provide tor aut
paUonu truo phyzloiOCfe -..
Uan ot funeuon and an ultimate
cu.ro tbrougb our rtte.areb &frota.
lions with lbe Southwettern
lea! FoundaUon J.tobillty C.ntar
ror RehabUltlllon Retearch. the
J(ent Waldrep National PAralyda
Found&tlon and Southwestern
M&dlcal School.''
Prtda)"e arant wu m.Ddo by
Rebob HoapliAI S.rvlcef Corp. of
WAShington, Cl aub:ddiuy or N
llonollledlcall!oterpr!aoo, wbl<h
owna aod operatu O..UU R-hab.
The origlool DaliA> rohab lJull.
tuto Wll founded In by tbo
Caru1h rmlly or Dallas.

McDonnell Douglas =.: .. =I likelihood of tax
tops contractors list to
bUUons ol dollan: pay lhe greater of e1ther tbe new
Contluued from Paae-tf.
gear such as cbemiCDt suits and
protective vests, food,
do:.ens oflraqt Scutb.
Pollnwlng Raytheon were
Lockh.OO Corp. (SM billion,
down from Sl.7 billion the prevl

Vnlled Technologies Corp. (12 9
bUUon, down rrom SJ.IS bllllon)
and Grumman Corp. (52 7 billion,
up from $2.4 billion)
. r\ il rranchlle tAX or a tlal pen:eot
UeOonncdl OouQIM $8.2 J8,8 lAX OD Uu:oma. Tbe tbiiije WOUld
OonotlfC>puamlca 8.3 7.0
Gonotal Eloctrlc U 5.8 counting !irtlll, to pay alate tu,.,
4.t
4.0 3.8
!lr.Otthmllld.
E!llncreue the st.ate'a curreot
6.25 percent GAlea tu. There 1J
allo Ialit of broldealng tho .. w
tax to ae.rvJceJ now exemp1 from
tbetax.
Sondplace General Dynam
Lcs l!i a co-producer wUb MeDon
nell Dou.glo.s of the Tomahawk.
and also ma):es Stinger and ROA
66 missiles, In addition, General
Oyno.mtcs produces P16 Falcon
rtsbter alrcrart at Its Pon Worth
plant, nuclear submarines and
the M4 tank, the Army's primary
bat1le tank In the ground war
against Iraq.
In fJftb place was RAytheon
co,, moker of the Patriot a:round
to-atr ml!lsUes that knocked out
Tenneco Inc., wblch produces
aircraft and nuclear sub-
marlnH, jumped from list place
tn rtscal1989to No. 10 o.ycar later
Jts contraclt Increased to $2.4 bU
Hon from S900 million
Textron fnc,, whose Bell Ucll
copter subaldl.rtry l..s bAsed ln Tar
rant County.,we.a 19th on thallst
wl1b su billion In l990 contract
awards., Dallu.baSed LTV Corp.
also lJOSied 511 bUiton to con.,
trr:tc:UJICU1year
II Hlgbcr motor 'f'eblcle fuel
taxes.
Yr.. Gehm Bald corporata
Jncome/francbJ.se we would ra!&o
only about S3 bUllon of lbe SS bU
llon the LegtBlature nteda to b41
anct the tt.ate budget,
Cork Computer works on Mac" like machine
Colltlnutd from Pqo IF.
wHI be mtntna. At tblJ polnt, buyers wiU bave
to supply the memory cbtp that
comet Witb atllndard Mact.o.toah,
That means sa!lware detJ&oed to run on lbe
t.Uc should run on tho Cork u ''bocaUN
tbero't a Mac tn1Jde 11," lAid. Mr Corcoran.
Cork hu terted "dolon.tlaod doloDJ cf 41florent
packages" of software on Its ayatem, Wllbout de
tectlng any problettlll In oporaUog them, be
&.ald.
"For them to b.ave tomethlll.J a:Jplflaun,
they would have to have" thetr own buie read"'
only memory cblp 1b11 doetn'1 vlolata Apple
patenta, eald Tim. Bajlrlo, vice protldoat of ere-
alive Strateg.ln Rueareb lntarnaUoD.Al to
SantaCiart,CaUI.
"I'm a little tkeptlcal aboul tbo approach,"
aald Jorry lklrroJI, odlltlr at At4CWDrld m&&
tine, to San PrtnCIICO. "11'1 1 wellbuten p.th
where tomtone takla an old ROY and triM to
make 110metblos new out of II "
What Cork 11 up q:IJ.nr'l t1 rocre.auna "tbe
mort upldly cbaoatas pan Gf tho operetiDJ
sy11elll. Good OOdl.''uld Yr, Borrell.
In ef!ect, Cork mu.n mab 111 operat1a1 qt.
tom and Ita ROU componuto for Jx. aaut
11on1 ot davelopmant of the Nadntotb l)'lltm.
"We jUJ'I: don't think that't 1 vJablo lppN*!b,ot
bo uld. "Applo iW:tlf could not DCtOatpUab
tbll."
The lmponJns of that cbip alJo meant the
Cork machine wiU bu reotrtctld to ao1Una: to
eurrenl cwnere of lau powerful Nac:intoeb m
cblnco, who want to upe:radt to tbo moro pow"
"It's an Interesting strategy," u.Jd Wr. B&tJa-
rln.
Later, Carll. may provide whole ayatem.J,
wltb all the read-only memory eblps netded to
prGduce Mac:intotb fune1ton1. lt'a no1 1 technl
col problem, ho lnii!U. "I! It'D potlliblo, wo'll bet
rudy lo exploil that poealbUUy," aald lLr Cor
eoran, a U.ycar-old law Br&d.uato from l..be UnJ.
vcnlty ofTexu at Au.uln But, "at tbla Ume, fl'a
not eiear tbattbll lt 1 p<aJbllhy, tbat lhtl't
leaal poutbUUy,"
EXIIIJDi M.lc OWDOrl may be a riublo
enough market for Corll: to aot flirted Ur- Cor-
coran flsuna bla apl!rGtcb. could appeal to
owners of more tbao baU of tho f 5 mUIIoD II
clntothea now In uso, tllhouab Yr. Borrell
question& tbe Idea that tberei.J eucha bll mar
iutt, &lvon experJenceJ ol other VfDdort, put
endprettnt
Por IDJtlneo, tbe approach wu t&Un by
compi.Atet to prodUCt portable or tbe
Uaclntosb, bclfore Applt ILMlf otrered 1 porta
bla macblne. oneaueb euppllar, wbJch UNJ the
Oynamac brand oamo, buictlly took mot1 of
tbe lnnardl or an oflthHll.ell U&c:tntoth and
roarrllJ.Iod them In porubla cue, addlna a
nat ocroon. Now, II offtl'.l ICtteiUithatatt.leh to
WAC computon to make tbem pol1tblo.
Mr. Coreonn alto ta not alone In what ap.
1*11 to be a bubble ready to burtt an tht Mlc
mark.et, provldlna dttktop elonu. In Cuper.
Uno, CaUl., where Applo 11 buod, NuTtk Com
pu1en 11 trylaa to deliver a chip aet, opentlns
l)'atem and ICI'HD dtaplty.

that
would allow anyone who wtnta to bocomo tho
terface, called Motif, but not the llac lntor1oce
lt6elt
Atooln CUpertino, Hydra S)'llllllllln<:.I.IMU
Ins a Sl,OOO board tblttmulltel tho Mac. Sot
Is an 6dd.on ror mw computer l)'lttml. 8aD Dt
tgo-buad RDI Computtr Corp. 1w davalopod
51,700 pack.ljt of llasdw.,. and aolttrantlhllt
lots c.oroputer ownem run Ute aoftwm, but 011
ponble mtcblnea thtllrt buld oo all an:bJ
teeture championed by worbtltJon mabr Su.o
Mlctol)'ltam.Jlnc.
In effe<;t, Yr. Corcaran and the othm
tried to ovoid a hlld.on batUa wtth Apple, Ha
A)'a relltlona wltb tbo firm 10 far bave betD
aent.al, but notll that "Apple bu a biltory of
bolDi lltlglolll." For lllflaDc4, Appltt baa botn
lockfld tn I flarc.e b.tttla to prottc1 the
01
1ook
and loti" of tu Nlclntoeh from WcrOIOh COrp.,
wblcb Ia martellna proa:ram c.lled Wlndowl,
which provtdet many atmUar ru:turu ror mu.
typo computtn.
"We'Ve bucJaated lf&Difleant IUDOIID.tl"" for
po1end.t IIU&IIon with Appla, oneo the Cork
1)'11flm rMChN Jlllfket, OVCID With lbl pncau-
IIOnt btl tOIDpiD)' hu tWo, Ur. Con::ann
uld.
COrk't announcement of tht S)'IWm 110 wu
duly ncordld In PC Wut,e tradt D:lapliDe, tn
Novembe-r, In Dlc:tmblr, Compultr RtNIUr
New1 rtported lhlt Cork planned to rtleuelbo
maebtne ''lnNa.rch." Now, that role.uol.toffat
leiUt until JuDe, by Mr, Corcortn'J natomtDt
1ht1 week at blt boadquuten.
Ho AYI hll ll).ponon tl.tm'l devolopmtnt
work aoo. thai a
Archives I The Dallas Morning News, dallasnews.com http:/ /nl.news bank.com/nl-search/w e/ Arc hi ves?p _ action=doc&p _ doci ...
I of I
search dallasnews com
News Sports Business Entertainment Life Health Travel Opinion Autos Homes Jobs Shopping/Ciassifieds
Weather Traffic Obituaries Celebrations Photos Video Newsletters Mobile/Alerts Contact Us Subscribe
Your purchase of 25 articles expires on 09/10/2011 5:00 PM
DALLAS MORNING NEWS
Corporations brace for state income tax
Marl\ Tatge Staff Writer of The Dallas Morning News THE DALLAS MORNING NEWS (DAL)
Published: MARCH 23, 1991
Texas businesses are bracing for the inevitable -- a state corporate income tax-- says Brad Gahm, vice
president of governmental affairs with the Texas Association of Business With the slate facing a $5 billion
budget deficit, legislators are lool<ing at a variety of new taxes to raise revenues But "the whole issue that
is at the tip of everyone's tongue is whether there will be a state income tax,' Mr Gahm said "I think the
chance of some type of corporate income tax being enacted is greater than 50 percent,' l1e said .. "Avoiding
a personal income tax is a high priority' Mr Gahm, who spoke to TAB members at a North Dallas luncheon
Friday, said he expects a restructuring of the state's tax system
Among the possible changes: The current franchise tax of $5 25 per $100 of capital asset value will be
cut to $4 per $100 of valuation The franchise tax Is paid mostly by big capital goods producers, such as
manufacturers, and has been criticized as being regressive
Under legislation proposed by Rep James Hury, D-Galveston, businesses would be required to pay the
greater of either the new franchise tax or a flat 4 percent tax on income The change would force
professional and service corporations, such as law and accounting firms, to pay state taxes, Mr Gahm
said 'Increase the state's current 6 25 percent sales tax There is also tall< of broadening the sales tax to
services now exempt from the tax Higher motor vehicle fuel taxes
Mr Gahm said a corporate income/franchise tax would raise only about $3 billion of the $5 billion the
Legislature needs to balance the state budget -
Home 1 Contact Us 1 Help Center 1 Advertising 1 Site Map 1 Find Dallas Jobs I News Feeds I Subscriber Services I Get the Newspaper 1 Special Offers
20 11, 1l1e Dallas Morning News, Inc All Rights Reserved 1 Terms of Service 1 Privacy Policy
8/11/2011 4:08PM
8.
Ross Ramsey, House Leaders
Study Variety of Possibilities for
New Tax Plan, Houston
Chronicle, Jul. 31, 1991
\
1991 HoustonChron!Cl<l **** 13

Fate pf preschool funding hangs budget ances
SuJ)eragency
bill wins
S,nateOK
IIV DIANA WIUJIUIIII
Houl.iton.ChJOnlcle Austin Bureau
AUSTIN - Mari, a 4-ytAN>ld
Freeport girl, is the bookwonn of
herlamlly. Although she can't read
ah;J
the afternoons she traces the
words.
It's her way of practicing lor
klndergarten.
"She tell!! me every day that she
can't walt to go tiack to sctlool,"
said Marla Lozano. Marl's mother.
"My other kids would cry or pre-
tend that they were sick to gel out
of achool. But I can tell that 'Marl
will he dillel'Ellt... leglslaUon. leaving the fale of the
Lozano cffi!llS Mart' entb!WJwn classes with a conlerence commit
lor learning to a BraZOllport IJlde. tee appointed to work out dllfer"
pendent School Di>trlct pilot pro- . """"" In the two bUb.
gram that targeis !ow-inCOme and "II doesn't make sense !hal the
non-English speaking children state spends mU!Ions of dollars ou
when !hoy are 3 years old. remedfal education and they want
And although "'boo! offlclala hall to cut theoe programs. It Is sheri:
tho cl.,. u progressive educalloo. sJgbted." oald Bill Laucher, site
Marl may he amoog the last stu dlrector of the B!SD program.
denta to benefit from such pro- CurrepUy, nine Texas school dis-
grams. !rielS oiler programs to 3-year-<>ld
The Texas HOUJe voted last week studenlS as part of a state-funded
to cut about m!IUoo from pilot endeavor. Under the plan
educatiOI! classes lor 3-ytar-olds eliminated by tho House, tho state
:\f. Ji'J
ate bas relnsU>ted the lundlng In lis tho program,
ver.loa of the educaUoo funding To he eligible, at leu stodenlll
'lfOII14 bi.ve to democslli'ate a lle<lll
,.,. pre-ldlldergarten in tho district.
Ellilble students would have to be

poverty level
'1110 plan Is similar to Head Start,
tho !JIM federal program for pre-
klndergarten educauan. which has
been heralded lor helping di>advan,
!aged childml succ:eed In school A
stedl"'lil' Head Start

The move to abolish the funds
time alter members of the House
Republican Caucu.s spearheaded
the cut to dec......., the state's $4.8
billion" projected budget shortfall,
Rep. Troy Frater, R-Big Spring.
who introduced the cut, said the
educational proeram was not a
priority and It should not be added
in a "budge\ crunch year "
"This is a program that we do not
need." &aid Fra'!!"
Larry Scbwelobart, co-director
of the Perry Pre-School Project in
Micblgan. said a. 20-year study of
that pr...,bool and ll.s graduates
concluded that preschool spending
ts cost-effective For every dollar
invested In preschool, society. yields
$6 ill benefits by ffilueing costs of
crime, special education and wel"
fare. he said,

lliltliiOIISIUMIIiY
Houston Chrontc:ie Ausbf'l BurllU
AUSTIN - Complaining that the
House bad sue<:umhed to chemical
company pressure, Ute Senate
Tuesday nonetheless unan!IIIOQ$Jy

;:
per-agency. .
The HI.HJ.Seamended veDloo wu
vatlly different from the earlier
Seriate bill. but the Senate llpoDli01'
told his colleagues he'd rather ap-
prove lt than have ll!e eaUre tssue
die In conlerence committee.
'River Massacre'' gunman's

House committee settles on budget
"I do oct believe that we, at this
lime. would do any better wltb the
conference eommit.tee." uld Sea.
Cor! Parker, [).Port Arthor. "And we
would endsnger tbe body of the bill.
whlcb bas, in fact, put us on tncl< lor
lloo.aeeommll-" mltl.ilevoW 1H.ID ad!l;lt-<>l!!!dga . will becoottng OUBehlemc'!!h .,....,_ .l
tee late Tuesday adopted a bud&t ofabout f5$ billion, or $32.1 blllloo in as a state In the long run for what agencies ass!"""" t ,. ly
DALLAS (APl - A mao origl
. nally sentenced to death In the so-
called "Trinity River Massacre"
of three law enforcement oflle<:rs
iW been removed from intensive
parole supervision only three
months after his parole prompted
a Texas Senate investigation.
The supervision of . Leonard
Ramos Lopez. a gunman in the
worst massacre of law enforce-
ment of!lcers ln Dallas hllltory,
was relaxed last week heeause he

"lie'$ working bard, he's mar
rled to a woman who be met in
...
U.rs, who aupervilled Lopex in the

Times Herald Tuenday.
"U he had violated the rules or
somehow goll<! aatray;lwouldn't
have recommended this," Waters
said, "But as far as his progress
goes 0 " there just wasn't a rea
son I could see to keep him here."
Lopex. 45, vias one of two gun-
men collvicted ln the execution
style slaylngs of three depuUes on
Feb. 15, 1!171, was originally ...,.
teneed to death. A secend trial In
11174 resulted In three life prlsoo
terms.
Only 16 years after
verdlct, Lopez was releaaed from
prison last Dee. 18.
The Dallas newspaper reported
thai Lopez bad been released and
was told to report to his parole
ofllcer twice a mont!L
The report outraged members
of a state Senate committee and
an lnvesUgaUon wu launehed In
April.
All<r ll!e Senate lnVeslfplloo!,
parole officials placed Lopez oo
the stricter program, requlrlni
hlm to ment with bla parole olfi
c:erFaweek.
1lie ruling by,Water meam thai
!11\:r atl!':l!
month, one home vLBit and one
office viBII
Southwest winds bring hottest
day this year - 98 degrees
Tuesday was HoU!Itonts hottest day
of the year - so far.
a lew degrees higher than nonnal
The result was "a typical Houston
ummer day," Stagno uld He noted
that the temperature trsdltlonally
reaches the I ()().degree mark around
genet- and protectltli the
from higher education and $100 mU aur1ng the 11100-91 budget period, The Senate's action ..00. the bill
lloo from welfare servieea Appropriations Chair
' .f,"!'
The proposed budget. wbleh 'lfOII14 man Jim Rudd said be couldn't could cover the remaining gap with wllh

r
take a :; percent slice from most predict bow many of the proposed a state lottery, an expansion of the The legiB!aUoo merges tho TelW
state a&eneles, would also cut about culll evtntWllly would be adopted. lranchlse tax and some fee increases Air COntrol Board. tho
$100 million from tho state prlsoo recommended by State Comptroller Drillers Board, the Board JrriJia
system. John Sharp. to111 and some luncUona of he (!e..
Lawmakers are meeting In apeclal Uoo cui "dsydreamlng" sharply p
0
ror
,.,.,Uootowrlteastatebudget.They criUcltedthebumanservlcesreduc fc W
lace a projected $4,8 billion shortfall tlon. giving it Utile chance to survive tbe sales a d gasolin ta ld water commission the Texas Nalu
between expected roveoue and the in the Senate.
!'ice ral Resources Conservallon Com-

cost of cooUnulog current levels of chairman of tho committee. ,. mission.
state oervlc:<sfor the next two ytara. Rep. Paul Colbert, who voted The House !ell ont Senate pml
1
tsaatednsueat thUeobn!Ucu,
opposed! we Rudd said the full House was slons creating Independent con
The House Approprlatlonlll Com- !ha expected to. debate tho bill Sunday. sumer and bearillgs olfi<s, And
while the HOUJe wolildiet the gover-
State leaders study .wiety of tax possibilities
Br ftOU iiAUIIiY
Hoooton Chrcnlclo Auatln Buroau
AUsTIN - An !kent-per- on
Increase in tho gasoline tax, a
business Income tal and a long Hat o(
fee increases lll)l the first places
lawmakers will seek new money ll!ill
summer, House leaders said Tues-
day
They bopeto avol4 an 1ncr,eaae or
change In ll!e &ales llx, which In
=a.ed to
The House'st.u-writillg Ways and
Meallll Committee wlll begin bear
ings oo taxes Liter today.
Both tho ebalrman of that commit
.. .:ci
they hope to avoid extending the
sales tax to such things aJ tap water,
haircuts, Ice cream. baked goods and

ll!oy hope to k<eR lawyers. ae<oun
tants and other service Industries
nempt from sales taxea.
"What he (Hury) Is doing . , . Is
developing various peckages that
would rm whatever void you need.''
LewlS sald. "You lmow,ll you want a
1000 mllllon tax blll, he's got the
package to do !hot. U you want oae
!hal's soing to be 1 butloo. he ha.l
that II takes ID a lot of different

SU!l, if the budget being written by
tlle HoUJC Appropriations COmmit
tee leaves too large a gap' between
what the state wants to spend and
what It expecls to bring In, sales
taxes will be included In the mix.
Nest, Hury said; 1awmalters wm
consider a series of accounting mel
aures and fee some

over the next two yean.
A lottery wlll he consldeffi!, but
can't he counted against tho bodget
dtllclt until voters approve it.
nor appoint the aCtncy's tJuee.mem
her llOard. 11 denied her power to
name its top ofllcllls.
The House added provisi(,.,. ,...
qulrillg the elly of Homtoa to pro-
vide water .and.sewer .. to
residential areas lt bas annexed,
cutting the number of environmeiltal
workers on the slate hY ZO
percent and laxing utlhtles that OW!l
nuclear plants a total of 10 million to
pay for administration of lowlevel
radioactive wa'!lte dumps.
Parker said he wiU Introduce sepa
rate leglslall6n "to correct these
things tliat the House dld." Speci.fi
cally, he oald, hill bill would rel111tate
felony crimes lor wllllully endsnger-
illg someonc's life by polluting,
strengthen worker saiety provisiOIIJ
and provide lor an Independent con-
.IIUIIIer advocate.
The city's official temperoture
rose to 98 degrees Tuesday afternoon
at the National Weather Service at
Houston Intercontinental Airport.
The prevloos official high temper
ature recorded here lor 1991 was 97
degrees oo July 14 and IS,
the first of August. r--====--==-----==C-=-=---=----
There are igns that the wiOII may
shill from the southeast through
Thursday, Stagno said. bringing an
Infusion of moist alr to tho Houston
area. That could reduce theam r
a lure by a lew degrees and bly
bring scatteffi!showers to e area.

Weather service meteorologist Ron
Stagna, however, oays a alight cool
lng trend may be developing,
.. h{.:,!
bring dry air from Mcliro to

the alr, eoabllng the mer<:ury to rise
On Tuenday, no rainfall waa mea
sured at Howton lntereonUnenlll,
but Isolated showers were reported
eillewhere In the Houston area.
Record local temperatura lor
July 30 and 31 are 101 dear-.
30/o on
--Our-Best--------
Exterior Paints
-our-aasusousa
Paint
:=.aar.r...,
San SUI *13'.!
House leaders study variety of possibilities for new tax plan 07/311199 L. http://www chron.com/CDA/archives/archive.mpl?id= 1991_800341
1 of2
""::vchron ! Houston Chronicle Archives
House leaders study variety of possibilities for
new tax plan
ROSS RAMSEY, Houston Chronicle Austin Bureau Staff
WED 07/3!/1991 HOUSTON CHRONICLE, SeclionA Page 13,2 STAR Edition
Share
U Share
AUSTIN- An BCent-per-gallon increase in the gasoline tax, a hybrid
business income tax and a long list of fee increases are the first
places lawmakers will seek new money this summer, House leaders
said Tuesday
mra Del.iclo.us
Twitter
Digg
They hope to avoid an increase or change in the sales tax, which in
recent years has been increased to stave off state budget crises
lffi) Facebook
StumbleUpon
The House's tax-writing Ways and Means Committee will begin
hearings on taxes later today
Both the chairman of that committee, Rep James Hury,
D-Galveston, and House Spepker Gib Lewis said they hope to avoid
extending the sales tax to such things as tap water, haircuts, ice cream, baked goods and auto repairs, a plan
reported in the Chronicle last week Additionally, they hope to keep lawyers, accountants and other service
industries exempt from sales taxes
"What he (Hury) is doing is developing various packages that would fill whatever void you need," Lewis said "You
know, if you want a $500 million tax bill, he's got the package to do that If you want one that's going to be $1
billion, he has that It takes in a lot of different scenarios "
Still, if the budget being written by the House Appropriations Committee leaves too large a gap between what the
state wants to spend and what It expects to bring in, sales taxes will be included in the mix
"In the event that you needed a great deal of money, then you would have to begin to look at other things," Hury
said "We're still talking about them"
Next, Hury said, lawmal1ers will consider a series of accounting measures and fee increases, some recommended
by Comptroller John Sharp in his proposal for saving $4 billion over the next two years
A lottery will be considered, but can't be counted against the budget deficit until voters approve it
But the cornerstone of the tax plan Involves reshaping the state's business franchise tax to include a tax on
business income, which Hury said will raise about $1 1 billion Under his plan, some companies would pay a tax on
capital, while others with less capital would pay a 4 percent tax on income
The House wants to tax business partnerships and sole proprietorships as well as corporations, but most state
senators want to tax only corporations Last week, all 22 Democrats in the Senate signed a letter to that effect
and sent copies to Gov. Ann Richards and Speaker Lewis
Both Hury and Lewis said Tuesday they will continue to push for the llybrld income tax on all businesses
"That tax is currently being paid to the federal government all this does is divert 4 percent of that taxable amount to
the state of Texas," Hury said
Copyright notice: All materials In this archive are copyrighted by Houston Chronicle Publishing Company Division, Hearst Newspapers
Par1nership, l P., or Us news and feature syndicates and wiro services No materlnls may be directly or indirectly published, posted to Internet and
intranet distribution channels, broadcast, rewritten for broadcast or publication or redistributed in any medium Neither these materials nor any
portion thereof may be stored In a computer except for personal and non-commercial use
Money Marl<et Accts
Find the best yields In the US Plus calcs, news,
tips & more.
www bankrate com
Mortgage Rate at 2.370/o
Get the Best Mortgage Rates. Refinance & Lower
Your Mortgage Payment!
Mortgage LeadSteps com
H2{HR Job- 476 Openings
Make $79/hr Working From Home. Requirements:
Computero As Seen On MSN.
www selectonl!nejobs com/
chron.com
Home
Houstor\ & Ibxns
Nauon
Guslnr:s.s
Sports
Enk:rk1inmcn!
Bbgs
Ctlr'orl Cormnor1s
Wealhcr
Traflrc
Topics
Marketplace
Cars

Posl an mj
Services
Help
Duector,
Cuntar.t us
Son::! tm trps
Chroll!cli':' In Educatron
About the compi?lny
Not Logged In Login/ Sign-up
Mobile ISMS
Search advanced search 1 archives
1'1.!'11
'} Chron com ': Web Search by YAHOO I
Bodies of two Infants found In Tarrant Co
Man dies in crash on tollway in NW Harris Co
Michael Jaci<son's death called homicide
Melanie Griffith checi<S Into rehab
beer
Obama 10 health care critics: end 'phony
clnlms'(654)
More ndverlisors ditch Socii al!er he calls
Obama racist( 50S)
Deal on jail, stadium 1 Dome in home
stretch'(17B)
Try to envision this: a world with $20-a-galion
gas(155)
County puts more heat on iidult
businesses(! 55)
Membership
Srgn ur
Mreud) re:;Jtsleretf'' Log u\
Other editions
MobHtl
RSS feeds
8/11/201110:56AM
9
Ross Ramsey, Taxes for
Cigarettes, Gas May Be
Increased/Hybrid Corporate
Levy Also Considered, Houston
Chronicle, Aug. 8, 1991
- Voroo No. m-
-Out the door
Beleaguered Tenneco
CEO James Ketelsen
says he will retire
lklslnese
]J.ep. :Evans dies under 'unusual' circumstances
""""'
dent Bush backs the
de<illlon to side wltb
ln Kansas. a move'tllat
federal judge involved case
Bwih dectmed to comment
Uvely on tho Wlcblta case, In which his
admlnlltraUon 1a challenging an injunc"
Uon by Judse Patrick Kelly, who luu
ordered fedttal marshals to prevent dcm
ons.tratm from blocking access to two
abortion cllnlcs.
"As.lundentand H, It's a juriadtcllonal
problem - 11tate and redera), Le-t them
sort ll DUt. This ian't a matter fqr the
espe<ially on tbellrsl day of ble
VJK'Atlon." BtJJb J&td.
White Howse spckesman Marlin Fltzwa"
t.er said Buab W)Uid have no rurlhcr
comment on tlw case. He said Busb was

tbe president agrees tbal Kelly had no
authority lO l.ssue an order barring tbe
protesten from blocktn& ae<:esa to the
clinic!.
"We believe thla Ia D m;atter to be
bandied by the local autboritlt!'IJ, Joca1
:.!t!rJa
by the Justke Department In a brief it
filed 'J'Ueaday tn SUpport or lht! prOlellcra'
apPeal ol Kelly's dt'CIJ!on.
Attorney General Dick Thornburgh aald
In Washington that the dNlfllon Lo inter

6H ABORTION on PDg<> 12A
A fodoral judga m New Orleans
ruled Wedne.sday lhal Lows1anas
now anl!-aboriJon law 1s uncons!!lu
110nal. opemng the door lor prom
15ed appeals to tho Supremo Court
Pag<> 311.
marked the 24th day of antlabortJon pro
tests In Wtchl!a About 1,900 demonstrators
have boon Jailed for blocking entrances to
clinics In that city since the protoats began
Police conduct Montrose
sting against gay-bashers
..,.. ,._.,,.._,..,.,.,..,._., ._ ',_" ._,,_,_-... ._----. '"'""'
Officers struck with bat, "tear-gassed
t
t Houllon cnron.cllt
[)tiring a of poalng as horno-
undnrwvu pollee oUJccrs
In MontrrJ:fC hnvc been hll with a b.:Jl

l'OiJrt.
The undt>rcnv,r tiling Op<'ratum Itt
aimed 111 l'ull'hlng and

charged In tlull case
Ourlng the flnL week at !he OJ>(fD' HousiOflt Now&PP.Jl411
lion. two aduii.J, acesl8 and l9. were ,.,.,) ' ... ..... .. ..
UCCU$C'd of IWIUJt In aeparate CU&f11,
and n variety of leuer wan

DRUG TEBTB - MolhOd!SI Hos"

Still rhorc h.'ClnH muy be prowtutld hJGhng
hy juYrnllt. authorlth. In lh!! inc!
dl'nl.
All th'' youths urc from outstdl
Houoton and Partly
carryinU ...

mula was declared t'Ons!llutlonal by
u Ktllte d1s1rict judge Wt'<lnu11day, hut
nut wttltoul u wurnlng to lawmalwns
lhatthrplanmuttl lx.fundctfititbto
prtwldtto.qult,Y
F tM:oU MrCown of

:o.lons cr'aUng cnunlywldo tax dhi
tmta and n'l:jUlrins lll'hool dllllrlriN
w bhart! lllclr wealth wcru untonMf
say colleagues probably \'otcd In hi:!.
ab&e1w:c, a common practice ther('. The
votes were subM:quently changed
for more five
was lntcOJ>C :;peculation th:H
hts rcl('asc could rorrshadow fnc"
dom for nnothrr
on Syrwn
lmUtall'd tlul! lfw rrlla!.e
ol otlwr wuuld dl'fK'nd on

dlmandl'<l
Now I bcllt'YC they vc dcddc:d
thnt what they wnnl nnw '" th\1>

Ml'Carthy, :n. who turned owr
to lht Brlll'lh m OamilRo
t a few ufln freed In
[klrut. told rcpnrttrs ut Syrlu s r--or
rlgn Ministry that "my heart IIi "''Q'
flrtUclul" to thosl' who workt'<l fur his
roloa!Ul.
McCarthy hili fcllnw
lndudlng Amcrimn Terry Andl'r:>on
hud given him the tilrt!nlllh tu !!Ur
vlvc hili ordeal i1c said ht' had
mt.cntly m.en Andcr!iOn und unothrr
Amt.>ricun ltootagt', Suthlr
l.:md, and that they wen in "good
Boa HOSTAGES on Page 12A,
Taxes for cigarettes,
may be increa'SOO
fi.brid corporate levy also considered
ROBS IIAMIIIV
Houl!ton ChroniclO Auohn Bureau
AUSTIN - Texas JawmakcrR

urc cotUlderlng nkkcl lncrcns.es in
galiOI\nc .ond clgarctlc a hyo

nleu
. Senators and key llouse mcmbe"'
flied In und oul of Lt Gov, &h
l!uUock's ofllce Cor Jlll)$\ of the alter

taxes to come up wUil something
that will rahw up tn t2.ti billion In
new rt>vcnue.
There rcm.nin many Yarlablcll, but

falling into place
liiSOnlto
lottlt}IOK

IIIRodllltl<t
Dlllnwouto
boboon lor
HIIPOnlca:
Pogo lilA.

_
would rul.!kl t002.4 million, uccordlng '
by the
Oy lnw, thrc1Hourths uf that
amount would be spent on road:s ond
s .. TAX on Pge 12A.
Tl1c Ol'W lr.w, wtll intu
tfletl thhl )t'llr, nhiftli humlrtth nf
mllltona of tlnl!arll In proswrty tux
rcvtnUl' from wcuJUurr tu
thtlr poort>r nciKhhorll within tduco-
thm dbtrh'ts drown ultlnH
tounty linl'li..
More than !iO Wl'iJithy tln.trlns had
('hallenged 'thn law. thl'
t'llunty f'dueutlon dhttmb rt'ftUirt"d
volrr upprl)llill lhotn mtntmum tux
rutr undlr llw new law
UIIIO\Inltd to II !ihilt>Witlt jl!tJjKrly
X and thut tht! L'OOIItltut\im
ned monty rohlt'd In um di!tlrlt'l
fr<1m btmg llptnt i11 annllwr
MrCuwn rt'jt'('Wd all nl tiHJ!It' arRII
1

Abortion
Coli- from PO{IG lA.

=
: jltfilldtcUon to order federal
' lhal.o lo jall the prole<l.ort.
"We're not tlklna sl<lts In thl>
' cue; Tbombur&h saJd.
11
Wbat we're
!
, tlul power t.o ac:L"
: 'lbe admllllltraUon'l
: Kelly, wbo acctlled tbe Jtm-
.. u:'':
llbortlM iJIIUil.
In a l.olevWM lnlmtl..,, Kelly
aald be Issued hi> order beaUJe ho
feared that the proteall, wlllcb
otarted July 15. were abootlo loocb
oil violent <OOirootA!Uoot In Wichllll
.. Guaranteed The
:1 '. o Greatest Diamond
AIIO'VE sr V 1 . H
:.,/ a ue m ouston
Rifios ll1d Wedding Ss Speciat;
'lleliriGd WidllanufacUed Cfl 011 Premises.
WE URGE YOU TO SHOP AHO COMPARE
1/2 ............. ,770.00 .......... $140.00
l/4............. IUO.OO ....... .tl452.00
let .... , .....
1
2100.00 ...... ullO.OO
11/2 ct ...... l400.00 ..... 3780.00
2ct ............ 4800.00 ..... 4980.00
2.1 ct......... 6900.00 ..... 190.00
Jet ............ ,.00.00 .. ti0,340.00

&878WESTHEIMER
I>Jf--
INSTANT CREDIT
Ill' TO $1,000 (upon QPPRMII)
--
Hostages
will be relfued today. I hope II will anDOUJI<:Ing lllt<:artby'o nlea..;ha4
be an American, l don't know aa1d lie was Ca!T)'Jn& a mews:@ tor
which American." Peru de Cuellar. MtCnthy C'QG-o'

lf.'ldent, uld: "We're bearing, too, "I unclcnl.ond that the letl.or ooeu1
J lbere may tbf belp lll
wbo spoke on
coodltlonolano- lnd lor tho$e held,n hr&el,"lltaal<l.
nymlty, could rudlfllla handwrllteo alltemenl
provide no otber .<1 eannot uy any mon1 about that
dotolb now, 11 the leiter It clearly lor tbe
The Wblto oemtaryaeneral'a pet'IOilJ) attAin.
l!:.'!f:.nt = .. lor blm to
. . wu pleated by . Sourcee In S.irut lllt<:ortby
tho reloau of luod mel wllh Pmz de CutU.r'a
McCarlbY. but envoy, Glalldomenlco PICC<l, at Syr.
1
McCarthy UII hal no dl Jon headquarten In Leba
.. ..

an Amtriean. Tbe ncretarY&eDOral 11.1ld he ll
SYrian Fortlin Mlnl.olllr For<>llk 101n11o be In Geneva on Sunday lot
AISharaa, ui.ed about tho prospect [J,N, dlstLWiotu on aid to Iraq. Ho
of another releue,. told lbe BriU.Ih bu that be would meet
Corp., ','I" UD but 1 a.ny envoy from the
cantpredlclatthemomonl Never AI the Syrian Fore! Mlnla-
theleU. be lie<! lUCh 1 relwo lo the l\lt<:artby uld he had
rreelna of prlJOMn by laraol. Andenon and a
1
Jeu u
brat I hu Nld no prlaoners would Watte,lbt envoy oltbe Archblahop of '
be freed untlllt obtelned usurance1 Cant.erbtlry. Waitt Wll abducted
throulb Jan. 20, 1m, whUo on a mlnloa to
teo ol lilo Re4 C1081 IIIII oevon try to free tho boal.o&es. Unlll Irilb
mlsline ln Lebanon b01t.p Brian Keenan w11
1
releaaw
would freed, or their remalna latt fear and apob of hurina
lhe Dererue Mlnil :,
lhere had betn

00
try's a.enlor advller on Lebanon, said "I am 1\appy to bt able to lell the
.. .. ..
Taxes for cigarettes, gas may be increased/Hybrid corporate levy also ... http:/ /www.chron.com/CDA/archives/archive.mpl?id= 1991_ 802156
I of2
j Houston Chronicle Archives
NEWS SPORTS BUSINESS ENTERTAINMENT LIFE TRAVEL SLOGS JOBS HOMES CARS BUY & SELL
Taxes for cigarettes, gas may be increased/Hybrid
corporate levy also considered
ROSS RAMSEY, Houston Chronicle Austin Bureau Staff
THLJ 08/08/1991 HOUSTON CHRONICLE, Section A, Page 1, 4 STAR Edition
Share
f!ilff!f Del.lcio.us
Twitter
Facebool<
r''1 Share
Dlgg
<a\ StumbleUpon
AUSTIN- Texas lawmakers seeking a politically acceptable way to
raise up to $2 6 billion In new taxes are considering nicl<el increases
In gasoline and cigarette taxes, a hybrid corporate income tax and a
levy on utilities used by industrial companies
Senators and l<ey House members iiled in and out of Lt Gov Bob
Bullock's office for most of the afternoon Wednesday, picking and
choosing from a $4 8 billion list of possible taxes to come up with
something that will raise up to $2 6 billion in new revenue
There remain many variables, but by day's end some of the major
pieces of the revenue puzzle were falling into place
Increasing the state's 15-cent-per-gallon tax on gasoline by a nickel would raise $902 4 million, according to an
April estimate by !he stale comptroller's staff
By law, three-fourths of !hal amount would be spent on roads and highways, and the remainder would be spent on
public education
A nickel Increase in cigarette taxes would raise roughly $78 million and would bring the state's tax to 46 cents, the
nation's highest
Extending the sales tax to include gas and electricity used by industrial companies would raise $958 2 million But
legislators would trim that total to $329 million, either by exempting utilities actually used in manufacturing
processes or charging a lower sales tax rate for industrial power
Only 19 states levy a sales tax on Industrial utilities Sales taxes on residential utilities are not included in the
Senate pacl<age.
Plans to revise the business franchise tax came undone In less than an hour when the House debated the measure
early Tuesday, but the Senate plan is slightly different and would raise less money from companies
The House plan would have taxed a company's capital and income, whichever is higher The Senate's version
would apply only to corporations, leaving out partnerships, joint ventures and sole proprietorships
About 125,000 corporations would pay no tax under the Senate plan, since their taxes owed would fall below a
$1 00 threshold The tax, according to Bullock, would raise $787 million in revenue over the two-year budget
period
The rest of the money would be raised with a combination of undisclosed fees and taxes And the package could
change as the negotiators work to find something that can win approval from the traditionally tightfisted House,
which was in no mood to raise taxes earlier this week
"It is Incumbent on the Senate to get a package that is a responsible package that's fair, and then get over there
and try to sell it to the House," said Sen John Montford, D-Lubbock
Tax bills must start in the Texas House. But the $3 3 billion measure introduced there was boiled down to just $30
million by unwilling House members early Tuesday morning, so the Senate is working out its own tax package as a
substitute
Typically, Texas lawmal<ers turn to the sales tax when their backs are against the wall But that's been ruled out by
Gov Ann Richards
"I do not agree with raising the sales tax," she said Wednesday "I do not agree to any Increase In the sales tax"
The author of the ill-fated tax bill, House Ways and Means Committee Chairman James Hury, 0-Galveston, blamed
the failure on a lack of Information and said things might go better when House members have a better idea of how
much money they need
"The major problem in embracing this tax bill, and I think any other tax bill, is that until you know the bottom line,
until you know how much money is necessary and what it goes to, we are not gonna have a tax bill," he said
Lawmakers still don't know the final size of the spending bill, or how much of Comptroller John Sharp's combination
of budget cuts, accounting tricks and tax increases will win final approval
Montford, head of the Senate Finance Committee, and his House counterpart, Appropriations Committee Chairman
Jim Rudd, D-Brownfieid, are trying to reconcile a $32 5 billion plan approved by the House and a $35 billion plan
approved by a Senate committee and set for a Senate vote later this week
Montford said Wednesday there are about $2 4 billion in "fundamental disagreements" between the two houses,
with the Senate wanting to spend millions more on public and higher education, health and human services and
prisons
There are only six days left in the special session
Copyright notice: .AJ! materials in th!s archive are copyrighted by Houston Chronicle Publishing Company Division, Hearst Newspapers
Partne(ship, L P, or its news und feature syndicates and wire services No materials mny be directly or Indirectly published posted to lntemel and
Not Logged In Looin/ Sign-up
NOW
90'
Mobile iSMS
Search advanced searcl1 1 archives
I@J
,..,, Chron com <.; Web Search by YAHOO!
Bodies of two infants found in Tarrant Co_
Man dies In crash on tollway in NW Harris Co
Michael Jackson's death called homicide
Melanie Griffith checl<s into rehab
beer
claims'(654)
More advertisers ditch Beck after he calls
Obama racist(505)
Deal on jail, stadium, Dome In home
stretch'(17B)
Try to envision this: a world wlih $20-agallon
gas(155)
County puts more heat on adult
businesses( 155)
TODAY ONLY!
Up to 53% off a
1-hour BFF Party
Package for Four
or Eight (Up to
$210 value)
811112011 II: 12 AM
Taxes for cigarettes, gas may be increased/Hybrid corporate levy also .. - http:/ /www.chron.com/CDA/archives/archive.mpl ?id= 1991_ 802156
2 of2
Intranet dlslrlbu\lon channcls
1
broadcast, rewriHon for broadcast or publication or rodislributod in any medium Neither lhasa materials nor any
portion lhereof may be stored in a computer except ror personal and non-commorciol usc
Mortgage Rate at 2.37D/o
Get the Best Rates. Refinance & Lower
Mortgage .LeadSteps com
Money Market Accoqnts
Find the best yields In the l!S Plus calcs, news,
tips & more
Bankrate com
Job- 476 Openings
Make $79/hr Working From Home Requirements:
www.selectonllnejobs com/
chron.com
Home
Houston p .. Tcoxas
Nalion
Business
Sports
Entertainment
Life
Trmtel
Blogs
Chron Commons
\l\
1
eall1er
Traffic
Topics
Pals Houston
MomHouston
HoustonBelief
Hou5ton garde11ing
Marketplace
Jobs
Homes
Cars
Shoppin;;]
Personals
Pos! an Cld
Conttlsts
Services
Help
Business Directory
Contaclus
Send us tips
Chronicle In Ectur.fltiOil
About thn co!Tlpnny
Home delivery
w1th us
Buy a Jnmner a1J
Pnvacy I rer ms of se1 VICe
lli 15 A R s 'II' newspapers
Membership
S1gn up
Already Log in
Other editions
fv10b1le
f\SS leeds
e-E(IIl!On
E-rnmlnewsletton;
8/J I /20 II II : 12 AM
10.
Ross Ramsey and R.G.
Ratcliffe, Grapping with exas
Finances/Senate OKs State
Budget, Tax Measure/Deadline
Looms Tonight for House to
Follow Suit, Houston Chronicle,
Aug. 13, 1991
' Big bank merger
BankAmerlca will
absorb Security Pacific,
creating superbaok
liklslnGIIII .
MrstM!f photos
Market Square project
needs
some old t-loustonlans
!!-land's song
Alabama singer writes song
In tribute to Houston's
Mickey Leland
Houston
Vol. 90 No. 304 Tuesday, Aug. 13, 1991
50Cenls ****''
AUSTIN- )he state racing commls
$IOU took a glilnt step toward returning
major horse racing to Texas on Monday
when it V{Jtcd unanimously to award a
llccns.e tq Sam Uoustcn Race Park In
norlbwCII,.IIarris County.
The 4.0 vott. .approving the Clas.s 1
trick wa.s greeted with cheers and

tbc historic vote that licenseS a major
bors.e racetrack in TclAS for the flrsl
lime slnoo 1937, when the Lcgls!Jture
Israel may
swap cleric
for soldiers
U.N. chief pushes
diplomatic efforts

reSQJve the crisis amid rc

turn vvt:>r missing
Tehran Radio today at'cused Israel
of blocking resolution of the l10st.Ltgc
crisis by Insisting On the return or
seven soldiers mhitilng In Lebanon.
But the radio ubo suggested the
crtst.s may be ne"r a solution anyway
bc<:auJ;C the captives hive served
their purpose - rnblng owurcnt.':ls
vf what II talled "Israel's brutal
policies:'
The radlu <.ommcntary came n11
soum .. "!i In the lraninnbackcd Hcz
bollah reportedly said they wl!re
ready to swap two Israeli sold1crs
ror Arab dctutnccs In an exch.ange
thut would ulso Jrec morc Western
of lhu groups in l..cba
non holding hDHiages arc believed
ull!ed with Hczboll.ab.
All prL':iHurc lncrc.asl'd on bruelto
make concessions that would bring
aboul a hostagt release. the U.N.
sccrctary"gencrul said the two sidell
arc not that far apart Ills nol an
ocean. J would :say Jt hi a river."
The kidnappers have freed tbrei!
Western hostages - Briton John
McC3rthy. Amt:rkan Tracy
and Frenchman Jerome Lcyraud -
ttlmc Thunduy, and 11 Westerners
remain missing In Lebanon.
The capton say further rclem;es

return of M:vcn or
U.s soldlcnl mltll$lng in Lebanon; the
In n letter released
Monday that frt'('tllllll fur the West,
trn 111 U!bahun htngca on
the rcltilst' of 1h:llllnl1'::& worldwide
lrun'n IIHil'WI ltcpubllc
News At.:cnty t(x!ay unony
ffiQU!> Muslim MIUrns us IUlylng

Juh, could be fn.tt:d by h.nwl by
Saturduy Obtid'Ii lrct.-dom i!:l ont! of
the key dtmands.
"It isn'l .\rut," Uan Nuveh, an
hrach M!nl,.try !ipokt.'!trnan
ti.:ild uf lht. IHNA r<'purt
The UrUJsh OroadcuHtmg C11rp,
meanwhile. reJW!tctl that lfltbollwh
See HOSTAGES on P.1go 16A.
Texas has two greyhound r.ace
tracks that operate year round. A third
is under construcUon In La Marque ami
Ia expected to open in early 1992
The Clus I hore racetr01ck licensed
S.o RACINQ on Pago 14A.
Iraq's 165-foot-long supergun
examined by U.N. inspectors
AmoN .. , 40 Llndor1 20
,.. "" fC Mrtllll , . . 8C
'""IE Maln... .10

a
nudl'ar hundreds of mUe11.
us1::;

Jt hnrrovad an Aml!mun spy
plunt 11.1 lUr\'t'Y (rUijl W!!ilpOilS jllf'l'
gram11 tu Baghdad l'OmpiH.os
wllh thl' ttnn: f11r t'Jidmg lhr null
Wur
Tlw H 1111 Ill'S 111 dwllll'IN
apparently WQII buill All purl or Pro
ject Oa:bylon,a Hupt:rsun projt'Ct thut
lntelllgcnc:e offlctals say was begun
In 1188
In a documcnl 11ubmiUt'd to UN

the wortd'a largest artillery plcei! If

t('ndcd to fire chcmlco,, biolasicul or
nudcur Wt!Dponl'
Wolfg.una Buttllr. U1e UN a chlef
haJIUIIIc li:.tld thut on Sun
610 IRAQ on Page 14A
, .. 8.90 Mtlro 19A
2 .. A Outtoolc 23A
.... "2:2A Puul .... _ .. so
. sJg
Houlton, """ ID World 16A
HOultOn t Fom11y
!WI tlwl)l.><>
t.
Houtton and vicinity: A 30%
chanco ot showers and thunder
storms lomghl. 60% Wednosday
Low tonight mld70o. H1gh Wed

Pago
Chron!clu
IIV TIIMV IILOUNT
Hou&lon Chronlcla
Sourres close to the Aslros sale ne>go
Uatlons the Houston group dirr-<:tcd
by Den and Jc(( Love made real
progress" In the last two weeks toward
purchasing the baseball club from John
McMullen.
thing:> bC't.'lll to be very a
one sourc!.' said of the Astros tatU.
''Many of the key polnu have boon
addressed and agn..>ed upon. There
on many lmporta=U
Another confirmed the two

News of !ilgnlricant progrc:.s Jn the
ncgoUatlons came on the same day
McMultcn':i Hou:;ton SPQrlS
was gr.o.ntcd a license lor u thorough
bred racetrack
,\s\ttls series with the San Dlego Pa,
.
..lt be<:amc u media circus the last
time the two groups md, .and no ouo on
Sot ASTROS on Paoo 14Ao
nate
state bud t,
tax measure
Deadline looms tonight
for House to follow suit
IIV ROGB RAMDIV
and R.Q. AATCI.tPFE
tiouston Ctuonclu
AWi1'1N - A $59 5 billion ululc
budget und a $2 U billion Hut bill wert
pn!:!.'led Monday by \he Senate but
only ufter u fiUrprlse parliamentary
move kept the tax leRI!ilntlon <Jiive
Uo!h nwasurc.s will now go to tho

Jcgh!lul!vc hc:;:-;lun - or lcrcc a flew
spet'itslwsston sU1rt1ng Wednesday.
i\flt'r thrCfl hours of the
Senate voted - In a show of trust for
budget author John Montford, D
Lubbock - for u budget blll few o!
them had read.
Seven of the Senate's nino RcpubU
cons voted against both thC! budget
mea sun and lhc tax bill
When h.th.'rul funtb and dcdlco'ltcd
spending on sucl1 things as highways
arc nmoved, the budget measure
pmvldC'S for gcnernl state spcndtng
of $34.7 billion over thco ncKt two
y(.'atti.
Both mcnsurl'l:i were ntgullati.!d
bc(orc they ever gut tu thl' fu.noll'
lloor. Hou!SC und Senotc mRoUutors
begun wrUng QUt llw dlflcrt.nces
hctwl'en a !ll)l.mdlng
Jllan ond onv approved by o Senutn
t"ummlttce Tllt'y finally nat'lll'd an
agrt'cmcnt IDtc Snturduy aftcrnuun,
a{tl!r roundtlwclot.'k mtelings
Thl Hpcndlng blll more
than $2 billion In new money lor
public- t'llUl'Dlion, enough lo coYer
tlw rush uf tourt"ordercr.l srl\c)OI
by the
It )Lavl'K higher t'tfucation short of

but l'ulh:gtH Will Rt'l murt. than the
SOo FINANCE on Page 14A.
Conferees OK
prison
bond proposal
Bv CLAY R08180N
11ouslon Chromcla Auslfn Buroav
AUSTIN - lle!ipl!c 11 C'OntlnulnR
dispute over Harris County's Jail
lllWt>UH, House ond Senate ncgotln
ton Monday thty have
un :1 $1.1 billion prllion bond pro
pnsal
'l'ht wiU
Iii Mayor aeeks IJmltt on Houaton
halfwpy houaea: Paga 19.4.
tnuhl; TtX:.tns In \'Ute nn lht bonds Ul
NtHil'mhtr, wluh wnrk
uul uvtr u mon l'flnl
JltchcnsiVt rrlmtnal jnlillt't' bill und
l'OUnly JUI)IIVt'TC'rUWdlllJ: In nnnthl'r
spttJul !>t'Slillm lall'r I hi!> yrur
A db>fJUii' htIWt'CII llarns Counly
nnd t unlirct.>s on th{'
prJwn hlll had lhn<ltt'nl'd ltllit'Uttlt'
'-'"Y uuthurl1.'-ltlun fur Jlrl:>.ull ('Xjlitn
s1on this summtr nut t'IJnftm.'t'h.
who mLl with (i!w Ann t)n
Sao PRISONS on Pogo 14A.
Coroner says cocaine killetrEWins- --
Death ruled accidental: drug stopped lawQtaker's heart
IIV ROY BRAGG
I loti ton Chromc!e Aut.hll Bwuilu
AUSTJN lluuMon t.latc lttp
Larry dl.'uth rull>d iH'
('/dentDI, tauKcd by on adVN!!C reat
lion to l'Qelllne that Jed IU l'iJrdiiH'
a coroner 11nJd Monday.
Travlll Counly MedJtal l':xumlmr
Dr ltCJbcrl tiUid traceb uf
the drug wtre found in the nose,
stomach blood and bile of the -42
ylar old Jeglalutur. who WUK found
dead Wtdntstlay in hill wulh
11 Forgiving moumott bid farewell
co Rep. Larry Event; Paso 19A.
upartrm:nt
flay:.rdo llaltltht udvcn.l' rt'iJl lion
wus !illllllur to an LIIINJtlt rcutl!lm.
whhll t.an uffutl rvt.'n long ttrm
druf( Tile dtK tor. howtVN.
an !!howtd nu si.:ntt ul
prolonged drug abut.t

drug 1n 1-:vnns' blood, whlth llaynrdo
11111d was u rclnUvtly minUil" umuunto
Wlull not l'OOUKh of tile drug 'to
tonslltutt> an or u puhwn
mg. the rcurhon I'LIU!><'d u !wart
arrhYihnuo. mmmlnR hi!l luarl btnl
luo 'rasl. and that lld to t'llrdlar
Uaynrdo 5ald tht miRhl hu\lt'
uhw conthJntd With thl,' lrl(i.\llatur'll
thronK nrspmuory u\lrncnt:i - tht
autopsy found ol
and mllhma to hrln.-: about n!iplo
See EVANS on Pagt t4A
--
Houston Sporla Anoclatlon Prealdent Bob Austin of ttw propossd Sam Houston Roca Park.
Hirler, cooter, and his partnsrs, KIJWin Drouat, Tho Class I trade will be built In norti!Weot Harris
loft. and Jlmos Klpp, stand near a drav.ing In County.
Racing
Evans
Contlnu.d from 1A.
ratory arrest.
o!

wlthh!stflfc lthoura btforehll body
wu found - said 1ats
he lnge;ted the eo<:alne four
hours belore he dlfd.
Pollee louDd u grarm of crack
cocaine In tbe lawmaker' lp.1rl
ment, as well u auually eaplldt
mterlal and a sea:ulll devJee. The
doors to lite apartmenl were
fl!r-E::
Re<:ordl abow tbe flve-t.erm DerJ'IO<'
crat wu &n'tSted lD July tHO tor
Finance
Con6nuod ..... Page 1A.
House voted ror them We week..
'7e.um an be proud of t.h.lJ bJU,"

naUoa.lt'1 not a Cadlllae. It'e at best
a CbevroJd. &l at leul It' not Ill
reverse. U'J not ln oeutnl.. lt'1
barely In drive."
'lb< tu bill took a ollgbtly dUlor
ent route to Senate approval A W
bUUoa venJon presented to the
House lall week waJ dismantled In
n allnlght seuiOD to a f3Q mUIJoo
!Jiell.

BOO Buuocf.t offlce t.o Write a t.n
bill that eoukl pw both h.ouJ.es., That
U.9 biUlon mwure, wbkh would

Cilmmlttet Friday
Tbe revtllue bill ralstt: allte tues
oo J.UOIIne Pd c!preUa. cnateo a
h1brld corporatl!l income tu and
lncrtuet colte-ae tWUoa. It lowen
I.M alate lis on dot track wa&erlq.
-lfthflotl<!ryl.oopprovodbyvotm
In Nonmbtr - ud erteodJ tbt
Pitt til lo conctrt Ucketl, &I'IIWtr

might never ut.
II twothird.t of tbe Uouse :.;:

t:
1

lnhll vote.
In ':.\'l':,::

bJg dJifertnce. Their
=...: ;:3.fJ::..I racln& bllt a
Sam HOII!too Rue Pllli ,.., ono
ol two for the HarriJ

&Uc as S.m HCI\IStrm Race
Plrtt
In voUtll \0 ward the lletnse t-o
Sam Houston Raee Park, the racing
C'OinmW.Iou lilllo voted to deny lbe
license to Uoustoa Turf Club.
Aus:Un attorney Dudley McC111a.

h-earing. said questionable Unanclng
wu tbtt primary rtuon for his rt-e-
ommtrldaUon against Houston Turf
Club.
"'It would rwt be In the be:st interest

thls llcenlf.'' Wd McCalla
No prlttt:lp.als or apokwnen lor
Houston Turf Club attended Mocl
day'omeettna.
HOt.Ltton Turf Club 1J not aut of Ute
picture,llowever. Tl\e group will be
110UHed today of Ute racln' panel'11

stale dll:trict court
When tbt track opens, Harter !laid,
be e11vlslons twa racloe mettlng.s for

would race fn the wrnmer
How thelf voted
AUSTIN-.. Here lilt tne
Ucat 2"7 votn by which tho
Senate approYOd budgdt and
Ia bills. Harris County sena.
IOf'& .,-e in boldface:
Voting In la'IO< (241 - Arm
brlattr, earrlenloa, Bivin&,
Btoo&:t, C4rrlker, Dickson. El
111, Glaagow, Orun, Hiley.

lOft, krler, Loodom, Sibley
Prisons
Continued from Pagt 1ol
Monday, agretd 10 approve the
bond$.

leglslalors said, and th!.'! session
must end tonight

aald Monday
ftep. Alle-n Hlgh.towcr, 0-Hunta-
vJUe, a House eooferee, agreed

Jtight.oworuld,
Both Lawmakers :s.;ztd negotiators
will IBftt'OI'I the Senate's Jll billion
bond propo$111, which could finance
construeuon of a.t many as 30.000
prison beds. The I foUR luid approved
abo\lt MOO million in prlson bonds.-
Detalls on when to 't:nd the

by the Legtstature. Lawmakers
would tbtn lulve anolber opportunity
to lfarrls and J3 other
countJes to atttle their lawslllts
against tbestateoverjalluowdlng,-
Harr\s County .!ICUitled a proposed
settlement hut aprlng by :,elng IJl.e'
only mliljor holdout to the agree-
m<nl

Nilked aL moving furwnrd with
prllon construction wltltout cmacting

ltnr!J Cow:ny on the prison
contermce tommHtee l>eld fut for
"I wooldn't too mucb
that aU.ttmenl.''
"Find of ail, a lot
(hanged s1Bce l,hat was
even if an a&reermnt Jn
WIJ reoched today, and '
beeo. it would. bo ;Iter the $e.UOn
eododbeforeafortnal trans!eroltbe
fraachJJe wu made. lt will take
wetb tot all the leQ.Il d()(:u:
mat.allon to be wk.ed out. ..
Sourets would aot: specify
pctnb bave beeD worked out. Tbe
::::

wllb tho ltAm and Uw Astrodome

Mcldulltn reportedly was asking
mlllloo lor the team. but may
bavc lowered hls Ill king price !or tbe
h-otels. Source: :aid the Love Jlrti'Jp
bas lncrtis.ed Its original otter, along
wllh cont.1ctlng wn outside party
about pwibly operallng the
for Use group.
One ret"ent nport indiCated Wal
Mart President David GIW Wils
Interested in bidding on the Astros.
Bullhe tUJUf'C(! lnvolved In tt\e Love
group ncgoUatlons Rid It was nol
true becat!S(> Glass Is a close friend
wllb Drnyton MeLanc, o member ol
the Love group.
"David Glass never would bid
against Drayton'," he said. "Mcl.aDe
ls the No.2 In WalMart.
It made any stnse. And
McLane Ls very loyal to the Love
group. He's a lea.al player. lfe Isn't
about to .awitch to MOther woup. All
LlldJcaUOOJ are that the Love group
:rr: .. candJdates to
In a 5t.atement released last week.
atus said he hlld no lntci'ClSt ln tbc
Astros.
lkn Love Is Use fonnf'r chairman
of Texas Commerce Dancsbarf!1i:.
Jeft Love, Ben's son. is on attorney
lor a Houston Law firm.

Randall's chain;
Charles Duncan, secretary of energy
tn President Carter'& Administration;

Bottling.
the county's -....... _

lowork outlhl'dctallso!thecrlmi
nul jusli hill and resolve a disputl.'
over eongrtssional redislrlctlng
which also Is expectfXI to rcmaio
unresohtt>d when this session end!i
tonight
John Wh1tm\re 11nd Ro<lnev

Lyon had not with a
(.'(lpy. Both threatened to klll the

llll lo Uarrlt County
But Paul Williams. the governor's
executive assistant. !aid the pro-

Several thousand tonvtrtC\.1 lc!Onll
are backlogged In county jaJJs be
CAUJC a lederoal court ord<'r hmit:..
the prison syshml'& population to 9!1
percent of capaclly.

rtduce overcrowding in U.s Ji!il. Tht.
county recently won a S49.3 million
Judgment ;galnst C6e !tate In state
dl!trlct court In Austin
Tbe state ia .attempting to per
suade llarrls and other counties to
settle their lawaultsln return for a
state promi.s.o to acet'pt all state
prisoners by Sept. 1,
The state abo Is promising to
transfer as many felons as possible
to lmcrowded jails In other ccun
tJe:s and partially rdmburse the
C<JunUes for Uwtc that can't be tram
rerred '
1be state also addi-
tional crlm!nal justl'"' Ctmdt<'oun-J
ttes that settle

and Sen. Gene Gr('('n l!m Dt(otlat.
lng over the prn<:Jarts that

that 1s

Rtrlng pauage of I' tu bill 1n tht
Uouse SeverAl House memlw!rs sa14
privately lh(.ly tluJ not want to vot1
on a tax bill If another special

Gov. Ann Hlchiuds trlt'd to ofh(t

on redistricting or jalllif
pa.ued a and tares
But before the Senatf' met. fllch
ardJ s.enl Bullock 11 lhnnhn
lng to veto tbt''!pt'ndlng lJJII unlt''slt

govc them to l1cr went
along, giving her tome budgrt powt>r
ovu ageneles where he apJ1Ullll5 the
ext"Cullvedlrcctor
When lhr. Votes on flnanc-r wcrr
complcw.scnatoraapprovcdltg!sla
lion to regulate a lottf'ry U votcrR
sn
million wEll ht I'UI frnm budgt 1
UC'rcm. lht board t'ktlpt fur !'duro.
hum.1n
vlt't>s
LoHNy t untrat h1
awardt.'d c:ompl'llll\ll')y Sen J1n1
Turner. U-CnU'ktU. told the 01nu11
Dut Monlfnrd aatd that would nh1w
'N';;? star!up ilw pruvt:uuu
Grappling with Texas finances/Senate OKs state budget, tax meastu e/ ... http:/ /www.chron.com/CDA/archives/archive.mpl?id= 1991_ 802999
I of2
---:l\:chron l Houston Chronicle Archives
NEWS SPORTS BUSINESS ENTERTAINMENT LIFE TRAVEL SLOGS JOBS HOMES CARS BUY & SELL
Grappling with Texas finances/Senate OKs state
budget, tax measure/ Deadline !ooms tonight for
House to follow suit
ROSS RAMSEY, R.G. RATCLIFFE, Houston Chronicle Austin Bureau Staff
TUE 08/13/1991 HOUSTON CHRONICLE, Section A, Page 1, 3 STAR Edttion
Share
,.fA DeLicio.us
Twitter
Facebool\
Cl Share
'"'' Dlgg
AUSTIN- A $59 5 billion state budget and a $2 9 billion tax bill
were passed Monday by the Senate but only after a surprise
parliamentary move kept the tax legislation alive
Both measures will now go to the House, which must approve them
today - the last day of the special legislative session- or force a
new special session starting Wednesday
After three hours of debate, the Senate voted in a show of trust
<1iJ StumbleUpon for budget author John Montford, DLubbock .. for a budget bill few
of them had read
Seven of the Senate's nine Republicans voted against both the
budget measure and the tax bill
When federal funds and dedicated spending on such things as highways are removed, the budget measure
provides for general state spending of $34 7 billion over the next two years
Both measures were negotiated before they ever got to the Senate floor House and Senate negotiators began
sorting out the differences between a House-approved spending plan and one approved by a Senate committee
They finally reached an agreement late Saturday afternoon, after round-the-clock meetings
The spending bill includes more than $2 billion in new money for public education, enough to cover the costs of
court-ordered school finance reforms approved by the Legislature earlier this year
It leaves higher education sl10rt of what's needed to keep services at their current levels, Montford said, but
colleges will get more than the House voted for them last week
"Texans can be proud of this bill," Montford said "It's not everything we need, by any stretch of the imagination
It's not a Cadillac It's at best a Chevrolet But at least it's not in reverse It's not in neutral It's barely in drive"
The tax bill took a slightly different route to Senate approval A $3 3 billion version presented to the House last
week was dismantled in an all-night session to a $30 million shell
After the House vote, legislative leaders began meeting in Lt Gov Bob Bullocl\'s office to write a tax bill that
could pass both houses That $2 9 billion measure, which would raise $2 2 billion for general state spending, was
approved by a Senate committee Friday
The revenue bill raises state taxes on gasoline and cigarettes, creates a hybrid corporate income tax and
increases college tuition It lowers the state tax on dog track wagering if the lottery Is approved by voters In
November. and extends the sales tax to concert tickets, answering services and country club dues
It also contains some taxes Texans might never see
If two-thirds of the House approves the tax bill, it will take immediate effect and thus raise more money than the
state needs If that happens, several taxes and fees would be dropped, including the cigarette tax Increase, sales
taxes on car washes and sand and gravel, and a proposed Increase in drivers' license fees
House Speaker Gib Lewis said his vote count is "in the 80s right now" - enough to pass the bill, but not enough to
get two-thirds of the 150-member House
"We've got lots of votes," said House Ways and Means Committee Chairman James Hury, D-Galveston
The Senate added $15 million in fees on electric utility companies with nuclear plants in Texas
Sen Bob Glasgow, D-Stephenville, added a provision that allows utility companies to ask for higher rates if their
taxes go up because of the changes to the business franchise tax, which would include a tax on corporate income
for the first time
Unlike the House version, that franchise tax would apply only to corporations and not to partnerships and sole
proprietorships
The Senate tentatively approved the tax bill after about an hour of deliberation But it takes a four-fifths majority
to suspend the rules and finally approve a measure on the same day it wins tentative approval
With 31 members In the Senate, seven Republican votes were enough to block final consideration
But Bullock showed legislative days are not governed by the earth's revolutions
Shortly after 7 p m , he recognized Sen Chet Brooks, D-Pasadena, for "a highly privileged motion" to adjourn
Five minutes later, the Senate returned - on a new legislative day
This time, the seven votes were not enough to block the new taxes, and they were quickly approved, 24-7
Conservatives also lost another fight on the budget Monday They had asked the Texas Supreme Court to
enforce a constitutional provision that prevents growth In stale spending from outrunning growth in the state
economy But the court ruled against them
As legislative leaders declared congressional and State Board of Education redistricting dead for this special
Not Logged In Login 1 Sign-up
NOW
90'
,.,. ,

Mobile ISMS
Search advanced search 1 archives
M
''' Chron com 0 Web Search by YAHOO!
..,._cz_;_::-;: 2011 CHEVnOLET SILVERADO TEX,\S EOITIOH
TcxJs Edl11on discount
( ,',11 q; ''.' M
: ; ' !1 j -' ! ' l
Bodies of two Infants found in Tarrant Co.
Man dies In crash on tollway in NW Harris Co
Melanie Grif'filh checks into rehab
beer
claims'(654J
More advertisers ditch Beck after he calls Obama
racist(SOS)
Deal on jail, stadium, Dome In home stretch'(178)
Try to envision this: a world with $20-a-galion
gas(155)
County puts more heat on adult businesses(1 55)
8!1 1/2011 II :28 AM
Grappling with Texas finances/Senate OKs state budget, tax measure/ ... http:/ /www.chron.com/CDA/archi ves/archive.mpl?id= 1991_ 802999
2 of2
session, Harris County lawmakers grew closer to reaching a deal on a Hispanic congressional district for the
county Two Houston Democrats, Rep. Roman Martinez and Sen Gene Green, were negotiating over the final
precincts that would make up a district thai is about three-fifths Hispanic
But hang ups on redistricting and jail lawsuit legislation were endangering passage of the tax bill In the House
Several House members said privately they did not want to vote on a tax bill if another special session was lil<ely
Gov Ann Richards tried to offset the anxiety by declaring there would not be a special session immediately on
redistricting or jails if lawmakers passed a budget and taxes
But before the Senate met, Richards sent Bullock a letter threatening to veto the spending bill unless It tool< some
budget powers away from the Legislative Budget Board and gave them to her The Senate went along, giving her
some budget power over agencies where she appoints the executive director
When the votes on finance were complete, senators approved legislation to regulate a lottery If voters approve
state-run gambling
If the lottery does not pass, $472 million will be cut from the budget across the board, except for education,
prisons and certain human services
Lottery contracts must be awarded competitively, Sen Jim Turner, n-Crockett, told the Senate But Montford
said that would slow down lottery startup The provision failed 17-13
How they voted
AUSTIN- Here are the Identical 24-7 votes by which t11e Senate approved budget and tax bills Harris County
senators are in boldface:
Voting In favor (24)- Armbrister, Barrientos, Bivins, Brooks, Carriker, Dickson, Ellis, Glasgow, Green, Haley,
Johnson, Lucio, Lyon, Moncrief, Montford, Parker, Ratliff, Rosson, Sims, Tejeda, Truan, Turner, Whitmire,
Zaffirini
Voting against (7) - Brown, C Harris, 0 H Harris, Henderson, Krier, Leedom, Sibley
Copyright notice: All matoriolsln this archive are copyrighted by Houston Chromcla Publishing Company Division Hearst Newspapers
Parlnershlp, L P, or its news and feature syndicates and wire services No materials may be directly or Indirectly pubfishod, posted to Intomel
and intranet distrtbutlon channels, broadcast, rewritten for broadcast or publication or redistributed in any medium Neither these materials nor
any portion thereof may be stored In a computer except for personal and non.commerci;:;l use
Money Market Accts (MMAs)
Find the highest yields In the US Plus cates, news,
tips & more.
www bankrate com
Mortgage Rate at 2 370/n
Get the Best Nortgage Rates, Refinance & Lower
Mortgage LeadSteps com
$79/HR Job- 476 Openings
Nake $79/hr Working From Home, Requirements:
Computer As Seen On MSN
www selectonlinejobs com/
chron,com
Home
Houston S Texas
l-.1al!on
Business
Sporls
Enlerlainmenl
Lifo
Travel
Blogs
Chron Commons
Wenlhr.r
Traflic
Topics
Pe15Houslon
MomHouston
HouslonBel!ef
Houston gardening
Marketplace
.Jobs
Homes
Cars
Shopping
Porsonals
Posl an ad
Contests
Services
Help
Business Directory
Contact us
Send us lips
Chroniclo In Education
A!Jout U1e company
Homo delivery
Advertise with us
Buy a banner ad
Pnvacy statement I Terms of sef\tice
H 5 A R s T 11ew.rpapers
Membership
Sign up
All eady reg1stemrJ? Log m
Other editions
Mob1!e
RSS reads
e.ErJ!Uon
E ~ m a l ! newsletters
8111/2011 11:28 AM
11.
Michele ay, Tax Issue
Drawing Little Agreement,
Austin American-- tatesman,
Mar. 24, 1991
',f: I!UN
SurH.tUy MtHt.:f' 24 1091 Austill ArntHtt.tt!l SIOIO!:llll<!ll
Tax issue drawing little reement
By Mtcholo Ktty
Sl,t!t
I ht tax dt h,tt,d
IIi rltr httrrOnlt,:_ Ill ro
d111 \
.\nd t\ t II \\ Llhlfl bt !!o...,IIH :>'
IIIIJllll\il\1\\ Utli\lltit 111\d '" lt<ll
l<>l.lrd tht th.ul un
.-h dL\t-r ... , ,,. t!u pr p, .. them

It t:n H11h llr!/lb t
<HI\\ \ht' 1 '1111111\H!II I
thl' <lli11tht l.tl<!hllJt Lrt tlt1tt
rexm, lil'ttl:- hulh pnttnnnl und
t trpntutt trt<. fllt' !HXl'" !{;,:
[UIJ!Jll:( <Ill II lo ol o\ tit,,\
tl.lh
Httll.,.t' :.;pl'td,tr (;th I t\'1"" hll'
dttl[\t:d ht.., pJttiL ;\ "t'l ,,J jlf
thdl l.U)!tl \)ll' ltifllilfU\t
I <Hllllll\1\11\ b111 lllln I t
mh a! tht' 1 utih rq(htl"r \nd
Ill I hi' .,tltlt \'ltll
till l'\ t'H ttlf 1 1 tlh
r :-
I lind 11 htlld !11 llllttt(lllt h,,v.
illl!ttlrrtn!
Ul !ht l.tWI:. prJPI<:-.Jti V.J!It
hut h1'1t'H ' Htl!
r\!Jll..,.U\ 1 Hl .1\l\t; \Itt rl!
111 tl!t Tt -\:.:-.111 .t Tti\
Hrl :\11'1111 f.Tilo\1'
! h111 hu" j,'/ldnr'nl 1 q>"tdh UIHl
\J\1 'lilt !u, 1
AMD expects
its version of
386 to power
its recovery
By Kirk LadOfldorf
Amtu"lcon .. S\Gtooman Stall
F
or !h Oh-
vt"r'!i tcum
uf romputN t htv JwJig"n
t>nl It Mktuiy dttot of
lunJ( prt!flt!UH! und
for relief rc({Ulur hankel
bull "umes oUhHdt Advrm< ud
Mu.:ru lJev!ft:a' buildml( !\in
tn Suulhcual Aut>tln
Hut Fnday lu\it
the nr .. t ruund uf wurk IJ/1 lJ
tutmt>rl I .cult,
hum Wlib t mnplcLcd un
f+Chcdult
Ohver"!) teorn ui><JUt :10
men lind wurnen m Lhtlr
11nd 30a. JUijl 1.1 fl'w yNittl
,,ut nf df)eJil lhc rc
of rJoy (UIIMUrtliOK
btt.r und bnxkct lll the Suit
L1ck H:lllcwront 111 Huylj
County
Th11t K wtll'rt' AMJ):, fltushv
ducf exc<uuve W J .Jf'rry':
Sundt!rll, whu 1.11 more of u
champsgne und cuviilr IJI>tL
rtuchtd hy phoul'
Sundt!OI Wll!l mfftf!ntfd that
the Auuun prHJC<:t Lu u
Lo Jnlti'K LIIHDCilt!eJy

thr buuh ,,( AM[ l rhirut,
from
lnt.ci \II!T!SIOII, 1-'v"OTkl d
IJIUOUthly
month11 lt1Lt:r Ad
vnnel'd Mkro 1.11 Ktdl
giJWHIK und cruwwg abw11 1t11
ttutl..'t:tus 111 dcvr.lopinK the
I ,onl{l"wrn , h1p, whu:h It How
1Ul11:1lh1! Am:lHt:i
I )n Munfiny tht!' t."IH11JHIIIY
wdl formu!ly LHlrodtJt:t:' lht
Atmlllt d!:HU(ncrl ond munufru
lllrt:d dt\111 t' l!ldudiOI( II VtH
I hill Ul 40

nt
'll lhHfl
tht: .1jwt:cht:til :pi{) prudlll't::d !;l.ti
fur b.., lnLt:l
'The state
cannot continue
to preserve the
status quo when
that status quo is
pitifully lacking.'
-Tommy Jacka
!'1t\ t ru! ttllt'r!Jti\t' 11 ftll"t
l1111d.. hr tht ul1->" hul.t
!tttnl u\lluduq.: .tnd '"'
to I ht lrtlllll\l:.o l1t'- BiJl
dft ltll\l'
m"rt: tluw nndfmtJ und It PH k
ll)!td \LrSI!Il., ,,, IIIIi Ldt'/1:-.
tlttt thnt t., llr'llt.,: 1:1\r'fl
nrdt! h\ tht- Htnt"'' \\u,,
<1111\ I 1>1/llhllh I J111 ].,.,.11
dttloloo;d tht hdrHlJ'Iun !C (f
Jut/It ln<tt'\l' tl .,.,,. dd pr\ Hit
lht \\1\h till IJt'.,\ :! 1/oI/J
I ht , ''ITII'I ndlt r '.\l<llhl
h111 !ht o1pt h<ll t!ll ooJ!t t 1\hrr
dll IIU llllll" \t\li Hit tiHlt
utg.., lrutu hht tn.l; "ll
Tht tht-nlurl' ""ll'ld
111 dttrllll.: .,! 11<1llh
tJ,.,.IIl h-11 lot pr1\u to d l.l.lll'tl
tqu,rutc prllll:-. th"tltm
'II a dun;{ I hut dl:-ltorh 11\t
Bun Otlvet 1!-howa oN a wofur 1\oiOlng 11 c.:lusltn ot 386 clonu chips du-
sloned bV o loom ol eng!ntHJru h" lod The loxaa lnslfumttttln
ThiH ht fnr mort! th{tn
tH\IJlher dup linnounceuwnr'IA1
AMD. whiL'h waH hattererf hy
firuutt:U:tl tttrlrmH and
prit e romrwttllm tn thtt" llftc
1980!1
Tht SttHnyvulc, (" ulif l11lhNi
1 Un!jHUIY Ill Ill lent fiJI dtlJII/11
Ktf!Jtlrll( tl Ill btH k Ill )1(111111'
It\ the IIIII !UfJJIJt C&\0( bWU
/1('/'111, lht" IHIJbt JHlf!
n( the urufurtiH LrtdiJH.lry
The :pit-) market rtfHI:'nthUt
tht richetSI Vt"lll t..IJ fJlJIH Ill
that buatntbh HJnLt tt u1 tht!
dumUtt!.llt "brutn duJ' fnt tht-
1 umpulf1r wdutol rv
N(ltuly Ulllllon !Hti prut ..,.,
tiiHtt t-lpcctmJ w l>t!' l'lllld
l111t1 ytur Lunt ye:ur'l) :salt:" f,u
the dup btlu:Hd to huv1'
tiJliJHd tlw $l Udhun mtttk
Bu!tlllt:Hh Ul thul lntt'l
htul nut btcn uble tu Ult't:l tht
dt-nUJnd fplfn I 1111lpUttlr IHUk
''ns f11r Lht' llup
A Mil ulfu tulfl arc ono.:uH:t!d
!Itt\ tun purlu) tht'lt
"! th1 :\Kf) IIIli t>Ukt1
ttlld u nlltru \H pP,fllulttbt!
jj kJutttt!r JIIY<J 111
wllll h lht' t'IJillfJUIIY lu11t $ii:\ !I
milli1m
Ohvtr jjll the ul
'""'''' :\HI ,q.p: II n
Ill< l.Hiv, :11 t.d.nd pr v .,,.J
!Itt\ 11rt >f!r!Hfrtlt tt\o
lt.ll (I tl111kl' qo I(I;IJII"d!rl:t--
I ho1l .t l:r 1.d:ttd
,,,Jidt"ll :.ti1d J IH!k, ftH
I I, I r1<tl 1 ,,"
r.., h;11,1t 11 hu itt PI" rJ
Ill.( Hull .. , k
,\II11V.11 ul-., 11;.-tkt.. , 1.: -.,d
pllll Ht ""' rHnllhu! ::1 (I\)(
ddltt\r .. ktrltng rh, I' :tnt
\\ )Ill\ \:- IIlii( O'fltll lt 1\\ "'I :)I
'What is material
is how we divide
up the cost of
paying for the
operation of the
state.,
-Bill Allaway
\llh Jjilht l""t d lr tht
"J"IIII\1"1\ I Ill! -:ull' hi'
)itn luv..Hlllkt-r:. dt<tlut_K 111\Jt u
r 11fd oltl!t 11 nrt toul.llrtl'( .JI rud1
.ul "lht' \JtJih d
J'tll\f-. Jn:t!>hl\nf,..llllllllld \IH HHI
1.1bull\ I 1.1 pt 111
, >lilt t1u i'l'n"d
llt1\ Lht 11!'..,1 pill Jllotr lht
!Jtlr tlwrt'/lltt bitt I I'"X!Jr!udtd lttot
I KUJt Jnt'JI..,lrtt:. llltltul<u,.: tn
, ft tht :-.ltll" lul uwl' tpuod
11-. ntint/11-! tiH' /t,!no )u._,.
PI ><.II, II, I ,. t "' .,.
ongtrt"""l tl!mtJ with tdt'LIIIJ IOW .. j)OWUI r;fllltlUIJ11)1JOtt
lesluflliJ tnlo tho AMD l onyhmn chrp
teum ltHHlt:r lr. {'MIJ '' l h111l
ogy h1H11 lf thr mumtnt Ar.
t)llt' 'uJJ AMJ) ofrtttttlpllll- 11
lht' .Ui yeur odd l'c J;u:-
!k 1lw
j(tJY with tht!' hulu IIVN
luud
The JAJJlt:hnru pt11)t' ( l>l1
Vtr I>IJ!d Wttn tilTUJj(htf<Jf\\.urd
IJut dt:llliUUitnj(
'Wt WIIIIWd to llllllilllll.t lhr"
1111\f l<J gtl lo UJl t'XU1 I Ill dt"J
u,f :IHtil ttlid undtorttluud
whut the lntt:l dt'1dC t' uul11nd
thtn t11kt' Lfwl uwl c:-nhulu t
tl"
In d11 !hut n:tjtJtrtd u lltl(lnl
11 unl uUhllml "'work lu tl1\'d
np tht- KoflWtHt: too!fl llt.!fded
tJ ._.mulfltt' lht" Juh.J t httJ Hlld
tlwn to lt:l:ll AMJJ'ro. JIWIJII.Htl
1mpruvcd verttwn
Ohvt>r whu tiJH:!lll hm ntrh
t lltt-t'f dllpR for 'J I' X
ur. ln"Lrtum:nt.a tullulat,,nt lie
1 uiPrl AM[) Hhfluld UH'orpuruk
lt1W JIIIWtr fiiiHHirnJllUJO lt-1.1
tunk IIIIo tht thtp ht
)HIIt"\-'CI! tiLl! Jll'f11t1Hllllllf11Jin{t!l
utdtJHtr .. ,,. \11WIIrd
IJull..er) pi!WtHiJ IIIII
1 hu1et1
II tht> '" tht tuJc
S.O AMD, Q3
I r.-" .. rt I" Jil I h111k 1 '"
t:o pun
h !1.-111 '"'!)II'' tift lt<l\ u:. llllllllJu:
' tJo I ht l11.\ .. \\ t" lt., t; II
\,, k .C If I" I 1 ltt':i< lr lul
,,ldt lr 11 Hut.., k t'ltnb,th "'11
O Ill
l th.-111 Allll,..u\
\\t (11lk tiHIIK!o HUH 111td
tint! I flllf lltun und .,..,. 1\'u\t
pt"IM' ""til l'hut tht
p: .. )d,'IJI.
I"!JI' iJ., .... ntr
tq lttlJ\ n Hk/11 lllllHIIK
ttlld llt'< Ull\ V. !w UIt
'lltrHI'ti! hn "'II lit '''rJ-:"1" t
<11-(11!1! tl l11 (t!Jlhi- .,I
dt pltltd 11 !!1 r,..
Amltlttrt 1 ltur !ltd\ !lu-
dt'bn/1 pr"l'''"uJ., IJIId Jlfll\toJUI!\ t
01\"/1!" II \qJ! lllll t" th\1'>1' till
dh.ttlt ttruj , lf11 wul .. lt'IIL "'
!ttlUl(Hfi lt\td I >JI(JO\ll \(1 Tt'h !o/l
llltlf11 It'll\ lnl\ Jl"ll\ttulh ptduinlt!t
IIW/1..,\Jrt'll
\\"l ufl' dl!illjJJ.-I'Illlltd thut hw.1
"-II tid ht' .. ktd '" ,..h.,,ddu
HI\ utldttl.,llol lnadrrt ptr
ttlll ,J turrrot lilt" ulreuth
ptwl h\ rh, .
"lttd Hrud I iultm \ u !11r
/!'*" rumtfll tJII/pr:-. ttl \}h' l"n.u.,..
Soo No tu, G2
Carnpaign:
Snuff out
tobacco
holdings
By Paul Rooburn
PitJ!i:t
\ !"Itt... Amen111ll
l'ublu Htultb :\liMit 111\lull Lb u:,.k
mg mvr.-tlltJrtr h1 dumr tht:lr tobut
I II k,.. /11\d ]11\1\ 11 ( '(.,
tllttu).. th ... tl[llu tllt pttdit
tlht/11.\ l<f folltU 1 If 1ft1'
:-.uul Fndu\
Tlu- ttttuJHnl(n 1:1 ht1111'd on !Ia
llhltlll I 1>/11 fii(IH! lUll Ill 1\ttlk Ill /1
[tHiit krllinf! ptllJllt ,,md Annr
Mtttll II Kt't'ft' 11 lltt'ltdltr otl tlu
!tlltnluiiiH< 'lubtlltl
l'rtt}l'l I Ill limttun '\\ t' lulktllj(
th lllurult-qunrtlt>nl of tlw
.\1tt1tllm , tlrl tl :,.l'lllnJo( 011
tiLt' t'lt hunt-;v
1 ht r,lbUIItl ['r,,
w I lttttllt'lwd 11 turn
j>JJit:ll 111 Mu\ ,J,J!lll" I
l'rn\l"'rntt\ Hur,Md l
llltd 1 ll\ t 111\trltl\\ "' N;-v. \1rk
Mt lht" IHl!l!\Ut\11/1' thlll
t I.IIII!IHIIH I d \ht \ V.uu)d tdl
d tht1r !tt!Htttot
..;,, hu\1 tht l-lt'ltf1 J KttJ,cf
l tlllttl\ hJt;udulJoll nl I llhl"riLitl
!bt Hulwrt W11ud Jqflllllllll FoltJlt
.!nllltt 11! Jnllt'\ IWd !lu
)(-,, kt It lin I tHuth F11;11) nl
rk 1\md 1\ ft'\tr 'Xt 1 utt' , ..
dtrtt hf I! tltt l'"l'u'"' !))u-.t
lld'ld l'tl,jtl!
I tt u!l\ 1 1h1 u." 11 ,.,,,,v.IHdl
thut;:: !ltlutfllh Mtl.tl
11111 !Itt 111111 lolhUtl"
lr11 !Ill ln!h]lt btullh lltllll
llw 111\IHII ,...tHl 11"111
t .. ;J, lith I p1111111 lu1tlil!
iff: llutrt t ... 1 ''
l"h.- It lit('" ,_.,1JI 1<'' lit XI ,,1
111nh ttl.,, t,,,,], 'lht htlul
),. (11\1 hi Ill 1111 jlf<l/ll<l(l<JII .,j
lflhllt " \J:n v.!ll ud\t'fht"h ullttl
lunhh nod 1" nl \t n
'"' 'Hl\11111\ ,,, !Itt !!Ill!< lllt/111\
.... tilt\ ], 1\ It' l<lt."'h tf
It 1111 <I \Ju h,,.,t ,,f pt1!1l1 hrJth ],
utlJu flttltfllrtliiiJ\I
!lttktlt \ u11d ltr; toul1u1 ,], , 1 .. ttlu
p.,t.h luuhh ",..,.,, !lllttll
1\1\11 .J .... ll/111111 I ,J, Ill! 11( 11\1
J\,,pkl/1:0. :-,, h.u,f 1 ll\.:ltllt tlllli
J'oll'!h l\1 ult!J !1 '-'II" llh m
puttlrh fr1 tlu ..., !t"d 111 l>t 11111ktn,c
111ht dloIJI\tt" );:1\t!l
lltt flit I I h11\ 11\K I /11
<lll.. l r lll,tldt ' Ull'>l
Q2
No tax plan pleases e\eryone
Continued from G1
AJ>SII\IU\1<11\ <II
'\\'h<itt'\l"f lttl lit t<"lnt
Up 1'.\(h ... hoHJ(d 1 l!h't\ \hill 1\lllltd
t\lht' r111hrr th!ln IHrtiHr. lltnh
U\Hif( 111 1\ lu
Till' bl.;i'>\1\t':O.,. <'1111\llliH\1 1- f'H
r:er \1> pnrtH. q>1tlt' Ill I ht IIH' lth'tl I lrlhl >ttfrdllt II!
t:. thtlltl kn <111\dtlllll II I'PHr{
lUI Hh<H1H' Ill\ i"l<'r till It\\ ld
111 I'''' "rpdtttk
ai\J tlt'fMIIIU[ .\, 'tJ!"f;l\1;" lii<>Hllt
\liX tihH\t' h \\ ldtJ\ I lt'\\t'd I'
dt'trumnttd t. tht hodth, I h.th
\lh tto<Ho<!\\\
Elll.t:>!l\lth
wdl hm,\Pr n dtl t lJIIlh 111
uud rt,,.\\t 01 ,,].,,. I ,,[,.
PUI tht' dtlh -\ud tlwt h,td !or
'i'l'7dl!l nHd r .. r t f
t;tlhlll
:-;tilt It .. HI l.tl
1" tuln the d
11 pt'nu>\H.II \U\ th ,;rul"llli!
'H:IHW Ill Ill \oi:"\111 th;l\
bu:.tnt .... HM lrl" I hli' t I" )nOt
dlld : .. I til\ hllftlllt MHt
ltHt-:t" ttlllli\IIJIHIH" \lcPIJI(iJ,Ilf tlw
\:tdtud
tntollH' litX
' 1111' f(t tHral ; , I h.11 ! ht
I tlf)l1lrtllt' 1 11/t\llliUIII\ h,h [,, ittHJ
tht li)lht l"r !It' 1111 .. m. w'
land llulltiO <Itt ttnHuwt ut
TtXtt:- A& I 1111 t r:.11 1.
Hut t'l til tl tHl t(lcrt ntuntnl
!)p] II ).'1\t'Jl lhrtt II "-ttl Itt
t Enqtlo\t r-. nnnt
tht' thumr 111
thul
:.ufler tht "J.!r <td I
tuul
It'!- thll t1 i!t\ttl l1.t:-1
11 lll]nll: rttnk ... h1 t 111 thl
fenn! hll\t'
rli'o,t'"fj!t'UI 1 11'1\
I )wpt- 1\\' 1 !tr! o.1. h
t"ntlllt':. ltq:m 1" h,tl I' lllld
l'ntlU!{h nl tht: plt'l tmtlll ,..tull
AIIH'I'.-!1\ "><iHI Hur tlw
1 11<'1 ol !:l>llHlt!)t
!'ltl'rt' urt- tltntttJl.:;. rhut thtnk tht
rurrent tax .. llltl h JJtrt'tnh
lint.
Tht' .\:.:-,twttm .. r l\11"t
und tht ,...;tl.llt ( 'ltuJHI,et .,j
Ctliii!IH;'ftt' \ur t Xttrnp!t clfc par
tlrulurh H\lt:rl'!itrtlut tht mttllt'lll
lO thl ruhhHl1! 11] :.ttHt' H':-.
Tht':-1 t.:r"uJI:- ht<ltt'\ .. thttt t':t
twnrl!!tHt" rltlt't\ t til ... ul; .. tuo
tutll) lwfort thl' dtbutt' 'H
htllt. n ,h fh 11 rut h.:r t IMn
id\ :iddlltl!:; I h!l\t>ll 11\llt'l\
''"! l;rlhm 111\d:- thdt 'lalt'
"]Will! 11\1 h1 Jl. j!l'rl t'tl\
!II \Itt 11t11t: lfl>lll '1 hd
itPO 1\1 k li )H)iJ.,tl Ill
I
\\ lw11 hcblllt't-:. :.ut h 11:.
the l't'!l'.tb tH\1"11 >I Hlbtltt.':\11
11h1>tJI ,..\ n:hbnt;: tht\ JtH:ull u
,lt<t'l' "l'rtll).:, It' ttl! til,; ruthtr tiHUI u
<iti!\JtLtPJillt).! tiJ)tri!IHIJl
i ;,)L,J fbutl \ rttj11H\'t- that
t\tr\ dtllttr hl sub)ntt'tl (,, tht
,rtlllll\ d lqc:blutllt' UPIHIJlrlll
l;uhm E\t'r\ J!;!tnn
U;!hl (., till II ,r l\1 \
"tS!'>tlllt v.h1 t\
IHHktt .
lhd t,rlltlp llkt< thr lrt11l
.tlld tilt' ut!tull >l
tr,lnuun){ 111 u ltJil
\lttLIHttullllt! , urrl'nt
I \\-: IH'l'd tu
l!h ft'ri'lt' :-pt'lHhttg t\1 1\rlt'
1tfttr nnlt und thl' Bund Atd
upprutllh h> n\t'l\ta !fut:.
n"t , otu..,tdtr tlui! llt'td ..
iu. kt-
Thl' "WI: 'unnot on! Ulllt' to
JHI':o r. t tht quu 1\ lwn thtll
tut;h "" ]11111\!ll\ l!n I ht
!>tllh' 1\l'tth llltlrt' 11\l;l\l"\ It I lliHltl{
'Hiltlltt In (lfitfi.l(t hl'l\11\ HI tht
ht>lhHII tlfl\tll\j;! 111 hlltntlll
tdt;,t.llt\11\ tlnd ,,. h1rth
,utd oqwt t to rt 11111111 u lt'uJt:'r
utlLIllt! :-lult ' ":>tlld Jth
I 1nt< Mfll nj H!Utt"rllt'1\\
t:- tht\1 tiw !11\1''\:
lit\ ._11\JIIIIId\ 1\t't'({:. (!llll)! !ill(
ttw tt' 1:-. 1111 1 Ill tlllllrlt\
1111d dtt:'rt:htrt. ill thl Urj.{l 1\l.\ 11f
tht 1h butt
Altu\\U\ hm\l'ltr lit'Ht"ll':' thul
th1 b:-ttt' 1:. t<rH<>I" d, ud rtIU!i
H<l'>IIH..,., !Jn:d lt> ht
,t\lo.trt' th11t tht' ... wd "thtr
111l t\P 11n r1-1d I h
ll<ll thtnn nu .. , .. rt!l tft
Jtlplt 1 uft'l :.\11 k
tht'IT btul\ 111 tht .uttd lltld '<1\ V.t
rloll ( )tkt 11\l\ If ,_] ,J\1 'i'itt'\
hti\t' to Itt" up fu !I ,ned dud v.11h
lilt I ("II .
COMPUTER
RENTU
Soi<SjScrvicc .. Ncw/U><:d
Cmuputer Aswdau:s of Austin
451-0191
Business to busincs.\ Person to person
l \1111 v. \11d1 r"ml atu ., ''"JI.It . 1 muw
My bike shop
rea I Iy s la rted
roll in g ...
I I tJ,, It "JI I It ' I I 'I I ! ' II ' I 'I! I l
lllf .,\11,] .4. I tt IIIJ ll!J "'J 1 , 1 II .'
,q]IJtli "!' lllll '. k : ltl!ll
h, .j J II \ ! 1/ '11H 1
1
.. JJI/1 I I Ill!!/ d
I> .tit i.1h \r,J 1'1 "1 , >I
I II
Southwest h<ktal llliTL'Ill imL'tllon Dl
approximately (J00 LOIIllllL'rLi<ll propt:t ti\'S, 111<111', ol \\ llicil
are lor<lll'd within llldjor llll'tiopolit<lll
AUSTIN AREA PORTFOLIO
I, 167.#4 sf Apartments or I ,21'>2 Units
86,804 sf Retail 1111 \6\f,881 sf Oflin
236'> A<res Land 20CJ

1\onnr:th/Khhoy Oupla:.l!CI Auftu' $1 426 CXXl
:".4-IHIItll. 66 !,Y,J.g If
LO<:atod Along Kennoth and t<.itkey
Onvcu &ovth of Phuaonl Va.tloy Rd
longtry ApAJ1mon\l Sa.n Mlllt:OI S1 t9J (XX}
49.61611
M4l!lltd Run Apru1mDnl!l Taylor
.S.O.unitll 31 \/5 sf
LOGo.tod a! IOCQ Mnllnrd LdnQ
Nonllc::nptt Apar1montt, Au&lln
2CXJ..un1b J96,135 111
RGmmgton Houae Apattmottnt.t Avo'm t9 49J 000
376-uniU. 319 3411 51
At 600 Btu"o'rO<XI Pork E of 11135
ANDI"IIdc QuartiHI Aue1u1 $1 100 ()().)
34 I I 1 t!
" AI SE comet ol & nl-..utr.ldll D1
\61 1 1
Ltx:Diod al 4320 5 Cong1u1a
Sc1Ja Apa:runante Guo,goto.,..n $1 :>40 000
104 vnrU 79.376 :Jf
LtXalad n.l 606 R.oo;kmo.:,,
Soat.ad b1th dull 3/20/91
T uruo !;took Apa.rtmonto, A.uttl!l
9&-unn 22.8.38 1r1
LOJ;etciJ !Kltti S lst S!lou\
Sat.lod bodv. duo J.,'li'JI

C<>nt.on.lo Cantor Aualm Sl /J:J
48 0'59 If COrrHTHmlty lh<JtP"'I.) CDIIII>I
L.xatod at 463\ Aotpol\ Blvd
0 \6 6CX) 1! 1h0ppmg t t. .. UitJ B
ltx:alltd at :lOOJ.:.1JU!)WhoiOIU.
Oaltll S<.:hool Road R.'l"ll Rour11J Rv..k J.Ctl QUO
2 JC0 .t lotJllii8Cilrt)'
loco.locl U 2881 County Ro.ad 1;._>;<>
Tho Common Round Aock CXXl
1J1
Loca\e<J al 901 Round Roc; Avo
A1v01 Au,1tn SOLO'
\ J..o.CJO mtLOit.uplenn"'d IUI,IOII!tal
communrty "tth tcnn1o t.ovrt.)
dfl'll'tng ng ,.,..cmmm11 pool & 16-holco
got! cot.uu
a1 u,., ... rm :Z.LZ
&rid Loop fi:<'O ocrou !rom JM
$1 000
33 07 ...,,. 101"<><1 \.() 4 lll
I HidQCI AVI\Ifl
I<JU<><IIuJmtU>d>ICI9
tiW comor Q( l(lo(.!iJ JbO 6 5jJ11ttU
Oou!UirlJW" l All\J lla<>IUttuwtl $1 I !I ('J".()
"40 1\ \Otol !K;IOI 'J Wpbli:IIO 11111.11
I 01\ t.CfOI, h.KI:IIIKI 0 1"1 lllolu ., ...
of US Hwy :i"..xl & Hwy I I
Jl 49 11<.101 JDll\illtllOtJ $jl
hunrty tJCNoh.tJ.ofT>ont
(m F tuJe 1A 11utl f-\11 ,..,u,.., lelo-uy
6.:) Jtuul 11rm1c.J ,,n,te
Locolod at !il:! twp J61) \,;.<,V\h
$1 14fXYJ
H.,.,.,.,.. latd Au1hn ,1 1[ $
Ol.W ute
' I o..<.aled al bfJ ka'"<rf 'llvf cor
\() W ..:. fv1 lllttholl\>&1 ,_,,.
ux.alotJ at (J,
....,..,JU 1 tao.ol "'''"''
9 1-t") .... IIU jt,ltl'>d QonuaJ 1Nol
..w .... , ... ,.,,.,.J,!J,.,,.,,.,,, .... o\llfl, .. ,,
l ::,9 IUIH,l lYIIU<J , till
Lu.:ostoa ot Nt .. u11tu "' ,J
<:!1111 Sl I! lJv,..n\vv.l Al.)\1
Pltugot'irllll lAnd t-. .'
'JOb liJIIUoJ 1.' 01' oJ\.l\1
I!. MF <uluil
111 .ol , 1
and Pllugol'oillo L
lono Land Aull' ${;..;
?0 45 fttlla
l.Oo.ahiO Iii luy>ut lit & <:.tHII \..ul,h.:
no.1 lo.ioo Af.,J FM :::.4.:.

Country Ptacu L11111J
lfl)a.cuu ll>ll\HtMI :;,ln:MI)
LC>I.lliOd 11\ Hull111
JQ8 ACIUII Ol 9dD\Itllvpotl
4.1 IQ\t Qlld II I u ,
1 Oi.UirH1 41 Moa{\vw n 6. f M \t),
" $<Ull.,.\l twJ
4!;.10.$ "' 4U 111!10\lun\tfl l11b
lonod fur Planned Uwl liu.u VIJ"IU':
L.Ut:lllOd IIIOrrg ''b.\tu
1
fla
' l 11\Jo ...... ,.. ... --J , 1
al Satxn & Por11mul
i'! ,. ..
'hhlll (uiJt C,oniUO:.I(Jwn \I
6 24 llf.ft.lt l.ll )J to
Zoo.:t 'i '"oJ f,M
.. ol lo.mt.tll 0 .'),I .11111 ,,,
Houtltlk()r ,.1 Jr .. ;),r.
.t!7 d NRA wrthn;? t .Jtii:JII,IJ'>
1...'()1 B.u. lkrrl\J f'U.utr.J 'I'
l M Sl\m Road Round rloL
I ono-tiOI) tllllldlll{l f 144 NH.A
1 uct<1 111 1 i:'t)') Som 1\om<J
611Arwood Othca ButltllnQ Goorootown
1 lu<y .l4t.l I tWIA
l OC#Itnd AI II 0 UJI(lfWO<'JCI
ttoad.,..oy li!'I!Lo Uuti>JHHJ A,,.,,.,
;;< 1!11or, Qt.!tdon trlf11..o :1 lJOO tlHA
11upt.111tSIIoul ()tflfft 'lll" MM<l<J)
" t I JbiJ I 101
400 >/1 ll<.plool>f
I IIJ() t tHtA
l0<.11lt1d 111 JOlt f1 \ll.ll uf
l'i Moy Htn.JIHIIiod
1 \lrJty \II 4 \I flH.A
()!d luwno !,.qlJAIII Houl\0
i' bUl!tJongb !:II.'JJ.U 1vtul :.1 WVI.
AI '..JW <Jf 1'. '.>.llul\11
.... u p, .. t. ......... r u ..... j,,v r '""'(,11.11 .... ,
46:17" NHA II)(,NIIIll HI t!l'l 'Hill\
u .... t ....
!)l1Wifll Go&liJUl!,Mol'
4 1\"'Y IJ.I!hl>"V' '1 I IOV
\lri.O!Od a.l 1'.)04 l':,.l(l
1
)nn (j(oJ,toe\
/II"""' \ij h'Jol) of tlll/.1 I JH"
At J.n.J:J h<>tt 1 .,.,., 1\.j < ,.IM\IIn>" 1"
\'
fU. 11111'1' h_,....tl! l'lr, IJlV\
A.l .'11'1 f ttlh ',u.ul 1 .,., 1,,.., t. ''
t;ul 1l1o0 4,lf'JI
l,I>Jt..o..-.
'JV
Archives I Austin American-Statesman I Statesman.com httv:/ /nl.newsbank.com/nl-search!we/ Archi ves?p _action=doc&p _ doci ...
I of4
SUBSCRIBE TODAY
PRINT OR ETEDITIOU
NEWS ENTERTAINtv'ENT HOOI<EMCOM CLASst=li:Os CARS HOf'v'ES JOBS
HOME . .J .. J a __L_OG _____s ____ ... __ c ____usTOMER SERv1c_: _ ___j
Archives
New Tips Tracker Cuslomcr Service FAQ FcL..S rcrms About lhc Arclthe
The Austin rStatcsman Online Archives
Options:
Results lisll Start a New Search I Prinler Friendly Version>
Tax issue drawing little agreement
BYLINE: Micllele Kay AUSTIN AMERICAN-STATESMAN
DATE: March 24, 1991
PUBLICATION: Austin American-Statesman
EDITION: FINAL
SECTION: BUSINESS
PAGE: G1
[>
8/10/2011 2:16PM
Archives I Austin American-Statesman I Statesman.com http://nl.news bank.com/nl-searchlwe/ Archives?p _ action=doc&p _ doci ...
2 of4
The tax proposals being debated in Texas are becoming more splintered daily
And even within the business community, attitudes and actions toward the state's fiscal woes are as
diverse as the proposals themselves
Lt Gov Bob Bullock wants to convince the business community, the public and the Legislature that
Texas needs both personal and corporate income taxes. But his message is falling on a lot of deaf
ears
House Speal<er Gib Lewis l1as drafted his own plan, a set of proposals that target the corporate
community but affect consumers only at the cash register And business leaders In the state are
turning an even deafer ear to the speaker's proposals
"I find It hard to imagine how any current franchise taxpayer can look at the Lewis proposal with
anything but horror," said Bill Allaway, executive vice president of the Texas Association of
Taxpayers, an Austin-based group that has endorsed corporate and personal income taxes
Several alternate plans to raise funds for the state also have surfaced, including revisions and
refinements to the franchise tax But most of these suggestions are little more than renamed and
repackaged versions of old ideas
One proposal that is being given some credit by the House Ways and Means Committee has been
dubbed the "hybrid plan" Its proponents believe it would provide the state with the best of both
worlds The comptroller would have the option of collecting either an income tax on corporate
earnings or a franchise tax on assets
The state, therefore, would cash in during periods of economic boom bul would be protecled when
corporate profits decline
''The thing that disturbs me about Band-Aid approaches, and that includes the hybrid proposal, is
they are trying to generate revenue to make up the immediate shortfall That is a short-sighted
solulion," said Tommy Jacks, president of the Texas Trial Lawyers Association. which is supporting
Bullock's proposal
Allaway also makes a good point He Is concerned that the tax debate is sl<irting the point
"What Is material is how we divide up the cost of paying for the operation of the state," he said
But lawmakers, dealing with a record deficit, are balking at radical tax measures The people of
Texas, legislators contend, are not about to support a personal income tax Period
They say the best option for the state, therefore, is an expanded list of stop-gap measures,
including increasing the sales tax and expanding its base, refining the franchise tax and adding a
corporate Income tax
'1l1e reason people think those are reasonable alternatives is partly because they are not as
familiar with the tax issues We have been tall<ing about them for years but, aside from Bullock,
everybody who deals with taxes is boring so no one listens to them," said Allaway
"We talk about things near and dear to our heart, and we leave people well-rested That is the
problem"
The splintering, however, Is equally evident amcng business owners and executives who are
concerned they will be targets once again of attempts to fill the state's depleted coffers
And there Is fear that despite the debate, proposals and pronouncements, Texas will fail to devise
an effective and efficient system of taxation and continue to rely on inefficient but politically
palatable measures
"We are disappointed that businesses would be asked to shoulder an additional burden when 63
percent of current taxes are already paid by the business community," said Brad Gahm, vice
president for government affairs at the Texas Association of Business
"Whatever tax system we come up with should correct that Imbalance rather than further
contributing to It," he said
The business community is eager to participate In the tax debate And one area of broad agreement
Is that a lmy condition to supporting an income tax is for the levy to come in two flavors corporate
and personal A corporate income tax alone is widely viewed as being detrimental to the health of
both businesses and the economy
"Excessively high business taxes will hinder economic development and result in a loss of jobs
throughout the state And that's bad for Texas and for consumers," said Gahm
Since mcst legislators are unlikely to tal<e the risk of supporting a personal income tax, the growing
sense, at least in Austin, is that businesses are going to have to join ranks and lobby hard in small
and large communities throughout the state to preach the virtues of a dual income tax
''The general feeling Is that the corporate community has to lead the fight for an income tax," said
Jared Hazleton, an economist at Texas A&M University
But even if an effort is mcunted, it's not a given that It will be successful Employers, nevertheless,
stand the best chance of convincing Texans that when businesses suffer, t11e symptoms spread to
workers and consumers
It's also not a given that businesses will join ranks because different groups have widely divergent
views
8/10/2011 2:16PM
Archives I Austin American-Statesman I Statesman.com http:/ /nl.news bank.com/nlsearch/w e/ Archi ves?p _ action=doc&p _ doci ...
.3 of4
"I hope we see various business entities begin to say we l1ave had enough of this piecemeal stuff,"
Allaway said "But the business community is not a monolith There are elements that think the
current tax system is perfectly fine "
The Texas Association of Business and the State Chamber of Commerce, for example, are
particularly Interested at the moment in the scrubbing of state agencies These groups believe that
state expenditures must be cut substantially before the debate moves on to ways of raising
revenues
"I hope constituents will bring pressure on legislators to cut spending ancl reduce the projected $5
billion deficit rather than simply adding $5 billion in new taxes," said Gahm, who adds that state
spending Increased by 117 percent in the 1980s, rising from $21 5 billion in 1980 to $46 6 billion in
1990.
When business groups such as the Texas Association of Business talk about scrubbing, they mean
a deep spring cleaning rather than a dusting and mopping operation
"Good fiscal policy requires that every dollar be subjected to the scrutiny of legislative
appropriation," said Gahm "Every agency ought to justify all over again at every budget session
why it deserves its budget "
But groups like the trial lawyers and the association of taxpayers are leaning in a different direction
"Maintaining current spending levels Is short-sighted We need to increase spending in one category
after the next, and the Band-Aid approach to raising revenue does not consider that need," said
Jacks
"The state cannot continue to preserve the status quo when that status quo is pitifully lacking The
state needs more money It cannot continue to tolerate being at the bottom among states in human
services, education and so forth and expect to remain a leader among states," said Jacl1s
One area of agreement among business leaders is that the state's tax situation needs fixing But
there is no consensus on timing and, therefore, on the urgency of the debate
Allaway, however, cautions that the issue is serious dead serious
"Business people need to be aware that the speal<er's and other tax alternatives are real This is
not theory This is real life
"Business people can't stick their head in the sand and say we don't like any of this stuff They have
to face up to it and deal with the situation "
Illustration: MUG SHOTS
Copyright, 1991,Ausfin American-Statesman
NEWS SPORTS WEATHER CLASSIFIEDS
tocnl Longhornu TRAFFIC Can
Vhtunl Cnpllol lonohornu Trnlflc c.:unor<Jtl Horncu
William!> on MULTIMEDIA Johll
Slll!O HS Foorbnll Colloc-llvO' Vblon Morchantll::;c
CrlmotrilCktH Hluh School lnu:rnctlvou CUSTOMER SERVICE
Sla\osmnnWttlch Recruiting Gollerlco Muml1or Conh:r
OhltunrluG Outdoors SLOGS e ..mall NowGIOIIOr!<
Dnlnbll\Hl' Control Golf ENTERTAINMENT SutJucrlbo to lim
Nn!lon Arc n Pro To nm11 1\List SIQn up for tho c Ed Ilion
World NFL Evonln SubcrllHH Sntvlcco
Lotlory NSA Munlc Where to buy tho Slillotimnn
BUSINESS ML3 Movlnn ouy Photo:;
Technology AP Sporln NC!WS Tclt>VII'ilon Aondcrn P;:mcl
Purnonnl Flnnnco LIFE Curecrs tit the Statcnmiln
Area Employarc style Rccrcnllon lntornshipG
Ernploymonl Trnvcl Spnti/SilhHI!l New:;poptH:. In Educalh>n
Real E.stnte Gnrdcnlng Food/Drink lnr.ido Unu
AP Bunlnor.s Grm!n MOBILEIRSS Ncwnllpu
OPINION Health & Slntosmnn Rumler rownrdG
IMIUhl Rolslno Austin Aul'it!nJGO Site mnp
Ben S01gunt /Pllonc Ethics Polley
Follh RSS
Life Guide
Wodtllnoo
for Cnti11!J
ADVERTISE
Print
Online
{Print & Online}
Nt.rWI.Ip:lpor ll.d;
MARI<ETINO
Community OC!volopmanl
OoGood
Glonsy
Conc::cr1 scrloD

Rcndorli pnncl
5JlU dul Sucllunn
AffliAlEO SITES
AJHHil St
Hookcm corn
Onnlrop Advurllucr
Cedar Park Citizen
Tr.:!VIII V!uw
Lodger
North Lake Travis Log
PtiU{JNVUit! Pflag
Round Rock lc.\ldor
Sm\lhv/llo Time&
Wostlnko Picayune
Copyright 2010 All rights reserved By using Statesman com. you accept the terms of our visitor agreement
Contact Stalesrnan corn 1 Prwacy Policy 1 About our ads
IACAPI!!!UM
8/10/2011 2:16PM
12.
Franchise Tax on Small Firms
Opposed, Dallas Morning
ews, Jul. 25, 1991
. AROUND TEXAS A SOUTHWEST
power booM In 1000, and upgrcdlng would coal about
$40(),000, ho a.ald,
IIJ88li'Ofl trwc- llltun new ciBe:l code
Fr3:nchise tax on small firms opposed
"""""'"""
AUSTIN- Exponslon of the state
corporate franchise tax shouldn't
family or eingle..owner
businesses, the bead of the Texos
AFL-CJO says"
"'The corporate franchise lax
chtU'ges CC1rpora1ion.s for the \Hne
fits they enjoy. But to tax the small
bU9inesS person In tbe same way 19
reAlly unfair taxation," said Joe
Gunn, TexuAJll.,CIOpre.ildent,
"Corporations take advantage of
privUeaea and protections
that a family-owned buslness or sin
gle proprietor Blmply do not enjoy,"
Mr. Gunn Wednesday.
State lawmakers, who racO a pro-
Jected $4.JI billion dollch as they
meet In special session to wrJte a
budget are considering recasting
the tax
Some lawmakers have suggested
extending the buslow franchise
levy 10 cover partnerships and role
pr,Prietorablps now excluded.
They say sucb e. phm, which would
Include an lot.<lme tax on compa-
nte.s that aren't taxed on captt.al,
could tower tho overall franchise
Drama professor may have slain
actress because she rejected him
........ ..
HOUSTON- Friends of a
proressor and tile a.cuess he Is
accused of killing speculated
Wednesd.a.y that the stAying may
have occurred btc:ausc she spurned
his advances. Pollee, thcoriu that
the two bad been having an affair
'the answerf may Ue In leiters
wrHten in Frencb 'hat University
of Houston profes:sor Claude Caux
Joh In hla car the: day pollee say be
stibbed Mary Avey Cbovanetz and
then himself In Mamorlal P11rk
futr, bul friends say Mr. CauK was
outraged over spurne-d advances.
A memorlal s.crvke for Ms. Cbo-
vunetz, who was married with two
children, was conducted Wedoes-
dcy.
Mr Caux's wife, Rosle, bas re-
moloed tn Mr. Caux's hospital room,
the Houston Chronicle reported.
Friends said that when Mr., Caux
wckcs up, he weeps.
''If he could onJy bave tho&e two
mlnules back." said Cecil Pickell, a
rellrcd unlvenlty drama professor
and CrJend to both Mr .. Caux ftlld)ds.
Chovaneu. "You have your raul at
truc11ons, your Otbellos It must
hove bc4i!n l.ldrlvlng rage boiUng
up."
Mr. Coux hu htred dcrense taw
wx rate and raise about Sll billion
for tho state every two years
APL-CIO members support ocom"
prellenslve revision of the tax S)'S
tam, and lbe corporate francblsc
to.x In partlculiU, Mr. Gunn SAid
But he said expanding the tnx to
non-corporote bustoes.seo would be
unfalr, actUDIIY to a per
sonallncome tax on .smotl business
owners
DEATHS

Unc.Ja.cksonMorrow Chaptl, McKin
oey.
Sfi'-LI.. Douatu, 77, of Dtnlwo,

neul Chptl. Van Alstyne
BRYANT, DUly n . 56, of Sherman, A
singer and mUJiclan. Services U a.m.
Tbunday, Beyd..SmllhWblle JJortu.
ary,Sberman
LAnlEN, Emma L., '11, of Allen, a retire-d
buu!ldao. Serv1telll0:30 1.m. Thu,.
day, Turrentloe.Jcbo!l!olorrow
Clltpel, McKinney
PEACOCJtJ Duncan, 86, llf MeAiu!tr

vices \lltlfct Wedouday, Orand Ave-
nue Unlled ldetbodlst Church. Me,
Alnter

times Appliance Store. Stlrvtcu 10
om. Prlday, Oarntr Ce1n1cry. V1o
i\Jstyoe
WIMB2RLY, Leona, !J, of Celina, a
homemaker. SGrvlcu IO:JO a.m. fi'rJ.
Unlled Methodist Cburcb,
: Mr. Cttux, who was listed in poor
ct Ben Taub Hospital
Wednesday wltb stab wounds to the
abdomen, has Jcllllng Ms,
qbovaneu, pollee said hut re-
to discuss the renson ror the
onoc)c
"He told us )le want3 to h
private," homicide Detective AJ
toepoel .. ld.

: DUt Houston homicide Detective
flub Moyer saJd that since tht.' ltll
ltNi have been tnmslo.ted. "we can
ploVe II was premi!dUsted" He
Would not reveal specific conlt:nt.!l
althe letters.
U!llng the ltt1111"11, thcor-
bed that the two were hDYing AD 1:1f"
bus been sel utSSO.OOO
"It sounds like unrequited love;
sold Karen Douglll!J, an acucss who
hns worked w1th Ms. Chovaneu.
"We really did tAlk glrly .. talk, and
shu nuver C!Ven hinted at anything
She wau a rantalh:Jng woman,
though I can see how a man could
become enttmored of her. Tbts all
reminds me or a be.d movie !ieene"
- ENTREES AND ENCORES--
w
Look For Our
Fort Worth/Mid-Cities
Restaurant and Movie Listings,
Fridays In GUIDE
ONlY IN
'Jf'l .... "''-' "'2U' ........ ......z .......,..:... "\..,. ...\............l
Call Tt1e Dallas Morntna News
WealhcrTrak SCIVICC at
11()0..3704000 on your touch
tone phone, !hen 202 for
Washington a C .. lhcarevaccess
codelcraovu S ctyorthc l!rsl
throelellnrsoflhaloreigndesnna
lton in wnch YCits'rc seeking
weatnermlormanon Wlthm sec
onds,you'llgelthotuJ/cnll!me
temperature, 4and10day lore
casts, skycondUtons, wmdspeecl
and d1reclion. baromeluc pres
s.urc, n!er5lato hohway condt
hens. loreon currency e,;ch,nge
rates, passporllV!SamlormatiOn
and slate hea.l!h
advlsOrh!S lor mote than 650
c1Hes around tho 'Norld (Rotary
callm may weather
condthons onl'f.)
Thechargoforcachcallls75t
Pl:lffiiOUID

1-1100-3'1'0-800.
And. attics and basements and garages. In fact, with an
ad in The Dallas Morning News Classified section, you
can clean out every room in your house. And fill up
\ .your pockets in the process.
Call 7 4 5-8123 today for Classified Advertising results!
Honw
c.,rnctcry
Mausokurn
Fl11wcr Shup

AI.! IN ONE LOCATION

]
1
c
.
c
II
Archives 1 The Dallas Morning News, dallasnews.com http:/ /nl.newsbank.com/nl-search/we/ Archi ves?p _ action=doc&p _ doci ....
l of l
;search dallasnews com [;B
News Sports Business Entertainment life Health Travel Opinion Autos Homes Jobs Shopping/Ciassifieds
Your purc11ase of 25 articles expires on 09/10/2011 5:00PM
DALLAS MORNING NEWS
Franchise tax on small firms opposed
Associated Press THE DALLAS MORNING NEWS (DAL)
Published: JULY 25, 1991
AUSTIN - Expansion of the state corporate franchise tax shouldn't include family or single-owner
businesses, the head of the Texas AFL-CIO says "The corporate franchise tax charges corporations for
the benefits they enjoy But to tax the small business person in the same way is really unfair taxation,' said
Joe Gunn, Texas AFL-CIO president "Corporations take advantage of legal privileges and protections that
a family-owned business or single proprietor simply do not enjoy,' Mr Gunn said Wednesday State
lawmakers, who face a projected $4 8 billion deficit as they meet in special session to write a budget, are
considering recasting the tax
Some lawmakers have suggested extending the business franchise levy to cover partnerships and sole
proprietorships now excluded
They say such a plan. which would include an income tax on companies that aren't taxed on capital, could
lower the overall franchise tax rate and raise about $1 1 billion for the state every two years
AFL-CIO members support a comprehensive revision of the tax system, and the corporate franchise tax in
particular, Mr. Gunn said
But he said expanding the tax to non.corporate businesses would be unfair, actually amounting to a personal
Income tax on small business owners "If we're going to lax personal incomes, don't just pici1 on small
business people,' Mr Gunn said
Home j Contact Us I Help Center 1 Advertising I Site Map I Find Dallas Jobs I News Feeds I Subscriber Services I Geilhe Newspaper I Special Offers
2011, The Dallas Morning News, Inc All Rlghls Reserved 1 Terms of Sennce I Privacy Policy
8/ll/20!1 4:25PM
13.
Tax Reform: Lawmakers Should
Revamp the Franchise ax,
Dallas Morning ews, Jul. 31,
1991
16 A

Wednesday, July 31, 1991
BUIILOstw!Ui, and Editor
Jr.no.tv L..liAl.aJttiCll Ckne:ra!Ata!l4ltr
RALPIIl.ANOfJI. \1/c:t PreddcnVEncuJJlhl' E.dl1or
WJLUAU W EVANS, &xccul/l.'tt Munojli'IJ &Utor
Roiii:JIT W. MoNa JR, Mano.s:lnr !:dltor
Pr.m:JtwN VIet Prn!dtni!Edlh.lrlo! Edllor
Sf'tllor\'/cePrt.Udenls
IIM!ItY M STliSU:v Jn &II, I ond MarhllriJ
J. WILt.JMl Cox.Adntlnhcrollon 11nd Finonet
.
V!ct1
1
rtsh!cnfJ
& Fnhr>K McKN!GliT Cirtulolftm
Ru:IIMII..lSTARKS. JldverlhlnJ
lll'oROLUF' G.v.RJR.Mn,k:ellnr
U...HnV Pl;CKUAM. Clmlto/ltr
GROVER U 1.1\'l!'<liSfOS tnformoJIPn MonOJtmtnl
EDITORIALS
TAx_REFORM
Lawmakers should revamp the franchise tax
The TcJ(3$ Will soon turn its
:mention fn,m Ut:>o :mJ IO
the ta't major
cwerhnul .,-.r the :-.::,:l .;,,Jt 1:: IH'I m the
ofhni: there :. \\ ,,uh1 spread
the l':B:t ..:!".;i'{ :.<., to
:c.': \\h!IC" rnis
n:,:: Si ; :-c" :>:- nexl
:' . ":-:. :' House
'"-::-: IO
::-.::-."">.;:...:: -' : .. ., :-::;:; '''Uid con
\t:-: t:; .. :.::..: tl) an

1.'! H::r' ; 1 ::0!: :: f'l::tndsthe
h' ':.:: ::-.: ... :i":
.sut:h a:.- .>:-:.:. ;-r ..'rrtetor
ShipS
'6 :.;.\ ::-:.- ta:t.
OrlSlnilttJ In .!:'.! \!..'":'..: :\ .,.Ut
date, SIOL'I;! It ,::
ment such as r:J:-:!
equipment t'Jrr;t".;, -".:.:-1< :,;,. l,uiJ
provide a betler ::".t'
ent kmds of ::-:
economy
Currently .. rnnnufactur:ng 18
percent of the gross stntt! produ.:t and
Dlmost '27 percent or tht' t.lX Oil
ond .gas lO percent of the gross
stnt..,roduct and pays 16 percent of
franchise tax Mconwhlle. serv1ce indusmd
are undCTtaxed. paying less than 8 percent
or the franchise tux. while providing more
than Wpercent of the gross :.tate product
Among those unincorporated businesses
exempt from \he franchise tllx are law
accounting partnerships. sole propnetors
real es\IUe ontl other hmitcd lJartncrship!:l
.11nUjoint ventures and privntc HWestor!i
Efforts are already under wuy to dcnnl
the Hury plan in the Sen4te. under pressure
from trial lawyers, doctors nnd some or the
state's wealthiest investors. Senators are ex-
pected to dump partnerships and sole pro-
prietors from any new tax plnn Instead. lhe
Senate likely will try to impose some kind of
occupattomll heJd ,tax - a yearly doing
business fee- for such professions as archi
tccts lawyers, doctors nnd certified public
accountants
Big business in Texas. which pays moat or
the francluse tax. is pressing for reform that
would bring all kind& of boslness- not just
those incorporated- into 1he tax tent. And
understandnbly so. Currently. 275,000 or
Texas 1 S million businesses pay the fran
ch1se tux. The top 10 percent of the compa,
nics pay 90 percent a( the tax. while some or
the state's wcallhiest business operations
gt>t off scot ,free.
Opponents who couch this as o small busi
ness ISSue are perpetrating a hoax If lnw"
makers are concerned about smaH bus:Jness,
they can create reasonable deductions or
floors lo protect amaU businesses that are
uper<tting on the margin
lf a business asset base is below n certain
or profits are not up to a level. that
business wouldn't have lo pay. But H profits
are above those level!, it wouldn't moke nny
dtfference how the business is organized
In other words, a proCilable chain or
beauty salons would be taxed while the li-
censed benutJcitm who does hairdos in the
front room of her house probably wouldn't
generate cmough revenue to trigger the tax
The Legishuure. meeting now in a special
budget session, should torget tht: idea or in
creasing the sates tnx Taxes on consumers
nrc hich enough lt'a tlmc instead to reform
the antlquntcd fronchise tux and produce a
fairer tax on ull1'cx.us businesses
SUMM.lT
Bush is right to strengthen economic, energy ties
When Mlkhml held his rtrst cosh tronsru.slon Further signiCico.nt old
summit session with Honald Reagnn in 1985, rnust be conditioned upon Soviel democratic
flf.\l/.. observers. If any, could huve imagmcd and the hcnlth of the American
that only six years lnteJ Hengan's succcs economy, but strengthening economic lies
sor. George Bush would vtsit the Soviet Will help both the Soviet Union and the
president in Moscow for the first summit or Umted Stotcs.
the postCold \Vnr ern So what is it that we For instunce by strcDmlining the process
must now imugine for the future of Soviet Amcricun otl hrms must go through in or-
precisely what Prcsi,

dents Bush and Gorbachev nrc discussing New energy development which can be
thls week It is important that a strategic brought abo\11 by :mperior American tech"
urms reduction treaty ts being signed locluy: nology. means grcnler 011 royal1ies for lhc
superpower relations have rcoched the Sovtet Union Improved profits for Ameri-
point where such ngrccmenls ore possible can oil firms and, most importantly,less de
and sensible pl!ndent:e by the West on Middle Eastern oil
Yet other Issues arc now of equal unpor The most :Hgnificant political question. or
tnncc to US Soviet relations f'or course. is the future shnpe of the Soviet
what role will each country play in lJ likely Unwn On President Bush ad
Mldenst pence conference! Can the two su the lJkrntnion parliament a' feat
perpowcrs cooper.alc again tn _the mnnncr that is tmroruml for Its recognition or the
which mude Vl_clory In the PerSian Gulf desire for :a::H determlnUtion amons the So.
Sible? The Sov1e1s nrc pressing for a confer vtct rcpubtu:s Whtlc President Hush and
ence by the end ur the yeur: Secretary of Secretory Uaker have been right to on
State Jamet.: Jlaker nlso would like to get all muuHo1nmg u :;oltd relationship wllh
1 parties to the table. but prudently is trymg tlnrbuchev the president IS wise to
tocJisurc that lsraers concerns nrc nul lost subtly highlight the rreedom struggles
Jlartu:ulorly thorny rinnnCHll 1ssue Within the ScH'ICt tlnmn cspr:t:iully in thr:
President Uush faces 1s whether or not tn Bult1c republics
extend rea/aid to the Soviet economy On These .:,;crural pohtlt:ul und c:conomtc is
Tuesday the prestdcnt pledged to seck mm;t SUC$ extend beyond tomorrows end of the
1 ruvorcd n:mon stntus for the Soviet hrsl pnut Culd War summ1t.so thl! two super"
Unaon an 1deu thut deserves con.:rcsstunul powcr!l now go (mto whut Security
npprova! Th1s would cm:ourugc So\'wt Adv1ser Brent Scowcron uptly terms
numtc renewal und bc>lstcr l'rcsJdt!nt new ugcndu Thut such on agenda exists 11:1
Golbuchcv'll reforms WllhoUI requ1r1ng 11 cuusc f11r hope
CAMPUS CONNECTION
German link puts Paul Quinn on the map
<icrmun mu} suun become u JliiJIUiur liw
guugc course un the Paul Quuw C'nlleRc
BLwg ubk tu 11 little f :crmuc1
Will. Cert"tnly t:umc 111 hl!IH.Iy lc1r the 'i\U
denlfi und fleul!r members wh11 pur!tclpulc
1n I hr. l'lt'hJUJ':. new exchUt!gt: Wllh
,, Cillrman l:llKincenng hrrn
Tlw pllrfncrqup hctwceu tltc lw.tnrn.:a!ly
wllcgc :uuJ Omnlt-t:h Eng:Hiccnn of
Lnmtuhl. illlnuuutctl w1;cY hy
l'n:ildtnt Wc.rrtn a hill
c11hlllll:Cd Whcu !ilUdcntn tiiH.I faculty memo
t:im JOint research JJt the envt-
ronrncntul Cllf(IIH.:cring corporation .11nd
1llhLr f,cruwn un1vcrs111es On the flnJJnclul
.\Ide th<: M:huul wtll benefit from the $10,000
Omuttech to rdur.b1sh the school's
ncncc und the SJ2.000 in unnuol
'dwl!.r:-.lllfl fM the next four years
Sueh 1ntcrnutmnul l1nks con only hi!lr
11ll' t:ullcgc 1u bcwmL' u Mrcotcr usset to the
IJ;tllost:'llllllllllllty l:tpwlly unporlnntll t:ets
' - -< - .-1"
Sobering
In !he mtdsl of soared spirits
surrounding celebrations of July
rourtlland the Vlclory In the Per
sian Gulr War, it was both sober-
ing and leveling 10 read the Rev,
William McElvBney's Viewpoinla
arUc:le of July J Hil voice Is Uile
that voic:e, c111tng in the wUder-
ne5:5, "Show me the wny,
is recorded In scripture. He is not
alone In his crylnB out for reas-on
The new order, which b illU
s1on. 1s clearly thingl na they hove
alw11ys been One need only look
olthc Middle Eet since our greG!
victory, The dlctll.lor l5 :alii in
power In an Jraq lllid was1e1our
bombs The hi b in
power In D Kuwait, where w en
h11ve no Vole. people are b lng
5entencLd to prison and d th
wiihoul due procel3,llnd Kuwaills
wau for other$ to "rebuild their
country.
We did win the war, but we
haven1 th.e fain leU notion of how
to make. Win and then keep the
peace
REV, CIIARLESCARNAIIAN,

History repeats
History does Indeed repeat if,
selr, In J97J, U1c i\mcricun P$ychi
ntrlc A!ilOCitltion ctiVed In to say
aclivbua ond redefined homoJexu
a lily aa a rather
than a mental lltness." Thol deli
nltlon rllone changed the putith;:ll
attitude toward homosexuality
and turned the gay movement
into a clvll righu battle
Now, lllmost 20 yurs latero the
American Medical Anociatlon
had 11 chance to atand up to the
homosexuala. but, unfortunately,
it too, buckled un_der voluntary
teuting .. is not going to stop an epi
demlc
Mandatory acq\lired immune
deficiency syndrome tc&ting mwt
be required for every doctor, den
list and other health-care worker,
they mus.t be held legally and
morally responsible to tell their
patients they have the disease
JutU one death needlessly
caused by an Infected doctor or
dentist is one death too many.
MAR/t..YN STATLER,
Plano
Brainwashed
ihe Ulustration oecompanylng
Ileana RIVera Liberatore's letter
regarding teaching birth control
to teena tells the whole story Most
nf our 1een11 today are slave. In
bondage to UUci1 sellt 'They are be-
Ing brainwashed to believe thut
abstinence is unrentisllc Not only
Wllll tt renlis11c during my !ten
years, it created 11 kind of utopia
We weren't in bondage; we were
free to just be ktds nnd hnve fun
We were not burdened with un,
wanted pregnancleJ, no birth con
trol worries, no venereal disease&

Picase Include your oddrtu lind
doyflme phone so we can
conlacJyuulorclariJlcollonurcall
flrmuJion BtCIIIUt' aJ/Iml/td lpCIC.f,
may conde-nse lenns that
fat publico/loll, We do no I
publldJorm lrllrrl, t:oplelor ltl
un wrHitn /oolhtrpubltcoflons.
Jlbo,Jht'slloturthtltlltt,lhebd-
leriiJt/lonrtofpllb/lcollllh
L.tuenmcybemolltdlo-
L.&lllersrromReddtn
The Dallas Morning News
PO.Boa:6S.li1J1
DallaJ, TX1J165
no lfcquired immune deficiency
syndrome. and drug abuse wu
unheard or I didn't even know
who! an abortion wns Until 1 was
srown, becnuse there was noth-
ing to abort Some of these ills
mny have exSued bu.t 1hey were
rare
A IJ.year-otd girl ts much too
young and im'mnlure to be mak
ing decillions concerning birth
control. Unfortunately, what is
beJng shown to our young people
through the entertainment media
111 not love; it 1a lust, and hut is
not leachable Wh"ether Ms. Llber
likca h or not, playing by
the rules would provide a much
more trouble-free and abundant
ti!e for our future generations. l
know. I've been there.
DORIS KENT,
Dalilu
Welcome to the mean streets
,
HENRY
TATUM
E v c r
since my
wire moved
dawn here
rrom Okl1.1
homa last
ycnr, she hcs
been puu.Jed
by the dlrter
enceJ be
tween Tcx-
om ;md rolks in her home
state It never ceases to amtlze her
thtlt a ribbon or water running
across red cloy could seve as
such .11 alrong dividing line for
pcrsonultttcs.
Nowhere hBs this aeemed more
her than on the strcctll
of Oallns "People don't honk their
horns the aame war down here:
she I old me recently. This :seemed
like nn tmprobobte obtervntion A
hunkmg horn Is a honking horn
So I usl<ed her to e!nbora!e
"In Oklohumo, we honk to let
pcuplt: know they nrc in dunger or
huvtnK u lrufhc accident; she ex
platned "In Texas. you honk to lei
people know they hove fouled up
and tlel>ervc- 10 be pumshed
No no. I though! to myself
Th1s couldnt be so In drive
fnendly" l!ut wuhin 11 few
cloy& D. couple of Dnllu motorhts
provttled us wnh on
outdoor muu pluy to prove what
:Jhc wus tulklng nboul
Nnt wunung to woll fur .a long
line of con nt n busy 111
tcr1cclion u driver 1n front of ua
"pranK rorwnrd the lnlltanl the
truffle hghl chnngcllto green und
lurned lch A motorht oftettded
by lhts oct nf impudence followed
the dnver for several hundred
ynrdJ lwnk1ng nlllhct wuy.
PerhoJu that u why u heodhnc
10 'l'he Uuflu5 Morning Nt.ws Sun
dlly CIIURhl tnY eye who
honkcd u :lltncked, police suy II
was o.Jmuu unneccssory to read
the Dtory 'l'hc heudhne told It all
On 1-'nl.lay cvcnmg, n tlnvcr
pulled up 11ctund a cur lho.l
:.UIItnnpfwd ut till llllcr5cct1Clh on
l'urk I .lim' ut Ccrurul EXJlrcsswny
wn thnuuh !he Wll!lllrccn
the ddver recoiled. then he
drove nbout 50 feel .11nd slommed
on his brakes:
The rest of the story rends lUte
o rccop oro Mike Tyson fight The
angered driver proceeded to purn
mel the mon who had just barely
beeped ol him" One m11n wound
up with a severe cui on his right
ear. a possible broKen thumb and
bruises on hls leg The other
wound up feeing aggravated ns
charges.
"It make, me feel like there are
some crazy people outlhere." <:om
mcnted the man. whose decision
to honk had unexpectedly turned
him into a punching bng
What Is goinG on here? Texas
didn't used to be this wny Why.
we olmout ended up pulling the
slogan 'The Friendship Slate" on
our license plates
Paychologlets would bo happy
to provide an explanation for our
chDnged nnllude if anyone b will
lng to listen When n scrica of
frecwuy occurred In
Ct!Ufornln several years ago, a
number or noted paychlotrlc
counselors warned thot this pat
tern :outd be tied dlrcclly to the
economic Pnd social atrain of ur.
bun living, When tlmca (!CI tough.
we all road warriors
Thanl<s Ia the odvertislns peo
pic on Madlaon Avenue autO>
mobile haa become on extension
of our pcraonulltles llow we reel
about ounwlve t5 reflected in
whot we drive, And how we drive
ill a direct reflection of the mood
we tHe In on !hut doy
A driver whu cuta In trona or
you Is an lrrunnt A drtver who
cuts tn front you on the dny you
hove been luid off lhe plant 19
an offensive foul who need& 1o be
tuuyht o
When oil prltt$ collapsed 1n
I he 19HOa. my frlenda In Houston
told me they hlld all bul given up
dnvlng on the freewuya F'rua
tratctl llouutonlons . .worc.,lurnlng
1 hL ronda into thetr ow11 flUme of
"hUmJler curs IJrlvcr\i would
speed along within nf t!llt:h
other, rnnkc WL'UVItl&: lone
'
I
crumpfed fcndera
The recovering Houston eton
omy seems to have restored a sem-
bl.llnce or aantty 1o driving habits
there, but.Jam worried llbout the
situation In my hometown. De
spite hopeful talk about improved
Dallas flnnntllll conditions. the
truth can be round out on the
road, where twisted wrecl<.oge and
rr.oyed nerves are aa mvch a !Illite
ment about economic trends 115
lhe lotesl name chango at your
bank.
It you accept this p.sychologlcol
wessmcnt, then Dallas now hns
creuted iu own vera ion or the San
Andreaa Fault Just AI Callfor
niona are waltlns to see If they
willaurvive the next mo.jor earth,
quake. we must walt and wonder
how the teaty mood of OaHu driv
ers will survive the recomtruc
tlon of Nqrth Centro I Eltpreaaway
For the remulnder of this de
cadc drivers wUI be honking
their way down o couple of nor"
row lanes of Centrnl
while work crews try to rebuild
the outdoted rreeway. And they
Will be ahoulln& nl each other on
Abrams, SkHlmtm, (irccnvitle,
Hlltcrcu or any ather roo.d they
chooue to cscope \he construction
ffiD1C
This may be a rather forwnrd
request but I am going 1o mo.kc It
nnyw.11y: I hope you bank oHicers
wttl 11t11rt loakins more kindly at
lonn appllcalions Cor the next few
years And Ia those pl11n1 mnnag
crs thHtking nbout try \a
hold orr ror awhile t oak. wcve
all got1o dr.lvc In thtt town
Henry Talum Is associate !!dllor
oJ The Uullns Morning New& edUu
rial page

ltollf:III'W.DI:CIJI.IHI
C'hul,mund/lll,fl<lllft/

Wfllllll.llt.I!\JJI

MHIIo\fi.J
.'i<'nhu\'url'tolhl<'/11
Archives I The Dallas Morning News, dallasnews.com http:/ /nl .newsbank.com/nl -search/we/ Archi ves?p _ action=doc&p _ doci ...
I of2
;search dallasnews com
iiJ
News Sports Business Entertainment Lifo Health Travel Opinion Autos Homes Jobs Shopplng/Ciassifieds
Weather Traffic Obituaries Celebrations Photos VIdeo Newsletters Mobile/Alerts Contact Us Subscribe
DALLAS MORNING NEWS
TAX REFORM Lawmakers should revamp the franchise tax
THE DALLAS MORNING NEWS (DAL)
Published. JULY 31, 1991
The Texas Legislature will soon turn its attention from cuts and consolidations to equalizing the tax burden
While a major overhaul of the state's tax code Is not in the offing, there is a proposal that would spread the
state's franchise tax more equitably to businesses not currently taxed, while raising $1 billion in new
revenue for the next two-year budget Rep James Hury, chairman of the House Ways and Means
Committee, is expected to introduce a bill this week which would convert the antiquated franchise tax to an
earned surplus tax whose base combines both assets and profitability The important factor of the Hury plan
Is that it extends the business tax to unincorporated businesses -- such as partnerships and sole
proprietorships
Today's business tax, the franchise tax, originated in 1907 and is woefully out of date, since it relies largely
on capital Investment such as plant and manufacturing equipment The earned surplus tax would provide a
better reflection of the role different kinds of businesses play in the state's economy
Currently, manufacturing contributes 18 percent of the gross state product and pays almost 27 percent of
the franchise tax Oil and gas contributes 10 percent of the gross state product and pays 16 percent of the
franchise tax Meanwhile, service industries are undertaxed, paying less than 8 percent of the franchise
tax while providing more than 19 percent of the gross state product
Among those unincorporated businesses exempt from the franchise tax are law and accounting
partnerships, sole proprietors, real estate and other limited partnerships and joint ventures, and private
investors
Efforts are already under way to derail the Hury plan in the Senate, under pressure from trial lawyers,
doctors and some of the state's wealthiest investors Senators are expected to dump partnerships and sole
proprietors from any new tax plan Instead, the Senate likely will try to impose some kind of occupational
head tax-- a yearly doing-business fee -- for such professions as architects, lawyers, doctors and certified
public accountants
Big business in Texas, which pays most of the franchise tax, Is pressing for reform that would bring all
1\lnds of business -- not just those incorporated -- into the tax tent And understandably so
Currently, 275,000 of Texas' 1 5 million businesses pay the franchise - tax The top 10 percent of the
companies pay 90 percent of the tax, while some of the state's wealthiest business operations get off
scot-free
Opponents who couch this as a small business Issue are perpetrating a hoax If lawmal(ers are concerned
about small business, they can create reasonable deductions or floors to protect small businesses that are
operating on the margin
If a business' asset base is below a certain level or profits are not up to a level, that business wouldn't have
to pay But If profits are above those levels, it wouldn't make any difference how the business is organized
In other words, a profitable chain of beauty salons would be taxed while the licensed beautician who does
8/11/2011 5:26PM
Archives I The Dallas Morning News, dallasnews.com http:/ /nl.newsbank.comlnl-searchlw e/ Archi ves?p _action=doc&p _ doci ...
2 of2
hairdos in the front room of her house probably wouldn't generate enough revenue to trigger the tax.
The Legislature, meeting now in a special budget session, should forget the idea of increasing the sates tax
Taxes on consumers are high enough It's time Instead to reform the antiquated franchise tax and produce
a fairer tax on all Texas businesses -
Home I Contact Us I Help Center I Advertising 1 Site Map I Find Dallas Jobs I News Feeds I Subscriber Sor.ices I Get t11e Newspaper I Special Offers
2011, The Dallas Morning News, Inc All Rights Reserved I Terms of Ser.ice 1 Privacy Policy
8111/2011 5:26PM
Laylan Copelin, Tax Bill
Heightens Old Fears, Austin
American-Statesman, Aug. ,
1991
t
:i
... Mid-701
<;:loodY vMil
i.tlalio& .01 rain

atesman
SUNDAY, AUGUST 4, 1991
Tax bill
hei tens
old fears
..,.
By Loylan
Amtnfcan-Stattsmtn Capitol Slel1
When 11tate Rep Jamea Hury laat week character
ized his franchi&e ta:. bilt 0.:1 a broad levy on buaineaa
income, opponenta chtered and applo.udcd behind the
8C4!11l!&,
It was not that Hury had never before diacua6ed
that provilion of hia plan 10
reviae the franchiae tal. But
--
nen jUill do.ya before tla
Huuae takes up ita tax. bill, Hury p\unstd tht iuue
into the mo&t treacherou1 or potltical wnlcra.
A tax by any name ia hard to sell in Tnaa. Bul one
idcntifif'd llll an income tax Ia an anathema to many
Tuao politican&, including Gov Ann Rlcharda" 1'htlt
l.a why many 11upportcru of Hury'& idea prefer 1o dt'
'>tribe it aa "re\lising the unfair franchiae tax,''
Currently, capltalintenahe buaineuea pay the bulk
or thl.! franchise ta:r. - tht atalr's primary busintB$
tax -on real eatnte, cash nnd ln\'enlory. Most urvice
do not pay. Hury wont! to utcnd lh4! fran
tax to thoae induatrlca, tllxing either thelr net
income or their capital, whichever ia hightr. Bualnen
Cl' wou\clnut bl the firU $40,0()0 or their \n ..
Bee Tax plan, A15
Hidden hurts
PatJonD ol thl NUOYO Luetto Turf Club liM up to placo tmKr bttl. The dub, hall and It tqu1PPtd wltn niato thlll a do ton tolo114on
Portrait of accused slaye1:,
he wanted to belong
rooonUy won 1 apedal :i!O.)'Mr waoorlog UconN, hu a largo bll1Uno U11e r&ee covtrtQa from around the wOtld
Mexico club may offer U.S. phone wagers
Jamoa lilattan and Mary EtW. Tobar
lhh'>' Yorio. T1m01 Sef'lll:e
Council airport vote
ealled less definitive
than FAA requires
lyltlllftiii!MIIf
.Amorlen'Statumltl Stall
The AutUn City Council made a tplath it de
eland Heratrnm Air Force the prefernd 1\te Cor a
ef(ecll likely won't be
2
Jo'edera1 Aviation Admlniatr&tlon, th mllhury and

thialella uld Council M11mber LwiM Ept.aln,

we declcHd to 10 ahud with th11 mut.tr plan. But if
thero wa quuthm.ovtr what lain lht mind o( the
council the tetQ\utlon clt1mS up any ambll\llliel."
11r

tain condition. which lnclud11 offordabllity, and
neiJhborhood and factou,
Mayur Pro Tern Chttltt Urdy, whQ oppond the
ttolutlun with Cuuncil
Todev'e
seotlona
"''"
Sactlon A. 1.20
City/Stat e.ctlon 9, 18
Sport a S.ctlonC, 118
C!&Uifltd
rnJ!ght 8KIIon E, 17
OuJJnNa 6oct!on F. 110
Hom
Lsfollyl Ela<UonH,
Btalon H. t:J.te
E.ntw!alnm.nt 8howWOtiO
Jndea
.Ann L&ndtn
Brldlll
Cfouword
O.lllht
EdUoclJtt
EIIJRuch
tiOIOIC()gl
J>Jmbll
LMI<elly
NrNtmtktU
Ponon11111"
TV log
Wool
"'
"'
HIO

E2.l
Hl
"'
H2
H3
.,.
'" Sr.ow Weald
A20

Sporta Club lo match n&w dlentelt) have
mlu<l fel!lin11 about lht upanded gambllniJ
aetvlce
"I think it'd 1w Jreat,' laid Juan Ortil, an
eledridan rrom tho Snuth Teu& city of Lon
do ju1t acrou the Rio Gronde, "I've be-en to
Vesaa 4nd Atlantic City, and nJJ the (horae}
race tracka in Tel.IU"

to the dub to somblr on their favorite ham
or fighter
Laredo tultom broker Hogelio Mendom Ia
not aa thrilled the cha.ngn Hto prefer'
the Turf Club the way it is
"llilr.e it. l eumo here o'dock, and I
find a tablr by and no ont bother
-Ciub,A1G
'
On 98 uf Jeffrey L Dahmer's Ohio high school

thftlr cunfident. -
OnP llt'nior three thr tnp hna ntJ amile. nu
nu fact' at ell: H1a 1mage wu blacked oul, re
ln 11 !iilhnuelte lJy an annuyed atu!.hmt bu
fore the went to the printer.
That waa Dahmer In 19i8, a cou-
pl.t' uf muntha befort' he auys he killed hi& first poraon,
With a b!lrbell, 13 yeaf1 before he to one of
tht' mllat hnrrlflr atrin1111 of sloyinjla in modrrn time
With gmrler. thut frum A't. tu D'11,
fell f11r uf hnnur Mlfiety bur he
mUJ the ll.ll i( he br\t,ngett No
clnt' lilnd 1:1 word until lung nfiN tht Oar.hbulb hnd
poJllHd nnd tht< JihUttt'r had clicked
In nil th1: ht' nied out fnr attrntim. it waa one
urthl' ftw tillll'ij ht' .:ut C'lltlt:ht Hy then he had laUI(ht
IIH ht'hu!d u musk .,r norm that hid hia
ctmiUM,tl, oh.-n l!motium It wa11 u maJik
Goo Pcrlrall of tonellntn, A 18
Rustlers hitting exotic bird in(lustry
Zelle MacCormack
Amlflc:an.Stetumar'ISialf
At the niRhtleu bud lndutitry
take off In Texu - wl!h inna
lura willing to ahell nut $1,000 ror
one egl( - ruatlen have added
emu And ottrlche tn therr lradl
tional plundrr ,,( raltle nnd l1unu
Two recent Au1tin-area
nettt>d poachen !132,(}00 in
chicka, new meaninH to th'
term "bbda urprey"
"There' bun numerrJUI thrfh
nl nnd emu alln\'er1'n

Malcom Wllkttl
1
a Milam
Shl'rllr, lleparfmf!nl invt<allwutur
W1lku and mher lAW enfnrn
menllllt!llciu, indudinK lhr l'ua
Hanana, arC! tl!lltchine for ut
t!Cy hetltUIIe the McQuurYt hculnut
yel .. hranded'' the >hirkH Tht'pre
rerrcd identlficutlnn method
h1K bird mnchrn i!i tttplace
u mkwrhip, whkh tun h(' rend
with Jl .comne'r. uud1r the 11kln un
lht bird'atwrk
''I btlii!Vt prtlty hord tn nm
them down," Bnicl t'umpun\ \'iC'I!'
prtMidrnt Sid 7:1. -Ira

in with thtir bhd!"
Anoth('r Centml Tt.un ulm Wllb
recently vktlmiud by ratih ru,.,
tltra waB Hutrnp C uunl}' rnnclwr
Al>.Swcult
The rurml!r hnji: rurmt<r wnkl
June :ln tu Ond thai nine uf hi
tmua hat! ht'f'n .wtw thr ptt\'inut.
nlwht whill hl' had alttnded tht>
MrDudr wutlltmt'lun
"I likrd tu hn\le o heart nltnd< trkh Mlultn Jul} from chick Law olflcora 1110 soarchtnQ lor

IDn July 20 from McQuary Farms ln
County lwcuuu we Wt>r1 jut llhmtt 111 }11'1
nut uf deht (rum 1hi11 dJVl'fail1td
farming eliJWrit-IJre," 1111id Sweatt, S9. u1d Irene Weydell. 7h, whu !1 prraident
nrtht parlnenhip a{.jlrted in 1UOOby fiYt'
Mt'Q11ary 11!bHnwa
"We'vt! hud 1u(J(J ftrtill' tl[i(& Wr hud
Knud laytrll, ttnd we had l'hlch u11111
tlw dlaiiiN atn1rk" 11ht- uid

heen ll[(end fur the rt>turn of
chirllll ur infutlnlltlun lcodln11 to on
111d1rtment ulthe thievn.
Tlw ttu\pn hird would ht hard lu idt'u
"J nr.\'tr dmmwd thl' hlrdt wuuld lw
lltnli!n Out here l'm iaulnt-t!d The}' hnr
fllWtd OJlt' u( my to tnkv
them 1hrou11h tlir wooda," uld Swtnlt,
IN RutUr, A17
I
I
\
lax plan heightens old fears
Conllo<!edft..,.At
&:_h would exclude- m.lllY
w'?.:lf..
W113a and M.... Coonmitr.e'
p.....t Friday. Tla full Houu ill
npectod to con.tidor lt e1rb' th.ia
week.

new tal an incoma to:, and huh
them with any ';Yea' vot.H durins
tho nod The GOP ill

nesa tu or fiip-floppins: on the
party'& antlt.az meua.ae.
Thouah many big ""fP'l"'tlo"'
support the tax elpAJlllon, their
Ropublican .m.. .,. uulish. "My
voodnou, it""''' too lnU<b like n
mcorne tax/' aaid one GOP'pollti-
eal odvian.
State Rep. Tom Craddick, R For eumpte. Hury noted in a !or Euon would not pay the tu,
Midlcnd and chtirman o1 the rruttno to Houae mcmbera thlt 80 but. a private lawyer workina: for
Houae RepubUc.an CautuJ, wu percent of the au.tte bualneaa&s himacl! would.
Copltel
tD.X ralo
-
goln
for lrlalo
4.5 porcent on
no1lncomct, comr
ponN.UOO for
roct.Ofl.ooftleot8
ltld.Pertnera
$1 bllllon
Minimum $0
...
Number of 160,000
taxpayers
Dodue1!onsflrat s.es.ooo ot
not lnoome/
$405,000 capital
% o1 w 78 peroeot
paid by
OO<p.
more blunt: "ljutthink it' a paynoneofthefrancht&e tu. Pro" Bullock alao reportedly waa an
b:U Smltor. r MHMConmlt=

tell It Hury'a du ..
of th4t qree.
charact.eriutlonoft.betuwillbea don't require as much land u the added twiat, Bulloek eventually tnent," said John Bender, Lewia'
mortal wound to the biU or ju.t a sector o tha oould be credl!.ed with ocuHIIng proso llfCret.ary.
11
He ia aupporting
faUJ pas in tho boltlt of buaineu economy. Hury'e tAx plan, aven though the his chairman (Hury)"
gie.nta 0\'Cr alate tu.e.tlon. And. Hury 41'f1Utd. lloutenant govornor favora fuU FinnUy, tho
On OnQddo or the battle are tal lltill would pay the bulk (l( DlJ tal: tiS nl!d,gtd Income! tueu. poratione, moatly ba&ed in other
w&aJYc'orporatloni rmch u Exlon, =ven if the Cranchbe t.u la e:;t.t.nd In addition, trial lswyere geMr at.at.(!&, face another political prob
banb arid larp m.a.nufactumn, od to ell bualnell(la; 12.6 billion ally oppostt expa.naion of tho fran lem They are challemrlnr tome of
On tho other an doctore, lawyers, compau.d with $GOO million tho atat.e'e. moat powertullobble&
roale&tat4:r!4,accou.ntanta,en Dttp:!: faimeS4 llrifU preaidel. : Re.altora
ownen ot aervlce corpo.-.t.iGns frree an Bullock la crpccted nert week to In the Capitol's world of
The outcomf could be crudal, Lt. Gov. Bob Bullock o.nd more unveU a 6morgubord of tax u.cratchlnr, it La the doctora, trial
however, to amall tupciyn1. Ir the than 20 aenatcn ti,cned a pleclae to choice&, mostly nkkelanddlme lawyero and other profea.aklnaLI
buaintu sLtnta eannot compro- oppoae e,rp&ndint th& tano that avoid the contioveraial who poor millions or dolJiltl lnt.o
ml&o, than leg{.datora may tum ta tax. They a.raue it amounta to a lncomD and aa.leo t.a.xeu the c.ampalgna of the legi.lllatortl.
OvERlOOO
REAsoNsTh CUP
This COUPON.
\\idt tlsi... mupcm ,.., n fn't' .\lugj{:up' .. ( :rlkt \\ill!
flllll'iuL'It'. }"I IIlii uJ.-.._, win u Sl ()(X) i'"'l'
Cnmllli]!]Juwl t"\1'1) \\Wk fnr thr :; .

I llfiU;t thl, \lull hul mmhwu nml I
I
I
I
lli'.Jijrilo..,,lf .. g
I I
I I
I I
I I
I I
I Austin I

llw i'lKKI (Allin
Highland Mall
111 o1! IJ',orr !... \1111
1 IMJJ(
the aalet tu u an naler altema penonalintOfDetalonprofeaaion The governor hAB 1ided with "Wo are there the day they nte
SE7#lf=.-e:
Huryandhlsalllesargueitiaun ried ahebelieveachehaaacommitmeilt lobbyl.1:1t. "The othtr BUY& Bn atill ..... .... ..,... ... _ .... __ - .. w.-ul,.,
fair for profitable bwin.eaaea that For lawyer working from Houae Speaker Glb LowU to introducing th&maelvet-

to ahun thalr ahare of taution.lll 11
We have taxed in Tn.ua cap!
tal component since the early
J!loo., and duriiiB that period of
time tluat wu the meuuro of
wealth," Hury said. 'Vfhlt Ia no
lonacr the of wealth tn
Tex.a.a.
5224 Burnel Rd
452-7122
Weight Loss
Surprises
Researchers
WASIIINHTON A nutrihon orJJa
oi1..:stion hopeful thou a nutrition
oily comth:h: "hih:ch"

of the wouliJ

un
mgredknt in the uptly product
fuod SuUII.'C One iH:IUally
p<opk tn lose wctghl. c\cn though
Sp<'Cirkully not10 altct not
mal cafi!lg paucms, ar.:curding u, unc

1n an curly hud spccu
la!cd that the was duo: to u
in the mlc\ltn.llllh>urption
of
Wlulc tb: uf Fm>t.l
Suutr.:c a flWJCCI or Nalnmal l)j .
. CI11T}" RCWJICh, WtiUIJ nul he IO
fullill miuinal ll-n;ll.
the di,co\'Cr)' lxcn a wmdfall r(!f
uwrwcit:hl pcuph: A Daylona Uc:n:h.
flnnda wumun a bal
tit for 12 )'I:OW> llu: pwdur.:c uo
the of her phy\ittan
and IO\t 311 She stated, "Not
unly ha\"C I 30 pounds but my
h;h dwppcd frum 2ll 10
143 I han two full ur clothes
wlud1 haH' nut lit me in '"" yean;
that I r.:an nuw v.car" In .1 wparuh:
n:pon, Jtldcplumc wtcrvh.:w tC\'CIIh:d
tha.l ol Wihningllln, Nur1h Carnhna.
hl\1 14 Jl:llUnd in 15 d:sy\

thwugh Jnd ph11nnac1n
without a pteM:ripuun bt:c;u.J\1: II .-
nul J druy and tllll)' natuul

Cup!C) or Jcfcrcnccd $lut.ly U/C
frum Natwrul Dwr:uy
i(clO('atch Sull!! 5H. JJ77 f. !oil,
IH llliXU. lmwcv\'t
pk:hclm:ludc '2('1J\IUgc& haml!mg

.,....Ill A-uMin Itt:
M.D.ftCAMUCY
\10\l/IVAelt 4181W!I
U.D.ItfAJIIMACY RID fiiVIII
J20J neu nv.l.ca OAUQ 41D<Jit3
(ill w"'

., ..... , 44 2a!n

:?DlO
CMIK
1
eo1o s==
0
o;...ARIIAci:4-ti101
.. Juj & Dvvn.t . 41!>40!> II
li-IA'IPHAIUitACY
1:?07 Of 0'6HI!)61
REQUIRED
STYLES
FOR IIACK
'ITO ICHOOII.
Polo for Men
by Ralph Lauren,
a classical
education in style
All American casuals (or lhe man ;'
woos graduated from lfendy to
llmeless. Ja<kets, sweaters,
and sbirls of premium quality.
natural fabrics, Designed to layer
u1 app<aling mixes of rolor
and leK!ure, Our Polo (or Men
collecllon ot dothing and
accessories. 47.50,695.00
Dillards
Archives I Austin American-Statesman I Statesman.com
http://nl .newsbank.corn!nl-searchlwe/ Archi ves?p _ acti on=doc&p _ doci."
l of3
NEWS ENTERTAIN>IENT
HOME j BUSINESS
ADVERTISE I
Archives
New Scan.h l'ip6 lracl<cr Cu.stomcrScrvicc FAQ Fm.s Ttrms Al:wulthcArchhc
The Austin American-,Statesman Online Archives
Options:
Results list! Start a New Search I Printer Friendly Version>
Tax bill heightens old fears
BYLINE: Laylan Copelin AUSTIN AMERICAN-STATESMAN
DATE: August 4, 1991
EDITION: FINAL
SECTION: NEWS
PAGE: AI
HOOKEM.COM
When stale Rep James Hury last wee!< characterized his franchise tax bill as a broad levy on
business Income, opponents cheered and applauded behind the scenes
It was not that Hury had never before discussed that provision of his plan to revise the franchise
tax But when he proclaimed it "a broad Income tax" on business just days before the House takes
up its tax bill, Hury plunged the issue into the most treacherous of political waters
A tax by any name is hard to sell in Texas. But one Identified as an Income tax is an anathema to
many Texas politicans, including Gov Ann Richards That is why many supporters of Hury's idea
prefer to describe it as "revising the unfair franchise tax "
Currently, capital-intensive businesses pay the bulk of the franchise tax -the state's primary
business tax- on real estate, cash and inventory Most service industries do not pay Hury wants to
extend the franchise tax to those industries, taxing either their net income or their capital,
whichever is higher Businesses would not be taxed on the first $45,000 of their Income, which
would exclude many small firms
The tax Is part of a $3 billion tax-and-fee bill that Hury's House Ways and Means Committee
passed Friday The full House is expected to consider it early this week
Democrats already are worrying that Republicans will brand the new tax an Income tax, and bash
them with any 'yes' votes during the next campaign The GOP is fearful Democrats will accuse any
Republican who votes for the business tax of flip-flopping on the party's anti-tax message
Though many big corporations support the tax expansion, their Republican allies are sl@ish "My
goodness, it lool<s too much lil<e an Income tax," said one GOP political adviser
State Rep Tom Craddick, R-Midland and chairman of the House Republican Caucus, was more
blunt: "I just think It's a corporate income tax and (later) I think you'd see a push for a (personal)
income tax"
It is too early to tell if Hury's characterization of the tax will be a mortal wound to the bill or just a
faux pas in the battle of business giants over state taxation
On one side of the battle are tax-weary corporations such as Exxon, banks and large
manufacturers On the other are doctors, lawyers, real estate agents, accountants, engineers and
owners of service businesses
The outcome could be crucial, however, to small taxpayers If the business giants cannot
compromise, then legislators may turn to the sales tax as an easier alternative, according to one
lobbyist who spoke on condition of anonymity
Hury and his allies argue It is unfair for profitable businesses that provide services instead of goods
to shun their share of taxation
"We have taxed in Texas a capital component since the early 1900s, and during that period of time
that was the measure of wealth," Hury said "That is no longer the measure of wealth In Texas"
CARS
SUBSCRIBE TODAY
PRINT OR EEDITION

.,.,. " , ""'" u
!1 o<DJ,OJ.\l!J
JOBS
$53 for Chiropractic
Exam, X-Rays and
Treatment!
$53 for $485
8/l 0/201 I 3:00 PM
Archives I Austin American-Statesman I Statesman com http://nl.newsbanlccom/nl-search/we/ Archives?p _ action=doc&p _ doci ...
2 of3
For example, Hury noted In a men-o to House members that 80 percent of the state's businesses
pay none of the franchise tax Professionals such as doctors and lawyers don't pay sales taxes
on their services Service businesses pay less in property taxes because they don't require as
much land as the capital-intensive sector of the economy
And, Hury argued, corporations still would pay the bulk of all taxes even if the franchise tax is
extended to all businesses $2 5 billion compared with $600 million
Despite Hury's fairness argument. the big corporations face an uphill battle
Lt Gov Bob Bullock and more than 20 senators signed a pledge to oppose expanding the
franchise tax They argue it amounts to a personal income tax on professionals and business
owners and treats them differently than their salaried counterparts
For example, a lawyer working for Exxon would not pay the tax, but a private lawyer worl1ing for
himself would
Bullock also reportedly was angered when big corporations did not help him sell his iHated plan for
a personal and corporate income tax several months ago. In an added twist, Bullock eventually
could be credited with scuttling Hury's tax plan, even though the lieutenant governor favors
full-fledged income taxes
In addition, lriallawyers generally oppose expansion of the franchise tax, and the group holds
sway in the Senate. over which Bullocll presides
Bullocll is expected next week to unveil a smorgasbord of tax choices, mostly nickel-and-dime
taxes that avoid the controversial income and sales taxes
The governor has sided with Bullocl< on this issue and, according to press secretary Bill Cryer, she
believes she has a commitment from House Speal<er Gib Lewis to do the same
"I'm not aware of that agreement," said John Bender, Lewis' press secretary "He is supporting his
chairman (Hury) "
Finally, the multinational corporations, mostly based in other states, face another political problem
They are challenging some of the state's most powerful lobbies - trial lawyers, doctors, Realtors on
their horne turf
In the Capitol's world of back-scratching, it is the doctors, trial lawyers and other professionals who
pour millions of dollars into the campaigns of the legislators
"We are there the day they file for office and until the day they vote for a tax bill," bragged one
lobbyist "The other guys are still introducing themselves "
(FROM STAFF GRAPHICS)
House tax bill
The House committee's tax-and-fee bill could bring in more than $2 billion to the general revenue
fund Other winners include universities, highways and city and county governments
Net increse to general revenue $2 26 billion
Net increse to highway fund $568 million
Net increse for local goverrnent $4 33 million
Net tuition increase to universities $32 million
Cities would get 2 cents of the 8-cent-a-gallon motor fuels tax increase Counties would get a
penny Both must use the money to build or maintain roads
Source: Legislative Budget Board
Rep Hury's franchise tax plan
Taxable entitles Corporations, partnerships, sole
proprietorships
Income tax rate 4 6 percent on net Income, compensation
for directors, officers and partners Capital tax rate $4 per $1,000 of capital
Revenue gain for state $1 billion
Minimum Tax $0
Number of taxpayers 150,000
Deductions First $45,000 of net lncome/$405,000 capital% of tax paid by corp 78 percent
Source: House Ways and Means Committee
Illustration: GRAPHS
Copyright, 199/,Austin American-Statesman
8il0/2011 3 00 PM
Archives I Austin American--Statesman I Statesman.com http:/ /nl .newsbank.corn/nl-search/we/ Archi ves?p _ action=doc&p _doc i ...
NEWS
Locnt
Vlrtunl Cnpflol

Stnto
Crlmoum:kcr
Sl,llcsrnnnWil!ch
Ob!luMit.>tl
Daliihn:m Cuntrul
N01llon
WorJ1J
lol!ery
BUSINESS
Tochnotouy
Purnonnl flnnnc:c
Arcn Employ11 ra
Employmunt
F1eJI Est.1te
AP
OPINION
lnr-loht
Ben Snrgcnt
3 of3
SPORTS WEATHER CLASS!FtEDS ADVERTISE
lonnhomc TRAFFIC Can; Print
Gatncwcck l'rnllh: Cameras Hosmu Onllno
Aonloa MULTIMEDIA Jobo Clnsn!flcds (Print e. Online)
ItS Colle ttlvo Vhllon MutGhanr.lbc Ncwnpapcr Adc
Htoh School CUSTOMER SERVICE MARI<ETING
Rccrultlnn G31lcrlca r.JumbtH CtnlhH Community Ocvutupmt:nl
Outdooro BLOGS E mnH Nows!Ntc rs DoGood
Golf ENTERTAINMENT Sub:H:rlbc to the Stntuom.ln Glo!lay
flrcn Pro Tc.1mn /\List Sign up for tho uEdlt!on Concotl :;ellen
tJFL Even In SuhcrUH1r Markctlnn
NBA Munh: Wharo to buy tho St.llC!lmnn Rcoth:oro: pone!
Mill tlloVl(!tl Ouy Photos Sp(!cilll ScciJcmt
AP Sports Nawn Tela vision ncndclll AFFLIATED SITES
LIFE Arts nt llH! Stilll!!JIII:m Ahora Sl
Style Rccrcnllon lnlcrnnhlpn Hookcm com
TrHVol SpnMSalonu N!!W!lpnpo.n In B.:ltltrop
Gatth:hlnu J!oudlt)rlnk lnuido Unc Ccd:H Pnrk cmzcn
Green MOBILE/RSS tlpG Loko TrO'Ivu:: VIew
Hcilllh a. Mcdlr.al Rc.:u:Jc-r rewards Lt!::!ntlCt loli{J('f
Rniulng Austin Auutln300 Site mO'Ip Nor111 LoJkc Travlz; Log
Bookn IPI\onc Ethics Polley Pf!uourvlllo PILl[!
F.1llh RSS Round Rotk Lo:Jdor
LIIC!'Ou\clu Smithville Tlmcu
WoddimJI: We Gtlnkc Picayune
St!.lllon for Curing
Copyright 2010 All rights reserved By using Statesman com, you accept the terms of our vrsilor agreement
Contact Slatnsman corn I Pnw1r.y Policy 1 Auoul our ads
8110/2011 .3:00PM
15.
House Committee Report on
HB 11, 72nd Legislature, First
Called Session, 1991

HOUSE
RESEARCH
ORGANIZATION bill analysis 8/5/91
HBH
Hury
(CSHB 11 by Hury)
SUBJECT:
COMMITTEE:
VOTE:
WITNESSES:
DIGEST:
Franchise tax revision; tuition and gasoline tax hike; tax and fee revision
Ways and Means: committee substitute recommended
10 ayes- Hury, Evans, Oliveira, Berlanga, Earley, Campbell, Seidlits,
Watkins, Williamson, Wilson
2 nays - Heflin, Price
1 absent - Wolens
Public hearing on July 31
CS HB 11 would revise the franchise tax, raise tuition at academic
institutions, increase the motor-fuels tax and certain fees, and repeal certain
tax discounts and exemptions.
CSHB 11 would increase general revenue available for appropriation in
fiscal1992-93 by $2.107 billion.
The bill would take effect September 1, 1991, if approved by a two-thirds
vote in both houses. Otherwise it would become effective December 1,
1991.
Franchise tax. The franchise tax, which is currently imposed only on
corporations, would be imposed on all business entities, including
partnerships, joint ventures, business associations and sole proprietorships,
as well as corporations.
The tax rate, which is currently $5.25 for each $1,000 of taxable capital,
would be 0.4 percent per year on net taxable capital, plus 4.5 percent of net
taxable earned surplus. Each business entity would pay whichever amount
was larger, the tax on capital or the tax on earned surplus.
Net taxable capital would be based on a corporations's stated capital and
surplus, a partnership's capital accounts, or a sole proprietorship's historical
cost minus depreciations. The frrst $405,000 of net taxable capital would
not be taxed .
- 3 -
HBll
House Research Organization
page 2
Net taxable earned surplus would be based on a business entity's reportable
federal taxable income or the income taxable to the partners. The first
$45,000 of earned surplus would not be taxed.
Tuition charges. CSHB 11 would establish a schedule of tuition increases
for all institutions of higher education, starting with the 1992-93 academic
year and extending through the 1996-97 academic year.
The bill would increase the tuition rate for Texas residents at public
institutions of higher education, which is currently $20 per semester credit
hour or at least $100 per semester. CSHB 11 would increase tuition to $24
per semester credit hour for the 1992-,93 academic year. For the four
ensuing academic years, tuition would increase $2 per hour per year, until
it reached $32 per hourin the 1996-97 academic year. The minimum
tuition wouid be raised 'to $120 per semester in 1997-98 academic year.
The bjll would increase tuition for Texas residents attending public medical,
denthl and veteiinary schools: for medical schools, from $5,463 to $6,550;
for dental schools, from $4,511 to $5,400; for veterinary schools, from
$4,800 to $5,400. Tuition for nonresident students enrolled in these
. p'rogran:is *.rould be a l t e r e ~ from four times the resident rate to three times
that rite. .
Tuition for Texas residents attending public junior colleges would be
doubled'from $4 per. semester hour to $8 per hour. Tuition for Texas
residents attending the Texas State Technical College (TSTI) System would
'ai'so be doubled, from $8 per semester credit hour to $16.
The bill would increase tl1e proportion of tuition set aside to fund the Texas
Public Educational Grants (TPEG) program. The set-aside from institutions
of higher education and TSTI, which is currently from 9 to 15 percent of
resident students' 'tuition charges, would be raised to a minimum of 15
percent and a maximum of 20 percent. The set-aside at junior colleges,
which is currently 25 cents from each resident student's hourly tuition
charge, would be 6 percent of that charge.
'The cost of education, which deterinines the tuition charged to
nonresidents, would include appropriations from the General Revenue Fund
- 9 -

HBll
page 3
for the Teacher Retirement System, Optional Retirement Program and
Social Security.
Motor-fuels taxes. The tax on gasoline, diesel fuel and liquified gas
would be raised by 8 cents, from 15 cents per gallon to 23 cents per gallon,
effective October 1, 1991 (or January 1, 1992, if the bill fails to pass by a
two-thirds vote). The gasoline and diesel rate for transit companies would
be 22 cents per gallon.
The current tax exemption for fuel not used to propel a vehicle on a public
highway would be repealed. Taxes from fuel used .for off-road purposes
would be allocated to the General Revenue Fund.
The current allocation of motor-fuels-tax revenue (other than from fuel for
off-road use), 25 percent of which is currently .distributed to the Available
School Fund and 75 percent to the State Highway, would be changed. The
Available School Fund would retain its share, but revenue from the
gasoline tax would be distributed 3.26 percent to the County Road Use
Improvement Fund, 6.52 percent to the Municipal Road Use Improvement
Fund, with the remaining 65.22 percent to the State Highway Fund.
Revenue from the diesel-fuel and liquified-gas taxes would be distributed
4.3 percent to the county road fund, 8.7 percent to the municipal road fund,
with the remaining 62 percent to the State Highway Fund. The money in
the local roads funds would be distributed to counties and municipalities in
proportion to the number of public roadways in each jurisdiction. The
money could be used only to acquire rights-of-way -and for constructing,
maintaining and policing public roads.
Current discounts for motor-fuels-tax filers, ranging from 0.5 percent to 2
percent, would be eliminated.
Driver's licenses. The fee for non-commercial driver's licenses, which is
currently $16 for four years, would be increased to $25 for five years.
Driver's record information fees. The fee charged by the Department of
Public Safety for providing certain information on individual drivers would
be increased from $3 to $9 per request and from $2.50 to $7.50 each for
requests of 100 or more .
- 10 -
HBll
page 4
Motor vehicle inspection stations and inspectors. The fee for a two-year
certificate for inspection stations would be raised from $30 to $200. The
fee for an inspector would be increased from $10 to $25. A
' "' inspection station would pay $30.
..
Motor-fuel enforcement fee. The fee charged by the comptroller for the
collection and allocation of motor-fuels taxes would be raised from 1
percent of gross collections to 5 percent of gross collections.
Sales-tax timely filer discount. Taxpayers would no longer by entitled to
deduct and withhold 0.5 percent of sales taxes collected.
MT A service fee. The fee charged by the comptroller for collecting sales
taXes for Metropolitan Transit Authorities (MTAs) would be increased from
2 percent of gross collections to 5 percent of gross collections.
Cigarette-tax-stamp allowance. The current allowance of 3 percent of
cigarette-tax payments by wholesale distributors would be eliminated.
Sales tax on boats and boat motors . CSHB 11 would impose a new sales
and use tax' of 6.25 percent of the total consideration paid for a boat or
outboard motor, effective October 1, 1991 (or January 1, 1992).
Parks and Wildlife Department fees. The Parks and Wildlife Department
would, through fee collections, recover the costs of administering park,
water safety and wildlife and plant conservation activities. The department
would review fees annually and increase them if necessary to cover the
costs of administering programs.
Environmental review fee. The Texas Parks and Wildlife Department
would review all permit applications for developmental projects, including
state agency projects, that would affect the state's fish and wildlife
resources. The department would collect a non-reimbursable environmental
impact review fee from the applicants to recover the cost of performing
these' reviews. The department would annually review the fees and, if
necessary, increase them to pay for administering the review program.
HBll
page 5
Administrative penalties for violation of environmental laws.
Administrative penalties would be assessed for an amount greater than the
economic benefit realized by the violation of an environmental law
contained in the Agriculture Code, the Health and Safety Code, the Natural
Resources Code, the Water Code or the Structural Pest Control Act.
The penalty would reflect the seriousness of the violation, any history of
previous violations and the cost incurred by any agency in determining
"economic benefit". Repeat violators and significant violations could be
referred to the Attorney General for civil action.
Animal Health Commission fees. The Texas Animal Health Commission
would be required to recover at least 25 percent of the cost of
administering disease control programs through fees.
Water and sewer assessment. Public water utilities would collect an
assessment of 1 percent of the charge for retail water or sewer utility
service. Water supply or sewer service corporations and conservation and
reclamation districts would collect a 0.5 percent assessment. The revenue
would pay for the expenses incurred by the Texas Water Commission in
the regulation of these entities. A portion of the assessment would be used
to provide on-site technical assistance to the utilities and corporations.
Insurance taxes and fees. Insurers would be required to pay interest and
penalties not only for late payment of premium taxes, but also for late
payment of maintenance taxes.
Premium tax credits that insurers receive for amounts they pay into a
guaranty fund (a fund that covers claims should the insurer become
insolvent), would be reduced from 100 percent to 40 percent of the amount
paid into the fund. The credit would be spread out over the successive
years following the date the taxes were paid.
Insurers could no longer offset premium tax and guaranty fund obligations
with attorneys fees incurred for taking legal action against another insurer
or indjvidual.
- 12 -
HBll
page 6
Interest rate on delinquent taxes. The yearly interest rate on all
delinquent taxes would be increased from 10 percent to 12 percent. Interest
. would compound monthly.
Alcoholic beverage excise tax discount. The 2 percent discount on liquor,
beer, wine, ale and malt liquor taxes would be repealed.
Certificates of good standing. The comptroller would charge a fee of $10
per request for a corporation's certificate of good standing, which verifies
that it has paid in full its franchise taxes. The comptroller would charge a
$5 certification fee, in addition to a charge of $1 per page, for certified
copies of tax records in the Comptroller's Office; a record search would
cost $3. These fees would take effect January 1, 1992. The comptroller
could charge additional fees for the purchase of public information by
commercial users.
Business filing fees. Business filing fees would be increased by 50
percent.
The secretary of state could charge an additional fee to those using a credit
card to pay a fee assessed by the secretary of state. The secretary of state
could charge a fee for telephone access to public information and could
contract with a private firm to provide the telephone information service
. . and bill users of the service.
Fees for criminal history inquiries. The fees charged by the Texas
Depru;tment of Criminal Justice for an individual's criminal history records
would be increased from $5 to $10 for name searches (if the inquiry is
submitted electronically or on magnetic media, the fee would be $1). The
fee for fingerprint comparison searches would be increased from $10 to
$15.
Misdemeanor offenses and driving while intoxicated (DWI). Those
convicted of a misdemeanor offense (except jaywalking or parking
illegally) would pay an additional court cost of $2.50, and those convicted
of driving while intoxicated would pay an additional court cost of $30
(regardless of whether they were given a breath or blood test). A
- 13 -
..
SUPPORTERS
SAY:
HBll
page7
municipal or county treasury could retain 10 percent of misdemeanor fees
and, if no DPS certified technical supervisor were used for alcohol testing,
three-quarters of the DWI fee.
A person convicted of DWI who caused an accident would be liable for the
reasonable expense of any accident response by a public agency.
CSHB 11 would reform the franchise tax, increase tuition, increase the
motor-fuels tax and certain fees and eliminate certain tax discounts. The
bill would generate enough additional general. revenue - $2.107 billion -
to fully fund the appropriations bill proposed by the House Appropriations
Committee and restore a portion of the pwposed cuts in higher education.
public education, human services and corrections. It would raise another
$874.7 million for other funds, including the State Highway Fund ($495.7
million), for a total revenue gain of $2.982 billion in fiscal 1992-93.
Franchise tax. A reformed franchise tax would increase general revenue
by $1.06 billion in fiscal 1992-93.
The franchise tax was established in 1907 and is woefully out of date.
Since the tax currently focuses on capital assets, such as plant and
manufacturing equipment, it taxes only a narrow segment of business
activity in the state. Capital-intensive corporations, such as oil refineries,
utilities and manufacturers, bear a disproportionate burden, while the
rapidly growing service sector, which accounts for some 20 percent of the
state economy, generates only 7 percent of franchise taxes. CSHB 11
would expand the scope of the franchise tax to include ability to pay
(earned surplus) as well as assets (capital), so that businesses that do not
have large capital investments would pay their fair share of supporting state
services.
The franchise tax is currently paid only by corporations. Other forms of
business organizations, including legal, medical, engineering and accounting
partnerships, sole proprietorships, limited partnerships and joint ventures, as
well as wealthy private investors, are currently exempt from the tax.
Because of this narrow scope, only one out of six Texas businesses pay the
franchise tax, and some of the state's most profitable business operations
escape fair taxation. CSHB 11 would apply the reformed franchise tax to
- 14 -
HBll
page 8
all business entities in order to increase the equity of business taxation in
,. . Texas. Corporations would still be responsible for more than three-
quarters of franchise tax revenue, even after the rest of the business
community was included in the tax. If the franchise tax is not reformed to
.t produce the additional revenue, there will be increased pressure to broaden
the base of the sales tax or increase the sales-tax rate.
The proposed change in the franchise tax would not adversely affect small
businesses, as some have claimed. Small firms would be exempt from the
franchise tax if their net annual income was less than $45,000 or if their
., capital assets were worth less than $405,000. Large law, accounting,
. engineering and architecture partnerships, some of .which earn tens of
millions of dollars a year, and wealthy investors with billion-dollar
individual empires would fmally start paying the state business tax; "mom
and pop" businesses would be excluded. Of the million sole proprietorships
in the state, only about 40,000 would be subject to the reformed franchise
tax.
Corporations, which tend to have more land and property than
unincorporated firins, will be hit disproportionately hard by the dramatic
!increases in property taxes expected because of school-fmance reform.
CSHB 11 would help eliminate the unfair competitive advantage enjoyed
by unincorporated businesses.
Those who argue that the franchise tax should be paid only by corporations
because of their special treatment under the law are clinging to an archaic
notion ofthe franchise tax as a license fee for the privilege of doing
business in the state in the corporate form. The archaic preoccupation with
a business' legal form has granted an undeserved economic advantage to
partnerships and other unincorporated entities at the expense of
corporations. The organization form of a business entity is chosen for
1 .financial reasons, not because of some hope of corporate immunity from
liability.
Including a firm's earned surplus in the franchise tax base is necessary to
ensure that all organizations pay a fair share of the franchise tax, regardless
of the capital investment required for their particular business. It would not
taX an individual's personal income; it would tax only business income.
- 15 -

HBll
page 9
A reformed franchise tax would by no means be a stalking-horse for a
personal income tax; the additional revenue raised by franchise tax reform
would help avoid that unpalatable alternative. A decision concerning
adoption of a personal income tax involves totally different factors
unrelated to business taxation; the likelihood of a personal income tax
would be unaffected by these changes in the franchise tax.
Tuition charges. If Texas is to continue its commitment to excellence in
higher education in the face of declining appropriations from general
revenue, the state must raise tuition charged to students. The individuals
who benefit directly from higher education should bear a larger portion of
the cost. This bill would provide some $32 million in much-needed
revenue to universities, but would also provide increased aid to low-income
students so that they can continue their education.
The proportion of resident tuition charges set aside for Texas Public
Educational Grants (TPEG) or for emergency loans would J.>e raised to
ensure that the increased costs of education do not discourage children of
low- or middle-income families from attending college. Tuition for
nonresident students, which is pegged to the cost of education, would
increase slightly by including in the cost of education the cost of pension
benefits for academic employees, but not enough to discourage these
students from coming to Texas for their higher education.
Motor-fuels taxes. The 8-cent increase of the tax on gasoline and other
motor fuels would generate $320.5 million in general revenue in the
coming biennium - revenue desperately needed to maintain the current
level of state services. In addition, $250 million would be directed to cities
and $125 million to counties to build and maintain their own roads.
Because energy prices have stabilized at lower levels than before the Gulf
War, the additional tax will not overly burden purchasers.
Eliminating the tax exemption currently enjoyed by off-road users would
increase general revenue by $163.7 million during fiscall992-93.
Eliminating the exemption for railroads would add another $74 million.
The full motor-fuel tax should be paid by all users, regardless of the
purpose to which the fuel is put. Construction, agricultural and railway
industries have profited for years from this special treatment; the state
- 16 -
HBll
House Research Organi,zation
page 10
budget can no longer afford to subsidize these special interests. Since tax
' revenue from. fuel for these uses is not dedicated to the Highway Fund, the
argument that motor-fuels taxes are a user fee to cover highway costs is
;irrelevant.
Motor-fuels-ta:x filers currently are allowed to retain as much as 2 percent
of the taxes they collect. The state could gain $19.6 million in general
' revenue by eliminating this excessive break.
Driver's licenses. An increase in the driver's license fee would generate
$48.8 million in the coming biennium. The increase would be small, from
$4 per year'to$5 per year, and lengthening the time between license
renewals would provide greater convenience to Texas drivers.
Driver record information fee. The state should increase the fees charged
for providing information on an traffic convictions and
accidents .. The state provides a valuable service to insurance companies
' . doing background research on individual drivers. The companies should be
willing to pay the actual costs of maintain,ing, retrieving and providing this
'
. information. This minor fee increase would generate an additional $63
million in. general revenue in 1992-93.
Motor-fuel enforcement fee. The comptroller charges a fee for the
collection of gasoline, diesel fuel and LP gas taxes. This fee should be
increased to better reflect the costs of enforcement, as recommended by the
Texas Performance Review. The additional revenue would accrue to the
Comptroller's Operating Fund, freeing up $78.4 million in general revenue
for other state programs.
Salestax timely filer discount. Taxpayers are currently allowed to deduct
and withhold 0.5 percent of sales taxes collected as reimbursement for the
costs of collection. This discount should be eliminated, as recommended
by the Texas Performance Review, since taxpayers are compensated in
.other ways for collecting sales taxes. For instance, taxes may be held for
at least 2() days, and as long as 50 days in some cases, before the revenue
must be remitted to the comptroller. Taxpayers may earn interest on the
m9ney in their possession or use the funds to meet business cash flow
- 17 -
HBll
page 11
needs. Eliminating the discount would increase general revenue by $61.5
million in the coming biennium.
MT A service fee. The fee charged by the comptroller for collecting sales
taxes for Metropolitan Transit Authorities O'.ITAs) should be increased, as
recommended by the Texas Performance Review. Some MT As collect
more sales tax than they need for current services and have built up
balances of $1.1 billion statewide. The effect of an increased fee on the
MTAs would be negligible, less than 2 percent of their current balances,
but this provision would increase general revenue by $33.3 million in fiscal
1992-93.
Cigarette-tax-stamp allowance. Cigarette distributors who pay the
cigarette excise tax and affix cigarette-tax stamps to their inventory are
allowed a 3 percent stamp allowance on their payments for tax stamps.
This special-interest benefit can no longer be justified in the current budget
situation; elimination of the allowance would increase general revenue by
$26.6 million in the coming biennium.
Sales tax on boats and boat motors. The sales tax should be broadened
to cover the purchase of boats and outboard motors. Purchases of similar
recreational items are now subject to the sales tax. This limited expansion
of the sales-tax base would generate $10.4 million in general revenue in
fiscal 1992-93.
Parks and Wildlife Department fees. Parks and Wildlife fees could
replace $45.8 million in general revenue that otherwise would be spent in
fiscal 1992-93 to support Parks and Wildlife operations. These fees would
ensure that Parks and Wildlife activities would be fmancially supported by
the park users who benefit from them. The department would establish two
separate fees for the new annual conservation permits established by HB
1207 by Kuempel, enacted during the regular session. One fee would be
only for day use of a state park, while the other would be for all other uses.
A survey conducted by Parks and Wildlife indicated that over half of the
respondents would support fee hikes to pay for department activities.
Environmental review fee. The Parks and Wildlife Department currently
does not have the funds or staff to review all proposed projects, some of
- 13 -
,,. \ !
-!
: .:r ~ , ~ .
HB 1l
page 12
which may be harmful to the environment. In 1990, for example, 831
permits were given superficial reviews or no reviews at all. Applicants
seeking permits for developmental projects are not currently required to
have- an environmental impact review, so the department cannot collect a
fee for the reviews. This is a cost to the state that should be borne by the
applicants. '
Requiring developmental project permit applicants to reimburse Parks and
Wildlife for environmental impact reviews would help ensure protection of
the'environment and sa:ve the state money.
Administrative penalties for violation of environmental laws. The
penalties riow imposed on violators of environmental laws are insufficient
to encourage compliance- they are seen by the regulated community as
:: just another cost of doing business. It is cheaper for some polluters to
.dump hazardous substances illegally and pay a fme rather than paying for
safe 'ahd proper disposal. Increased administrative penalties that eliminated
the economic benefit of criminal activity would result in a cleaner and safer
environment. Although the Texas Performance Review, which
recorrunended this provision, was unable to project the fiscal impact of
increased penalties, the state would save the potentially huge future costs of
: cleaning up' a polluted environment.
Animal Health Commission fees. The Animal Health Commission
currently does not charge fees to support its activities. Since commission
activities' such as the federally-required cattle brucellosis eradication
pro grain primarily protect and benefit cattle producers, the producers should
'bear at least part of the cost of the program. These fees could free up $3.8
1
million in general revenue in fiscal 1992-93.
Water and sewer assessments. The utility-tax base would be expanded to
inc'lude water supply 'and sewer corporations. Assessments collected by
these entities would raise nearly $1 million to help fund the regulation of
public utilities, water and sewer service corporations and districts, helping
protect the public health and the environment and providing for better
review of water districts by the state.
- 19 -
.
' '
HB 11
page 13
Insurance taxes and fees. The insurance-tax provisions of this bill would
increase general revenue by $2.9 million in fiscall992-93.
Applying penalties and interest for late payment of maintenance taxes
would help ensure that they are paid and would reduce the state's collection
cost. Reducing insurer tax credits and applying the credits to past, as well
as future, taxes paid would increase the amount of premium taxes deposited
into general revenue.
Insurers should not be given a tax advantage under the "anti-fraud"
provision for taking legal action against others. All other businesses incur
this type of expense as part of the normal course of doing business.
Current law allows insurers who are not directly affected by any alleged
fraud to bring a suit and bill the state for their attorney's fees and expenses.
Even though a district court judge has already declared the provision to be
unconstitutional, an appeal has been filed. If the provision were repealed,
the state could avoid further legal expenses.
Interest rate on delinquent taxes. Taxpayers currently delay paying their
state taxes to take advantage of the low interest rates charged by the state
on delinquent taxes, which is below the cost of commercial loans or the
rate earned on investments. Raising the state penalty rate above the market
rate would encourage taxpayers to make timely payments, increasing
collections and decreasing enforcement costs. Interest revenue from those
taxpayers that remain delinquent would be increased. The total impact
would be to increase general revenue by $4.6 million in fiscal1992-93.
Alcoholic beverage excise tax discount. Alcoholic beverage distributors,
wholesales and manufacturers who pay liquor, beer, wine or ale excise
taxes are allowed a 2 percent discount on taxes owed. This special-interest
benefit can no longer be justified in the current budget situation;
elimination of the discount would increase general revenue by $3.9 million
in the coming biennium. According to the Texas Performance Review,
which recommended this provision, only 11 other states offer similar
discounts.
Certificates of good standing. The comptroller's office is deluged with
requests for corporate documents. While the information is public, the
- ?0 -
OPPONENTS
SAY:
HBll
page 14
costs of preparing the requests are substantial. Charging fees for such
requests would transfer the burden of the state's costs from all taxpayers to
those using requesting the services and save $733,000 in general revenue in
fiscal 1992-93.
Business filing fees. Increasing business filing fees charged for statutory
business filings would increase general revenue by $16.9 million in the
coming biennium.
Misdemeanor offenses and driving while intoxicated. Adding an
additional court cost of $2.50 for those convicted of misdemeanors would
allow the state to collect $17.7 million in general revenue in fiscal 1992-93.
The additional court cost for those convicted of DWI would transfer the
costs of certified breath testing from the state to those breaking the law,
saving the state $2.4 million in general revenue in the coming biennium.
Drunk drivers who cause accidents would reimburse the state some
$600,000 in the costs of responding to the consequences of their
irresponsibility.
Manufacturing equipment sales tax. CSHB 11 would not delay the
phase-out of the sales-tax exemption for manufacturing machinery and
equipment, as proposed by the Texas Performance Review, since taxing
production machinery discourages investment and slows economic growth.
The state has made a commitment to firms investing in Texas that this tax
would be phased out, and they have made purchases in reliance on that
commitment. Any revenue gained by a delaying the phase-out would be
lost by the image of unreliability a change would create.
Texas taxpayers should not be burdened with new taxes. The Legislature
should keep the budget within available revenues and fully implement the
proposals of the Texas Performance Review, rather than raising taxes high
enough to support a wish list of wasteful spending. A family cannot just
decide to increase its income just because it wants to maintain some
"current level" of happiness. The Legislature should demonstrate similar
discipline and live within its available revenue.
- 21 -
'
I
HBll
page 15
If taxes are raised, it should be only for the coming fiscal biennium. There
should be a renewed debate during the next regular session on tax reform,
the role of direct business taxes and the proper level of state taxation.
Franchise tax. CSHB 11 would apply the franchise tax, which is intended
to tax only corporations, to small businesses and even individuals working
for themselves. Small business is the most vibrant sector of the state
economy, helping pull it out of recession when large corporations struggled
and creating most new jobs. Taxing entrepreneurs, family-owned business
and sole proprietorships would tarnish the reputation of Texas as a state
that values the ability of a hard-working individual to build a successful
business from scratch.
A franchise tax that considered the earned surplus of a unincorporated firm
would be the same as a personal income tax on Texans in business for
themselves. The compensation of a lawyer in private practice would be
subject to the income-based franchise tax, but the salary of a lawyer
working for a large company would be sheltered from taxation. Every poll
has made it clear that Texans want no part of a personal income tax.
Corporations have long enjoyed special treatment in Texas law. These
legal distinctions were recognized when the corporate franchise tax was
first adopted and they remain valid today. Corporations enjoy the same
legal status as a person, with constitutional rights that continue even if
ownership or management changes. The "corporate shield" against liability
is a legal privilege with economic value and is unavailable to partnerships
and sole proprietorships. The franchise tax is the price corporations pay for
these valuable privileges and protections.
Tuition charges. The tuition burden on our students should not be
increased. The benefits of higher education are so great to both the student
and the state that Texas should put the minimum possible financial barrier
between students and their education. A well-educated workforce is the
key to a growing economy. If Texas keeps some of its top students away
from higher education by imposing excessive tuition charges, it will hurt
the state in the long run. The way to raise money for higher education is
to increase taxes paid by all Texans, not just tuition paid by students and
their families.
- 22 -
HBll
page 16
Universities are not making the best use of their revenue, wasting large
amounts of money on high salaries, country club memberships and
luxurious offices for administrators and star professors. If the Legislature
forced the universities to spend their income teaching students and stocking
libraries rather living high, there would be no need to raise tuition charges.
Motor fuels taxes. Texas motorists cannot afford a 50-percent increase in
the state gasoline tax, which would give Texas the highest gasoline tax of
the ten largest states. Excise taxes on necessities like gasoline are very
regressive. Since people tend to use the same amount of gasoline
regardless of their income, an increase in the gas tax would be felt
primarily by poor and middle-class Texans who must watch their budgets.
The federal government is also considering a drastic increase in gasoline
taxes that, combined with this increase, would drive Texas gasoline prices
to unbearable levels.
Motor-fuels taxes are a user fee, paid by highway users to defray the costs
of maintaining state roads. Since heavy construction machinery, farm
equipment and railroads do not use the highways, they are properly exempt
from the motor-fuels tax.
Motor-fuels-tax filers are allowed to take a small deduction against their tax
due in order to help cover the costs associated with remitting the funds to
the state. This individuals are doing the state's work; they should not have
to bear the cost, too.
Driver's license. The proposed increase in the driver's license fee would
place Texas fees among the highest in the nation. The fee was last raised
only in 1987.
Driver record information fee. Tripling the fees paid by insurance
companies for retrieval of public information would unreasonably burden
these companies, who would undoubtedly pass on the additional expenses
by raising car insurance premiums. The fee on individuals seeking their
own driving record should stay the same, as recommended by the Texas
Performance Review.
- 23 -
HBll
page 17
MTA service fee. Metropolitan Transit Authorities (MTAs) should not be
singled out for an increased fee. The comptroller also collects sales taxes
for cities and counties; any service fee for the costs of collection should be
unifonil for all taxing units. MTA balances, which generally are reserved
for long-term capital construction projects, should not be drained to support
state spending.
Cigarette-tax-stamp allowance. The cigarette-taxstamp allowance is
intended to reimburse distributors for the costs of stamping machines,
separate warehouse areas and labor. The allowance was increased from
2.75 percent to 3 percent during the regular session by SB 689 by Bivens,
effective June 7, in recognition of these costs. All states provide Cigarette
stamp allowances ranging up to 14.5 percent Elimination of the allowance
would force up the price of cigarettes in Texas and place distributors doing
business in other states at a competitive disadvantage.
Parks and Wildlife Department fees. Increased park fees would saddle
the public with yet another charge for the use of parks that their tax dollars
already go to support. Most state parks already charge an entrance fee for
overnight camping and other amenities. Inflating the price of a scenic drive
by tacking on a "permit" fee would drive casual visitors away. Higher fees
would effectively bar many low-income people from state parks.
Environmental review fee. A new environmental impact review fee could
increase the cost of doing business in Texas. Applicants for permits could
be charged fees by the department for unnecessary, long, expensive
reviews. The fees could be raised by a bureaucracy to support its
continued existence.
Administrative penalties for violation of environmental laws.
Unreasonable open-ended administrative penalties could force the closure of
legitimate Texas businesses. A small business that made a legitimate error
could be given no room for corrective action - ~ it could be bankrupted by
being hit with a punitive penalty. CSHB 11 would discourage economic
development in Texas by frightening away new businesses and giving the
state too much power to deprive fmns of "economic benefit."
- 24 -
OTHER
OPPONENTS
SAY:
HBll
page 18
Water and sewer assessments. Water supply and sewer corporations are
not currently iricluded in the utility-tax base because they provide necessary
services to retail customers. Forcing these corporations to pass on an
assessment to retail customers could discourage their development and
make provision of water and sewer services more difficult in areas where
they are needed.
Insurance taxes and fees. Raising insurer penalties and reducing tax
credits would unfairly burden insurers and encourage them to leave the
state .
. Alcoholic beverage excise tax discount. The alcoholic beverage excise
tax discount is intended to reimburse beverage distributors,
wholesalers and manufacturers for the costs of keeping. records, furnishing
bonds and accounting for taxes due. The elimination of the current
discount would result in higher costs being passed on to consumers.
Misdemeanor offenses and driving while intoxicated. Misdemeanor
offenders are already overburdened with an abundance of court fees. Any
increase in court fees, fines and costs would lessen the ability of a
to pay and might not generate a proportional increase in revenue,
only an increase in jail overcrowding from those unable to pay.
<:;:Slffi 11 would not raise enough revenue to maintain eyen the current
meagerJevel of state services, to say nothing of providing the exemplary
level of education and medical care befitting a leading state or lifting
prisons or mental health/mental retardation services from their minimally
constitutional level.
tax system .is out of balance, with an overreliance on
regressive and inefficient taxes like sales and local property taxes. The
limited revision. of the tax would not go far enough; only a
personal income tax can grow with the economy and generate enough
revenue to support the necessary functions of state government in the
future. CSHB 11 is not the bold tax reform recommended by the
Governor's Task Force on Revenue (1991), the Select Committee on Tax
Equity (1989) or any of a number of other studies of our deficient tax
system.
- 25 -

.. 'I.,
NOTES:

HBll
page 19
Manufacturing equipment sales tax. CSHB 11 omits the most lucrative
provision of the bill as ftled - a delay in the phase-out of the sales-tax
exemption for manufacturing machinery and equipment. This one provision
would increase general revenue by $368 million in the 1992-93 biennium,
according to the Texas Performance Review, which recommended a delay
through the end of fiscal 1993. The exemption is a special-interest give-
away that cannot be justified in the current budget squeeze. Academic
studies demonstrate that local taxes have little effect on corporate location
decisions; several successful Sunbelt states, including California and
Florida, tax machinery and equipment at the full rate.
Tuition charges. Tuition should be doubled, as recommended by the
Texas Performance Review, then pegged to a percentage of the cost of
education. An eight-year phase-in period would take too long to generate
the necessary revenue. Texas tuition is artificially low because of the
heavy subsidies given students by taxpayers. General revenue currently
being spent to support higher education could be diverted to more pressing
public needs. Even doubling tuition would leave Texas in the middle rank
of the most populous states in tuition cost.
Insurance taxes and fees. Insurers should be charged a service fee to
cover state operating costs not currently covered by maintenance taxes, as
recommended by the Texas Performance Review (TPR). Also, the State
Board of Insurance should be allowed to set maintenance tax rates by rule
to ensure that the actual costs of regulation could be allocated to the
appropriate line of insurance and recovered appropriately. Maintenance tax
rates are currently set statutorily. The TPR estimates that its insurance-tax-
related recommendations could increase general revenue by $56.5 million.
The original version of HB 11 as ftled would have delayed the phase-out of
the sales-tax exemption for manufacturing machinery and equipment. The
committee substitute added the provisions concerning the franchise tax,
tuition, motor-fuels tax increases and the sales tax on boats .
- 26 -
HOUSE
RESEARCH
ORGANIZATION Senate amendments digest 8/12/91
HBll
Hury (Glasgow)
SUBJECT:
DIGEST:
Franchise tax reform; increased tuition; tax and fee revision
The proposed Senate substitute for HB 11, expected to be voted on in the
Senate today, would revise the corporate franchise tax, raise tuition at
academic institutions, repeal certain tax discounts and exemptions and raise
certain fees. It would increase general revenue available for appropriation
in fiscal 1992-93 by an estimated $2.16 billion if it took immediate effect,
which requires passage by a two-thirds vote of each house. If instead the
bill became effective in 90 days, it would generate an estimated $2.074
billion in general revenue.
The bill would take effect September 1, 1991, if it received a two-thirds
vote in each house. Otherwise it would become effective December 1,
1991. Estimates of revenue gains and losses from the provisions are based
on a general effective date of December 1. If the bill did not receive
enough votes for immediate effect, certain contingent revenue proposals
would be triggered to raise additional revenue.
Franchise tax. The franchise tax, which is currently imposed only on
corporations, including limited liability companies, would also be imposed
on state or federal savings and loan associations.
The tax rate, which is currently $5.25 for each $1,000 of taxable capital,
would be 0.25 percent per year on net taxable capital or 4.5 percent of net
taxable earned surplus. Each business entity would pay whichever amount
was larger, the tax on capital or the tax on earned surplus. If the tax
computed was less than $100, the corporation would owe no tax.
Net taxable capital would be based on a corporations's stated capital and
surplus, a limited liability company's members' contributions and surplus or
a S&L's net worth, apportioned by the proportion of total gross receipts
that are from business done in the state. Net taxable earned surplus would
be based on a firm's reportable federal taxable income. Officers' and
directors' compensation would not be included if the corporation had fewer
than 36 shareholders or was an "S corporation." (Estimated gain to general
revenue -- $801.5 million.)
HBll
page 2
Delay of manufacturing-equipment sales-tax-refund phase-in. A portion
of sales taxes paid on manufacturing machinery would be credited against
franchise taxes owed. The credit, which would be 25 percent of the sales
tax paid for property purchased in 1992 and 50 percent of the tax paid for
property purchased in 1993, could be claimed after January 1, 1994. The
currently scheduled reduction of sales taxes paid on the manufacturing
equipment - a reduction of 25 percent in 1992 and 50 percent in 1993 -
would be repealed. (Gain of $329.7 million)
Sales-tax base expansion. The state sales tax would be applied to
telephone answering services ($5.9 million), wrapping and packing supplies
($76.8 million), country club dues ($5.2 million) and concert tickets ($8
million).
The sales-tax exemption for improvements to real estate of tax-exempt
organizations (except school districts and nonprofit hospitals) would be
repealed. (Gain of $93.3 million)
Motor-fuels taxes. The tax on gasoline, diesel fuel and liquefied gas
would be raised by 5 cents, from 15 cents per gallon to 20 cents per gallon,
effective October 1, 1991 (or January 1, 1992). (The gasoline tax rate for
transit companies would be raised from 14 cents per gallon to 19 cents per
gallon; the diesel rate for transit companies would be raised from 14.5
cents per gallon to 19.5 cents per gallon.) (Gain of $205.9 million)
Unclaimed off-road-use fuel-tax refunds would be deposited in the General
Revenue Fund. Three-quarters of unclaimed motorboat-gas-tax refunds
would be deposited in the General Revenue Fund, for appropriation to the
Parks and Wildlife Department, rather than deposited in the Game, Fish and
Water Safety Fund. (Gain of $33.6 million)
Motor-vehicle sales tax. The motor-vehicle sales tax would be raised from
6 percent to 6.25 percent of the total consideration. (Gain of $82.4 million)
Automobile rental tax. The tax on automobile rentals, currently 6 percent
of gross rental receipts, would be increased to 10 percent of rentals for 30
days or less and 6.25 percent for longer rentals. (Gain of $43.5 million)

HBll
page 3
Sales tax on boats and boat motors. The bill would impose a sales and
use tax of 6.25 percent of the total consideration paid for a boat or
outboard motor, including used boats, effective October 1, 1991 (or
January 1, 1992). (Gain of $10.4 million)
Driver,s record information fees. The fee charged by the Department of
Public Safety for providing information on an individual driver's date of
birth, license status and address would be increased from $2.50 to $4. The
fee for information on an individual's traffic-law convictions and accidents
would be increased from $3 to $6 per request and from $2.50 to $5 each
for requests of 100 or more. The fee for information on completion of an
approved driver education course would be increased from $3.50 to $7.
The fee for certification of record information would be increased from $5
to $10 per request. (Gain of $33.1 million)
Fees for criminal history inquiries. The fees charged by the Texas
Department of Criminal Justice for an individual's criminal history records
would be increased from $5 to $10 for name searches (if the inquiry is
submitted electronically or on magnetic media, the fee would be $1 ). The
fee for fingerprint comparison searches would be increased from $10 to
$15.
Misdemeanor offenses and driving while intoxicated (DWI). Those
convicted of a misdemeanor offense (except jaywalking or parking
illegally) would pay an additional court cost of $2.50, (Gain of $17.7
million) and those convicted of driving while intoxicated would pay an
additional court cost of $30, regardless of whether they are given a breath
or blood test. (Gain of $2.4 million). A municipal or county treasury could
retain 10 percent of misdemeanor fees and, if no DPS certified technical
supervisor is used for alcohol testing, three-quarters of a DWI fee.
A person convicted of DWI who caused an accident would be liable for the
reasonable expense of any accident response by a public agency, up to
$1,000. (Gain of $600,000)
Tuition charges. The bill would establish a schedule of tuition increases
for all institutions of higher education starting with the 1992-93 academic
year and extending through the 1996-97 academic year .
HBll
page 4
The bill would increase the tuition rate for Texas residents at public
institutions of higher education, which is currently $20 per semester credit
hour or at least $100 per semester. The bill would increase tuition to $24
per semester credit hour for the 1992-93 academic year. For the four
ensuing academic years, tuition would increase $2 per hour per year, until
it reached $32 per hour in the 1996-97 academic year. The minimum
tuition would be raised to $120 per semester in the 1997-98 academic year.
The bill would increase tuition for Texas residents attending public medical,
dental and veterinary schools - for medical schools, from $5,463 to
$6,550; for dental schools, from $4,511 to $5,400; for veterinary schools,
from $4,800 to $5,400. Tuition for nonresident students enrolled in these
programs would be altered from four times the resident rate to three times
that rate.
Tuition for Texas residents attending public junior colleges would be
doubled from $4 per semester hour to $8 per hour. Tuition for Texas
residents attending the Texas State Technical College (TSTI) System would
also be doubled, from $8 per semester credit hour to $16.
The bill would increase the proportion of tuition set aside to fund the Texas
Public Educational Grants (TPEG) program. The set-aside from institutions
of higher education and TSTI, which is currently from 9 to 15 percent of
resident students' tuition charges, would be raised to a minimum of 15
percent and a maximum of 20 percent. The set-aside at junior colleges,
which is currently 25 cents from each resident student's hourly tuition
charge, would be set at 6 percent of the hourly charge.
The cost of education, which determines the tuition charged to
nonresidents, would include appropriations from the General Revenue Fund
for the Teacher Retirement System, Optional Retirement Program and
Social Security.
(No impact on general revenue. Revenue from increased tuition and fees
would be reappropriated to the educational institutions.

HBll
page 5
Business f i l i ~ g fees. Business filing fees, including fees for submission of
bonds to the attorney general for examination and approval, would be
increased by 50 percent. (Gain of $16.9 million)
The secretary of state could charge an additional fee to those using a credit
card to pay a fee assessed by the secretary of state. The secretary of state
could charge a fee for telephone access to public information and could
contract with a private firm to provide the telephone information service
and bill users of the service.
Professional fees. There would be increases in the annual fees paid by
doctors ($300), dentists ($230), optometrists ($250), chiropractors ($100),
psychologists ($120), certified public accountants ($120), architects ($180),
engineers ($230), realtors ($100), stockbrokers ($210), veterinarians ($220),
and lawyers ($250). Of these increases, one-quarter would be deposited in
the Foundation School Fund and three-quarters in the General Revenue
Fund. There also would be increases in fees paid by architects, securities
dealers, engineers, chiropractors, vocational nurses, pharmacists, dentists,
hearing aid dispensers, private investigators, barbers and cosmetologists.
(Gain of $140.9 million)
Fees for public records. The comptroller would charge a fee of $10 for
each official certificate, a fee of $1 per page and $5 for certification for
certified copies and a fee of $3 for a search of records. The comptroller
could charge additional fees for purchases of public information by
commercial users. (Gain of $700,000)
Miscellaneous fees. Fees would be raised for organic food certification,
weights and measures testing, agricultural inspection, state library services,
solid waste disposal, commercial trucks and coin-operated machines. (Gain
of $7.6 million)
Bingo gross receipts tax. The bingo gross receipts tax would be increased
from 2 percent of gross receipts to 5 percent. (Gain of $30.6 million)
Bingo-hall rental tax. A new tax of 3 percent of gross rentals would be
imposed on licensed authorized commercial bingo lessors. (Gain of $2.3
million)
HBll
page 6
Bingo prize fee. A new fee of 3 percent would be collected from each
person who wins a prize in a bingo game. (Gain of $19.1 million)
Bank franchise tax. Revenue from franchise taxes paid by banks would
go to the state, rather than to local governments.
Interest rate on delinquent taxes. The annual interest rate on all
delinquent taxes would be increased from 10 percent to 12 percent. Interest
would be compounded monthly. (Gain of $4.6 million)
Pari-mutuel wagers on dog races. Contingent on the adoption of a
constitutional amendment authorizing a state lottery, the current 6-percent
tax on greyhound-racing wagers would be reduced to 2 percent on the first
$100 million of the total amount of live pari-mutuel pools, 3 percent of the
next $100 million, 4 percent of the next $100 million and 5 percent on the
remainder. The minimum purse in a greyhound race would be 4.7 percent
of the total pool, rather than 3.5 percent. (Loss of $18 million)
Sales-tax permit fee. The current fee of $25 for a sales-tax permit would
be repealed. (Loss of $24.3 million)
Contingent provisions
Certain provisions of HB 11 would take effect only if the bill failed to
receive the two-thirds vote of each house required for it to take immediate
effect. The anticipated revenue from these provisions is $163.5 million.
The revenue from the non-contingent provisions of HB 11 would be
increased by an estimated $240 million if the bill took immediate effect,
rather than taking effect in 90 days. The net revenue gain from immediate
effect would be $76.5 million.
The contingent provisions are:
Driver's licenses. The fee for non-commercial driver's licenses, which is
currently $16 for four years, would be increased to $25 for five years.
(Gain of $48.8 million)

~
....
HBll
page 7
Cigarette tax.. The tax on cigarettes would be raised from 41 cents per
pack to 46 cents per pack. The tax on tobacco products would be raised
from 35.213 percent to 39.507 percent. (Gain of $65.5 million)
Sales tax on sand and gravel. The transportation charges in connection
with the transfer of title of sand, dirt, gravel or fill would be subject to the
sales tax. (Gain of $5.7 million)
Sales tax on car washes. "Wash-and-detail services," including automated
car washes and full-service interior and exterior cleaning and waxing,
would be subject to the sales tax. (Gain of $11.7 million)
Hotel tax. The hotel tax would be raised from 6 percent to 6.25 percent of
the price paid for a hotel room, effective October 1, 1991 (or January 1,
1992). (Gain of $8.9 million)
Insurance taxes and fees. Insurers would be required to pay interest and
penalties not only for late payment of premium taxes, but also for late
payment of maintenance taxes. Premium tax credits that insurers receive
for amounts they pay into a guaranty fund (a fund that covers claims
should the insurer become insolvent) would be reduced from 100 percent to
40 percent of the amount paid into the fund. The credit would be spread
out over the successive years following the date the taxes were paid. (Gain
of $2.9 million)
Insurers could no longer offset premium tax and guaranty fund obligations
with attorneys fees incurred for taking legal action against another insurer
or individual.
Realtor's fees. The fee for filing an original application for a real estate
broker license or real estate salesman license and for the annual renewal of
a real estate broker or salesman license woulq be increased by $100, of
which the Fotmdation School Fund would receive $25 and the General
Revenue Fund would receive $75. (Gain of $20 million)
16.
Bob Bullock, et. al. to nn
Richards and Gibson Lewis, Jul
23, 1991, Bob Bullock
Collection, t. Governor Series,
1991-1992, Correspondence,
Elected Officials, Gov. Ann
Richards, Baylor Collections of
Political Materials, Baylor
University, Waco, Texas
July23,1991
L7he S.:nalt.? o(
"7he Stale ._,( C"Jcxcrs
..::::/ltt:5filf. 74!.n15 78711
The Honorable Ann W. Richards
Governor
The Honorable Gibson D. Lewis
Speaker
St.ate of Texas
State Capitol, Room 200
Austin, Texas 78701
Dear Governor and Speaker:
House of Representatives
St.ate C'....apitol, Room 241
Austin, Texas 78701
We, the below signed members of the Texas Senate, have carefully considered the
current proposals for franchise tax reform. There is broad agreement among us that
the existing franchise tax must be revised. It doesn't reflect a modem economy, and it
doesn't raise enough revenue.
Under the most popular proposal, tax would be levied on the higher of a capital or an
income base. We are not opposed to that approach.
It has been proposed, however, that the franchise tax should also be expanded to cover
non-corporate businesses. There is some surface appeal to thls, but corporations are
neither legally nor economically equivalent to partnerships and proprietorships.
Partnerships and sole proprietorships, unli.ke corporations, are not free-standlng legal
entities apart from their owners. They are pass-through entities that do not limit the
personal liability of the partners or proprietor.
To include partnerships in the corporate tax means that the income of accountants who
work in partnership would be taxed, while that of accountants on corporate payrolls
would nol The incomes of architects and engineers employed in partnership would be
taxed, while that of those on corporate payrolls would nol lhls would not be an
equitable result While it is true that an all-business tax would raise somewhat more
revenue, the policy is intellectually unsound and inimical to small business
development in onr state.
A tax on partnership income and proprietorship income is really a t.ax on personal
income that only applies to some persons. A narrow income tax on independent
business men and women is no more acceptable to the public than a broad based
income tax.
Page 2
July 23, 1991
Of crucial significance is t11e limitation of liability iliat incorporation provides. Tills
limitation of liability is of imponance and value to both ilie owners and managers of
corporate enterprise. Business leaders often identify liability considerations as a
critical--and often determinative-factor in decision making. Given iliat reality
1
it does
not make sense to treat fonns of business iliat do not l.imit liability ilie same as
corporations for tax purposes.
For all of these reasons, ilie federal tax code recognizes iliat partnerships and
proprietorships are not the business equivalents of corporations If the benefits of the
corporate form were illusory or of limited value, tl1ere would be a wholes.ale
conversion to a partnership fonnat in order to avoid a layer of federal corporate
taxation.
Accordingly, we will not consider any revision of the franchise tax iliat contemplates
the inclusion of all forms of doing business in this state. Please be advised of our
strong feelings in this regard.
Sincerely,
Members of ilie Texas Senate
(See attachment)
17.
Bob Bullock to A Richards,
Jul. 19, 1991, Bob Bullock
Collection, Lt. Governor Series,
1991-1992, Correspondence,
Elected Officials, Gov. Ann
Richards, Baylor Collections of
Political Materials, Baylor
University, Waco, Texas
Bo lb Bulllock
Lieutenall1lt Govennon ofT exas
Capitol
Aus(in, 78711-2068
(S 1 2)
July 19, 1991
The Honorable Ann W. Richards
Governor
State of Texas
State Capitol Building
Room 200
Austin, Texas 78711
Dear Ann:
Here is my response to those who want to tax partnerships, joirit ventures, etc. under
the franchise tax.
BB:rd
Attachment
From the Papers of
Bob Bullock
.\
Corporations and Partnerships:
Apples and Oranges in Law and Taxes
Texas general law as well as Texas tax law have long recognized that
it is critical to the Texas economy for corporations to be treated
differently from partnerships and businesses owned by sole
proprietors. The reasons are as valid today--and as critical to Texas
business--as they were in 1907 when the first Texas corporate
franchise tax was adopted.
The corporate franchise tax itself badly needs reform and revisiOn,
but corporate tax reform should not open any door for considering
corporations equivalent to partnerships and proprietorships legally,
economically or in the tax system.
A proposal to bring all forms of business entities under the corporate
franchise tax is a step toward inequality in taxation and holds
potential for harm to both the corporation concept and the existence
of partnerships and proprietorships in the Texas economy.
The very foundation of the corporate franchise tax was--and is--that
corporations enjoy privileges and protections that make the price of
the corporate franchise tax worthwhile.
A corporation structure limits--if not erases--the personal liabilities
of corporate executives and stockholders from debt and other
corporate actions. The corporation itself enjoys status under law as
a person, separate and apart from its shareholders. It has the
constitutional rights of a person in court, and a corporation exists
continuously even if its "ownership" changes.
Indeed, the protections afforded corporations are known as the
"corporate shield," a thing of economic value and legal privilege not
available to sole propr.ietors, family-owned businesses and
partnerships. (Even the limited partnership form ultimately has at
least one, final partner subject to liabilities.)
hvm ,J:,.; [ < p ' - ' t ~ of
~ b ]Bullock
1
No similar protections and privileges exist for non-corporate forms of
business. It would be unfair to apply the corporate tax to businesses
which enjoy none of the fruits of corporation law.
A corporate tax applied to non-corporate businesses would actually
tax the incomes of Texans in business for the,mselves. Even the
federal tax system has always honored the difference between
corporations and partnerships and proprietorships.
For many beneficial reasons, the corporate shield is vital to the
economic well-being of Texas industry, but the price of the shield
should not be assessed on business which does not enjoy the
protection of that shield.
Thanks to court orders and changing economic times, the corporate
franchise tax must be rewritten, but it must be revised from a
corporation perspective and not be made worse by building in the
unfairness of corporate taxation of non-corporate businesses.
the Papers @1f
- B\\lllloot
2
###
18.
ob Bullock, Corporations and
Partnerships Should Not Be
Taxed the Same, Austin
American-Statesman, Aug. 1,
1991
Ttn.ndc.y, Augutt 1. 1e9t A17
LETTER GUI0LIHE f ,PUBLIC FORUM GUIDELINE MEETING WITH THE EOITOBIAL BOARD
Tho Amotieln:sJa,_,.,. wUIII'Mci lttton on thO baA!Q.,OI rc.cdorthlp II'IICt
ctt end re!ovo.nco to cuuent cvonlp.. Lottortl &hculd bo 200 01 foww wetdt..
'Opon' ot lGttctl \V\11 no.t bo pobllohcd. I.CIItcn tnu#t CUty a
name. l't\tiUI\g addtuo end dbytlmo to!:phono numb. lcthv
wrllots m.tlrJ eppur ones d.:ya..Duo 10 \'041mo, !otton '1!1111 not to ec-
Wo r....-v.ltwllighf to odttlo110f11. Send lolts to IAttm to
11\e..EdltOf, P .0. B<lll 670, 'Au::tln, TO:l!iU 78767
PubliC Forum c$,1rtbl.ltlc1U1 lhoold bo from pen.ons Of ln-
In a or eurrMt public lntii'MI.IndLKIInO UiriW\wtuonln ro
a Pub lid Forum. o.ho\.lld bo llml104lo 650 WOtdl. A
oubm!Wcn ohould CUI)' a nuno, complo1o mllllnQ cddr"', tob-
phono number and o do&Cflptlon ot tho wrllcr'a Involvement Df In
tho 1\lbjec:l be!ng &ddreuod. We tee4tt the tlgtltlo edl1eubmluiona. Ad-
dtcU camril:i'Ullonllo PubUc Forum. P.O. (J{)x 670, AU&tln. Te:xu 78767
Tt'IO board 'Mil I'T'oOtt, by priM
!Mth mombotl olll\0 bullnNo Of{l:tnllUont.
public: {ntttnt groupt, ofiiMlcderl. 01 candldatot lor publiC oli!Qt to dtJ-
cuu mancr ot publk: 11\totoot. B;wae olthO PfMO or buaiMU. IM boatd
Ia uaudy able to only two o wotk for lOCh mootltlila.
!hough 11ato may bO urgtnt maHtu. To dltl.:u.. a moonno
(._- u!J 4ol5 3860.
OPINION
Election districts proposed for Railroad Commission
Ono Dtmocrat "'Onieo that IJ.Ome-
thlns oould trip up Lima ou. .... ro'o ""
Cort to b& tlee10d mn year to th11
RaU.roadCommilaJon ae.at to which abe
wu oppolntod by Gov. AIUl Rkbarda.
Hla auatnted aoJution it to have tM
thrte membera of the commiulon elect
td from rather
than have .U tlirco utowide.

tiWI John Pouland, wbo lll&do "" UD
OUettl'ul bid In 1988 for tho
Detnoc:ratic nomination Cor the aut
Ouam.ro now boldt.
Pouland thlnb Cuomro would In
heroddo Coreltd.ion a.pinat a P;!l
t.ntWiy oucna J,!tpubli<an chilllili>B6

, It would tho make tho eommiuionen
more aecountable if their W.trie\a wero
o...U.r, Pouland arautd.
Dave
McNeely
He propoata h.avl.na: one diltrict made
up of Auatin, San Antonio South
woot Tet:uj another of t.M Dalla.a-Fort
Worth area and North Ttxu: and the
third lncludinr Hou.ton and Southeut
Texa.a. Under Pouland'a plan, Guerrero
would repreaent the aouthwettem dlt-
triet. whkh would have a Jrtion
of the atate'a Hbpo.nic population, mool
o( them Democrat:
Pouland tbinb the ainal.o-mcmber
dbtricta would aave tho otaU:t from po
tential Votins Rl1hta Act problem i1
Guerrero thould loeb ln a &t.att!wide race.
Ho worrieu that her defeat might r;nake
Salute this man's crusade
against the ill-mannered
had e.atered.
James
Kilpatrick
Other t.nlimony came from Thom1111
A. Stroup, pruident of a trade auocia
tion whoM 650 membera provide pllJing
ond ceUular telbcummunleatlon& aer
vice.. He too wu fed up. Time after
tJrne, he uld, "autodla.Wra" Into
pagina eyJtema. Some II million cua
lomtn buy paging equipment; mort
than 6 million peraons tuhambe to eel
'!ular t.eJephone.a FalN pagu from auto
dJalen produce "enormoua confulon"
a.nd tie up cellular equipment - at the
eubacrlbtr'o epensc,
It It pleuant to npott that thl! auto
dWinr indulltry itadf D.jTf.leD that thlng.a
have JOtten out of hand. The aubcum
mlttoe heard from Richard A. Ranon, a
gran.dlatherly fellow who oorvn u a
vice prealdent for the Direct ..

Jlve JJUJitik,., .. a tmall port or direct
marketllli but a l.ug:e bualneu nonethe

telephone every day,
Stroup wa agtetable to an outright
ban on uquentla.J autodlalin1, lh would
prohibit call to pogera and ceiJular
phon" One of the moat infurillling fea,
turea of aome autodiallng ayatema Ia
that a call doea not disconnect until tl1e

nnd dlaconnect as beyond tud11.y'a

the nc.'i!d
Sen Dele Bumpera, ).Ark ,
over tho htrinp, uked witue .. if
they would ban telephon11 aolicltatlon11
by the- United Way, Red Croaa and other

but Hulmaah, atAyln11 in character, 1.11ld
he would prohibit charity collll All
Let 'em aend out leLIAR inatcrad
My own thought Ia Lo eay hooray for
Holllnga. Thru c:hun a.nd 11 Ug.r for
llulmuh. TM world get. ruder, crudtr
and more lnwtent aU tho time. Manner
have tled to the wlnd.ll- Barbarian pteu.
upon the gatet. The molt prccioua of all
uld Juatlca IAJula fbandela, Ia
the riaht to be left alflne.
autodialer And aood riddAnce
t<llp.l;tricic le a aynlittt41d wriiOt on ntllooat
a.nd lnt.,natlonalffll

eou)dn't bo. etecud under the
current ptan.
Underminin; that argument l!. the
fad that two Hiq:lanka - Attorney
General DIUl Moro.J.on o.nd Teua Su"
preme Court Jwlict Raul Gonul.ez -
have been eii:Cttd atat.ewide, aa hu a
blAck member of the Cowt or Criminal
Appeals, Morrlt Oventrett,
Also, the incumbent commiMioru:rn:.
lncludinc Guerrero, probably tJ.nn't all
that fond of. thn let... Pouland sald ho
talked to Guerrero and Jim Nugent -
Bob out of town - and de"
eeribed them u "c:autloua. ..

ninrotat.ewide. They know lhe po&alblli
ty to nm for aome other atatewldc
office without up thflir eomtnib"
eion aeat u Guerre.ro'a predeccuor
John ShArp did in being eli'!'Cted
comptroller,
One (ormer commlul<ln member, the
l1to Beauford Jnter, wu ele<:ted so vet
nor, and othC!ra, lncludins Kent Hance
and Buddy Temple, have tried. ,Both

regulating tranaport&ticn Bnd oil and
....
_. former member U.S
Houae of RepresentaUvea from New
BraunreW. hu run two loain.g ra.cea Cot
the U.S. Senau-, and wouldn't mind run
nina aa\n, even thDuah he h.n.a
to aerve bll full lis-year term, Nugent
baa hinted before about running for
comptroller, lieutenant governor or
&erne othn, officf,
And evtn probably woutdn't
mind at oome trying to follow in
tke footettps of her ment.or1 Rh:h&nle,
runnlna for aom.e other atatewide
Ill
AND SO ON . . A rumor haa betn
floatlnt that Secretary or St4te John

Carriker, D-Roby.
Even thoush ll'o been ta.lum aeriout-
ly enoUBh that oorne Houe.e members
In Carriker'a diatric:t are already di
tt
Hannah haa no to retlre. And if

urdu would give It to him.
MGNooly,
Covetlpollllca!IUUOIIIIfloctlngttiOitttl,
LE'AST FAVOREP
NATION
It's not the it's the global warming
The molt tlreaomc thinB about tlw

been told befort: the 1tory about how

dltlonlna broi:, down. the old atoriel
about blowina Cano ovet block& of ict in
lunchwnettee
But there i Alwaya aomethius uew
under the aun, and thle eummer it'll
global w.rmlns. People art talking
about the weather u an act of man, not
of Cod
Ju1t 10 yuu. a10 the ozone lay.r wa
Largely the purview of the tofu-nd- Bir
ken.tock crowd. Now r.clentlta who
atudy thia atufl aay that a 1ure u the
buchu will fill with bod! .. on the fint
IOQ.. degree day, thell phonea will begin

the alow
Weather' alway been e uaeful aym
bot; maybe f!ellnr lt'Uilty about the fact
that 1000 w.u thfl warmnt year on re
(ord In the Northeaul ha a lot 1.0 do
with til the other dlmlnlahed elpecla ..
tilme we're panlnB alonr to uur
chltdnn.
Tht old upward curve - bricklayer to
cop to lawyer to judie In faur acntra
':.
rollercoutcr,
Oownwud mobility i tht hlp tAtrm
(or what WI!' in their futurea. No
houKt, no .avlnp - and now no au
tumn We can picture huddlrd
Aima
Ouindlen
Mound the air-conditioner 50 )'e&f\1
from rww qying, "Oh, Mom, not that
had
But that old 1tmy already fella true.
Wlnl.ert without .tnow. Springnthat last
24 houn Long hot aummen In hurt,
aouthern Callromia (or aJl.
It mako me' think of fiehlng with my
(ather in Dalawaro Oay whtn I Willi t;, uf

I
d&nlduateina theaun tor the tint time.
Now th-e flounder 1110 (ew_,r and f11rther
betwHn in many of fiehinr
The Alaelum anuw melted two wecka
earlier in the 1980t than in the
Put an iclde In the rruur this Janu11ry
1
to .rive your children aomething to tt
member y.ou by

cydin1, taktHlul food, air-conditiOned
nr and pcr111Unal computen
Every time I look: at unt' of thr.ir upJit't
arma, I can't holp noliclna that they
hcvtr nu I mall rtmnd ICAr fmm llmUIJJXIl
lnoculallon, the tattoo uf those Jlf Ull
burn thu l97Ua In an nut tu
aeero like hoptltte noataJgice, we try nol
to dwell too much on a time when the air
W111n't carthtoned
We ttiU buy the thing m.nufaetuted
with that roul thealr,atUI talk
nervouaty of clobal warrnina and then
jump in tho car to go to the l'tach, leaV
inll' our own l!t\le of t11r
bun diOxide pumt -
Perhnpo thial& the beginning of aome
dante. the fact that w many people
worried that mild wint-on and long
oummere are environmental, not acci
dental. Once we believtd that only God
could make a heat wave; now we think
lhat maybe we took creation Into our
uwn hand! nd rarohioncd a monater, a
lt'Jlt ur gnl(lf that ltap tlw wnrlll air aa
aurt"ly n glaaro plat.ea do.
Tht" folko whu UKUe about whether
we'r11 really grlllng warmer aoy the
l990r. will tell. Thy moy alao tell wheth
planning to do anything 11bout
thil
11omrdtiy tJur children will

J-'lnibla 1-'lyt"r, about daya o cold that
the rain would actually frt'ilze and coat
the wwund wilh a Craun white blanket
nn whkh Y>u could alcim downhlll.
One of thrm will au rely IWY! "Ah, ahe'e
t1ld ua that unt a milli1m timt-1 I atiiJ
think mode it up."
Corporations and partnerships should not be taxed the same
aw llob Dullock
Sp.c!tlto tM Amafic:anGIItMman
In Tuaa in both xcncrallaw and ta1

ahlpa nd butlneaua awned by 10le
pwprirton There are important ew
- rwmlc r,.10n1 for th01a
PU8LIC
PORUIJI ruwn ata u valid tu
---- day - wd u critical t.o
bualntat - u they wen In 1007 when
th'" Tuau CUI'p(J,.te franchlu tal wu
Ont edopk-d.
The frJtu:hJ1011 tax Ia tbtr 11riu wrpu
ratinn1pay fur tblltt vluahl prlvilMe
und protectlun1. Th11 valu of
ttutmont baro nuthln,to do
with the ftct thai lh franchiR tu tll
day It In bad nted <Jf refurm and revi
hm,thanka t.o a changinJ Knnumy and
u 1luw of court dtdalunl
Uul ea th11 Lo!Plature undartakea
C"(JtpUtlllf (rnch{N \11: r1form, \htra
art aume who advoc:at4- uter11lon or the
rurpi'Jrate t.ex to non-corporate bullneu
enlitln - 41 mrw that would render the
taa Inequitable and harm ulallna port
norahlpa, famllyown&d hu11nuue and
anle prnpriet11nhip
PartnenhiJll and fUUJirivlJnhipro littt
ntlther ecunumlally nur lel(ally fiJUIVtl
lent W Cllf'J)IIfetlonu. and it W(luld he
wrung v, l4r them 01 MUch
Statua1u a curtHitAllun eraatiiiiC!NHn
alliabilltio of curporatc nKutlvtrl and
atockholdet from debt and uther corpi'
rate actions. 'l'ho curpnrltlon lt.aelf en
joya ILilus und.or law Ill a
14!JlUflt.o and apart from Ill llllttf!hold
en It hu the conatltutinna.l righla of n
penon In court, 1nd a curporatlou cai11W
contlnuoualy even I( Ita "uwuenhip"
the m1te-ctlonll afforded cur
poratiun ore tnown u the ''corp.Hule
lhiCtld," 11 thinK flf ecunumtc value ond
ltvlprivilte
Nune uf then IJIKial trntment.t Ia
.avullable tu nit '""Prlti.Unl, f11mily
ownl.'d llulint!IIU:I ur Jlartn.,nhiJ ...
C.H'fwtulleadt111 ufwn ur;y thtlllll/111
ll!ctlonw Bft- critical In maklrtH huitwua
d1'dr.iun11, aud thb l.egi11loture ll fre

the limit on C!lfllutot.e liubilitie
Uut many curpor.aUr ludcr11 whu JIUIIh
hurd fur llrunter c:U1JIIIf11lhm prulet'
tinna ore nuw the umo unu wlm UIY
that in taaa\iun tht:n thuuld be nn di(
fcorenct' l>tttwoen tht JHivlltaed curpora"
1
tluna and the bullinetlBCIII whilh Lnjuy I
num of tho fruit IJ( COfliUf&tCI law
A curpuratt- tu applied tu nun fii1JIU
nile btnintor.aea would llCHially be the
1
u un inrmnu Ull un Teaana In '
buwlne&a forlbomaelvra gven the ferlllr i
al lua ll)'atem hu alwoyM hunored the
difrurenn lwtWt'PJI cutJXlrlltinn and
JllltlUL!tllh!jJII Ullt)jiUijlflt'IUOihipa.
ur many benrlicial rr.oaun1, cnr
Mhltld i vital lu the ecnnumir
\lo't>ll o( Tuaa \nduatry, hut th
Jlrh-11 ur the llhield ahould nnt be
llt'Bed un hualnl'tla whkh dneanut enjny
the llrtll.flrtiun of tho I ahleld

alt'Jl and ftpirh with the tu:upe uf alluth
vr torporalt! Jowl, and not be
mode wurs.r by building in arbitrary and
Utlflllr t.a.. thm uf UIIUl'IIIJlotltC

Bo.l!!ock IIIIOtliOntnJ govrnOI' of Tu
Archives I Austin American-Statesman I Statesman.com http:/ /nl .newsbank.com/nl-search/we/ Archives?p _ action=doc&p _ doci ...
I of2
NEWS ENTERTAL\If/ENT HOOl<EMCOM CLASS!PIEDS
HOME I __ _ _j_ SPORTS j __ uF_E __
ADVERTISE --- I
Archives
New Search rips Iradwr Customer Service I:AQ l'cl's lcrms ,\houL the Archh c
The Austin American- Online Archives
Options:
Results t;st 1 Start a New Search I Printer Friendly Version>
Corporations and partnerships should not be
taxed the sa1ne
BYLINE: Bob Bullocll AUSTIN AMERICAN-STATESMAN
DATE: Augusl1, 1991
EDITION: FINAL
SECTION: EDITORIAL
PAGE: A17
COLUMN: PUBLIC FORUM
In Texas in both general law and tax law, corporations have long enjoyed special treatment not
available to partnerships and businesses owned by sole proprietors There are important
economic reasons for these legal and taxation distinctions, and those reasons are as valid today -
and as critical to business -as they were In 1907 when the Texas corporate franchise tax was first
adopted
The franchise tax is the price corporations pay for those valuable privileges and protections The
economic value of that special treatment has nothing to do with the fact that the franchise tax today
is In bad need of reform and revision, thanl1s to a changing economy and a slew of court decisions
But as the Legislature undertakes corporate franchise tax reform, there are some who advocate
extension of the corporate tax to non-corporate business entitles- a move t11at would render the tax
inequitable and hann existing partnerships, family"owned businesses and sole proprietorships
Partnerships and proprietorships are neither economically nor legally equivalent to corporations
and it would be wrong to tax them as such
Status as a corporation erases personal liabilities of corporate executives and stockholders from
debt and other corporate actions The corporation itself enjoys status under law as a person,
separate and apart from its shareholders II has the constitutional rights of a person in court, and a
corporation exists continuously even if its "ownership" changes
Indeed, the protections afforded corporations are l<nown as the "corporate shield," a thing of
economic value and legal privilege
None of these special treatments Is available to sole proprietors, family-owned businesses or
partnerships
Corporate leaders often say these protections are critical in making business decisions, and the
Legislature Is frequently asked In the name of economic development to expand and strengthen the
limits on corporate liabilities
But many corporate leaders who push hard for stronger corporation protections are now the same
ones who say that in taxation there should be no difference between the privileged corporations and
the businesses which enjoy none of the fnJils of corporate law
A corporate tax applied to non-corporate businesses would actually be the same as an Income tax
on Texans in business for themselves Even the federal lax system has always honored the
difference between corporations and partnerships and proprietorships
For many beneficial reasons, the corporate shield is vital to the economic well-being of Texas
industry, but the price of the shield should not be assessed on business which does not enjoy the
protection of that shield
The corporation franchise tax must be rewritten, but It must be revised In step and spirit with the
SUBSCRIBE TODAY
PRI."/T OR
CARS HOtJES JOBS
CUSTOMER SERVICE
$53 for Chiropractic
Exam, X-Rays and
Treatment!
$53 for $485
['
8/10/2011 2:42PM
Archives I Austin American-Statesman I Statesman.com http:/ /nl. newsbank.com/nl-search/we/ Archi ves?p _ acti on=doc&p _doci ...
2 of2
scope of all other corporate protective laws, and not be made worse by building in arbitrary and
unfair taxation of non-corporate businesses
Bullocl\ is lieulenant governor of Texas
Copyright, 1991,Austin American-Statesman
NEWS SPORTS WEATHER CLASSIFIEOS
Lucul Longhornn TRAFfiC Gilrn
Vit!Unl Cnpltol Lonohorno Gnnwwcok Trnffic Comor;,n Homco.
Wllll>!lll!ODil Agglo:;. MULTIMEDIA Jollu
HS Footbnll Coltocllvu Vh>lon
Crlmolt.:lckor HIOh School lnturnc!lvcc CUSTOMER SERVICE
St::.lusmnnWQtch Rccrulllno Onllcrlnn McmlHH ConhH
Obllu.ulcu Outdoor::. BLOOS E-malt Ncw:.luUurt;
Ccntrnl Golf ENTERTAJNMENT Subacrlbu to lim Stntcnm:m
Amn Pro Tcnmu A"Ust Sion up lor thu uEdiUon
World NFL Evcnto. Scrvlcoo.
Lottery NBA Music WIHHO to buy the
BUSINESS MLB t.1ovlcr. Duy Photou
Tochnology Ar Sports News Tclcvlulon Panel
Puruonal Ffnnncc LJFE
"'"
Cnrccr:; at the
J\rt'.1 Employt'rs Stylo RccrcMion Internships
ErnpiPymunt Travel Spnsi5.110n!l In Etluc.ltlon
Entnlo Food/Dnnk ln:;idc Uno
fiji DtiUinur.:; Grt!nn MOB!LEIRSS !>Juwntlpn
OPINION Hl:!a11h 8. Mcdic:ll Reader rcwntdf>
ln!ii[Jhl R:tlr.lnulluutln 1\uuthtJGO Sit11 rllllfl
Bon S:uqont Booku IPhono :1pplic111ion Ethics Polley
Fallh RS5
Ulo Guido
Wcddlngn
So anon for Corlny
ADVERTISE
Print
Onlirw
Cl:nl:ullhrdr. (Prlnl H. Onlmrlj
Ncwupopcr Ath
MARKETitJO
Community Development
OoGood
Glotlsy
Concl'!rt toorlo:;
t.latlll!Ung
RcrHJtrs pnnnl
Spud.:tl Sccllon!l
AFFLIATEO SITES
Ahur.J Sl
ffookcmcom
0.1u!rop Advortionr
Ccd.u P.:uk Cillzcr1
Lako Tro1Vb Vluw
Leander lctloor
t :tkc Travm Lo9
PIIU{JO rvlllo P11.10
Round
Smilh\ll!lt! Tlmtor.
Wcn11,1ko Picnyunn
Copyright 2010 All rights reserved By using Statesman com. you accepttha terms or our vrsitor agreement
Contact Statesman corn 1 Privacy Policy I /\bout our tids
8/10/2011 2:42PM
19.
Bob Bullock, Leave
Corporations Alone, Dallas
Morning ews, Aug. 4, 1991
NUL
PEIRCE
Talk about bhun The 19$0$ round moo sonmora anti
los the vk:tim. AI leglaleton, Intimidated by the bla tax.
.atJte aovernmenu voll roucbed ott by Californla'o
enduro the torturee Uon 13, ln a painfully c:&Utlou.D mood.
of Hadel. with dt..,.. Few were about lo tcueet that Ronald
tJc c:uu Rcqau....; bufina on the id.c:a that sov-
eout to C04It. erit ernment iJ the problel'll, nnt tbe .solution
ICI leap forward to - aal in the WhJtc UoUK and called lhe
qy the otatu are ir poUtiul tlllll'
reJpoDilblc epend . A true llal or wbn ballooned tate
thrift. toteUy at budaeta rnolvta heavily around lhe
fouh for all thelr'mt&eriet. word "federal - fe4eral ctnbackl. ted
A det:ade or runawy state aovcm eral court orden.. toderal111andJitet. fed
ment cpendituret, and pandert.na: to erAl LDd.itttreoce about a mounttna tide
tpte:lal lntcran - ausaeau Stephen of in:uniJrat!on
Moore- ol the Wuhtn11oabued Cato In Ci.llfornla and P'lori4D:, tor eumple,
Jtitutc- it Whit huled the atateo. from m faulled for hninQ: ra.bed tbdr bud
Auawta to Sacramento. to \hit tummer' seta moen nptd.Jy durina the '80s -u It
manthon buttaetNraainlng and tbreau d.l.ilr pll.no-, bta- and boltlotd.o ot illlml
of payJeu paydaya. could be ab&orbed free
Foraet the n:ceu1on, fotKet &lubed Cr!Uca or the atatea teem unawarct
federal eid u on elcu.ae for 1tete budget that the '80114w a wave of family dtuo1U
cruncheJ. 1.1)'1 Mr. Moore The real rea 11on, acquired Immune de-
ron tor the flacal as:ony Jt that natee let riclency ayndrome, drug1 and crack b<l
their budgelll balloon by 104 percent al blet. Wuhlngton responded - nut by
mWt twice the r.ate of inflauon over the helping but- by cutUng bJI.cl:t decUive!y
couru o!tbe eo. on tu tJd to 1tatea and JocaiiUeA i"tderol
'l'ht: wan Streel Journol joined the aid, in Jnnalion-adjusted dollaro. went
abo.rp crUlciam of theatetes wilb a July 1 from $110 billion In 1978 to$88 btl! ion in
headline, "Growlb lndu.atry: Fiscal Criate 1982,to596bi1Uon ln_lm.
or No. State Bureaucraclea Just Ke-ep To malur thinya wone the tederally
Swclhna.Somc1elevilloncomrnentatort mand4ted Mechcaid program for medi
picked up the tbemc. few tis ca1ly indlJtnt people, 1pllt rougbl)' SO.SO poor dllltJctl u rlcb one1. h jUJt pander Uudset woea will never end unlcu '908
cal would ezbt if Jtate payroJla between Waslltnaton and tbe ltatt!J, lng toapcclallnteretiJ? lltntes find more erfictent economh: You tlln argue. In tact lhatlhe pertor
bl:ldn't rl.sen 110fut in lhe grew 88 percent. in intl#tionodju.sted The raw facll are lhat educallon, Med ways to do buatnet5 &xial ttnd ac::hool mtmce of I he so 1tate a:overnmcnu, lhdr
So wbat 1.1 the lXJ the atotes de- dollara. durina the '80s icald. welfan:: and priJ(IIll accounted for ond prlt.on cust1o will con11nut! to awar and cilie11 . will increulngly edd
a convlnc a
forexamplt untll we learn how 10 beUcr up to the Unllt!d statu' cumula11ve

Well. 1111e payroll and budiela have 'em, lock 'em up law-enforcement crar.c. wllen avcntge atale 11pcndlna ro$C 9.4 help poor farnlhca eacape the tread mall
11
JrCnilth and lU we face the
arown dramatically. Some governoraand The wr on druga more than doubled percent correclioru and Medicaid both of lnlt!T8tneratlonal failure Yet aucced 2ht century
Jeaillatora have In sterUng pel" America'& Inmate popuJatton In
10
years.. wertd 17 pen:ent Unleu aoale mlrecu on I he wclal fronl could tranulate mlu It'& one thang to put lbe m(lnkey on
formance.; been buge dtaap Would cr1tics oltele apcnding open lous cures are round'tor our meuedup &C{l&.alional longlerm JUIVIPBII. human atale&' backs to perforro more dfecttvely"
pointmen\J And you can a1wDya tlnd the prison doora now? Or when about medical-care !)'Items, Medicaid custJ art and flntncJel Jlut If IllY to tbey could heve I
- pork
;:r;:.tcd to double qain in the next live

'
Dul anyone who thinka tbe lui mg - whieh more than doubled In the It Ia fair to challensc etlltJ to u&e the ins governor and a1s1e legi11la1ors, nu ahould .. , du lht'lf' Job un the cheap.

j
...
\ Universities ge the business tax I
I
h b t
;I The Tex.u Leghlatuf!! hi! bt paid no IAXe!l 1
ave oos ep.

I
lockout& at Jtltt parka, atalo em, Many of theae lndlvduala: have not paid 1 penay of
t
ploycc layaffa and buraeoalnu tbo ttato's buamr:as tu. but have ruped tbe bentf1ts
'S ta e economy or bullnemJ
I
two rDlld.t befott ua. one 111 the beer llie financial burden of increased Uablllty. and
By the be&lnnlng or Ehe old route laid out by the preaent ao ahouh1 not be lreated under tht! tu law the qme
1
---=--
'; u dltrerenUI betw=n corporation and

dreu 1bo nd to broaden more dllclentand responalve sovernment. nun-corporate buJmeaa 11 nate rul tuue. In
the buc of the Texat r:ault> Pint, the Lea:Uiature muat act aasreu,vc:Jy on tact, the orsanlutlon or an enllty tor bu11neu pur
my Even bc:forr: the t(ll' Comptroller Jobn Sherp15 performance review aJid poae1 - whether il be a torporutlon. p.arlner.blp or
lapGe or oil pricea In 1982. make government leoner and more The proprietor11b1p - Ia done for flnnnc:lal rtUOlLI. lawo
tuden In aovernmenl, aecond atcp Ia to make IUrD tbt current tu &yltem )'era routinely pterce I he corporate vetlln putautna
buainw and academic aec renecta the New Texas , Corporate Immunity ln llablllly cuea 11
lora bad recoantzed the fl Ourins the regular ue.uton, the Houac ton not reality lntoun& today
nile nature of petroleum re- lidcrtd
1
bill to revamp the nate's tax, tbe Thr clmplc fact 1.!! that the franchlae tu
enaure economic bualneu tax that helps auppor1 state government bill will broaden the tax base. makma n more repre-
lf Tu.u wu to have a The bill. with 1ome modincatlone,lJ before the LegiJ.

etroru took place under the
, BUI Clementa" ThO that major
IIepa forward were Jed: by Gov. Yari White, in
cludinl euractlnc Hl.eroelei:lronlc.a and Com
puler Tocbnoloay Corp. to Teuo.. vbere (U
Iormor MCC prealdenO I un ptnon11ly atteatto
lbe leadenhlp role tbe aoveroor played Gov
Clemcnta played a comparabl!! role Jn .anractlna
Semalech and the Supuconduc::tlna Super
Colhder TheM were lht aucce:NC lhat made
beadUnea. but vutly more were created by
parallel. quiet efforta thlt attrectcd many new In
dutrles to the 111te
What aU leaden re<:osnlr.cd and
ported wu the dynamic role abat hlaher educ
lion pllytd In broadenlna the atate't economic
but lnveatmenta from the prevloua iS ron.
made: euy by prohflc oUba.s.ed revenue, bad poo
ltioned blaher eduC41tlon to 1 maanet to
lndWIItlea looklns for the most able araduaU!t to
1Wf1heir orrlcu. Laboralone1 and ftctoriea.
tn l1te 1984. when thr comptro11er announctd
! a drop of 5900 mUilon In npected revenue for
the nut biennium, the LeJitla!lve Dudaet &ard
elected to propor.e almoat hAlf !hat reduction
from higher education.. rether than redoiDBihe
en)jre budaet, with the erpectauon thalli would
reJtore the lnvealmcnt during the 1985 leill

TbOICI of Ul who worked lo tontroJ lhe dam,
aae watched major breln dnJn or the brlahtett
youna profeuon beatn When the evidence bc--
aan to auumulale. Gov. Whne nd Speaktr Olb
Lewia joined t.t Gov Bill llobby In aareuhe
mDvtt In retlore bl1her tdutalioo fundlns 1nd
J1mtted the dlmaae. .
Suc:ceedJntlestltlve "w the com-
blntd leaderahlp, even with a chenae In gover
non, c;ontlnue to focu on tbe role of lnvetment
1n hftrier educallon critical to crullna 1
1lron1 TelW economy Thai leadeuhlp came to
1
undautand thet bel at sood wu not enouch- to
aeln economic advantaar the lntHulloru of
hlaher tduc:auon had to bt emon1 tht very but
Sucb leaderthlp tt toreiy mlqlnl In Auatln
theN dly. lnINd of rnaktna 1
atrateJlC vlllon for lh TCIIU econoiDf, we have
a 1pproacb that advocatu aharJna
the ml.ery tor the Ju.at pollttcal diJtomfort
Prec!Htl)' at 'the moment when further
tnv..atmnl 1n htlfh,.r Pdur.Mtlnn amtd Mtillnn

century we are em bar kina on o path certelu to
produce the niaht of top talent *
Anyone advocating lltaylnu on lhe 11row1h
patb lJ JCCUJtd or lptCIAl Interet\ plead!Di I
note lbat Gov Clcmenta' Ue were 1o Southern
Metl1odl1t Unlvcf'lilly; Gov Whtte't were to
Baylor; end 1..1 Gov llobby'1 were to Rice. When
they colleetlvely provided liaderahlp to 1ua
ttlned arowth of fuflt11na for pub11c hl1ber edu
caUon, they weren't aood old boyt 1ookina afler
old ecboolllea, bul r1ther had a clt'ar 1lrategtc
viaton for economic srowtb
Tbe peeker cannot be e"Jtpe:c:led 10 lead tbll
fisht alone. l.t Gov Bob nu!IO<:k doca not yet
h.ave tbe cloul accumulated by Lt <iov Hobby
over many yean. bUI be haa 111 lellll given md1ca
Uoru that he untlcrstandJ what u at atakt
The mot 11lartns \'Oid 11 the approach of lhe
governor Two yeare aao 'l'reuurer Ann H1ch
ardl rcac.:hed out. scti:Jng pr1vate 1deu on how to
enturc thet we built a strong economy Todny,
abe IJ roo buay wilh the l.cl:llllature to listen to
pnvate advice !hot ahe Ia \Ia toward on
economic dluattr
Many of ua 111ned unto the Nt:w Texu for the
promlte of lonlf.VVt:rdue dJventty In political
lcltlerahip to enure that the promlslna 'Ccu
economic future encompassed aU of Ill ci!Jr.ens
rn !he or the coaltlionbuildlng political
leed.rthip th11 mude criUcst cholcet to protect
arowth, we now look rorward 10 a proceu or a
dlveraWed aroup of talented appolnteca who wtu
prtllde over the decllne ot Tea:u to teconddw
tlaiUI,
The public 11 tkep11cl about aovernment'a
abJIIty to meet lttlonaterm necdJ, and that akcp-
Uclun will cerrt&lnly be fed by the horHerm yJ.
alon now on dlaptey In AuttJn
-&;;by iiDY 1s o)orn;;; CiUiifflt-;n--c;d
chlel r:ucurlve of/leer of MCC who I now 4 prl
valt> IIWt',tor A rellrrtJ admiral In the US. Haw.
lalure asaln. The chRnsea are ne:eded 110 ttuu the bu111 payera will be reduced, and the burden "'UI rcmaJn
ne111i tu burden will be diatrlbutcd ttlroughout the primarily on larae buslne.uc It will ew:cludc amaH
butlneu community, 10 that allaegmenta or major tn bualnw. Period. '
du&try In Teleas wm PJl}' their fair share ourms the recent herd economic timet. smell, en
Some In the &tate don't won11o share I he burden trepreneurio1 bwlncB&ea pulled the alate out of the
but they hould Jmo\V a revamped franchl!!e tu eC(Jnomlc doldrums If the franchise til iJ nol el
would not apply to a mull butineu ownere. Hut they panded and wilhln the conte!t of tuinaall
hope to raise I he concern of thouaand; of amall bUti large buuineU. u 111 hkely tbtre will be an etrort 1o
neu.ca m order thbl thoae people who currently do the 1a!I:Riu
not pay a franchise t.ax WHI rt:liln thelrex.:mptaon We can trvnte an dfJcteut KOVernment. and
There art: certotn euUih.'l - auch u law can reform the fnmchJlt: tu thlllall major bull
yen. doetora and other profeaslonata - part neu nlltiu pay their fair ahort
ncr1hlps y!eld milliontllll profltJcac.:h )'tar ror ex
mplr. o fL'(;en1 .aludy hnwed that thto top 25 law Rtp. lllJry, fHiulveslon. u t'hllirman oflhll
ftnnsln Texesrnrned $t7 --------
Leave corporations alone
In 'fe111aa In both senerl lw continuously \Wen If 111 chnae.
ond 111l Jaw, c.:urporalluns hove the pruteclionlil afforded corporation are
lone enjoyed apeclol treatment alhe corporb\t: hltld," a thtng of economic
not ovaUabJ11 to parlnenhipt value and legal prlvJiege None or theH lptelalaren
and bu1lncsaea owned by aole menta lll u.volluble tn wit' proprteton. family-owned
proprletor11 'l'herc: lilrti 1mpor bullrU!IIIIt!ll or
toni economic reasoru for thelt' Corporate leudeu oflcn Y thue protecliohl are
lesal ond taxouon dhlmcuon. critlc.al in maklug and the t..ta:iala-
Jnd thow rearona arc u valid turc tli frequcnth IUikcd 111 the mtme or economic de
tod11y - ond aa critical to busi velopment to upumJ and otrungthen tho limit on
neu - aa !hey were 10 J907 corporale Uublhtiea
when the Tuucorporatc fran chloe tu wat adopted. Out many corporate le-aden who pub bard ror
The kanchl!e tax. II the price corporat10W pay for stronger pro!tchonu ue now I he Pmc (lllet who aay
lhoc valueblo prlvlleae u.nd prou:cllon 'rhe l:(o- thul In tou;ullon 11hould be no dJCtorcnce be-
nomic value o( thatlpedal treatment hat notbinM to tween the pnvilcgcd corpor&tlona and the butlnetsta
dtt Wllh the fact that the franchilc ttlllodiiY 111m b.td thutcnjny nonu ur the rru1t1 of curporele low
netd ar reform end rcvbton. thanka to a chonglna A lax applied 10 non-corporate bual
economy and a 11lew of decltlona nelltl would 00 the aume u au tn on Tellnt
Uut 11 the Lcal.tature undertakeJ corparulc fran in fu1 lhl!llllt'lves F.\cn lhC" Y
tu: rdorm. there are aome who edvcx:ate cxten tern hu alwuys honurtd the between cor
aion or the corporate tax to non-<:orporlle butlneJ& purall11111 tmd partnerthtps und proprfctorebipa
entlllea-a move lhDt would ronder the tot lnequi1D many bcneltclll rt:IUUn&, the corporate ahleld
ble Dnd harm cxi11lna parlnerahlpll. femll)'fiWned Ia vital to 1he well bema of Teau lndualry,
buslneuea end aole proprletorahlpa but I he pntr uf lht< thr1uld nut be aneued on
Partncrahtpa and proprle1onMps are neither eco- buatneB.!I whll.:h dtK'J noll!OJoY the pmtecUon of that
nomtcaUy nor leaaJiy tqUIVIIent lo corpor.utlonJ. ancl lhlllld
U would be wron11o tax I hem uauch The cvrporuUon 111x muat be rewrmen,
Statui 11 a corporation cruet per.wnui lloblliUel but 11 mu11 be r(vued h1 tttp "nd MpirJt With the Kopc
of corporate uecutlvea and Jtockholdcn from debt ol all other corpurull' prutcl'UVc and not be
and other corporeto ac11on1. The corporatwn llaelf madt: Worae by bulldmg 111 urbilrary and unfair till
enjoya JtatUI under Jaw 11 a peraon 1eparnte nncl lion of noncurporatr bUIInclllclt
epart from Ita thcrehuhlcn It has tin.< tOEulltutwnul .... (
Archives I The Dallas Morning News, dallasnews.com http://nl .news bank.com/nl-search/w e/ Archives?p _ action=doc&p _ doci ...
1 of2
isearch dallasnews com
News Sports Business Entertainment Life Health Travel Opinion Autos Homes Jobs Shopplng/Ciasslfleds
DALLAS MORNING NEWS
Leave corporations alone
Bob Bullock THE DALLAS MORNING NEWS (DAL)
Published: AUGUST 4, 1991
In Texas in both general law and tax law, corporations have long enjoyed special treatment not available to
partnerships and businesses owned by sole proprietors There are important economic reasons for these
legal and taxation distinctions, and those reasons are as valid today -- and as critical to business -- as they
were in 1907 when the Texas corporate franchise tax was adopted The franchise tax is the price
corporations pay for those valuable privileges and protections The economic value of that special treatment
has nothing to do with the fact that the franchise tax today is In bad need of reform and revision, thanks to
a changing economy and a slew of court decisions
But as the Legislature undertakes corporate franchise tax reform, there are some who advocate extension
of the corporate tax to noncorporate business entities - a move that would render the tax inequitable and
harm existing partnerships, family-owned businesses and sole proprietorships
Partnerships and proprietorships are neither economically nor legally equivalent to corporations, and it
would be wrong to tax them as such
Status as a corporation erases personal liabilities of corporate executives and stocl1holders from debt and
other corporate actions
The corporation itself enjoys status under law as a person, separate and apart from its shareholders It has
the constitutional rights of a person in court, and a corporation exists continuously even if its "ownership"
changes
Indeed, the protections afforded corporations are !mown as the "corporate shield," a thing of economic
value and legal privilege
None of these special treatments Is available to sole proprietors, family-owned businesses or partnerships
Corporate leaders often say these protections are critical in making business decisions, and the Legislature
is frequently asked in the name of economic development to expand and strengthen the limits on corporate
liabilities
But many corporate leaders who push hard for stronger protections are now the same ones who say that in
taxation there should be no difference between the privileged corporations and the businesses that enjoy
none of the fruits of corporate law - A corporate tax applied to noncorporate businesses would be the
same as an Income tax on Texans in business for themselves Even the federal lax system has always
honored the difference between corporations and partnerships and proprietorships
For many beneficial reasons, the corporate shield is vital to the economic well-being of Texas industry, but
the price of the shield should not be assessed on business which does not enjoy the protection of that
shield
The corporation franchise tax must be rewritten, but It must be revised in step and spirit with the scope of
all other corporate protective laws, and not be made worse by building in arbitrary and unfair taxation of
8/11/2011 4:37PM
Archives I The Dallas Morning News, dallasnews,com http://nl ,newsbanlccom/nl -search/we/ Arc hi ves?p _ action=doc&p _ doci ..
2 of2
non-corporate businesses
Bob Bullock is lieutenant governor of Texas
Home I Contact Us I Help Center I Adverllsing I Site Map 1 Find Dallas Jobs I News Feeds I Subscriber Services 1 Geilhe Newspaper 1 Special Offers
2011, The Dallas Morning News, Inc All Rights Reserved I Terms of Ser;ice I Privacy Policy
8/ll/201 I 4:.37 PM
20.
Ross Ramsey, Legislators OK
$34.6 Billion Budget, Houston
Chronicle, Aug. 11, 1991
Vcl.llO No.302
dream
Grant Teaff markS
20th year with
hope for title

$1.25 ****''

.In Ariz. temple
billion budget
PHOENIX; Ariz. - Nine
people - alx Buddhist
rnotlkl, a nUn and two attr
denll-...,.aiOillldoholiO
dGDih exeeutlco-styi<>Salur
day morning In o Buddhlot
!Gri1plewesto1Phoonlx.
llllorjH Tom f,gnos $Aid It

wn.t=ld out elc!o by side,
no olgn of re
No moti,;. had boOn oslab-
UJhed In tho of.l)llnga, but two
room were_ ransaCked,
no&uJd:RIQII211.
., .
E Joaeph DIWtrlng I Chronlele
Precinct 34 JUdae Jim Owtns, right, wsll$ IO< votoro to wide, only aboul 12 percent of registered voters turned oot to coat
IJI)pNTSawrday at Follx !;lsldcan Reataurari}'fn Montrooo .. COUnty- balloi!J Voters rejected the 16-6 council plan by a 4-to-1 ratio.
, ..-.,.."<
U.S. may be freed today
Recently abducted Frenchman released by group in Beirut
-pnosa "'"""' wfth ... .......... ......,.., Plj!O 21A.
by a colo< p&otoarapll of Amerlc.an
boll.lp Edwanl Auatln Tracy.
"'''lo RArvolllllol>ary JuaUce Or

leu bootap 1o """" oa lluaclay,

'l!oo .....,UUUOII bad cWmod !be
abdllttloo ol Amerkaot Jooeph Ct
dpplo, &0, on S.pl 12, an<l
TrACy, allo 110, on October IV, liM.
'llle ""'"" bad releued a plclure of
CJdpplo 011 Frld.ly wbtn II lin!
annOWK:ed U.s lnte1ltlfXl to release
ooe ol !be hotJJ'B.
Neltber however,

fr<Od.
A pollee patrol !Ol>lld Fre!>Chman

lu!de a car at about 6 a m
Petruzielo wants 345 jobs cut
Supe;intelldent plans to shift administrative personnel
Pflrudtlo announced earlier that
'::
bud&et and &biil more money to
tchoo!J.
Kem who bad acUclpated lbe
nwnbtr or tllrninlttd posltlollJ to be
even hlabfr, 11Jd her members are
not to much opPQMd to the cull u
lbty are apprehemlve about thtm
EvtryOM hiJ been worried about
tb<lrjobll.
"I cannot find any aubatanllve
fault llb lbo cull tbt were rocom"
;::
follu are dlltracttd rl&ht now be

me?'"
Oaylo Fallon, pretldtnl or lM
today (9 p.m Houston Ume
day).
The car was parked ncar lhe Mld
dle East Hosplt.alln Belrut'l teulde
resldenllal auburb ot Ramlel II
Bald.a, &ald a pollee official, 1pe.ai.tng
on condl\kln o(
-::tl

ata
alation. Pollee prohibited journa1iall
from aJk.lns: h.lm qutsUOfll.
Ue wore the ume blue jeanJ and A
Boo HOSTAGU on Pogo ""
Mt:tro,.,," ........ tc
Mov'-lwZOGI
... tE
, ...... , .. 5E
n.at eat.no ..... 8F
RoMe ........... .,, &C

Tnwtt ............. ,JH

WO<id ............ 20A
Hou!llon'a FamUy
-
New law may allow federaJ QOV
ornmenl to uelze pornogrlpherl'
aneto: Plj!O lA.
Ordinarily, !be run senate would
voteoo .a and tbt dll!ereo<:es
would be recooclled In a H.,_.

ween
But with aBly aboat a week 10
"ork with, Montlonl and Ilia 11....
COW>ta]>art, Rep. Jim Rudd, !Hub-
bock, opllt the spendlos bill tn10
sectioDS last week and handed them
out lo aeveral "unofllclal"
to ilili!h Frlilay
nl8bt, but atumbled over dllference:J
1n higher educetloo, bealtb and hu ..
man services, i1Dd public safety
spending.
'lbe negOillltlng ,..ejom resumo<t
Saturday """""'' and at aboat G

decla1o It a deal.

and paslo and pill It uU

agreements and a.uemble the a pend;
tng plan Into readable form 10 law
makena .caD cwnlno lt before the}'
vote.
LeglJlaUve le.adcnlsald they bopo
Coo IUDQET on
Voters reject
1 council
1.
by big mar n

mv ALAN 1118RII11Tillll
OACioiOIIIIWIWAIIItl
Houston Chronicle
Houston voters rejected a City
C<luncll espans!on plan by a ft.!)-1
raUo Saturday. plalling a contro-
versy over Ulspanlc representation
Into a new lep.l phue.

' ' ... ,
J:
elected at-large and tbe mayor. Tbe
uoofllclal total was n.m aialnst
city
votert
to
atate Leg;lsl.ature. SJnco lbe
councU baa bad Dine membera
elected citywide and five mtmbe.m
elected Jn G!Jtrlct.s. 10'
wr.J:"'a': :Cy!!
cowrpllman. llllpaniCII ,.ld U..lr

a leader
ol the pro-eap41Mlon lorces, sald a
main realM for the plan' defeat
wu Uuura:umcnt by opponent.Jlhat
more seaLS would be too expenalve.
City olflclala uld the slew of new
coondl members would coat tatpay
en at lust $1.6 mUllon a year .
However, the mayor said aome
form of councll exparulon sun IJ
-
11
ft ll an lsaue we need to address:

with smaller and more distrlctJ."
Whitmire, mayoral chJIIenaer Syl
Vetter Tumc.r and otber oUlclALa hAd
arsued that In addlUon lo provldJng
Gao 11 .. 0t1 PDQO 12A,
Sch.ooltax
exemptions
approved
to go to voters
as Senate ends filibuster
tlr II.D. IIATCUPPB
Hootlon Auslln BurNU
r

will bo dcclded by votort
TOO Tens Renate gave final ap-
provall2"& to a lottery referendum
a
Tile atdator uld he aave up ilflcr
bclna ovC!rwhelmed by nauKa and a
..... orfuUUty
Tbe Senate action fulfilled a earn
palan promise by Gov. Ann Rich
ank. who 10ld the ali an
allemaUvo to "a huge ln bill." Out
even with the loUery 1hn may 1HIII
bavo totl&n a 12 biiJion tax lncrcaac.
-- .. t ... .... t....t .. l .. hl

'It's not going to put the state ln
reverse.lt's not going to put It In high gear, Mke
I'd like to, but It's going to be .. and ru>-frills.'
""""""""""'
"
"
: 6alaiiJ tex.onc:ar lillllllhca: .................. ,_, .................................... .. ... t1.'7l'ft!:lillol"t ;.
..
.....
"....,.,_""""'_,..,.o.2G-------..--.... -.w-

,._.,..,.._ ____ '_

aDrW._....., .................................................. 4Un!IIIOo
::::::: .. :
..... : : ..: ..
--... --............................................... -K3-

HISD
Legislators OK $34.6 billion budget 08/1111991 I Archives I Chron.com ... http:/ /www.chron.corn/CDA/archi ves/archive.mpl?id= 1991_ 802922
1 of3
'<'l,r c.:hron I Houston Chronicle Archives
legislators OK $34.6 billion !budget
ROSS RAMSEY, Houston Chronicle Austin Bureau Starr
SUN 0611111991 HOUSTON CHRONICLE, SecUon A, Page 1, 3 STAR Edition
Share
f!!lm Del.iclo.us
Twitter
IE] Facebool1
Cl Share
; ~ j Digg
<@ StumbleUpon
AUSTIN- A $34 6 billion state budget, written largely on Post-It
notes and other scraps of paper, was approved by House and
Senate negotiators Saturday
With federal funds and earmarl<ed taxes added in, the negotiated
state budget totals $59 billion during the next two years
To l<eep the deal together, lawmakers will also have to approve
$2 B billion in new and higher taxes
"It's not going to put the state of Texas in reverse," said Sen John
Montford, D-Lubbock "It's not going to put it in high gear, lil<e I'd
like to, but it's going to be fair and no-frills "
Exact numbers within the budget won't be available until late today But Montford said the negotiators put more
than $2 billion in new money into public education to bring funding up to levels promised in a school finance bill
earlier this year
That education bill was aimed at settling a lawsuit against the state for unequal funding of public schools State
District Judge Scott McCown ruled that education fix constitutional, but only if lawmakers fund it
Higher education Will get about $150 million less than its supporters sought, and health and human services
spending, which had been a sticking point, came out close to maintaining current levels
The budget does not contain funding for new prison beds Lawmakers hope to raise money for that later through
bonds
A week ago, the House approved a $32 5 billion budget that included an additional $1 63 billion that could be
spent If taxes were raised The Senate hasn't voted on spending yet, but the House measure, including the $1 63
billion, added up to about $900 million less than what the Senate wanted to spend over the next two years
Ordinarily, the full Senate would vote on a budget, and the differences would be reconciled In a House-Senate
conference committee, a process that ordinarily takes two to four weeks
But with only about a week to work with, Montford and his House counterpart, Rep. Jim Rudd, D-Lubbock, split
the spending bill into sections last week and handed them out to several "unofficial" legislative negotiating teams
They had hoped to finish Friday night, but stumbled over differences in higher education, health and human
services, and public safety spending
The negotiating sessions resumed Saturday morning and at abOtrt 6 p m House Speaker Gib Lewis and Lt Gov
Bob Bullock met briefly to declare it a deal
"We've agreed to agree as soon as possible," Bullock said "We've just got to cut and paste and put it all
together"
Legislative employees began working immediately to compile the agreements and assemble the spending plan
into readable form so lawmakers can examine it before they vote
Legislative leaders said they hope to have copies of the 600-page spending measure on the 1 B 1 lawmakers'
desks by Monday morning at the latest The Senate plans to vote on the spending measure Monday, and the
House is scheduled to follow Tuesday
They'll also be voting on a negotiated tax package approved Friday by a Senate committee
After legislators and tax experts and lobbyists met privately for several days, that committee unveiled a $2 8
billion tax bill
The tax bill Includes creation of a hybrid corporate income tax to replace the state's business franchise tax,
increases in gasoline and cigarette taxes, an Increase in college tuition and a "a mishmash" of other taxes and
fees
The budget could get an additional $450 million in revenues from a lottery if that form of gambling is approved by
voters in November
To finish the special session by Its midnight Tuesday deadline, the House will have to go along with whatever tax
bill the Senate approves
"We don't have the time at this stage to go to a conference committee, so it's going to have to be that (the
Senate version)," Lewis said
"Unfortunately, that's the posture we're in"
The agreement on the budget bill sets up a complicated choreography for the House and Senate, and if they don't
approve the spending and revenue plans by midnight Tuesday, Gov Ann Richards has said she will call another
special session starting Wednesday
"Everybody's going to be fighting for their own positions up until the last minute," said Rep Robert Early,
D-Portland
But with time slipping away and with legislative leaders in agreement on spending and taxes, any changes to
either measure could derail t11e whole plan
Not Logged In Login I Siun-up
NOW
90'
Mobile ISMS
Search advanced searcllj archives
1 ~ 1
'' Chron com 0 Web Search by YAHOO!
Bodies of two infants found in Tarrant Co.
Man dies In crash an tollway In NW Harris Co
Melanie Griffith checks Into rehab
Malaysia delays caning of woman who dranl<
beer
Obama to heallh care critics: end 'phony
clalms'(654)
More advertisers ditch Beck after he calls Obamn
racist( 50S)
Deal on jail, stadium, Dome in home stretch'(178)
Try to envision this: a world with $20-a-gallon
gas(155)
County puts more heat on adult businesses(155)
8/ll/20lll1:2.3AM
Legislators OK $34.6 billion budget 08111/1991 I Archives I Chron.com ... http:/ /www.chron.com/CDA/archives/archive. mpl?id=l991_ 802922
2 of3
Richards met with the House Democratic caucus Saturday to sell them on the tax bill and to see if they have any
problems with it
"Tiley said that the most difficult part is the gas tax," she said "They don't have any problem, really, with any
of the rest of it "
She told them to think of the measure as a $1 3 billion lax bill, since she doesn't see the $800 million franchise tax
revision as a new tax
"The franchise tax will make roughly what it made before, so I just look at that as a mirror tax," she said "It isn't
anything new, just new in form "
But that revision includes a tax on corporate income for the first time in modern Texas Corporations would pay
the higher of two taxes on capital or income under the Senate plan
Paul Williams, a Richards aide, said the governor was just trying to sell the plan
"Anytime you try to sell a tax bill, part of It is public relations," he said
House members coming out of the meeting said Richards had reiterated her opposition to an increase in the sales
tax rate and called on them to try to win House approval of the tax bill
"She is just asldng Democrats to tal1e the responsible role in this state, because It's obvious that we're not going
to get too many votes from across the aisle," said Rep Paul Colbert, D-Houston
Until the budget accord was reached, legislators were growing more pessimistic about the chances of finishing
state finances by the end of the session
There remain plenty of opportunities for the deal to come apart But representatives said they'll finish the budget
easily before the end of the fiscal year Aug 31
"Miracles happen," said Rep Sam Russell, D-Mt Pleasant, "But I'm confident if we don't get through Tuesday,
we'll still be here Wednesday"
Item by item on tax bill
Specifics in the tax bill approved by the Senate Finance Committee:
Franchise tax change: $801 5 million
5-cent increase in motor fuels taxes: 823 6 million
$4-per-semester-hour increase in college tuition: 104 million
Sales tax on amusement machines: 23 7 million
Sales tax on car washes:
Sales tax on pacl1aging and wrapping: .
Sales tax on sand and gravel:
11 7 million
76 8 million
57 million
Repeal sales tax exemption for Improvements to exempt real estate (exempt school
districts): 93 3 million
Delay cuts in taxes on manufacturing equipment: 329 7 million
Increase motor vehicle tax to 6 25 percent: 82 4 million
Auto rental under 30 days 10 percent: 43 5 million
Hotel occupancy tax to 6 25 percent: 8 9 million
5-cent increase in cigarette tax: 65 5 million
Increase professional license fees (physicians, optometrists, chiropractors, psychologists, accountants, lawyers,
architects, engineers, dentists and real estate brokers): 170 9 million
Bingo gross receipts to 5 percent: 30 6 million
Bingo rental hall to 1 0 percent: 7 6 million
Used boat sales tax to 6 25 percent: 1 0 4 million
Insurance guaranty pool: 2 9 million
Reapportion motor fuels tax: 33 6 million
Driver's license fee: 48 8 million
Breath test: 2 4 million
Double driver's record fees to $6: 33 1 million
Business filing fees: 16 9 million
Misdemeanor offenses (fines): 17 7 million
Repeal sales tax permit fee: -24 3 million
Lower tax on dog tracl\ wagering: -15 3 million
TOTAL: $2 81 billion
Copyright notice: All matorints In this archive nre copyrighted by Houston Chronicle Pubnsh!ng Company Divl5!on, Hearst Newspapers
Pnr1ncrship, L P, or its news and feature syndicates and wire services No materials may be directly or Indirectly published, posted to lnlcmct
and intranel distribution chennols, broadcast, rowrillen for broadcast or publication or redistributed in any medium Neither the so materials nor
any portion thereof may be stored in a computer except for pcrsono1 and non"commerclal usc
8/11/2011 11:23 AM
Legislators OK $34.6 billion budget 08/11/1991 I Archives I Chron.com .. http:/ /www.chron.com/CDA/archives/archive.mpl?id= 199!_ 802922
3 of3
$79 /HR Job - 476 Openings
Make $79/hr Working From Home. Requirements:
www se!ectonUnejobs com/
View Todav's Rates
Find Today's Interest Rates, Money 11arkets, CDs
and Much 11ore.
banl(rate.com
What Is Mutual Fund
Looking For What Is Fund? Find It Nearby
With Local.com!
Local com
chron.com
Home
B!ogs
Houston e. Texas
Cl1ron Commons
NatJon
Weau1er
Business
Traffic
Sports Topics
Entertainment
PetsHouslon
Liie
MomHouston
Travel
HaustonBelief
Houston gardening
Marketplace Services
Help Jobs
Homes
Cars
Sl1opping
Personals
Pasl an ad
Contests
Bustness Direc.tory
Contact us
Send us Ups
Ctlronic!e In Educ3lion
About the company
Horne delivery
Adv,.3rtise with us
Buy a tnmner arJ
Pnvncy stntcnv.mt I Tenm1 of
Copyright 2009 The Houslon Chronicle
H 15 A R s '!!' newspapers
Membership
S1gn up
Already regtstered'' Log 111
Other editions
Mobile
RSS leeds
eEd1\10n
newsletters
8/11/2011 II :23 AM
21.
TEX. CONST. art. VIII, 2
Art. 8, 24 TAXATION AND REVENUE
24. Personal income tax; dedication of proceeds
Sec. 24. (a) A general law enacted by the legislature that imposes a tax on
the net incomes of natural persons, including a person's share of partnership
and unincorporated association income, must provide that the portion of the
law imposing the tax not take effect until approved by a majority of the
registered voters voting in a statewide referendum held on the question of
imposing the tax. The referendum must specify the rate of the tax that will
apply to taxable income as defined by law.
(b) A general law enacted by the legislature that increases the rate of the tax
or changes the tax, in a manner that results in an increase in the combined
income tax liability of all persons subject to the tax may not take effect until
approved by a majority of the registered voters voting in a statewide referen-
dum held on the question of increasing the income tax. A determination of
whether a bill proposing a change in the tax would increase the combined
income tax liability of all persons subject to the tax must be made by comparing
the provisions of the proposed change in law with the provisions of the law for
the most recent year in which actual tax collections have been made. A
referendum held under this subsection must specify the manner in which the
proposed law would increase the combined income tax liability of all persons
subject to the tax.
(c) Except as provided by Subsection (b) of this section, the legislature may
amend or repeal a tax approved by the voters under this section without
submitting the amendment or the repeal to the voters as provided by Subsec-
tion (a) of this section.
(d) If the legislature repeals a tax approved by the voters under this section,
the legislature may reenact the tax without submitting the reenactment to the
voters as provided by Subsection (a) of this section only if the effective date of
the reenactment of the tax is before the first anniversary of the effective date of
the repeal.
(e) The legislature may provide for the taxation of income in a manner which
is consistent with federal law.
(f) In the first year in which a tax described by Subsection (a) is imposed and
during the first year of any increase in the tax that is subject to Subsection (b)
of this section, not less than two-thirds of all net revenues remaining after
payment of all refunds allowed by law and expenses of collection from the tax
shall be used to reduce the rate of ad valorem maintenance and operation taxes
levied for the support of primary and secondary public education. In subse-
quent years, not less than two-thirds of all net revenues from the tax shall be
used to continue such ad valorem tax relief.
(g) The net revenues remaining after the dedication of money from the tax
under Subsection (f) of this section shall be used for support of education,
subject to legisl(ltive appropriation, allocation, and direction.
272
TAXATION AND REVENUE Art. 8, 24
(h) The maximum rate at which a school district may impose ad valorem
maintenance and operation taxes is reduced by an amount equal to one cent
per $100 valuation for each one cent per $100 valuation that the school
district's ad valorem maintenance and operation tax is reduced by the mini-
mum amount of money dedicated under Subsection (f) of this section, provided
that a school district may subsequently increase the maximum ad valorem
maintenance and operation tax rate if the increased maximum rate is approved
by a majority of the voters of the school district voting at an election called and
held for that purpose. The legislature by general law shall provide for the tax
relief that is required by Subsection (f) and this subsection.
(i) Subsections (f) and (h) of this section apply to ad valorem maintenance
and operation taxes levied by a school district on or after the first January 1
after the date on which a tax on the net incomes of natural persons, including a
person's share of partnership and unincorporated association income, begins to
apply to that income, except that if the income tax begins to apply on a January
1, Subsections (f) and (h) of this section apply to ad valorem maintenance and
operation taxes levied on or after that date.
G) A provision of this section prevails over a conflicting provision of Article
VII, Section 3, of this Constitution to the extent of the conflict.
Adopted Nov. 2, 1993.
Historical Notes
This section was adopted at the Nov. 2, 1993
election, as proposed by Acts 199.3, 7.3rd Leg.,
S.J.R, No. 49.
Library References
Taxation <P3427, 34.34, .34.38, .3440, 3564.
Westlaw Topic No. 371.
Research References
Encyclopedias
TX Jur. .3d Taxation 46, Sales and Use Tax-
es; Income Taxes.
Treatises and Practice Aids
Howell, 21 Tex. Prac. Series 191, Funda-
mental Principles.
273
22.
Press Release, Office of the
Governor, Gov. Perry ames
2 -Member Texas Tax Reform
Commission ( ov. 4, 2005)
All
Press Release
Speech
m ~ ~ r y Names 24-Member Texas Tax Reform
Commission
Executive Order
~ e r 04, 2005 Appointment
Multimedia
Archive
AUSTIN- Gov. Rick Perry today named the membership of the Texas Tax
Reform Commission, a bipartisan group of 24 Texans who will develop
proposals to modernize the state tax system and provide long-term property tax
relief as well as sound financing for public schools. Perry announced in
September that he was creating the advisory commission and named John
Sharp, a Democrat and former Texas comptroller from 1991 to 1999, to head the
group.
"The commission members will provide a broad, fresh perspective on the
challenges ahead as we look to modernize our tax structure, reduce property
taxes, and provide a long-term, stable source of revenue for our schools," Perry
said.
"I look forward to working with this talented group of individuals to design a plan
that will make our tax system fairer, encourage continued economic growth and
win support in both chambers of the Texas legislature," Sharp said.
The commission plans to hold public hearings across the state. Perry also
announced that Robert Howden, a former communications director lor Perry, will
serve as staff director for the commission. Before worl<ing lor Governor Perry,
Howden was the executive director of the National Federation of Independent
Business (NFI B) in Texas for more than 10 years. While at NFIB/Texas,
Howden worked with then Governor Bush to create the first ever small business
franchise tax exemption. He also worked with then Lt Governor Perry to create
the Lt. Governor's Small Business Summits which were held in seven cities
throughout Texas
Also serving as staff to the commission will be ,James LeBas, former revenue
estimator in the comptroller's office and currently chief financial officer for the
Texas Water Development Board, who will serve as research director for the
commission, and Karey Barton, former director of tax policy for Sharp when he
was comptroller. Also named to the Texas Tax Reform Commission are:
Truman Arnold of Texarkana is chairman of the board of Truman Arnold
Companies, a privately-owned regional petroleum marketing company. Arnold is
a National Advisory Council member on the National Petroleum CounciL He is
also a member of the Society of Independent Gasoline Marketers of America,
the Petroleum Marl<eters Association of America, the Texas Oil Marl<eters
Association and the Arkansas Oil Marketers Association. Arnold is chairman of
the board of directors of Christus St Michael Health System in Texarkana and
of the Texarkana College Foundation board. He is former president of the
Texarkana Chamber of Commerce Arnold received his bachelor's degree from
Lamar University in Beaumont
William B. Blaylock of Dallas is vice president and tax director at Texas
Instruments (TI), where he is responsible for the administration of Tl tax
matters, including public policy issues involving taxation. He also has been a
member of Tl teams that analyzed site selection decisions for manufacturing
facilities in the U.S. and abroad. Blaylock has served as the chairperson and in
other capacities on many tax committees for such organizations as
Manufacturers Alliance, American Institute of Certified Public Accountants and
the Semiconductor Industry Association, and he has testified on tax policy
issues at the state and federal levels. A certified public accountant and
attorney, Blaylock received his undergraduate degree from Baylor University
Recornrend
Governor's Initiatives:
BusiNEss TAx REFORM >>
CONNECT &SHARE
and his law degree from Baylor Law SchooL
A.J, Brune Ill of Midland is chief financial officer and executive vice president of
Wagner and Brown, Ltd., an independent oil and gas producer where he has
worked for since 1986, Brune is also a certified public accountant He was
recommended for appointment to the commission by House Speaker Tom
Craddick, He previously held the position of vice president -taxation of
Conquest Exploration Company, an American Stock Exchange-listed oil and
gas exploration and production company. Brune also worked for Arthur
Andersen and Company for 12 years, eventually serving as a partner in the tax
division of their Houston office. He received his bachelor's degree from the
University of Houston
T. Randall Cain of San Antonio, a certified public accountant, is managing
partner of Ernst & Young's San Antonio office, where he also serves as the Gulf
Coast area tax managing partner, A graduate of Texas A&M University where
he received a bachelor's degree in business administration, Cain is a member of
the American Institute of Certified Public Accountants, the Texas Society of
Certified Public Accountants, and Texas A&M University Mays College
Development CounciL He also has served as treasurer of the San Antonio
Economic Development Foundation, chairman of Junior Achievement of South
Texas, and on the 12th Man foundation and the Greater San Antonio Chamber
of Commerce.
Alonzo Cantu of McAllen is president of Cantu Construction Co., which was
awarded the National Minority Construction Firm of the Year, Cantu serves as
chairman of the board lor Lone Star National Bank and is involved in civic
organizations including Court Appointed Special Advocates, Valley Initiative lor
Development and Advancement, United Way, and the National Congressional
Hispanic Caucus Institute He co-founded and is chairman emeritus of Valley
Alliance of Mentors for Opportunities and Scholarships, which has raised more
than $8 million to provide scholarships for Hispanic students in the Rio Grande
Valley. Cantu received a bachelor of business administration in finance from the
University of Houston.
James D. Dannenbaum of Houston is chairman, president and chief executive
officer of Dannenbaum Engineering Corporation. During his time with the
company, he has served progressively as a design engineer, associate,
executive vice president and in 1972, became president. Dannenbaum is a
member of the American Society of Civil Engineers, the Consulting Engineers
Council of Texas, Inc., and the Texas Society of Professional Engineers. He is
a member and former finance committee chair of the UT M.D. Anderson Cancer
Center Chaplaincy Fund Board. Dannenbaum is chairman of the Texas Cancer
Council and is a member of The Chancellor's Council of The University of Texas
System. Dannenbaum received a bachelor's degree in civil engineering from The
University of Texas at Austin
Printice L Gary of Dallas is managing partner of Carleton Residential Properties,
a position he has held since founding the firm in 199L Before that, Gary was a
division partner for Trammell Crow Residential Co. from 1986 to 1991, where he
oversaw the acquisition, financing, development, construction, asset
management, and property management of more than 6,000 multifamily housing
units. From 1978 to 1985, he was vice president and corporate controller for Fox
& Jacobs, Inc. He started his career as an investment banker with Piper
,)affray, and he also is a former division president with the Centex Corp. Gary is
active in civic organizations, having served on the Dallas Citizens Council,
Southwestern Medical Foundation and the North Texas Tollway Authority. He
currently serves on the board of C.C .. Young, Inc., a multiple service retirement
organization in Texas, and the National Equity Fund, Inc in Chicago, Illinois. He
received a bachelor's degree in economics from Carleton College, where he
currently serves as a trustee, and a MBA degree from Harvard University.
Wendy Lee Gramm of Helotes is a distinguished scholar and founder of the
regulatory studies program at the Mercatus Center at George Mason University
in Virginia. Gramm serves on the executive committee of the Association of
Private Enterprise Education and is on the Board of the Texas Public Policy
Foundation She served as chairman of the U.S .. Commodity Futures Trading
commission for five years and was administrator for information and regulatory
affairs at the Office of Management and Budget for three years. Gramm is also
former executive director of the Presidential Task Force on Regulatory Relief
and former director of the Federal Trade Commission's Bureau of Economics.
She has been a member of the Board of Regents of the Texas A&M University
System since 2001. A graduate of Wellesley College, Gramm received a
doctorate degree in economics from Northwestern University.
,Jodie L Jiles of Houston has been in the municipal finance business for 20
years with various Wall Street, regional and minority firms. He currently serves
as senior vice president with First Albany Capital and his responsibilities include
coordinating municipal finance operations; implementing strategic marketing
plans with targeted clients throughout the Southwest. Jiles is currently chairman
of the Greater Houston Partnership for 2005. He also serves on the Board of
Directors of The One Hundred Club, The Greater Houston Visitors and
Convention Bureau and The Pyramid/CDC, and he is a director of the Houston
Branch of the Federal Reserve Bank of Dallas. Jiles serves on a number of
boards and commissions, including the Baylor College of Medicine Board of
Directors, Texas Children's Hospital Board of Directors and the University of
Texas Health Science Center Development Board. He also is a board member
of the Center for Reform of School Systems, board member of Charter Schools
Policy Institute and a former member of Houston Independent School District
Foundation. Jiles has also served as chairman of the Governors Business
Council Math Initiative and former vice chairman of the Reading Initiative for the
Governors Business CounciL Jiles has a bachelor's degree in accounting from
the Texas Southern University and a master's degree in professional
accountancy from The University of Texas at Austin
Hunter Hunt of Dallas is senior vice president of Hunt Oil Co., where he focuses
on the company's liquefied natural gas efforts and other energy operations,
including Hunt Power. He previously worked for Morgan Stanley in London and
New York. He is vice chair on the economic steering committee of the Bill ,J.
Priest Institute for Economic Development and a rnember of the executive
board of the School of Engineering of Southern Methodist University (SMU).
Hunt is a graduate of SMU, where he received his bachelor's degree in both
economics and political science. Woody L Hunt of El Paso is chairman and
chief executive officer of Hunt Building Company, Ltd, a privately owned
development, construction and property management company. Hunt was
previously vice chairman of The University of Texas System Board of Regents
Serving as a member of the Governor's Business Council, Hunt is a member of
the Executive Committee and chairs the Higher Education Task Force .. He is
involved in community organizations such as the Greater El Paso Chamber of
Commerce Foundation and the El Paso Junior Achievement Board. Hunt is
president of the Cimarron Foundation, a private family foundation he and his
wife established, which supported the creation of the Public Policy Research
Center and other university organizations at UT El Paso. Hunt received both a
bachelors degree and master of business administration from The University of
Texas at Austin. He later received a master of arts degree from the Claremont
Graduate School in California.
Kenneth M ,Jastrow II of Austin is chairman and chief executive officer of
Temple-Inland Inc., an Austin-based company, which he has been with for 27
years. Jastrow serves as director of MGIC Investment Corporation, KBHome
and the American Forest and Paper Association. He is past chairman of Texas
Taxpayers Research Associations and Texas Mortgage Bankers Associations.
,Jastrow is past chairman of The University of Texas Development Board,
advisory council of the McCombs School of Business and Neighborhood
Longhorns. He is a member of President Faulkner's Executive Council and
Governor Perry's Business Council. Jastrow is a member of the McCombs
School of Business Hall of Fame. He received his bachelor's and master's
degrees from The University of Texas at Austin
Victor E. Leal of Canyon is a small-businessman and owner of Leal's
Restaurants, a chain of four family restaurants, a business started by his
parents in 1957. A former mayor of Muleshoe, he also has served as a regional
vice president of the Texas Municipal League, on the Region 17 Service Center
and as a director of the Muleshoe Chamber of Commerce. He has received a
number of regional business awards, including the 1991 Business of the Year
award from the Whitesboro Chamber of Commerce, the 1994 Business of the
Year award from the Muleshoe Chamber of Commerce, and the 1996 Employer
of the Year award from the Muleshoe Chamber of Commerce. He also is a
member of the Texas Restaurant Association and NFIB and serves on the
board of directors of the Amarillo Chamber of Commerce and on the United Way
cabinet.
Judith A. Lindquist of San Antonio is general counsel and corporate secretary of
H-E-B grocery chain. Lindquist was recently appointed to the Board of the
Texas Taxpayers and Research Association. Previously, she worked for Hewitt
Associates; Gray, Plant, Mooty, Mooty and Bennett, PA; and Fredriksen and
Byron, PA. Lindquist currently serves on the Fredriksen's outside advisory
board. She has served on the American Law Institute's Continuing Professional
Education Advisory Group, has served as co-chair of the ABA National
Conference on Executive and Employee Compensation and was a member of
the ,Journal of Taxation of Employee Benefits Advisory Board. During her tenure
as a practicing attorney, Lindquist was named in The Best Lawyers in America,
published by Woodward White, Inc A graduate of the University of Illinois, she
received a law degree from the University of Chicago Law School
William A. McMinn of Houston is currently involved in various aspects of
nanotechnologies and bio-pharmaceutical industry .. McMinn spent 34 years in
the corporate world working for such companies as Petro-Tex Chemical Co. and
FMC Corp. He was vice president of FMC and general manager of its Industrial
Chemical Group in Philadelphia. McMinn served on the company boards of Cain
Chemical, Arcadian Corp., Texas Petrochemicals and Lexicon Genetics. He
was president and chief executive officer of Cain Chemical and chairman of
Arcadian and Texas Petrochemicals. McMinn currently serves on the board of
directors of Carbon Nanotechnologies, Rational Technology and Legend
Ventures. He is also chairman of the board of the Texas Public Policy
Foundation. McMinn received his bachelor's degree from Vanderbilt University in
Nashville, Tenn.
Ernest A Morales of Devine is co-owner and general manager of Morales
Feedlots, Inc., a family-owned commercial cattle feeding and ranching business
that he has worked for since his youth. Morales has served in different
capacities in the Texas Cattle Feeders Association and served on the board of
directors for both the Texas Beef Council and the National Cattlemen's Beef
Association He has also served as commissioner of the Texas Animal Health
Commission and as a member of the Devine Independent School District board
of trustees. Morales received a bachelor's degree in animal science from Texas
A&M University.
Jan Newton of Austin is president of SBC Texas During her 29-year career,
Newton has held several positions including executive director in the office of
SBC Chairman and CEO Ed Whitacre, and as executive director of wholesale
policy and resale marketing. She is active in the Texas Taxpayers and
Research Association, the Texas Telephone Association and the Roundtable
Advisory Committee for Texas One. She serves on the board of the Women's
Museum in Dallas and has been active in chambers of commerce, the United
Way, ,Junior Achievement, and Boy and Girl Scouts. A graduate of Texas Tech
University, Newton completed post-graduate management programs at Duke
University and the University of Southern California.
Dennis Patillo of Houston is chief executive officer of ERA Stephen Properties
in Houston and president of Stewart Title in Victoria and chairman-elect of the
Texas Association of Realtors" As a small-business owner, Patillo commits
much of his time to legislative issues that affect the real estate industry" At the
national level, Patillo served on the National Association of Realtors (NAR)
board of directors as well as NAR's Multiple Listing Service, governmental affair
and business issues committees" Since 2002 he has served on NAR's Federal
Tax Working Group, where he reviews in detail federal tax proposals as they
relate to the real estate industry and recommends policy positions for NAR
Patillo is a national authority on real estate-related consumer trends, and
taxation and legislative issues"
John V. Roach of Fort Worth is currently Chairman of the Board Emeritus of
Tandy Corporation, which is now Radio Shack Corporation. Roach has worked in
different capacities with the company since 1967, holding such positions as
general manager of Tandy Computer Services, vice president of Radio Shack
Manufacturing, and president and chief executive officer of Tandy Corporation.
He serves as a board member on the Texas Christian University (TCU) Board of
Visitors, the Scott and White Memorial Hospital and as chairman of the Fort
Worth Executive Roundtable Roach is a former board member of the Texas
Department of Commerce, former chairman of the United Way and former
president of Fort Worth Country Day SchooL He received a bachelor's degree in
physics and math and later a master's degree from TCU ..
Robert Rawling of Irving is the owner and chairman of TRT Holdings, Inc", a
privately owned, diversified holding company that owns the Omni Hotels chain
and Tana Exploration Co. Rawling serves as chairman of Omni Hotels" He is a
member of the board of trustees of The University of Texas System, the board
of directors of the Investment Management Company (UTIMCO) and chairs the
Task Force on UT Dallas Lands. Rowling is also the past chairman of the
Corpus Christi Area Economic Development Corp. He currently chairs SMU's
Willis M Tate Distinguished Lecture Series and serves on the national board of
trustees for Young Life" In October 2003, Rowling was inducted into the Texas
Business Hall of Fame, and he received the 2003 Distinguished Alumni Award
from SMU's Dedman School of Law" A graduate of The University of Texas at
Austin, Rawling received his law degree from SMU's Dedman School of Law.
Ronald G" Steinhart of Dallas is a private investor who serves as a director of
Prentiss Properties Trust Steinhart also served as chairman and chief
executive officer for the Commercial Banking Group of Bank One Corp. from
1996 until his retirement in 2000. He also served as chairman and CEO of Bank
One Texas, a company he joined in connection with the merger of Bank One
and Team Bank, which he founded in 1988. He also has served as a director of
United Auto Group, Inc., and Carreker Corp", and as a trustee of MFS/Compass
Group of Funds. He also has served on a number of civic groups, including as
director of the Dallas Citizens Council, the State Fair of Texas, the Dallas
Museum of Art, Zale Lipshy University Hospital, the Tate Distinguished Lecture
Series and the Dallas 2012 Committee. He has a bachelor's degree in
accounting and a MBA in finance from the University of Texas at Austin and is
a certified public accountant. He also chairs the University of Texas at Austin
Capital Campaign and is past chairman of the university's Development Board.
DL David Teuscher of Beaumont is a partner and member of the board of
directors of the Beaumont Bone & Joint Institute as well as the team orthopedist
for Lamar University's men's and women's NCAA teams" He is an orthopaedic
surgeon at the Beaumont Bone and Joint Institute, Christus St. Elizabeth
Hospital and Memorial Hermann Baptist Beaumont HospitaL Teuscher received
his undergraduate degree from the University of Illinois at Urbana-Champaign
and his doctor of medicine degree from the University of Texas Medical School
at San Antonio. He did his post-graduate internship and residency at Brooke
Army Medical Center. He is a diplomate of the American Board of Orthopedic
Surgery, a fellow of the American Academy of Orthopaedic Surgeons, managing
editor of Orthopedic Medical Legal Advisor, and previously served on the faculty
of the University of Texas Medical Branch at Galveston, the University of
Oklahoma School of Medicine and Baylor University" He also is the recipient of
several military awards, including the Army Commendation Medal with Oak
Leaf, the meritorious Service Medal, National Defense Service Medal and the
Southwest Asia Campaign Ribbon with Oak LeaL
Howard Wolf of Austin is chairman of the board of Stewart & Stevenson
Services and acting chairman of the Falcon Seaboard Companies. Wolf, who
was recommended for appointment to the commission by Lt. Gov. David
Dewhurst, also is a member of the board of directors of Simmons & Co.
International and a retired senior partner of the law firrn of Fulbright & Jaworski,
where he practiced law for more than 40 years. He is a graduate of the
University of Texas at Austin, where he received a Bachelor of Business
Administration degree and a law degree. While at UT, Wolf was elected
president of Student Government and president of the lntrafratemity CounciL
While in law school, Wolf was elected to the Order of the Coif and was
associate editor of The Texas Law Review. He also is an Eagle Scout.
23.
Texas Tax Reform
Commission, Tax Fairness:
Property Tax Relief for Texans,
March 29,2006
March 29, 2006
Governor, State of Texas
Texas State Capitol
Austin, Texas
On behalf of the 24 members of the Texas Tax Reform Commission, I am pleased to present our
final report
You gave this Commission the formidable challenge of recommending reforms to the Texas tax
structure that would provide significant and lasting property tax relief and that also would
provide a stable and long-term source of funding for our schools. In carrying out the mission, we
conducted 16 public hearings across the state, took oral testimony from an estimated 300
individuals and written testimony from many others.
We heard a wide range of suggestions on how Texas should restruch1re its tax system, including
recommendations that we broaden the business tax, adopt a state personal income tax, collect only
consumption taxes, and expand gambling. The Commission seriously considered numerous
options, ultimately zeroing in on the recommendations enclosed in this report as the most
positive, realistic, and appropriate direction for Texas tax policy. All this was considered in the
glare of the court-imposed June Jst deadline, which ruled out constitutional changes due to the
short timeframe.
This Commission undertook its charge knowing that its recommendations- if adopted- would
have lasting consequences that would affect Texas for generations. I'm confident that you will
find that our recommendations honor the principles you laid out for the Commission and I
believe we have fulfilled the task you charged us with accomplishing. This task has been
attempted for more than fifteen years, and we believe we have finally found the key to a fair and
equitable revision of the franchise tax that will serve all Texans well in the future.
The task, while not easy, was a learning experience for everyone. On behalf of all members of the
Commission, I thank you for the confidence you showed in us. Together we share a commitment
to the fuhue of this state and its schoolchildren.
Sincerely,
Chairman, Texas Tax Reform Commission
TAX FAIRNESS
PROPERTY TAX RELIEF FOR TEXANS
JOHN SHARP,
CHAIRMAN
MARCH2006
Presented to:
Governor Rick Perry
Lieutenant Governor David Dewhurst
Speaker Tom Craddick
Members of the 79th Texas Legislature
TABLE OF CONTENTS
EXECUTIVE SUMMARY ....................................................................................................... 1
MEMBERSHIP OF THE COMMISSION .. .. .... .... .... .. ...... ...... .. ...... .. .... ...... .. ... .. .. .. .. .. ........ .... 3
THE LEGAL AND ECONOMIC ENVIRONMENT......................................................... 11
The Supreme Court Ruling ....................................................................................... 11
Why Texas Has Been Unable to Grow Its Way Out of the Problem .................. 12
THE COMMISSION'S WORK ............................................................................................. 15
Hearings ... .. . . .. .. . ... . . .. .. . . . .. . . . . . . . . . . . ... . ... .. ... . . . . .. . . . .. . .. . . . .. . .. . . . . . . . . .. . .. .. . . . .. .. . . .. . . .. . .. . . . .. . . ... . . . . 15
Conclusions ................................................................................................................. 16
THE COMMISSION'S PLAN .............................................................................................. 17
Property Tax Relief.................................................................................................... 17
Financing Mechanisms .............................................................................................. 18
Long-term Funding for Public Schools ................................................................... 20
SAMPLE TAX FORMS .......................................................................................................... 21
ii
ACKNOWLEDGMENTS
The Commission would like to publicly thank those individuals and institutions that
made a successful endeavor possible. Particular appreciation goes out to the cities,
chambers of commerce, businesses, and higher education centers that graciously
provided venues for our meetings:
Victoria College, Victoria
e Del Mar College, Corpus Christi
e Austin City Council
e El Paso City Council
University of Mary Hardin Baylor, Belton
Baylor Law School, Waco
Texas Tech University, Lubbock
Laredo Community College, Laredo
South Texas College, Weslaco
Texarkana College, Texarkana
Hardin-Simmons University, Abilene
Fredonia Hotel, Nacogdoches
Commemorative Air Force, Midland
San Antonio City Council
e Texas Southern University, Houston
e Wyndham Hotel, Arlington
We would also like to acknowledge the assistance of Commission staffers Robert
Howden, Karey Barton, James LeBas, and Julie Nordling who, along with Andria
Aguayo and Terri Wegner of the Governor's Office, kept the trains running and the
data flowing. Finally, the counsel of the Governor's staff including Mike Morrissey,
Deirdre Delisi, and Phil Wilson was invaluable as we considered the many options
before us. Special thanks are due Haley Smith of Ernst & Young for lending her
expertise on business tax topics.
lll
iv
EXECUTIVE SUMMARY
Governor Rick Perry directed the Commission to make recommendations on how to reform
the state's business tax structure and provide significant property tax relief. Both goals are
essential to promoting long-term economic growth and ensuring a stable, long-term source of
revenue for public education. While many Texans advanced ideas other than the
recommendations contained in this report, we believe our recommendations not only
address the Governor's directive, but also meet later court-mandated improvements in how
Texas funds its schools. Just as importantly, however, we believe these recommendations can
achieve the bipartisan support of the Texas Legislature.
RECOMMENDATIONS
I. The Legislature should cut school district property taxes for maintenance and
operations substantially. With many districts setting rates at or near $1.50 per $100 of
valuation, Texans are clearly paying too much in property taxes. The rate should be
lowered to $1 per $100 and permanently re-capped at no more than $1.30 per $100 by
the 2007 tax year. Reductions for the 2006 tax year sufficient to comply with the
Supreme Court's mandate must be provided immediately.
II. The Legislature should reform the state's franchise tax by:
Broadening the base of businesses that pay into the system and eliminating
loopholes that have allowed many businesses to avoid paying their fair share.
Cutting the franchise tax rate from 4.5 percent to 1 percent and changing the
underlying base of the franchise tax.
Basing the franchise tax on a business' margin by allowing each business to
choose between two calculations: deducting either the cost of goods sold or
employee compensation (including health insurance, pensions and other
benefits) from its total revenue.
Doubling the small-business exemption from $150,000 to $300,000 in total
revenue and exempting sole proprietors and non-corporate general
partnerships.
III. The Legislature should raise tobacco taxes, including raising the tax on cigarettes by $1
per pack.
IV. The Legislature should implement anti-fraud measures to boost state tax collections,
including increasing the Comptroller's audit and enforcement activities and
implementing an improved tax system for the sale of used cars.
V. The Legislature should use a portion of the state surplus to buy down property taxes.
Using some of the state's surplus would avoid the need for increases in other fees and
taxes, such as the state's sales tax, which is already among the highest and broadest in
the nation.
BENEFITS OF THE RECOMMENDATIONS
Texans will get a $6 billion reduction in property taxes- the largest property tax reduction in
history.
Home ownership would be more affordable for millions of Texans.
Recommended reforms to the franchise tax would encompass a broader cross-section of the
state economy and be a fundamentally fairer way of funding our children's education or
providing additional property tax relief.
The reforms to the existing franchise tax would apply to those businesses with state-provided
liability protection, as was originally intended.
Unlike earlier proposals for franchise tax reform, businesses would be rewarded for creating
more jobs and providing health care and pensions.
The state would pick up an estimated 50 percent of the costs of funding public education, a
dramatic increase over the 34% level expected for fiscal2007.
Doubling the small-business exemption from $150,000 to $300,000 in total revenue would
help small businesses prosper and grow.
The plan would reduce the amount of money recaph1red and re-directed to other school
districts by Robin Hood.
2
MEMBERSHIP OF THE COMMISSION
John Sharp of Austin is a principal at Ryan & Company, a Dallas-based tax consulting firm, and he
chairs the Texas Tax Reform Commission. ln 1990 Mr. Sharp was elected Texas Comptroller of Public
Accounts. During his eight years of service in that office he initiated many innovative programs,
including the Texas Performance Review, the Texas School Performance Review, the Texas Tomorrow
Fund and the Lone Star Card, all of which still benefit the state today. He was elected to the Texas
House of Representatives, representing Victoria and Calhoun counties, and was later elected as a
State Senator from South Texas. In 1985 he was elected to the Texas Railroad Commission where he
served a four-year term. A graduate of Texas A&M University where he was elected class president
as well as student body president, he also earned a master's degree in Public Administration from
Texas State University while working full time at the Legislative Budget Board in Austin.
Truman Arnold of Texarkana is chairman of the board of Truman Arnold Companies, a privately-
owned regional petroleum marketing company. Arnold is a National Advisory Council member on
the National Petroleum Council. He is also a member of the Society of Independent Gasoline
Marketers of America, the Petroleum Marketers Association of America, the Texas Oil Marketers
Association and the Arkansas Oil Marketers Association. Arnold is chairman of the board of
directors of Christus St. Michael Health System in Texarkana and of the Texarkana College
Foundation board. He is former president of the Texarkana Chamber of Commerce. Arnold received
his bachelor's degree from Lamar University in Beaumont.
William B. Blaylock of Dallas is vice president and tax director at Texas Instruments (TI), where he is
responsible for the administration of TI tax matters, including public policy issues involving taxation.
He also has been a member of TI teams that analyzed site selection decisions for manufacturing
facilities in the U.S. and abroad. Blaylock has served as the chairperson and in other capacities on
many tax committees for such organizations as Manufach1rers Alliance, American Institute of
Certified Public Accountants and the Semiconductor Industry Association, and he has testified on tax
policy issues at the state and federal levels. A certified public accountant and attorney, Blaylock
received his undergraduate degree from Baylor University and his law degree from Baylor Law
School.
A.J. Brune III of Midland is chief financial officer and executive vice president of Wagner and
Brown, Ltd., an independent oil and gas producer where he has worked since 1986. Brune is also a
certified public accountant. He was recommended for appointment to the commission by House
Speaker Tom Craddick. He previously held the position of vice president - taxation of Conquest
Exploration Company, an American Stock Exchange-listed oil and gas exploration and production
company. Brune also worked for Arthur Andersen and Company for 12 years, eventually serving as a
3
parh1er in the tax division of their Houston office. He received his bachelor's degree from the
University of Houston.
T. Randall Cain of San Antonio, a certified public accountant, is managing parh1er of Ernst &
Young's San Antonio office, where he also serves as the Gulf Coast area tax managing parmer. A
graduate of Texas A&M University where he received a bachelor's degree in business administration,
Cain is a member of the American Instih1te of Certified Public Accountants, the Texas Society of
Certified Public Accountants, and Texas A&M University Mays College Development Council. He
also has served as treasurer of the San Antonio Economic Development Foundation, chairman of
Junior Achievement of South Texas, and on the 12th Man Foundation and the Greater San Antonio
Chamber of Commerce.
Alonzo Cantu of McAllen is president of Canh1 Construction Co., which was awarded the National
Minority Construction Firm of the Year. Canhl serves as chairman of the board for Lone Star
National Bank and is involved in civic organizations including Court Appointed Special Advocates,
Valley Initiative for Development and Advancement, United Way, and the National Congressional
Hispanic Caucus Institute. He co-founded and is chairman emerih1s of Valley Alliance of Mentors for
Opporhmities and Scholarships, which has raised more than $8 million to provide scholarships for
Hispanic sh1dents in the Rio Grande Valley. Cantu received a bachelor of business administration in
finance from the University of Houston.
James D. Dannenbaum of Houston is chairman, president and chief executive officer of
Dannenbaum Engineering Corporation. During his time with the company, he has served
progressively as a design engineer, associate, executive vice president and in 1972, became president.
Dannenbaum is a member of the American Society of Civil Engineers, the Consulting Engineers
Council of Texas, Inc., and the Texas Society of Professional Engineers. He is a member of the UT
M.D. Anderson Cancer Center Board of Visitors and the UT Houston Health Science Center
Development Board. Dannenbaum is chairman of the Texas Cancer Council and is a member of The
Chancellor's Cmmcil of The University of Texas System. He was selected as Engineer of the Year in
2004 by the Texas Society of Professional Engineers. Dannenbaum received a bachelor's degree in civil
engineering from The University of Texas at Austin.
Printice L. Gary of Dallas is managing parmer of Carleton Residential Properties, a position he has
held since founding the firm in 1991. Before that, Gary was a division parh1er for Trammell Crow
Residential Co. from 1986 to 1991, where he oversaw the acquisition, financing, development,
construction, asset management, and property management of more than 6,000 multifamily housing
units. From 1978 to 1985, he was vice president and corporate controller for Fox & Jacobs, Inc. He
started his career as an investment banker with Piper }affray, and he also is a former division
president with the Centex Corp. Gary is active in civic organizations, having served on the Dallas
Citizens Council, Southwestern Medical Foundation and the North Texas Tollway Authority. He
currently serves on the board of C.C. Young, Inc., a multiple service retirement organization in Texas,
and the National Equity Fund, Inc. in Chicago, Illinois. He received a bachelor's degree in economics
from Carleton College, where he currently serves as a trustee, and a MBA degree from Harvard
University.
4
Wendy Lee Gramm of Helotes is a distinguished scholar and founder of the regulatory studies
program at the Mercatus Center at George Mason University in Virginia. Gramm serves on the
executive committee of the Association of Private Enterprise Education and is on the board of the
Texas Public Policy Foundation. She served as chairman of the U.S. Commodity Futures Trading
commission for five years and was Administrator for Information and Regulatory Affairs at the Office
of Management and Budget for three years. Gramm is also former executive director of the
Presidential Task Force on Regulatory Relief and former director of the Federal Trade Commission's
Bureau of Economics. She has been a member of the Board of Regents of the Texas A&M University
System since 2001. A graduate of Wellesley Coilege, Gramm received a doctorate degree in
economics from Northwestern University.
Jodie L Jiles of Houston has been in the mtmicipal finance business for 20 years with various Wall
Street, regional and minority firms. He currently serves as senior vice president with First Albany
Capital and his responsibilities include coordinating municipal finance operations and implementing
strategic marketing plans with targeted clients throughout the Southwest. Jiles is immediate past
chairman of the Greater Houston Parb1ership. He also serves on the Board of Directors of The One
Hundred Club, The Greater Houston Visitors and Convention Bureau and The Pyramid/CDC, and he
is a director of the Houston Branch of the Federal Reserve Bank of Dallas. Jiles serves on a number of
boards and commissions, including the Baylor College of Medicine Board of Directors, Texas
Children's Hospital Board of Directors and the University of Texas Health Science Center
Development Board. He also is a board member of the Center for Reform of School Systems, serves on
the advisory board for KIPP Academy and a former member of Houston Independent School District
Foundation. Jiles has also served as chairman of the Governor's Business Council Math Initiative and
former vice chairman of the Reading Initiative for the Governor's Business Council. Jiles has a
bachelor's degree in accounting from the Texas Southern University and a master's degree in
professional accountancy from The University of Texas at Austin.
Hunter Hunt of Dallas is senior vice president of Hunt Oil Co., where he focuses on the company's
liquefied natural gas efforts and other energy operations, including Hunt Power. He previously
worked for Morgan Stanley in London and New York He is vice chair on the economic steering
committee of the Bill J. Priest Institute for Economic Development and a member of the executive
board of the School of Engineering of Southern Methodist University (SMU). Hunt is a graduate of
SMU, where he received his bachelor's degree in both economics and political science.
Woody L. Hunt of El Paso is chairman and chief executive officer of Hunt Building Company, Ltd., a
privately owned development, construction and property management company. Hunt was
previously vice chairman of the University of Texas System Board of Regents and currently serves as
the vice chairman of its investment management company (UTIMCO). A member of the Governor's
Business Cotmcil, Hunt serves on its Executive Committee and chairs the Higher Education Task
Force. Hunt is president of the Hunt Family Foundation, which, along with other charitable
endeavors, created the Public Policy Research Center and other university organizations at UT El
Paso. In El Paso, he is involved in community organizations such as the Paso del Norte Group, where
he chairs the Higher Education Committee.
Kenneth M. Jastrow, II of Austin is chairman and chief executive officer of Temple-Inland Inc., an
Austin-based company, which he has been with for 27 years. Jastrow serves as director of MGIC
5
Investment Corporation, KBHome and the American Forest and Paper Association. He is past
chairman of Texas Taxpayers and Research Association and the Texas Mortgage Bankers Association.
J as trow is past chairman of The University of Texas Development Board, advisory council of the
McCombs School of Business, Neighborhood Longhorns and was Chairman of The Commission of
125. He is a member of Governor Perry's Business Council. Jastrow is a distinguished alumnus of UT
and a member of the McCombs School of Business Hall of Fame. He received his bachelor's and
master's degrees from The University of Texas at Austin.
Victor E. Leal of Canyon is a small-businessman and owner of Leal's Restaurants, a chain of four
family restaurants, a business started by his parents in 1957. A former mayor of Muleshoe, he also
has served as a regional vice president of the Texas Municipal League, on the Region 17 Service
Center and as a director of the Muleshoe Chamber of Commerce. He has received a number of
regional business awards, including the 1991 Business of the Year award from the Whitesboro
Chamber of Commerce, the 1994 Business of the Year award from the Muleshoe Chamber of
Commerce, and the 1996 Employer of the Year award from the Muleshoe Chamber of Commerce. He
also is a member of the Texas Restaurant Association and National Federation of Independent
Business (NFIB) and serves on the board of directors of the Amarillo Chamber of Commerce and on
the United Way cabinet.
Judith A. Lindquist of San Antonio is general counsel and corporate secretary of H-E-B food and
drug retailer. Lindquist was recently appointed to the Board of the Texas Taxpayers and Research
Association. Previously, she was a managing director and member of the executive committee of
Hewitt Associates; of counsel to Gray, Plant, Mooty, Mooty and Bermett, PA; and a partner of
Fredrikson and Byron, P A. Lindquist currently serves on the Fredrikson' s outside advisory board. She
has served on the American Law Institute's Continuing Professional Education Advisory Group, has
served as co-chair of the ABA National Conference on Executive and Employee Compensation and
was a member of the Journal of Taxation of Employee Benefits Advisory Board. During her tenure as
a practicing attorney, Lindquist was named in The Best Lawyers in America, published by
Woodward White, Inc. A graduate of the University of Illinois, she received a law degree from the
University of Chicago Law School.
William A. McMinn of Houston is currently involved in various aspects of nanotechnologies and
bio-pharmaceutical industry. McMinn spent 34 years in the corporate world working for such
companies as Petro-Tex Chemical Co. and FMC Corp. He was vice president of FMC and general
manager of its Industrial Chemical Group in Philadelphia. McMinn served on the company boards of
Cain Chemical, Arcadian Corp., Texas Petrochemicals and Lexicon Genetics. He was president and
chief executive officer of Cain Chemical and chairman of Arcadian and Texas Petrochemicals.
McMiru1 currently serves on the board of directors of Carbon Nanoteclmologies, Rational Teclmology
and Legend Venh1res. He is also chairman of the board of the Texas Public Policy Foundation.
McMinn received his bachelor's degree from Vanderbilt University in Nashville, Tenn.
Ernest A. Morales of Devine is co-owner and general manager of Morales Feedlots, Inc., a family-
owned commercial cattle feeding and ranching business that he has worked for since his youth.
Morales has served in different capacities in the Texas Cattle Feeders Association and served on the
board of directors for both the Texas Beef Cotmcil and the National Cattlemen's Beef Association. He
has also served as commissioner of the Texas Animal Health Commission and as a member of the
6
Devine Independent School District board of trustees. Morales received a bachelor's degree in animal
science from Texas A&M University.
Jan Newton of Austin is the recently-retired President of AT&T Texas. During her 30-year career,
Newton held several positions including executive director in the office of SBC Chairman and CEO
Ed Whitacre, and as executive director of wholesale policy and resale marketing. She was active in
the Texas Taxpayers and Research Association, the Texas Telephone Association and the Roundtable
Advisory Committee for TexasOne. She serves on the board of the Women's Museum in Dallas and
has been active in chambers of commerce, the United Way, Junior Achievement, and Boy and Girl
Scouts. A graduate of Texas Tech University, Newton completed post-graduate management
programs at Duke University and the University of Southern California.
Dennis Patillo of Houston is chief executive officer of ERA Stephen Properties in Houston and
president of Stewart Title in Victoria and chairman-elect of the Texas Association of Realtors. As a
small-business owner, Patillo commits much of his time to legislative issues that affect the real estate
industry. At the national level, Patillo served on the National Association of Realtors (NAR) board of
directors as well as NAR' s Multiple Listing Service, governmental affairs and business issues
committees. Since 2002 he has served on NAR's Federal Tax Working Group, where he reviews in
detail federal tax proposals as they relate to the real estate industry and recommends policy positions
for NAR. Patillo is a national authority on real estate-related consumer trends, and taxation and
legislative issues.
John V. Roach of Fort Worth is currently Chairman of the Board Emeritus of Tandy Corporation,
which is now Radio Shack Corporation. Roach has worked in different capacities with the company
since 1967, holding such positions as general manager of Tandy Computer Services, vice president of
Radio Shack Manufacturing, and president and chief executive officer of Tandy Corporation. He
serves as a board member on the Texas Christian University (TCU) Board of Visitors, the Scott and
White Memorial Hospital and as chairman of the Fort Worth Executive Roundtable. Roach is a
former board member of the Texas Department of Commerce, former chairman of the United Way
and former president of Fort Worth Country Day School. He received a bachelor's degree in physics
and math and later a master's degree from TCU.
Robert Row ling of Irving is the owner and chairman of TRT Holdings, Inc., a privately owned,
diversified holding company that owns the Omni Hotels chain and Tana Exploration Co. Rowling
serves as chairman of Omni Hotels. He is a member of the board of trustees of The University of
Texas System, the board of directors of the Investment Management Company (UTIMCO) and chairs
the Task Force on U.T. Dallas Lands. Rowling is also the past chairman of the Corpus Christi Area
Economic Development Corp. He currently chairs SMU' s Willis M. Tate Distinguished Lecture Series
and serves on the national board of trustees for Young Life. In October 2003, Rawling was inducted
into the Texas Business Hall of Fame, and he received the 2003 Distinguished Alumni Award from
SMU's Dedman School of Law. A graduate of The University of Texas at Austin, Rowling received
his law degree from SMU' s Dedman School of Law.
Ronald G. Steinhart of Dallas is a private investor who serves as a Director of United Auto Group,
Inc. and as a Trustee of MFS/Compass Group of Funds. Steinhart served as Chairman and Chief
Executive for the Commercial Banking Group of Bank One Corp. from 1996 until his retirement in
7
2000. He also served as Chairman and CEO of Bank One Texas, a company he joined in connection
with the merger of Bank One and Team Bank, which he founded in 1988. He also serves as Member
of the United States Holocaust Memorial Council, as a Director of the State Fair of Texas, Dallas
Museum of Art" and the Dallas Center for the Performing Arts, and as a Trustee of the Dallas
Foundation, Temple Emanu-El Foundation and Dallas Medical Resource. He has a bachelor's degree
in accounting and a MBA from The University of Texas at Austin and is a Certified Public
Accountant. He also chaired The University of Texas at Austin Capital Campaign and is past
Chairman of the university's Development Board.
Dr. David Teuscher of Beaumont is a partner and member of the board of directors of the Beaumont
Bone & Joint Institute as well as the team orthopaedist for Lamar University's men's and women's
NCAA teams. He is an orthopaedic surgeon at the Beaumont Bone and Joint Institute, Christus St.
Elizabeth Hospital and Memorial Hermann Baptist Beaumont Hospital. Teuscher received his
undergraduate degree from the University of Illinois at Urbana-Champaign and his doctor of
medicine degree from The University of Texas Medical School at San Antonio. He did his post-
graduate internship and residency at Brooke Army Medical Center. He is a diplomate of the
American Board of Orthopaedic Surgery, a fellow of the American Academy of Orthopaedic
Surgeons, managing editor of Orthopaedic Medical Legal Advisor, and previously served on the
faculty of The University of Texas Medical Branch at Galveston, the University of Oklahoma School of
Medicine and Baylor University. He also is the recipient of several military awards, including the
Army Commendation Medal with Oak Leaf, the meritorious Service Medal, National Defense Service
Medal and the Southwest Asia Campaign Ribbon with Oak Leaf.
Howard Wolf of Austin is chairman of the board of Stewart & Stevenson Services and acting
chairman of the Falcon Seaboard Companies. Wolf, who was recommended for appointment to the
commission by Lt. Gov. David Dewhurst, also is a member of the board of directors of Simmons &
Co. International and a retired senior partner of the law firm of Fulbright & Jaworski, where he
practiced law for more than 40 years. He is a graduate of The University of Texas at Austin, where he
received a Bachelor of Business Administration degree and a law degree. While at UT, Wolf was
elected president of Student Government and president of the Intrafraternity Council. While in law
school, Wolf was elected to the Order of the Coif and was associate editor of The Texas Law Review.
He also is currently serving a second two year term as a Public Member of the Texas Sunset Advisory
Commission.
Staff of the Texas Tax Reform Commission:
Robert Howden, a former commtmications director for Governor Perry, is staff director for the
commission. Before working for Governor Perry, Howden was the executive director of the National
Federation of Independent Business (NFIB) in Texas for more than 10 years. While at NFIB{fexas,
Howden worked with then Governor Bush to create the first-ever small business franchise tax
exemption. He also worked with then-Lt. Governor Perry to create the Lt. Governor's Small Business
Summits that were held in seven cities throughout Texas.
Karey Barton, former director of tax policy during the Comptroller Sharp administration, is tax
director for the commission. Barton's tenure includes six years in private consulting and fourteen
years with the Comptroller's office. As assistant manager of revenue estimating, he was the primary
8
contact for legislative fiscal analysis issues for the Comptroller's office and oversaw the legislative
fiscal note process within the agency for six years.
James LeBas, director of financial analysis for the commission, is the state's former chief revenue
estimator and currently serves as chief financial officer for the Texas Water Development Board. His
earlier work included budget and planning analysis for the Governor's Office, during which he
helped develop and deliver Governor Bush's 1997 proposal for property tax relief. LeBas received his
bachelor's and master's degrees in 1983 and 1985, respectively, from The University of Texas business
school.
9
10
LEGAL A.ND ECONOMIC ENVIRONMENT
We nmu hold, as did the district court, that local ad valorem taxes have become a state property tax in
violation of Article VIII, section 1-e, as we warned ten years ago they inevitably would, absent a
change in course, which has not happened . ... To end the constitutional violation, we agree with the
district court that the use of the current system must be enjoined.
-Supreme Court of Texas, November 22, 2005
The Supreme Court Ruling
On November 22, 2005, just one day after the Texas Tax Reform Commission convened its
first meeting, the Texas Supreme Court found that the state's method of financing public
schools violated the constitutional prohibition against a state property tax. The Court said, in
effect, that the state cap on property tax rates and the state requirements to which school
districts are held combine to eliminate meaningful discretion for school districts in setting
their tax rates. In other words, if the state is setting both the floor (the education
requirements) and the ceiling (the rate cap) in a way that forces most tax rates to the ceiling,
then a de facto state property tax exists, prohibited under Article VIII of the state constitution.
The Court's decision is the most recent in more than two decades of near-continual public
school finance litigation; of the various issues brought to the Court's attention, the plaintiffs
prevailed only on the question of the state property tax. The state prevailed on matters
related to the adequacy and efficiency of the system, leaving the financial aspects to be
remedied no later than June 1, 2006. Practically speaking, the property tax must be lowered,
the revenue replaced, and the schools given tax rate setting discretion to bring the system
back into compliance with the court order.
The Supreme Court has given the Legislahue a June 1, 2006 deadline to solve this problem. It
was in this environment that the Tax Reform Commission began its work and under which
the 79th Legislature must act.
11
Why Texas Has Been Unable to Grow Its Way Out of the Problem
The fiscal and economic sihwtion that the state faces is as challenging as the legal
environment, to which two Regular Sessions and three Special Sessions of the Legislah1re can
attest. Significant time, research, and efforts expended by the 78th and 79th Legislatures
toward restructuring the tax system and public school finance have not yet borne fruit. And
in fact the challenge goes back even further, as Comptroller Bob Bullock first observed two
decades ago:
There are whole industries today-enormously important and profitable industries-that weren't even
dreamed of twenty-five years ago. The new economy has been described by many names: service,
information, space age, diversified. But our tax structure remains tied to the past, to hard products
and assets attached to the ground.
Bob Bullock, Time of Change/Time of Choice; Tax Equity and the Texas Economy, 1986
The basic structure of today's Texas tax system is remarkably similar to that of twenty years
ago, despite economic upheavals and numerous increases in existing taxes. At $30.9 billion
in fiscal2005, property taxes
imposed by local governments
continue to dominate the tax
landscape, dwarfing the state sales
tax despite many rate and base
increases in the sales tax since its
adoption in 1961. The state sales
tax generated $16.3 billion in fiscal
2005, and local add-on sales taxes
generated another $4.5 billion. As
different as they are, both sales
and property taxes are levied
primarily on tangible items
despite an economy that is
increasingly service-driven.
Likewise, the state's taxes on
motor fuels (gasoline), motor
vehicles, and oil and gas
production are duties on tangible
products.
12
Data Source: Toxas Comptroller's Offi<o November 200S
Over the past decade, property tax rates have risen steadily even as property values have
increased. State aid to school districts has substantially increased from 1995 to the present,
but could not on its
own keep property
tax rates down. The
average property
tax rate levied by tax rote
school districts for Sl.SO
"maintenance and
operations" (for
everything except
debt repayment)
has risen every
single year,
flattening out only
in recent years as
large numbers of
districts have hit
the tax rate cap of
$1.50 per $100 of
value. Rates have
risen in part
$1.45
$1.40
$1.35
$130
$1.25
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
because under current law, long-term growth in property values generates savings to the
state rather than additional revenue to the school districts. Inflation, competition with the
private sector for employees, and increased numbers of higher-cost sh1dents have also put
upward pressure on school tax rates.
Another less visible but equally powerful force contributing to the rise in property taxes has
been the inability of Texas' archaic state-level tax system to maintain a state/local balance in
the financing of education. As described by Comptroller Bullock in 1986 and affirmed by
Governor Bush in 1996, the Texas tax system does not reflect the Texas economy. Most
symbolic and symptomatic of this failing is the state's business franchise tax. Of the major
taxes that support the state's general revenue fund- the largest portion of which is spent on
education- the franchise tax had the lowest growth rate of all over the past decade. Growth
rates in the bases of the sales tax, the property tax, and the motor vehicle sales tax all
exceeded that of the franchise tax. Compare the growth rate in two other business taxes- the
insurance companies tax at 99% growth and the oil and gas production tax at 164% growth-
to the stunted 52% growth rate in franchise tax collections. This occurred while the Texas
economy grew 72% over the same period.
13
Because of its antiquated structure, the impact of the Texas tax system on the various
industries as it pertains to
education funding is very
uneven. During the past
decade, the services sector of
the Texas economy has
grown substantially, adding
nearly one million jobs but
contributing about $400 per
job toward paying for
schools. At the other
extreme, the mining sector,
primarily oil and gas, has lost
more than 6,000 jobs but
contributed almost $11,000
per employee.
1
With the
growth in the economy
occurring in the lightly taxed
industries, Texas cannot
410
300
150
BusinessPoid Stole & locol Toxes Per Employee Ill Growth In TI10usonds of Employees,
for the Support of Texos Public Schools Eslimoted by Sector 1994-2004
Eslirnotcd by Sector, filcol2004
grow its way out of its tax problem. Rather, we're growing our way into it. Therefore, a
broader base for the state's business tax is required, one that does not rely so heavily on
property.
With the growth in
the economy
occurring in the
lightly taxed
industries, Texas
cannot grow its way
out of its tax
problem . .Rather,
we're growing our
way into it.
As we listened to people all over Texas, we found near-
unanimous dissatisfaction from taxpayers about the level of
property taxation. The other constant we heard from every
corner of Texas is that property taxation is so high that it is the
single largest barrier to economic development and job
creation that Texas has. We ask businesses to expand and to
locate or re-locate here from other states, but when they see
our high level of property taxation, they hesitate. We are
many times able to recruit them only with massive abatements
and incentive dollars. Our high level of property taxation is
and will continue to be the largest job killer in Texas. This
level of property taxation is not sustainable if we are to have a
prosperous Texas in the future.
1
This analysis displays the relationship between an industry's tax payments for the education system and its draw on that
system (number of employees). An analysis of the relationship between tax payments and other measures, such as revenues
or profitability, would produce a different distribution.
14
THE COMMISSION'S WORK
As you consider proposals to reform the Texas business tax structure, I ask that you judge each idea on
its merits and whether it will achieve the primary goal of lowering property taxes and ensuring greater
fairness across the system, and providing a long-term reliable source of revenue for our public schools .
. . . By agreeing to serve yourfellow Texans, the people of this state, you seize a golden opportunity to
make a lasting difference for future generations. And I know this group's going to succeed.
- Governor Perry's address to Tax Reform Commission, November 21, 2005
Hearings
The Commission met for the first time on November 21, 2005 in the Capitol. At this meeting,
the Governor charged the Commission with designing a tax system to be based on five
fundamental principles:
" Fairness- The tax system must provide a level playing field that is essential for
healthy, free market competition.
Broad Based -Those who benefit from Texas' resources and services must pay their
share.
Modern- The tax system must reflect the realities of a rapidly evolving economy.
Understandable- Those considering locating or expanding business in Texas should
know what their obligations will be. Small business owners must be able to focus their
time and resources on creating jobs rather than navigating a maze of government
regulations.
Competitive- The tax system must allow Texas to attract jobs. Texas must be the most
competitive state in the nation when it comes to building or moving a business here,
risking capital, and winning in a global economy.
Invited testimony was taken from staff and from Drs. Steve Murdock and Ray Perryman,
who armed the Commission with the essential facts on Texas taxation, economics, and
demography.
Public testimony was taken at hearings across Texas beginning in December 2005 and
concluding in March 2006 at which hundreds of witnesses addressed the Commission.
Public witnesses ranged from business associations to school officials to Texas citizens.
15
Date of Hearing City
December 13, 2005 (AM) Victoria
December 13, 2005 (PM) Corpus Christi
January 9, 2006 Austin
January 11, 2006 El Paso
January 18, 2006 (AM) Belton
January 18, 2006 (PM) Waco
January 23, 2006 Lubbock
January 26, 2006 Laredo
January 27, 2006 Weslaco
February 7, 2006 Texarkana
February 13, 2006 Abilene
February 21, 2006 Nacogdoches
February 28, 2006 Midland
March 6, 2006 San Antonio
March 8, 2006 Houston
March 13, 2006 Arlington
Passionate testimony was common, reflecting Texans' varying but deeply held beliefs about
taxation and education. Common statements heard were:
That property taxes are too high;
That taxation should be broad and as low as possible;
That schools should be a priority for state funding;
e And- perhaps most frequently of all- that property taxation makes it difficult to
attract businesses to Texas without serious and costly incentives.
Conclusions
The Commission agrees with the four verdicts above voiced by the people of Texas. The
school property tax must be brought down significantly. Replacement revenue must be from
a broad-based, low-rate source. And the state budget must put school children first. We
recognize that before a serious debate on school funding can occur, we must first address the
Supreme Court's ruling, which we do with this report and accompanying legislation.
It is also the consensus of the Commission that school property taxes should not only be
lowered, but should also remain as low as possible, while still recognizing the Texas Supreme
Court's order to allow schools the required discretion. Some members of the leadership at the
Capitol have stated that they should develop the mechanism to do that working with
members of the legislature, appropriate persons from the education community and legal
experts. While agreeing to that request, the Commission has also included in its proposed
legislation a recommendation that the maximum tax rate be reduced from $1.50 to $1.30 at
the time the school M&O (maintenance and operations) tax rate is lowered to $1.00.
16
THE COMMISSION'S PLAN
High taxes, sometimes by diminishing the consumption of the taxed commodities, and sometimes by
encouraging smuggling, frequently afford a srnaller revenue to government than what might be drawn
from more moderate taxes.
- Adam Smith, The Wealth of Nations, 1776
Property Tax Relief
The Texas Legislature, in both its 1997 and 1999 meetings, paid for property tax relief for the
people of the state. In 1997, the state-mandated homestead exemption for school taxes was
tripled from $5,000 to $15,000, for which the state replaced the revenue from its general fund.
In 1999, this funding was continued, and the state paid for an additional6-per-$100
valuation property tax rate rollback. But in neither case did many Texans get actual tax
reductions, as the added funding was absorbed and overwhelmed by other factors such as
appraisal increases and subsequent rate increases.
It is the belief of the Commission that such minimal purchases of property tax relief, while
occasionally affordable within the state's current revenue system, are too insignificant and
fleeting to be meaningful. A meaningful reduction is one that brings the school tax
2
down to
$1-per-$100 valuation for all school districts and keeps it down, subject to local control and a
statutory hard cap of $1.30 per $100. Tax relief should be financed this tax year- 2006- at a
level that meets the Supreme Court's mandate for local tax rate discretion, using a mix of the
existing state surplus and new revenues, including tobacco tax increases. Effective January 1,
2007, a new state tax system must be in place to finance the remainder of the property tax
relief and to provide a permanent solution to the problem beginning with the 2007 tax year.
Alternatively, the Legislature could finance the entire amount of property tax relief
immediately by retroactively imposing the reformed franchise tax described in this report.
2 This applies to the properly tax levied by school districts for M&O (maintenance and operations) purposes,
which excludes any tax levied to pay off bonds"
17
Financing Mechanisms
Franchise Tax Reform
The centerpiece of the Commission's financing plan is the broadening and lowering of the
state's business tax, the franchise tax. For nearly a century the tax has been applied to
corporations. The original purpose of the franchise tax- and that which the Commission
finds is still valid- was to collect a modest levy in return for the tremendous value afforded
to businesses that chose to benefit from a state-provided liability shield. However, the recent
spread of new business forms such as limited-liability partnerships have tapped the state's
protections previously available only to corporations while avoiding the very levy designed
to reflect the value of that protection. Tax-free stah1s has thus been secured by many firms, to
the competitive detriment of those remaining in the corporate form.
Today the vast majority of businesses in the state escape the franchise tax, either through the
deliberate use of tax-defeating organizational structures, or simply by avoiding the corporate
form altogether. Many active businesses, some quite large, operate in Texas under a state-
provided liability shield and compete with taxpaying companies while contributing nothing
to franchise tax revenues.
These businesses, which may be formed as limited partnerships, limited-liability
partnerships, professional associations, or business trusts, also benefit from the state's
education system and would receive property tax relief under the Commission's plan. Many
are organizations made up of professionals, the employees and owners of which were
educated at great expense to the state. Hence they should be brought into the tax system in
the same manner as are corporations. The clear intention of the law's original framers- that
the franchise tax should be imposed in exchange for the state's liability shield- remains the
guiding light for the Commission's recommendation.
In addition to broadening the forms of businesses that are subject to the franchise tax, the
underlying base itself should be changed. Today, taxpayers pay on the higher of two tax
bases: one reflecting net income, the other net worth. Neither of those two components are a
broad and stable measure of a business' activity in Texas: net income is a relatively small tax
base that fluctuates dramatically with business conditions and which requires a high tax rate,
and net worth is not a measure of activity at alP Designing a broad and stable tax base that
encourages job creation and investment was the Commission's goal.
1
The state's ability to impose a net income tax on non-corp01ate entities may also be impaired by an existing Constitutional
provision.
18
Our solution is to re-base the franchise tax on a business' margin- rather than net income or
net worth- and to slash the primary rate from 4.5% down to 1%.
4
In computing its margin, a
business would pay on the lower of two calculations: deducting either cost of goods sold,
5
or
employee compensation (including health insurance and other benefits),
6
from its total
revenue.l
Compared to previous franchise
tax reform proposals, employers
would be rewarded, not punished,
for hiring people and for providing
health care and pensions, as all
three would lower their tax.
Because the reformed franchise tax
would continue to be levied in
exchange for state-provided
liability protection, sole
proprietorships and general
partnerships owned by natural
Reformed Franchise Tax Based on Margin
Total Revenue
Deduct Choice of Either:
Cost of Goods Sold 300,000
or
bZJ Employee and Ovmers Compensation 600,000
Equals Margin
Tax Rate:
Tax:
Tax BEFORE Property Tax Savings
$1,000,000
$400,000
1%
$4,000
persons would remain exempt, as would non-profit organizations. The tax would apply only
to active businesses, exempting passive unincorporated investment pools so that double
taxation is avoided and the state's ability to attract investment capital is maintained.
Additionally, the current franchise tax exemption for small, liability-protected businesses
with less than $150,000 in total revenue would be doubled to $300,000 and increased over
time with inflation.
Consumption Taxes
Consumption taxes would also be used to finance property tax relief. The state's tobacco
taxes, long unadjusted, would be increased. The cigarette tax would be increased by $1.00
per pack, and taxes on other tobacco products would be increased 13.6%.
Two anti-fraud measures would also boost state tax collections. Increasing the Comptroller's
audit and enforcement activities would improve compliance and revenue, and replacing the
4
Trade businesses (those engaged primarily in wholesale or retail activities) would pay 0.5'Yo, in recognition of
the low profit margins that are basic to the industry.
5
Cost of goods sold would be computed in a manner similar to the method for federal income tax purposes.
Lending institutions would use interest expense as their cost of goods sold.
6
All employee and owner benefits, such as expenses for retirement and health insurance, would be deductible
as compensation. Cash compensation would also be deductible for payments and distributions of up to
$300,000 for any employee or owner, increased over time with inflation.
7
Multi-state businesses would compute their Texas portion of the margin using the same calculation currently
used for the franchise tax.
19
so-called used car "liar's affidavit" form with a system based on standard vehicle value
would increase motor vehicle sales tax revenues.
Making Education the Top Priority in the State Budget
The third major element of financing property tax relief would come from the state surplus
and natural increases in future state revenue. In so doing, the state acknowledges that
education is our top budget priority, and that a significant share of general revenue available
today, and of the growth of tomorrow's revenue, should go first to education and to the
inextricably-linked property tax system before other budget demands are considered.
Long-term Funding for Public Schools
Ensuring that the state maintains its share of the cost of education will be a major long-term
factor in keeping property tax rates down. The Commission encourages the 79th and all
future Legislatures to continue funding for the tax relief provided by the Commission's plan,
and supports additional amounts as may be afforded by nah1ral growth in state revenues in
the future.
20
EXAMPLE TAX FORMS
Schedule A: School Maintenance and Operations Taxes
Current Law Proposed Law
Tax Rate (per Tax Rate (per
$100) Calculation $100) Calculation
School Property Tax Relief
1 Taxable Value of Property
2 Maintenance and Operations School
Tax Rate (per $100 valuation) $1.00
3 Line 2 divided by 100 (converts tax
rate per $1 00 to a percentage tax rate - 0.010
4 School Maintenance and Operations
Taxes (line 1 * line 3) $ - $ -
Notes for each line:
1 Taxable value of property will be the same under current and proposed law.
2
The current weighted average statewide school maintenance and operations tax rate is $1.48 Actual current law tax rates for each
individual taxpayer may be different. Proposed law would reduce all districts to a tax rate of $1.00.
3
Property tax rates are commonly expressed in terms of taxes per $100 of valuation. To convert this to a percentage tax rate, divide
the tax rate expressed in dollars by 100.
21
Schedule B: Reformed Franchise Tax Calculation
Line and Item Amount Amount
Form to be filed and taxes paid on a water's edge unitary combined basis.
(See instructions for more detail on each line item)
1. Total Revenue (if $300,000 or less, enter "0" on lines 7 and 9) ................. ~
2. Less Certain Deductible Expenses
a. "Cash" compensation, such as wages, salaries, stock options,
not to exceed $300,000 for any single employee ........................
b. Employer's Cost of Retirement Contributions ............................
c. Employer's Cost of Employee Health Insurance ........................
d. Employer's Cost of Workers' Compensation .............................
e. Employee Compensation (sum of a through d above) .................... -
f. Cost of Goods Sold (similar to federal tax return) .....................
--
g. Enter greater of line e or line( ..................................................
3. Margin (line 1 minus line 2g, but nte 70% of line 1) ................................
-
4. Texas Apportionment (same as current franchise tax)
a. Gross Receipts Everywhere .................................................
b. Texas Gross Receipts .........................................................
c. Percentage of Gross Receipts Attributable to Texas (line
4b divided by line 4a) ...............................................................
5. Taxable Margin (line 3 multiplied by line 4c) .........................................
6. Tax Rate (wholesalers & retailers, 0.5%; all others, 1 %)
7. Tax (line 5 multiplied by line 6)
-
8. Less Prior Credits Earned
I
9. Tax Due (line 7 minus line 8 but not less than zero) ...............................
22
Summary of Tax Reform Plan
Current Law Proposed Law Difference
Item Amount Amount Explanation of changes Amount
Property Taxes
a. School Maintenance &
Reduction of Tax Rate (See
1 Operation (enter amounts $ -
from Schedule A)
Schedule A)
b. School Debt Service
No change; current law amount for
-
both boxes
Business Tax
Current law franchise tax,
2 Franchise Tax Reformed Franchise Tax from -
Schedule 8 under Proposed Law
Tobacco Taxes
3 a. Cigarette Tax
Increase from $0.41 rate to $1.41
tax rate
-
b. Other tobacco products
Multiply current law by 1.136
-
(13.6% increase)
Total Taxes, sum of lines
$ $ $
1-3
- - -
-
23
Schedule B Instructions
Reformed Franchise Tax Calculation
Exemptions: The following businesses are exempt from the tax:
sole proprietorships;
o general partnerships owned entirely by natural persons;
e passive unincorporated investment entities, where at least 90% of revenue is from passive investments
(rent is not considered passive income);
., Non-profit and other organizations currently exempt from the franchise tax; and
" Businesses with $300,000 or less in total revenue.
Combined Reporting Required: Affiliated groups of businesses must report on a water's edge unitary combined
basis. An affiliated group includes all businesses in which a controlling interest (i.e. it is 80% or more owned) is
owned by a common owner. The combined group is considered a single taxable entity and must elect the same
deduction from total revenue.
Line 1-Total Revenue
For corporations, total revenue equals line 1 c plus lines 4-10 on IRS Form 1120. For partnerships, total revenue
equals line 1 c plus lines 4-7 on IRS Form 1065, plus lines 2-11 on IRS Form 1065, Schedule K. Certain
exclusions from total revenue are allowed such as for bad debt, foreign royalties and dividends, and net
distributive income from entities treated as partnerships for federal income tax purposes. Additionally, certain
types of "flow-through" funds that are mandated to be distributed to other entities may be excluded. A combined
group can exclude from total revenue intercompany receipts from a group member.
Line 2a-Cash Compensation Deduction
This deduction is capped at $300,000 per employee and includes wages, salaries, stock options, and net
distributive income from entities treated as partnerships for federal income tax purposes, but only if the person
receiving the distribution is a natural person. A combined group would exclude from cash compensation and
benefits deductions any expense payments related to the intercompany receipts excluded from total revenue.
Lines 2b-d-Employee Benefits Deduction
This deduction is not capped and includes the cost of benefits the taxable entity provides, including retirement,
health care, and workers' compensation, to the extent deductible for federal income tax purposes.
Line 2f-Cost of Goods Sold Deduction
This deduction is for taxable entities in the business of producing or selling goods and is generally computed in
a manner similar to that used for federal income tax purposes. The term "goods" is defined as real or tangible
personal property included as inventory of the taxable entity and does not include services sold. If the taxable
entity is a regulated lending institution, the cost of goods sold is equal to interest expense. A combined group
would exclude from cost of goods sold deduction any expense payments related to the intercompany receipts
excluded from total revenue.
Line 3-Margin
Margin equals total revenue in line 1 minus a deduction of the greater of compensation in line 2e or cost of
goods sold in line 2f. The maximum margin in line 3 would be 70% of total revenue in line 1.
Lines 4a-b-Texas Apportionment Calculation
The apportionment calculation for business done in Texas based on gross receipts is the same as the current
franchise tax. Receipts that are excluded from total revenue in line 1 may not be included in gross receipts (both
for entire business and Texas) used for apportionment.
Line 6-Tax Rate
The tax rate applied to taxable margin is 1%, except the tax rate for taxable entities primarily engaged in
wholesale or retail trade is 0.5%. A taxable entity is considered to be primarily engaged in wholesale or retail
trade if the total revenue from these activities is greater than the total revenue from other activities. A taxable
entity that predominantly sells or resells products it or a member of the affiliated group produces would not
qualify. Retail or wholesale utilities, including telecommunications services, electricity, or gas also would not
qualify.
Line 8-Tax Credits
The franchise tax credits in current law are repealed. However, taxable entities with unused prior credits may
continue to apply those credits for a certain period of time depending on the type of credit.
24
2.
Draft legislation proposed by
Texas Tax Reform Commission
By:
1
A BILL TO BE ENTITLED
AN ACT
.B. No.
2 relating to property tax relief and certain taxes; making an
3 appropriation; providing penalties.
4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
5 ARTICLE 1. SCHOOL DISTRICT PROPERTY TAX RELIEF
6 SECTION 1.01. The heading to Section 26.08, Tax Code, is
7 amended to read as follows:
8 Sec. 26.08. SCHOOL DISTRICT TAXES AND ELECTIONS [ELECTION]
9 TO AUTHORIZE OR RATIFY SCHOOL TAXES.
10 SECTION 1.02. Section 26.08, Tax Code, is amended by adding
11 Subsections (n) and ( o) to read as follows:
12 (n) Subsections ( i) and (k) do not apply to a school
13 district for the 2006 and 2007 tax years. The rollback tax rate of a
14 school district:
15
16
( 1) for the 2006 tax year is the sum of:
(A) the lesser of:
17 (i) the rate that is $0.17 per $100 of
18 taxable value less than the rate adopted by the district for
19 maintenance and operations for the 2005 tax year or the rate of $1
20
21
per $100 of taxable value, whichever is greater; or
(ii) the district's maintenance
22 operations tax rate for the 2005 tax year;
and
23 (B) the rate of $0.06 per $100 of taxable value;
24 and
79S30338 DAK/KLA/BDH/SMH-D 1
1
2
3
(C) the district's current debt rate; and
( 2) for the 2007 tax year is the sum of:
(A) the lesser of:
4 (i) the rate that is $0.33 per $100 of
5 taxable value less than the rate adopted by the district for
6 maintenance and operations for the 2006 tax year or the rate of $1
7
8
per $100 of taxable value, whichever is greater; or
(ii) the district's maintenance
9 operations tax rate for the 2006 tax year;
and
10 (B) the rate of $0.06 per $100 of taxable value;
11 and
12 (C) the district's current debt rate.
13 ( o) The commissioner may adopt rules specifying the method
14 for computing the rollback tax rate of a school district for
15 purposes of compliance with this section. A rule adopted under this
16 subsection is final and may not be appealed by a school district.
17 SECTION 1.03. Effective January 1, 2007, Section 45.003,
18 Education Code, is amended by amending Subsection (d) and adding
19 Subsection (e) to read as follows:
20
21
(d) A proposition submitted to authorize
maintenance taxes must include the question of
the levy of
whether the
22 governing board or commissioners court may levy, assess, and
23 collect annual ad valo.rem taxes for the further maintenance of
24 public schools, at a rate not to exceed the rate, which may be not
25 mo.re than $1.30 ( ~ ] on the $100 valuation of taxable property in
26 the district, stated in the proposition.
27 (e) A school district authorized by an election held before
1 June 1, 2006, to impose a maintenance tax at a rate greater than
2 $1.30 on the $100 valuation of taxable property in the district may
3 not impose a maintenance tax at a rate greater than $1.30 on the
4 $100 valuation of taxable property in the district. This
5 subsection does not apply to a district permitted by special law on
6 June 1, 2006, to impose a maintenance tax at a rate greater than
7 $1.50 on the $100 valuation of taxable property.
8 SECTION 1.04. The changes in law made by this article apply
9 to the ad valorem tax rate of a school district beginning with the
10 2006 tax year.
11 SECTION 1.05. (a) Not later than September 1, 2006, the
12 secretary of state shall:
13
14
15
16
(1) prepare a letter that includes a brief explanation
of the property tax reduction provisions of _.B. No.
the 79th Legislature, 3rd Called Session, 2006; and
, Acts of
( 2) distribute a copy of the letter to the tax assessor
17 for each school district in this state.
18 (b) On October 1, 2006, or as soon thereafter as
19 practicable, the tax assessor for each school district in this
20 state shall mail a copy of the letter to each owner of taxable
21 property as shown on the appraisal roll for the school district.
22 The tax assessor should include a copy of the letter with each tax
23 bill for the school district for the 2006 tax year, if practicable.
24 (c) This section expires January 1, 2007.
25
26
ARTICLE 2. FRANCHISE TAX
SECTION 2.01. Subchapter A, Chapter 171, Tax Code, is
79S30338 DAK/KLA/BDH/SMH-0 3
l SUBCHAPTER A. DEFINITIONS; TAX IMPOSED
2 Sec. 171.0001. GENERAL DEFINITIONS. In this chapter:
3 ( 1) "Affiliated group" means a group of one or more
4 entities in which a controlling interest is owned by a common owner
5 or owners, either corporate or noncorporate, or by one or more of
6 the member entities.
7 (2) "Assigned employee" has the meaning assigned by
8 Section 91.001, Labor Code.
9 (3) "Banking corporation" means each state, national,
10 domestic, or foreign bank, whether organized under the laws of this
11 state, another state, or another country, or under federal law,
12 including a limited banking association organized under Subtitle A,
13 Title 3, Finance Code, and each bank organized under Section 25(a),
14 Federal Reserve Act (12 U.S.C. Sections 611-631) (edge
15 corporations), but does not include a bank holding company as that
16 term is defined by Section 2, Bank Holding Company Act of 1956 (12
17 U.S.C. Section 1841).
18
19 (A) for a taxable entity chartered or organized
20 in this state, the date on which the taxable entity's charter or
21 organization takes effect; and
22 (B) for any other taxable entity, the date on
23 which the taxable entity begins doing business in this state.
24 ( 5) "Charter" includes a limited liability company's
25 certificate of organization, a limited partnership's certificate
26 of limited partnership, and the registration of a limited liability
27 partnership.
1 (6) "Client company" has the meaning assigned by
2 Section 91.001, Labor Code.
3 ( 7) "Combined group" means taxable entities that are
4 part of an affiliated group engaged in a unitary business and that
5 are required to file a group report under Section 171.1014.
6 (8) "Controlling interest" means:
7 (A) for a corporation, either 80 percent or more,
8 owned directly or indirectly, of the total combined voting power of
9 all classes of stock of the corporation, or 80 percent or more,
10 owned directly or indirectly, of the beneficial ownership interest
11 in the voting stock of the corporation; and
12 (B) for a partnership, association, trust, or
13 other entity, 80 percent or more, owned directly or indirectly, of
14 the capital, profits, or beneficial interest in the partnership,
15 association, trust, or other entity.
16 ( 9) "Internal Revenue Code" means the Internal Revenue
17 Code of 1986 in effect for the federal tax year beginning on January
18 1, 2006, and any regulations adopted under that code applicable to
19 that period.
20 ( 10) "Lending institution" means an entity that makes
21 loans and is regulated by the Federal Reserve Board, the Office of
22 the Comptroller of the Currency, the Federal Deposit Insurance
23 Corporation, the Texas Department of Banking, the Office of
24 Consumer Credit Commissioner, the Department of Savings and
25 Mortgage Lending, the Credit Union Department, or any comparable
26 regulatory body.
27 ( 11) "Retail trade" means the activities described in
79830338 DAK/KLA/BDH/SMH-D 5
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Division G of the 1987 Standard Industrial Classification Manual
published by the federal Office of Management and Budget.
(12) "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.
(13) "Shareholder" includes a limited liability
company's member and a limited banking association's participant.
(14) "Staff leasing services company" has the meaning
assigned by Section 91.001, Labor Code.
(15) "Total revenue" means the total revenue of a
taxable entity as determined under Section 171.1011.
( 16) "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
17 activities so as to provide a synergy and mutual benefit that
18 produces a sharing or exchange of value among them and a significant
19 flow of value to the separate parts. In determining whether a
20 unitary business exists, the comptroller shall consider any
21 relevant factor, including whether:
22
23
24 manufacturing,
(A) the activities of the group members:
(i) are in the same general line, such as
wholesaling, retailing of tangible personal
25 property, insurance, transportation, or finance; or
26 ( ii) are steps in a vertically structured
27 enterprise or process, such as the steps involved in the production
7 ( 17) "Wholesale trade" means the activities described
8 in Division F of the 1987 Standard Industrial Classification Manual
9 published by the federal Office of Management and Budget.
10 Sec. 171.0002. DEFINITION OF TAXABLE ENTITY. (a) Except as
11 otherwise provided by this section, "taxable entity" means a
12 partnership, corporation, banking corporation, savings and loan
13 association, limited liability company, business trust,
14 professional association, business association, joint venture,
15 joint stock company, holding company, or other legal entity. The
16 term includes a combined group. A joint venture does not include
17 joint operating or co-ownership arrangements meeting the
18 requirements of Treasury Regulation Section l. 761-2(a) (3) that
19 elect out of federal partnership treatment as provided by Section
20 761 (a), Internal Revenue Code.
21
22
23
(b) "Taxable entity" does not include:
(1) a sole proprietorship;
( 2) a general partnership the direct ownership of
24 which is entirely composed of natural persons;
25 (3) a passive entity as defined by Section 171.0003;
26 or
27 (4) an entity that is exempt from taxation under
1 Subchapter B.
2 (c) "Taxable entity" does not include an entity that is:
3 (1) a grantor trust as defined by Sections 671 and
4 7701(a) (30) (E), Internal Revenue Code, all of the grantors and
5 beneficiaries of which are natural persons or charitable entities
6 as described in Section 501(c) (3), Internal Revenue Code, excluding
7 a trust taxable as a business entity pursuant to Treasury
8 Regulation Section 301.7701-4(b);
9 (2) an estate of a natural person as defined by Section
10 7701(a) (30) (D), Internal Revenue Code, excluding an estate taxable
11 as a business entity pursuant to Treasury Regulation Section
12 301.7701-4(b);
13 (3) an escrow;
14 (4) a family limited partnership that is a passive
15 entity in which at least 80 percent of the interests are held,
16 directly or indirectly, by members of the same family, including an
17 individual's ancestors, lineal descendants, spouse, brothers and
18 sisters by the whole or half blood, and the estate of any of these
19 persons, and that is a limited partnership:
20 (A) formed pursuant to the Texas Revised Limited
21 Partnership Act (Article 6132a-1, Vernon's Texas Civil Statutes);
22 (B) formed pursuant to the limited partnership
23 law of any other state; or
24 (C) treated as a partnership for federal income
25 tax purposes;
26 (5) a passive investment partnership that is a passive
27 entity and that is:
1 {A) formed pursuant to the Texas Revised Limited
2 Partnership Act (Article 6132a-l, Vernon's Texas Civil Statutes);
3 {B) formed pursuant to the limited partnership
4 law of any other state; or
5 {C) formed pursuant to the limited partnership
6 laws of any foreign country;
7 (6) a passive investment partnership that is a passive
8 entity and is a general partnership;
9 (7) a trust that is a passive entity:
10 (A) that is taxable as a trust under Section 641,
11 Internal Revenue Code;
12 (B) all of the beneficiaries of which are natural
13 persons or charitable entities as defined in Section 50l(c) (3),
14 Internal Revenue Code;
15 (C) that is not a trust taxable as a business
16 entity pursuant to Treasury Regulation Section 301. 770l-4(b); and
17 {D) that is organized as a trust and is described
18 in Section 770l(a) (30) (E), Internal Revenue Code;
19 (8) a real estate investment trust (REIT) as defined
20 by Section 856, Internal Revenue Code, and its "qualified REIT
21 subsidiary" entities as defined by Section 856(i) {2), Internal
22 Revenue Code, provided that:
23 (A) a REIT with any amount of its assets in direct
24 holdings of real estate, other than real estate it occupies for
25 business purposes, as opposed to holding interests in limited
26 partnerships or other entities that directly hold the real estate,
27 is a taxable entity; and
1 (B) a limited partnership or other entity that
2 directly holds the real estate as described in Paragraph (A) is not
3 exempt under this subdivision, without regard to whether a REIT
4 holds an interest in it; or
5 (9) a real estate mortgage investment conduit (REMIC),
6 as de ined by Sect ion 8600, Internal Revenue Code.
7 (d) An entity that can file as a sole proprietorship for
8 federal tax purposes is not a sole proprietorship for purposes of
9 Subsection (b) (1) and is not exempt under that subsection if the
10 entity is formed in a manner under the statutes of this state or
11 another state that limit the liability of the entity.
12 Sec. 171.0003. OEFINITIONOFPASSIVEENTITY. {a) Anentity
13 is a passive entity only if:
14 ( 1) the entity is a general or limited partnership or a
15 trust, other than a business trust;
16 (2) during the period on which margin is based, the
17 entity's federal gross income consists of at least 90 percent
18 of the following income:
19 (A) dividends, interest, foreign currency
20 exchange gain, periodic and nonperiodic payments with respect to
21 notional principal contracts, option premiums, cash settlement or
22 termination payments with respect to a financial instrument, and
23 income from a limited liability company;
24 (B) distributive shares of partnership income to
25 the extent that those distributive shares of income are greater
26 than zero;
27 (C) gains from the sale of real property,
79S30338 OAK/KLA/BOH/SMH-0 10
1 commodities traded on a commodities exchange, and securities; and
2 (D) royalties, bonuses, or delay rental income
3 from mineral properties and income from other nonoperating mineral
4 interests; and
5 (3) the entity does not receive more than 10 percent of
6 its federal gross income from conducting an active trade or
7 business.
8 (b) The income described by Subsection (a) (2) does not
9 include:
10 (1) rent; or
11 ( 2) income received by a nonoperator from mineral
12 properties under a joint operating agreement if the nonoperator is
13 a member of an affiliated group and another member of that group is
14 the operator under the same joint operating agreement.
15 Sec. 171.0004. DEFINITION OF CONDUCTING ACTIVE TRADE OR
16 BUSINESS. (a) The definition in this section applies only to
17 Section 171.0003.
(b) An entity conducts an active trade or business if: 18
19 (1) the activities being carried on by the entity
20 include one or more active operations that form a part of the
21
22
process of earning income or profit; and
( 2) the entity performs
2 3 operational functions.
active management and
24 {c) Activities performed by the entity include activities
25 performed by persons outside the entity, including independent
26 contractors, to the extent the persons perform services on behalf
27 of the entity and those services constitute all or part of the
l entity's trade or business.
2 (d) An entity conducts an active trade or business if
3 assets, including royalties, patents, trademarks, and other
4 intangible assets, held by the entity are used in the active trade
5 or business of one or more related entities.
6 (e) For purposes of this section:
7 (l) the ownership of a royalty interest or a
8 nonoperating working interest in mineral rights does not constitute
9 conduct of an active trade or business; and
10 (2) payment of compensation to employees or
ll independent contractors for financial or legal services reasonably
12 necessary for the operation of the entity does not constitute
13 conduct of an active trade or business.
14
15
16
on(+
Sec. 171.001. TAX IMPOSED. (a) A franchise tax is imposed
(+-}-] each taxable entity [corporation] that does
17 business in this state or that is chartered or organized in this
18 s t a t e [ ~
19 ( ( 2) each limited liability company that does business
20 in this state or that is organioed under the la'dS of this state].
21 (b) (In this chapter:
22 ((1) "Banking corporation" means each state,
23 national, domestic, or foreign bank, 'dhether organioed under the
24 lmm of this state, another state, or another country, or und-e-r-
25 federal lar,r
1
including a limited banldng association organioed
26 under Subtitle A, Title 3
7
Finance Code, and each bank organioed
27 under Section 25(a)
1
Federal Reserve Act (12 U.S.C. Sees. 'iill 'ii31)
1 (edge corporations)
1
but does not include a bank holding company as
2 that term is defined by Section 2
1
Bank Holding Company Act of 1956
3 (12 U.S.C. Sec. 1811).
4 [ ( 2) "Beginning date" means:
5 [(A) for a corporation chartered in this state,
6 the date on '..'hich the corporation's charter takes effect1 and
7 [(B) for a foreign corporation, the date on 'dhich
8 the corporation begins doing business in this state.
9 [ ( 3) "Corporation" includes:
10 [(A) a limited liability company, as defined
11 under the TeltaS Limited Liability Company Act 1
12
13
14
[(B) a savings and loan association, and
[(C) a banking corporation.
[ (4) "Charter" includes a limited liability company's
15 certificate of organi3ation.
16 [ ( 5) "Internal Revenue Code" means the Internal
17 Revenue Code of 1986 in effect for the federal tal! year beginning on
18 or after January 1, 1996
1
and before January 1
1
1997
1
and any
19 regulations adopted under that code applicable to that period.
20 [ ( 6) "Officer" and "director" include a limited
21 liability company's directors and managers and a limited banking
22 association's directors and managers and participants if there are
23 no directors or managers,
24 [ (7) "Savings and loan association" means a savings
25 and loan association or savings bank
1
'dhether organi3ed under the
26 lm1s of this state, another state, or another country, or under
27 federal lmJ.
79830338 DAK/KLA/BDH/SMH-0 13
1 [(g) includes a limited liability
2 company's member and a limited banl<ing association's participant.
3 l+e+l The tax imposed under this chapter extends to the
4 limits of the United States Constitution and the federal law
5 adopted under the United States constitution.
6 Sec. 171.0011. ADDITIONAL TAX. (a) Except as provided by
7 Subsection (e), an [AA] additional tax is imposed on a taxable
8 entity [corporation] that for any reason becomes no longer subject
9 to the [earned surplus component of the talE, ,.rithout regard to
10 '..'hether the corporation remains subject to the talEable capital
11 component of the] tax imposed under this chapter.
12 (b) The additional tax is equal to the appropriate rate
13 under Section 171.002 of the taxable entity's taxable margin
14 percent of the corporation's net taJrable earned surplus] computed
15 on the period beginning on the day after the last day for which the
16 tax imposed on taxable margin [net taJrable earned surplus] was
17 computed [under ection 171.1532] and ending on the date the
18 taxable entity [corporation] is no longer subject to the [earned
19 surplus component of the] tax imposed under this chapter.
20 (c) The additional tax imposed and any report required by
21 the comptroller are due on the 60th day after the date the taxable
22 entity [corporation] becomes no longer subject to the [earned
23 surplus component of the] tax imposed under this chapter.
24 (d) Except as otherwise provided by this section, the
25 provisions of this chapter apply to the tax imposed under this
26 section.
27 (e) An additional tax is not imposed on a taxable entity
that becomes no longer subject to the tax imposed under this chapter
2 because the entity qualifies as a passive entity.
3 Sec. 171.002. RATES; COMPUTATION OF TAX. (a) Except as
4 provided by Subsection (b), the rate [The rates] of the franchise
5 tax [ a'l'-e+
6 [ ( 1) 0. 25] percent per year of privilege period of
7 [f!.e-t.] taxable [capital, and
8 [ (2) 4.5 percent of net talcable earned surplus].
9 (b) The rate of the franchise tax is 0.5 percent per year of
10 privilege period of taxable margin for those taxable entities
11
12
primarily engaged in retail or wholesale trade.
franchise talc on each corporation is computed
13 folloHingi
[The amount of
by adding the
14 [(1) the amount calculated by applying the tax rate
15 prescribed by Subsection (a) (1) to the corporation's net taxable
16 capital1 and
17 [(2) the difference betHeen1
18 [ (l\) the amount calculated by applying the talc
19 rate prescribed by Subsection. (a) (2) to the corporation's net
20 talrable earned surplus 1 and
21 [(B) the amount determined under Subdivision
2 2 +-1-J--... l
23 (c) A taxable entity is primarily engaged in retail or
24 wholesale trade only if:
25 (1) the total revenue from its activities in retail or
26 wholesale trade is greater than the total revenue from its
27 activities in trades other than the retail and wholesale trades;
1 (2) except as provided by Subsection (c-1), less than
2 50 percent of the total revenue from activities in retail or
3 wholesale trade comes from the sale of products it produces or
4 products produced by an entity that is part of an affiliated group
5 to which the taxable entity also belongs; and
6 ( 3) the taxable entity does not provide retail or
7 wholesale utilities, including telecommunications services and
8 electricity or gas. [In making a computatien under Subsection (b)
1
9 an amount computed under Subsection (b) (1) or (b) (2) that is zero or
10 lese is computed as a zero.)
11 (c-1) Subsection (c) (2) does not apply to total revenue from
12 activities in a retail trade described by Major Group 58 of the
13 Standard Industrial Classification Manual published by the federal
14 Off ice of Management and Budget.
15 (d) A taxable entity [corporation) is not required to pay
16 any tax and is not considered to owe any tax for a period if:
17 (1) the amount of tax computed for the taxable entity
18 [corporation) is less than $100; or
19 (2) the amount of the taxable entity's total revenue
20 [corporation's gross receipts!
21 [+,M-] from its entire business [under Section
22 171.105) is less than or equal to $300,000 or the amount determined
23 under Section 171.006 [$150
1
0001 and
24 [(B) from its entire business under Section
25 171.1051
1
including the amount excepted under Section 171.1051(a) r
26 is lese than $150
1
000) .
27 [Sec, 171.005. RATE OF TAX FOR CORPORATION IN PROCESS OF
1 LTQUIDZ\TTOH. Tho franchise talE rate on a corporation in tho process
2 of liquidation, as defined by Section 171.102 of this code, is tho
3 rate established by Section 171.002 of this code,]
4 Sec. 171.006. ADJUSTMENT OF ELIGIBILITY FOR EXEMPTION AND
5 COMPENSATION DEDUCTION. (a) In this section, "consumer price
6 index" means the average over a state fiscal biennium of the
7 Consumer Price Index for All Urban Consumers (CPI-U), U.S. City
8 Average, published monthly by the United States Bureau of Labor
9 Statistics, or its successor in function.
10 (b) Beginning in 2009, on January 1 of each odd-numbered
11 year, the amounts prescribed by Sections 171.002(d) (2) and
12 171.1013(c) are increased or decreased by an amount equal to the
13 amount prescribed by those sect ions on December 31 of the preceding
14 year multiplied by the percentage increase or decrease during the
15 preceding state fiscal biennium in the consumer price index and
16 rounded to the nearest $10,000.
17 (c) The amounts determined under Subsection (b) apply to a
18 report originally due on or after the date the determination is
19
20 (d) The comptroller shall make the determination required
21 by this section and may adopt rules related to making that
22 determination.
23 (e) A determination by the comptroller under this section is
24 final and may not be appealed.
25 SECTION 2.02. Subchapter B, Chapter 171, Tax Code, is
26 amended by adding Section 171.088 to read as follows:
27 Sec. 171.088. EXEMPTION--NONCORPORATE ENTITY ELIGIBLE FOR
1 CERTAIN EXEMPTIONS. An entity that is not a corporation but that,
2 because of its activities, would qualify for a specific exemption
3 under this subchapter if it were a corporation, qualifies for the
4 exemption and is exempt from the tax in the same manner and under
5 the same conditions as a corporation.
6 SECTION 2.03. Subchapter C, Chapter 171, Tax Code, is
7 amended, including the reenacting and amending of Section
8 171.109(g), as amended by Chapters 801 and 1198, Acts of the 7lst
9 Legislature, Regular Session, 1989, to read as follows:
10 SUBCHAPTER C. DETERMINATION OF TAXABLE MARGIN [ C!\PITAL MlD TAXABLE
11 EARNED SURPLU) ; ALLOCATION AND APPORTIONMENT
12 Sec. 171.101. DETERMINATION OF [w:E-T) TAXABLE MARGIN
13 [CAPITZ',L). (a) The [EJtcept as provided by Subsections (b) and (c),
14 the net) taxable margin [capital) of a taxable entity [corporation)
15 is computed by:
16 (1) determining the taxable entity's margin, which is
17 the lesser of:
18 (A) 70 percent of the taxable entity's total
19 revenue from its entire business, as determined under Section
20 171.1011; or
21
22
(i) determining the taxable entity's total
23 revenue from its entire business, under Section 171.1011; and
24 (ii) subtracting, at the election of the
25 taxable entity, either:
26 (a) cost of goods sold, as determined
27 under Section 171.1012; or
1 (b) compensation, as determined under
2 Section 171.1013; [adding the corporation's stated capital, as
3 defined by Article 1.02
1
Texas Business Corporation Act, and the
4 corporation's surplus, to determine the corporation's tmrable
5 capital,)
6 (2) apportioning the taxable entity's margin
7 [corporation's taJrable capital) to this state as provided by
8 Section 171.106 [171.106(a) or (c), as applicable,) to determine
9 the taxable entity's [corporation's) apportioned margin [taJrable
10 capital); and
11 ( 3) subtracting from the amount computed under
12 Subdivision (2) any other allowable deductions to determine the
13 taxable entity's [corporation's not] taxable [capital].
14 (b) Notwithstanding Subsection (a)(l)(B)(ii), a staff
15 leasing services company may subtract only compensation as
16 determined under Section 171.1013.
17 (c) In making a computation under this section, an amount
18 that is zero or less is computed as a zero [The net taJrable capital
19 of a limited liability company is computed by:
20 [ (1) adding the company's members' contributions, as
21 provided for under the TeJras Limited Liability Company Act, and
22
23
surplus to determine the company's taJrable capital,
[ (2) apportioning tho amount determined under
24 Subdivision (1) to this state in the same manner that the taxable
25 capital of a corporation is apportioned to this state under action
26 171.106(a) or (c), as applicable, to determine the company's
27 apportioned taJrable capital, and
1 [(3) subtracting from the amount computed under
2 Subdivision (2) any other allO'./able deductions, to determine the
3 company's net taJ[able capital.
4 [(c) The net taxable capital of a savings and loan
5 association is computed by:
6 [ (1) determining the association's net '..'orth; and
7 [(2) apportioning the amount determined under
8 Subdivision (1) to this state in the same manner that the taxable
9 capital of a corporation is apportioned to this state under Section
10 171.10e(a) to determine the association's net taJtable capital].
11 Sec. 171.1011. DETERMINATION OF TOTAL REVENUE FROM ENTIRE
12 BUSINESS. (a) In this section, a reference to an Internal Revenue
13 Service form includes a variant of the form. For example, a
14 reference to Form 1120 includes Forms 1120-A, 1120-S, and other
15 variants of Form 1120. A reference to an Internal Revenue Service
16 form also includes any subsequent form with a different number or
17 designation that substantially provides the same information as the
18 original form.
19 (b) In this section, a reference to an amount entered on a
20 line number on an Internal Revenue Service form includes the
21 corresponding amount entered on a variant of the form, or a
22 subsequent form, with a different line number. The comptroller
23 shall adopt rules as necessary to accomplish the legislative intent
24 prescribed by this subsection and Subsection (a).
25 (c) Except as provided by this section, and subject to
26 Section 171.1014, for the purpose of computing its taxable margin
27 under Section 171.101, the total revenue of a taxable entity is:
1 (1) for a taxable entity treated for federal income
2 tax purposes as a corporation, an amount computed by:
3 (A) adding:
4 (i) the amount entered on line lc, Internal
5 Revenue Service Form 1120; and
6
7 10, Internal Revenue Service Form 1120; and
8
9
10 tax purposes that corresponds to items of gross receipts included
11 in Subsection (c) (1) (A) for the current reporting period or a past
12 reporting period;
13
14 (c) ( 1) (A),
(ii) to the extent included in Subsection
foreign royalties and foreign dividends, including
15 amounts determined under Section 78 or Sections 951-964, Internal
16 Revenue Code;
17 (iii) to the extent included in Subsection
18 (c) (1) (A), net distributive income from partnerships and trusts
19 and from limited liability companies and S corporations treated as
20 partnerships for federal income tax purposes;
21 (iv) allowable deductions from Internal
22 Revenue Service Form 1120, Schedule C, to the extent the relating
2 3 dividend inc orne is included in total revenue;
24 (v) to the extent included in Subsection
25 (c) (1) (A), items of income attributable to an entity that is a
26 disregarded entity for federal income tax purposes; and
27 (vi) to the extent included in Subsection
1 (c) (1) (A), other amounts authorized by this section;
2 (2) for a taxable entity treated for federal income
3 tax purposes as a partnership, an amount computed by:
4 (A) adding:
5 (i) the amount entered on line lc, Internal
6 Revenue Service Form 1065;
7 (ii) the amounts entered on lines 4 through
8 7, Internal Revenue Service Form 1065; and
9 (iii) the amounts entered on lines 2
10 through 11, Internal Revenue Service Form 1065, Schedule K; and
11 (B) subtracting:
12 (i) bad debt expensed for federal income
13 tax purposes that corresponds to items of gross receipts included
14 in Subsection (c) (2) (A) for the current reporting period or a past
15 reporting period;
16
17 (c) (2) (A),
(ii) to the extent included in Subsection
foreign royalties and foreign dividends, including
18 amounts determined under Section 78 or Sections 951-964, Internal
19 Revenue Code;
20 (iii) to the extent included in Subsection
21 (c) (2) (A), net distributive income from partnerships and trusts
22 and from limited liability companies and s corporations treated as
23 partnerships for federal income tax purposes;
24 (iv) to the extent included in Subsection
25 (c) (2) (A), items of income attributable to an entity that is a
26 disregarded entity for federal income tax purposes; and
27 (v) to the extent included in Subsection
1 (c) (2) (A), other amounts authorized by this section; or
2 (3) for a taxable entity other than a taxable entity
3 treated for federal income tax purposes as a corporation or
4 partnership, an amount determined in a manner substantially
5 equivalent to the amount for Subdivision (1) or (2) determined by
6 rules that the comptroller shall adopt.
7 (d) Subject to Section 171.1014, a corporation that is part
8 of a federal consolidated group shall compute its total revenue
9 under Subsection (c) as if it had filed a separate return for
10 federal income tax purposes.
11 (e) A taxable entity that owns an interest in a passive
12 entity that is not included in a group report under Section 171.1014
13 shall include in the taxable entity's total revenue the taxable
14
15 the extent the net income of the passive entity was not generated by
16
17 (f) A taxable entity shall exclude from its total revenue,
18 to the extent included under Subsection (c)(1)(A), (c)(2)(A), or
19 (c) (3), flow-through funds that are mandated by law or fiduciary
20
21 (1) damages due a litigant the proceeds of which are
22 handled by the litigant's attorney; and
23 (2) taxes collected from a third party by the taxable
24 entity and remitted by the taxable entity to a taxing authority.
25 (g) A taxable entity shall exclude from its total revenue,
26 to the extent included under Subsection (c) ( 1) (A), (c) ( 2) (A), or
27 (c) (3), only the following flow-through funds that are mandated by
contract to be distributed to other entities:
(l) sales commissions to nonemployees, including
split-fee real estate commissions;
l
2
3
4 ( 2) the tax basis as determined under the Internal
5 Revenue Code of securities underwritten; and
6 (3) subcontracting payments handled by the taxable
7 entity to provide services, labor, or materials in connection with
8 the actual or proposed design, construction, or repair of
9 improvements on real property or the location of the boundaries of
10 real property.
ll (g-1) A taxable entity that is a lending institution shall
12 exclude from its total revenue, to the extent included under
l3 Subsection ~ c ) ( l ) (A), (c) (2) (A), or (c) (3):
14 (l) proceeds from the principal repayment of loans;
15 and
16 ( 2) the tax basis as determined under the Internal
17 Revenue Code of securities and loans sold.
18 (h) If the taxable entity belongs to an affiliated group,
19 the taxable entity may not exclude payments described by Subsection
20 (f), (g), or (g-1) that are made to entities that are members of the
21 affiliated group.
22 (i) Except as provided by Subsection (g), a payment made
23 under an ordinary contract for the provision of services in the
24 regular course of business may not be excluded.
25 ( j) Any amount excluded under this section may not be
26 included in the determination of cost of goods sold under Section
27 171.1012 or the determination of compensation under Section
1 171.1013.
2 (k) A taxable entity that is a staff leasing services
3 company shall exclude from its total revenue payments received from
4 a client company for wages, payroll taxes on those wages, employee
5 benefits, and workers' compensation benefits for the assigned
6 employees of the client company.
7 (l) For purposes of Subsection (g) (l):
8 ( l) "Sales commission" means:
9 (A) any form of compensation paid to a person for
10 engaging in an act for which a license is required by Chapter 1101,
11 Occupations Code; and
12 (B) compensation paid to a sales representative
13 by a principal in an amount that is based on the amount or level of
14 certain orders for or sales of the principal's product and that the
15 principal is required to report on Internal Revenue Service Form
16 1099-MISC.
17
18
(2) "Principal" means a per son who:
(A) manufactures, produces,
19 distributes a product for sale;
imports, or
20 (B) uses a sales representative to solicit orders
21 for the product; and
22 (C) compensates the sales representative wholly
23 or partly by sales commission.
24 Sec. 171.1012. DETERMINATION OF COST OF GOODS SOLD. (a) In
25 this section:
26 (1) "Goods" means real or tangible personal property
27 sold in the ordinary course of business of a taxable entity.
1 (2) "Production" includes construction, installation,
2 manufacture, development, mining, extraction, improvement,
3 creation, raising, or growth.
(3) (A) "Tangible personal property" means: 4
5 ( i) personal property that can be seen,
6 weighed, measured, felt, or touched or that is perceptible to the
7 senses in any other manner;
8 (ii) films, sound recordings, videotapes,
9 books, and other similar property embodying words, ideas, concepts,
10 images, or sound by the creator of the property for which, as costs
11 are incurred in producing the property, it is intended or is
12 reasonably likely that any tangible medium in which the p r o p e r t ~
13 embodied will be mass-distributed by the creator or any one or more
14 third parties in a form that is not substantially altered; and
15 (iii) a computer program, as defined by
16 Section 151.0031.
17 (B)
18 include:
19
20
"Tangible personal property"
(ii) services.
does not
21 (b) Subject to Section 171.1014, a taxable entity that
22 elects to subtract cost of goods sold for the purpose of computing
23 its taxable margin shall determine the amount of that cost of goods
24 sold as provided by this section.
25 (c) The cost of goods sold includes all direct costs of
26 acquiring or producing the goods, including:
27 (1) labor costs;
1 ( 2) cost of materials that are an integral part of
2 specific property produced;
3 (3) cost of materials that are consumed in the
4 ordinary course of performing production activities;
5 ( 4) handling costs, including costs attributable to
6 processing, assembling, repackaging, and inbound transportation
7 costs;
8 (5) storage costs, including the costs of carrying,
9 storing, or warehousing property, subject to Subsection (e);
10 (6) depreciation, depletion, and amortization, to the
11 extent associated with and necessary for the production of goods,
12 including recovery described by Section 197, Internal Revenue Code;
13 (7) the cost of renting or leasing equipment,
14 facilities, or real property directly used for the production of
15 the goods, including pollution control equipment and intangible
16 drilling and dry hole costs;
17 (8) the cost of repairing and maintaining equipment,
18 facilities, or real property directly used for the production of
19 the goods, including pollution control devices;
20 (9) costs attributable to research, experimental,
21 engineering, and design activities directly related to the
22 production of the goods;
23 ( 10) geological and geophysical costs incurred to
24 identify and locate property that has the potential to produce
25 minerals;
26 (11) taxes paid in relation to acquiring or producing
27 any material, or taxes paid in relation to services that are a
1 direct cost of production;
2 (12) the cost of producing or acquiring electricity
3 sold; and
4 ( 13) a contribution to a partnership in which the
5 taxable entity owns an interest that is used to fund activities, the
6 costs of which would otherwise be treated as cost of goods sold of
7 the partnership, but only to the extent that those costs are related
8 to goods distributed to the taxable entity as goods-in-kind in the
9 ordinary course of production activities rather than being sold.
10 (d) In addition to the amounts includible under Subsection
11 (c), the cost of goods sold includes the following costs in relation
12 to the taxable entity's goods:
13 (1) deterioration of the goods;
14
15
( 2) obsolescence of the goods;
(3) spoilage and abandonment, including the costs of
16 rework labor, reclamation, and scrap;
17 (4) if the property is held for future production,
18 preproduction direct costs allocable to the property, including
19 costs of purchasing the goods and of storage and handling the goods,
20 as provided by Subsections (c) (4) and (c) (5);
21 (5) postproduction direct costs allocable to the
22 property, including storage and handling costs, as provided by
23 Subsections (c) (4) and (c) (5);
24 (6) the cost of insurance on a plant or a facility,
25 machinery, equipment, or materials directly used in the production
26 of the goods;
27 ( 7) the cost of insurance on the produced goods;
1 (8) the cost of utilities, including electricity, gas,
2 and water, directly used in the production of the goods;
3 (9) the costs of quality control and inspection
4 directly allocable to the production of the goods; and
5 (10) licensing or franchise costs, including fees
6 incurred in securing the contractual right to use a trademark,
7 corporate plan, manufacturing procedure, special recipe, or other
8 similar right directly associated with the goods produced.
9 (e) The cost of goods sold does not include the following
10 costs in relation to the taxable entity's goods:
11 ( 1) the cost of renting or leasing equipment,
12 facilities, or real property that is not used for the production of
13 the goods;
14
15
16
(2) selling costs, including employee
related to sales;
(3) distribution costs,
17 transportation costs;
including
expenses
outbound
18
19
20
21 (7) bidding costs, which are the costs incurred in the
22 solicitation of contracts ultimately awarded to the taxable entity;
23 (8) unsuccessful bidding costs, which are the costs
24 incurred in the solicitation of contracts not awarded to the
25 taxable entity;
26 (9) interest, including interest on debt incurred or
27 continued during the production period to finance the production of
1 the goods;
2 (10) income taxes, including local, state, federal,
3 and foreign income taxes, and franchise taxes that are assessed on
4 the taxable entity based on income;
5 (11) strike expenses, including costs associated with
6 hiring employees to replace striking personnel, but not including
7 the wages of the replacement personnel, costs of security, and
8 legal fees associated with settling strikes; and
9 ( 12) officers' compensation.
10 (f) A taxable entity may subtract as a cost of goods sold
11 indirect or administrative overhead costs, including all mixed
12 service costs, such as security services, legal services, data
13 processing services, accounting services, personnel operations,
14 and general financial planning and financial management costs, that
15 it can demonstrate are allocable to the acquisition or production
16 of goods, except that the amount subtracted may not exceed four
17 percent of the taxable entity's total indirect or administrative
18 overhead costs, including all mixed service costs. Any costs
19 excluded under Subsection (e) may not be subtracted under this
20 subsection.
21 (g) A taxable entity that is allowed a subtraction by this
22 section for a cost of goods sold and that is subject to Section
23 263A, 460, or 471, Internal Revenue Code, shall capitalize that
24 cost in the same manner and to the same extent that the taxable
25 entity is required or allowed to capitalize the cost under federal
26 law and regulations, except for costs excluded under Subsection
27 (e), or in accordance with Subsections (c), (d), and (f).
1 (h) A taxable entity shall determine its cost of goods sold,
2 except as otherwise provided by this section, in accordance with
3 the methods permitted by federal statutes and regulations. This
4 subsection does not affect the type or category of cost of goods
5 sold that may be subtracted under this section.
6 (i) A taxable entity may make a subtraction under this
7 section in relation to the cost of goods sold only if that entity
8 owns the goods. The determination of whether a taxable entity is an
9 owner is based on all of the facts and circumstances, including the
10 various benefits and burdens of ownership vested with the taxable
11 entity.
12 (j) A taxable entity may not make a subtraction under this
13 section for cost of goods sold to the extent the cost of goods sold
14 was funded by partner contributions and deducted under Subsection
15 (c) ( 13).
16 (k) Notwithstanding any other provision of this section, if
17 the taxable entity is a lending institution that offers loans to the
18 public and elects to subtract cost of goods sold, the entity may
19 subtract as a cost of goods sold an amount equal to interest
20 expense.
21 (l) Notwithstanding any other provision of this section, a
22 payment made by one member of an affiliated group to another member
23 of that affiliated group not included in the combined group may be
24 subtracted as a cost of goods sold only if it is a transaction made
25 at arm's length.
26 (m) In this section, "arm's length" means the standard of
27 conduct under which entities that are not related parties and that
1 have substantially equal bargaining power, each acting in its own
2 interest, would negotiate or carry out a particular transaction.
3 (n) In this section, "related party" means a person,
4 corporation, or other entity, including an entity that is treated
5 as a pass-through or disregarded entity for purposes of federal
6 taxation, whether the person, corporation, or entity is subject to
7 the tax under this chapter or not, in which one person, corporation,
8 or entity, or set of related persons, corporations, or entities,
9 directly or indirectly owns or controls a controlling interest in
10 another entity.
11 Sec. 171.1013. DETERMINATION OF COMPENSATION. (a) Except
12 as otherwise provided by this section, "wages and cash
13 compensation" means the amount entered in the Medicare wages and
14 tips box of Internal Revenue Service Form W-2 or any subsequent form
15 with a different number or designation that substantially provides
16 the same information. The term includes:
17 (1) net distributive income from partnerships and
18 trusts and from limited liability companies and S corporations
19 treated as partnerships for federal income tax purposes, but only
20 if the person receiving the distribution is a natural personi and
21 (2) stock awards and stock options expensed for
22 federal income tax purposes.
23 (b) Subject to Section 171.1014, a taxable entity that
24 elects to subtract compensation for the purpose of computing its
25 taxable margin under Section 171.101 may subtract an amount equal
26
27 (1) subject to the limitation in Subsection (c), all
25 (l) shall include payments made to the staff leasing
26 services company for wages and benefits for the assigned employees
27 as if the assigned employees were actual employees of the entity;
(2) may not include an administrative fee charged by
2 the staff leasing services company for the provision of the
3 assigned employees; and
4 ( 3) may not include any other amount in relation to the
5 assigned employees, including payroll taxes.
6 Sec. 171.1014. COMBINED REPORTING; AFFILIATED GROUP
7 ENGAGED IN UNITARY BUSINESS. (a) Taxable entities that are part of
8 an affiliated group engaged in a unitary business shall file a
9 combined group report in lieu of individual reports based on the
10 combined group's business. The combined group may not include a
11 taxable entity that conducts business outside the United States if
12 80 percent or more of the taxable entity's property and payroll, as
13 determined by factoring under Chapter 141, are assigned to
14 locations outside the United States. In applying Chapter 141, if
15 either the property factor or the payroll factor is zero, the
16 denominator is one. The combined group may not include a taxable
17 entity that conducts business outside the United States and has no
18 property or payroll if 80 percent or more of the taxable entity's
19 gross receipts, as determined under Sections 171.103, 171.105, and
20 171.1055, are assigned to locations outside the United States.
21 (b) The combined group is a single taxable entity for
22 purposes of the application of the tax imposed under this chapter.
23 (c) For purposes of Section 171.101, a combined group shall
24 determine its total revenue by:
25 ( l) determining the total revenue of each of its
26 members as provided by Section 171.1011 as if the member were an
27 individual taxable entity;
1 ( 2) adding the total revenues of the members
2 determined under Subdivision (1) together; and
3 (3) subtracting, to the extent included under Section
4 17l.l0ll(c)(l)(A), (c)(2)(A), or (c)(3), items of total revenue
5 received from a member of the combined group.
6 (d) For purposes of Section 171.101, a combined group shall
7 make an election to subtract either cost of goods sold or
8 compensation that applies to all of its members.
9 (e) For purposes of Section 171.101, a combined group that
10 elects to subtract costs of goods sold shall determine that amount
11 .!:?.Y..:..
12 (l) determining the cost of goods sold for each of its
13 members as provided by Section 171.1012 as if the member were an
15 (2) adding the amounts of cost of goods sold
16 determined under Subdivision ( l) together; and
17 (3) subtracting from the amount determined under
18 Subdivision (2) any cost of goods sold amounts paid from one member
19 of the combined group to another member of the combined group, but
20 only to the extent the corresponding item of total revenue was
21 subtracted under Subsection (c) (3).
22 (f) For purposes of Section 171.101, a combined group that
23 elects to subtract compensation shall determine that amount by:
24 (1) determining the compensation for each of its
25 members as provided by Section 171.1013 as if each member were an
2 7 ( 2) adding the amounts of compensation determined
1 under Subdivision (1) together; and
2 (3) subtracting from the amount determined under
3 Subdivision (2) any compensation amounts paid from one member of
4 the combined group to another member of the combined group, but only
5 to the extent the corresponding item of total revenue was
6 subtracted under Subsection (c) (3).
7 (g) A combined group may elect to include in the combined
8 group an exempt entity that would be included in the group if the
9 entity were not exempt and to treat the exempt entity as if it were a
10 taxable entity.
11 [Sec. 171.102. DETERMINATION OF TAXABLE CAPITAL OF
12 CORPORATiml IN PROCESS OF LIQUIDATimL (a) "Corporation in the
13 process of liquidation" means a corporation that 1
14 [ ( 1) adopts and pursues in good faith a plan to marshal
15 the assets of the corporation, to pay or settle 11ith the
16 corporation's creditors and debtors, and to apportion the remaining
17 assets of the corporation among the corporation's stockholders,
18 [(2) adopts the plan by a resolution approved by the
19 corporation's board of directors and ratified by a majority of the
20 stockholders of record 1 and
21 [ (3) conducts the liquidation in the manner provided
22 by the la11 of this state to dissolve a corporation.
23 [(b) The taJlable capital of a corporation in the process of
24 liquidation is the difference betr.1een the amount of the
25 corporation's steel< issued and the amount of the liquidating
26 dividends paid on the stock.
27 [ (c) The president and the secretary of the corporation
1 shall file an affi.davit ;.'ith the comptroller contain.:ng .information
2 about the amount of liquidating dividends paid and a statement that
3 the corporation is in the process of liquidation. The plan
4 described by Subsection (a) of this section for the corporation's
5 liquidation shall be attached to and be a part of the affidavit.
6 [ (d) This section applies only to the computation of a
7 corporation's tmwble capital under Section 171.101 of this code.]
8 Sec. 171. 103. DETERMINATION OF GROSS RECEIPTS FROM BUSINESS
9 DONE IN THIS STATE FOR MARGIN CAPITAL]. (a) Subject to
10 Section 171.1055, in [ffi] apportioning margin [taJtable capital],
11 the gross receipts of a taxable entity [corporation] from its
12 business done in this state is the sum of the taxable entity's
13 [corporation's] receipts from:
14 [(1) each sale of tangible personal property if the
15 property is delivered or shipped to a buyer in this state regardless
16 of the FOB point or another condition of the sale, and each sale of
17 tangible personal property shipped from this state to a purchaser
18 in another state in Hhich the seller is not subject to taJtation;
19 [ ( 2) each service performed in this state 1
20 [ (3) each rental of property situated in this state;
21 [(4) the use of a patent, copyright, trademark,
22 franchise
1
or license in this state 1
23 [ ( 5) each sale of real property located in this state
1
24 including royalties from oil, gas, or other mineral interests; and
25 [ ( 6) other business done in this state.
26 [Sec. 171.1032, DETERMINATiml OF CROSS RECEIPTS FROM
27 BUSHlESS DONE Hl THIS STATE FOR TAXABLE SURPLUS. (a) EJtcept
1 for the gross receipts o ~ ~ o r a t i o n that are subject to the
2 provisions of ection 171.1061
1
in apportioning taJ[able earned
3 surplus
1
the gross receipts of a corporation from its business done
4 in this state is the sum of the corporation's receipts from:]
5 ( 1) each sale of tangible personal property if the
6 property is delivered or shipped to a buyer in this state regardless
7 of the FOB point or another condition of the sale [
1
and each sale of
8 tangible personal property shipped from this state to a purchaser
9 in another state in '..'hich the seller is not subject to any taJ[ on
1
or
10 measured by, net income, .;ithout regard to Hhether the talE is
11 imp o s e d ] ;
12 (2) each service performed in this state, except that
13 receipts derived from servicing loans secured by real property are
14 in this state if the real property is located in this state;
15 ( 3) each rental of property situated in this state;
16 (4) the use of a patent, copyright, trademark,
17 franchise, or license in this state;
18 (5) each sale of real property located in this state,
19 including royalties from oil, gas, or other mineral interests; and
20 (6) [each partnership or joint venture to the eJEtent
21 provided by ubsection (c) 1 and
22
23
[-{-?+] other business done in this state.
(b) A combined group shall include in its gross receipts
24 computed under Subsection (a) the gross receipts of each taxable
25 entity that is a member of the combined group and that has a nexus
26 with this state for the purpose of taxation. [A oorporation shall
27 deduct from its gross receipts oomputed under ubsection (a) any
1 amount to the extent included under Subsection (a) because of the
2 application of Section 78 or Sections 951 961
1
Internal Revenue
3 Code
1
any amount excludable under Section 171.110 (k)
1
and dividends
4 received from a subsidiary, associate, or affiliated corporation
5 that does not transact a substantial portion of its business or
6 regularly maintain a substantial portion of its assets in the
7 United States.
8 [(c) A corporation shall include in its gross receipts
9 computed under Subsection (a) the corporation's share of the gross
10 receipts of each partnership and joint venture of .chich the
11 corporation is a part apportioned to this state as though the
12 corporation directly earned the receipts, including receipts from
13 business done \lith the corporation.
14 [Sec. 171.104. CROSS RECEIPTS FROM BUSINESS DONE IN TEXAS.
15 DEDUCTION FOR FOOD MlD MEDICINE RECEIPTS. A corporation may deduct
16 from its receipts includable under Section 171.103(1) of this code
17 the amount of the corporation's receipts from sales of the
18 follo\ling items, if the items are chipped from outside this state
19 and the receipts 'dould be includable under Section 171.103(1) of
20 this code in the absence of this section:
21 [ (1) food that is eJEempted from the Limited Sales,
22 EJEcice, and Use TalE Act by Section 151.314(a) of this code1 and
23 [(2) health care supplies that are exempted from the
24 Limited Sales, Excise, and Use Tax Act by Section 151.313 of this
25
26 Sec. 171.105. [DETERMINATION OF CROSS Rl!:Cl!:IPTS FROM
27 BUSHmSS FOR TZ\XZ\BLJ!: CAPITAL. (a) In apportioning taltable
1 capital, the gross receipts of a corporation from its entire
2 business is the sum of the corporation's receipts from:
3 [(1) each sale of the corporation's tangible personal
4 property,
5
6
[(2) each service, rental, or royalty, and
[(3) other business.
7 [(b) If a corporation sells an investment or capital asset,
8 the corporation's gross receipts from its entire business for
9 taJeable capital include only the net gain from the sale.
10 [ec. 171.1051.) DETERMINATION OF GROSS RECEIPTS FROM
11 ENTIRE BUSINESS FOR MARGIN [TAXABLE EARNED URPLU). (a) Subject
12 to Section 171.1055 [EJccept for the gross receipts of a corporation
13 that are subject to the provisions of ection 171. 1061), in
14 appo.rtioning margin [taJeable earned surplus), the gross receipts of
15 a taxable entity [corporation) from its entire business is the sum
16 of the taxable entity's [corporation's) receipts from:
17 (1) each sale of the taxable entity's [corporation's)
18 tangible personal property;
19
20
( 2) each service, rental, or royalty; and
(3) [each partnership and joint venture as provided by
21 ubsection (d) 1 and
22
23
[+4+] other business.
(b) If a taxable entity [corporation) sells an investment or
24 capital asset, the taxable entity's [corporation's) gross receipts
25 from its entire business for taxable margin [earned surplus)
26 includes only the net gain from the sale.
27 (c) A combined group shall include in its gross receipts
1 computed under Subsection (a) the gross receipts of each taxable
2 entity that is a member of the combined group, without regard to
3 whether that entity has a nexus with this state for the purpose of
4 taxation.
5 Sec. 171.1055. EXCLUSION OF CERTAIN RECEIPTS FOR MARGIN.
6 In apportioning margin, receipts excluded from total revenue by a
7 taxable entity under Section 171.1011 or l71.1014(c) (3) may not be
8 included in either:
9 ( 1) the receipts of the taxable entity from its
10 business done in this state under Section 171.103; or
11 ( 2) the receipts of the taxable entity from its entire
12 business done under Section 171.105. [A corporation shall deduct
13 from its gross receipts computed under ubsection (a) any amount to
14 the OJEtent included in ubsectien (a) because of the application of
15 action 78 or actions 951 964
1
Internal Revenue Code, any amount
16 excludable under action 171.110(k)
1
and dividends received from a
17 subsidiary, associate
1
or affiliated corporation that does not
18 transact a substantial portion of its business or regularly
19 maintain a substantial portion of its assets in the United tates.
20 [(d) l\ corporation shall include in its gross receipts
21 computed under ubsection (a) the corporation's share of the gross
22 receipts of each partnership and joint venture of 11hich the
23 corporation is a part,]
24 Sec. 171.106. APPORTIONMENT OF MARGIN [TAXABLE CAPITAL AND
25 TAXABLE l!:ARNJW URPLU] TO THIS STATE. (a) [l!:ltcept as provided by
26 ubsections (c) and (d)
1
a corporation's taJrable capital is
27 apportioned to this state to determine the amount of the taJE imposed
1 under Section 171.002(b) (1) by multiplying the corporation's
2 taxable capital by a fraction
1
the numerator of \lhich is the
3 corporation's gross receipts from business dono in this state, as
4 determined under Section 171.103
1
and the denominator of 'dhich is
5 tho corporation's gross receipts from its entire business, as
6 determined under Section 171.105.
7 [+b+) Except as provided by this section [Subsections (c)
8 and (d)), a taxable entity's margin [corporation's taxable earned
9 surplus] is apportioned to this state to determine the amount of tax
10 imposed under Section 171.002 [171.002(b) (2)} by multiplying the
11 margin [taxable earned surplus) by a fraction, the numerator of
12 which is the taxable entity's gross .receipts from
13 business done in this state, as determined under Section 171.103
14 [171.1032), and the denominator of which is the taxable entity's
15 [corporation's] gross receipts from its entire business, as
16 determined under Section 171.105 [171.1051].
17 ill [-k+] A taxable entity's margin [corporation's taxable
18 capital or earned surplus] that is derived, directly or indirectly,
19 from the sale of management, distribution, or administration
20 services to or on behalf of a regulated investment company,
21 including a taxable entity [corporation] that includes trustees or
22 sponsors of employee benefit plans that have accounts in a
23 regulated investment company, is apportioned to this state to
24 determine the amount of the tax imposed under Section 171.002 by
25 multiplying the taxable entity's [corporation's] total margin
26 [tmrablo capital or earned surplus] from the sale of services to or
27 on behalf of a regulated investment company by a fraction, the
1 numerator of which is the average of the sum of shares owned at the
2 beginning of the year and the sum of shares owned at the end of the
3 year by the investment company shareholders who are commercially
4 domiciled in this state or, if the shareholders are individuals,
5 are residents of this state, and the denominator of which is the
6 average of the sum of shares owned at the beginning of the year and
7 the sum of shares owned at the end of the year by all investment
8 company shareholders. [Tho corporation shall make a separate
9 computation to allocate tmtable capital and earned surplus.] In
10 this subsection, "regulated investment company" has the meaning
11 assigned by Section 851 (a), Internal Revenue Code.
12 ill [-k!+J A taxable entity's margin [corporation's taJtable
13 capital or taxable earned surplus] that is derived, directly or
14 indirectly, from the sale of management, administration, or
15 investment services to an employee retirement plan is apportioned
16 to this state to determine the amount of the tax imposed under
17 Section 171.002 by multiplying the taxable entity's [corporation's]
18 total margin [taxable capital or earned surplus] from the sale of
19 services to an employee retirement plan company by a fraction, the
20 numerator of which is the average of the sum of beneficiaries
21 domiciled in Texas at the beginning of the year and the sum of
22 beneficiaries domiciled in Texas at the end of the year, and the
23 denominator of which is the average of the sum of all beneficiaries
24 at the beginning of the year and the sum of all beneficiaries at the
25 end of the year. [The corporation shall make a separate computation
26 to apportion taJtable capital and earned surplus.] In this section,
27 "employee retirement plan" means a plan or other arrangement that
1 is qualified under Section 401(a), Internal Revenue Code, or
2 satisfies the requirements of Section 403, Internal Revenue Code,
3 or a government plan described in Section 414(d), Internal Revenue
4 Code. The term does not include an individual retirement account or
5 individual retirement annuity within the meaning of Section 408,
6 Internal Revenue Code.
7 ill [(e) On or before January 1
1
1998
1
each entity
8 registered 11ith the tate ecuriticc Board under The ecuritiec 1\ct
9 (Article 581
1
Vernon's Texas Civil tatutec) that provides
10 management, administration, or investment cervices to an employee
11 retirement plan, must file a report \,'ith the comptroller containin<5
12 such information as the comptroller deems necessary in order to
13 determine the fiscal impact of ubcection (d). The tate
14 ccuritiec Beard and the ecuritiec Commissioner shall cooperate
15 11ith the comptroller in obtaining the information. The ecuritiec
16 Commissioner shall impose the penalties provided in The ecuritiec
17 Act (Article 581 1 et ceq.
1
Vernon's Texas Civil tatutec) against
18 any entity that the comptroller certifies is delinquen'.:: in '.:he
19 filing of the report required by this section.
20 [(f) On or before eptember 1
1
1998
1
the comptroller shall
21 issue a report \,'hich evaluates the ctat01o'ide fiscal impact of
22 ubcection (d). If the comptroller determines that implementing
23 ubcection (d) ',.rill not have a negative fiscal impact on this state,
24 ubcection (d) shall be effective for reports or returns originally
25 due on or after January 1
1
1999. If the comptroller determines that
26 there 11ill be a negative fiscal impact, that subsection shall not be
27 implemented.
1 [(g) If this Act and another Act of the 75th Legislature
1
2 Regular Session, 1997
1
make the same substantive change from the
3 current lm.' bu"!: differ in text
1
this ,n,ct prevails regardless of the
4 relative dates of enactment.
5 [+h+J A banking corporation shall exclude from the
6 numerator of the bank's apportionment factor interest earned on
7 federal funds and interest earned on securities sold under an
8
9
agreement to
correspondent
repurchase
bank that
that are held in
is domiciled in this
this state in a
state. In this
10 subsection, "correspondent" has the meaning assigned by 12 C.P.R.
ll Section 206.2(c).
12 ~ [{+) Receipts from services that a defense
13 readjustment project performs in a defense economic readjustment
14
15
16
zone are not receipts from business done in this state.
[Sec. 171.1061. l\LLOCATION OF CERTAHl TAXABLE E Z \ R ~ l E D
SURPLUS TO TlliS STF,TI!;. An item of income included in a
17 corporation's taxable earned surplus, except that portion derived
18 from dividends and interest, that a state
1
other than this state
1
or
19 a country
1
other than the United States
1
cannot tax because the
20 activities generating that item of income do not have sufficient
21 unitary connection with the corporation's other activities
22 conducted 'n'ithin that state or country under the United States
23 Constitution, is allocated to this state if the corporation's
24 commercial domicile is in this state. Income that can only be
25 allocated to the state of commercial domicile because the income
26 has insufficient unitary connection \,'ith any other state or country
27 shall be allocated to this state or another state or country net of
1 eltpenses related to that income. Z\ portion of a corporation's
2 taxable earned surplus allocated to this state under this section
3 may not be apportioned under ection 171.110 (a) ( 2).)
4 Sec. 171. 107. DEDUCTION OF COST OF SOLAR ENERGY DEVICE FROM
5 MARGIN [TAXAgLE CAPITAL OR TAXAgLE EARNED URPLU) APPORTIONED TO
6 THIS STATE. (a) In this section, "solar energy device" means a
7 system or series of mechanisms designed primarily to provide
8 heating or cooling or to produce electrical or mechanical power by
9 collecting and transferring solar-generated energy. The term
10 includes a mechanical or chemical device that has the ability to
11 store solar-generated energy for use in heating or cooling or in the
12 production of power.
13 (b) A taxable entity [corporation) may deduct from [t-s
14 apportioned taJEable capital the amortized cost of a solar energy
15 device or from) its apportioned margin [taJEable earned surplus) 10
16 percent of the amortized cost of a solar energy device if:
17 (1) the device is acquired by the taxable entity
18 [corporation) for heating or cooling or for the production of
19 power;
20 (2) the device is used in this state by the taxable
21 entity [corporation); and
22 (3) the cost of the device is amortized in accordance
2 3 with Subsection (c) [of this sect ion) .
24 (c) The amortization of the cost of a solar energy device
25
26
27
must:
( 1) be for a period of at least 60 months;
( 2) provide for equal monthly amounts;
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
( 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) !', 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 talE period and to the first regular annual period.]
Sec. 171.108. DEDUCTION OF COST OF CLEAN COAL PRO,JECT 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 [taJtable 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 a c qui r e d by the
[corporation] for use in generation of electricity, production of
process steam, or industrial production;
1 (3) that the taxable entity [corporation) uses in this
2 state; and
3 (4) the cost of which is amortized in accordance with
4 Subsection (c).
5 (c) The amortization of the cost of capital used in a clean
6 coal project must:
7
8
9
( 2) provide for equal monthly amounts;
(3) begin in the month during which the equipment is
10 placed in service in this state; and
11 (4) cover only a period during which the equipment is
12 used in this state.
13 (d) A taxable entity [corporation) that makes a deduction
14 under this section shall file with the comptroller an amortization
15 schedule showing the period for which the deduction is to be made.
16 On the request of the comptroller, the taxable entity [corporation)
17 shall file with the comptroller proof of the cost of the equipment
18 or proof of the equipment's operation in this state.
19 [ (e)
"
10: corporation may elect to make the deduction
20 authorized by this section from apportioned taJEable capital or
21 apportioned taJcable earned surplus, but not from both, for each
22 separate regular annual period. An election for an initial period
23 applies to the second talE period and to the first regular annual
24 period.
25
26
27
[eo. 171.109. URPLU. (a) In this chapter:
[ (1) "urplus" means the net assets of a corporation
minus its stated capital. For a limited liability company,
1 "surplus" means the net assets of the company minus its members'
2 contributions. Surplus includes unrealized
7
estimated
7
or
3 contingent losses or obligations or any r,nitedor,,'n of assets other
4 than those listed in Subsection (i) of this section net of
5 appropriate income tmr provisions. ''he definition under this
6 subdivision does not apply to earned surplus.
7 [ ( 2) "Net assets" means the total assets of a
8 corporation minus its total debts.
9 [ (3) "Debt" means any legally enforceable obligation
10 measured in a certain amount of money 'dhich must be performed or
11 paid l.'ithin an ascertainable period of time or on demand.
12 [(a 1) A legally enforceable obligation that requires the
13 return of a like kind property that r,.ras borror..'ed Hill be considered
14 debt if it is a liability according to generally accepted
15 accounting principles and if the return must be mad.e '..'ithin an
16 ascertainable period of time or on demand. ''he amount that 'dill be-
17 consid.ered debt is the fair market value measured. on the last d.ay on
18 "hich the report is based. as required by Section 171.153. For
19 purposes of this subsection, "like l<ind property" means the same
20 quantity, quality, and nature or character as the property
21 borro'..'ed..
22 [(b) l':Jrcept as othen,'ise provided in this section
7
a
23 corporation must compute its surplus
7
assets
7
and debts according
24 to generally accepted. accounting principles. If generally accepted
25 accounting principles are unsettled. or do not specify an accounting
26 practice for a particular purpose related to the computation of
2 7 surplus
1
assets
1
or d.ebts
1
the comptroller by rule may establish
1 rules to specify the applicable accounting practice for that-
2 purpose.
3 [ (c) A corporation \,'hose taJtable capital is less than $1
4 million may report its surplus according to the method used in the
5 corporation's most recent federal income taK return originally due
6 on or before the date on 'n'hich the corporation's
7 report is originally due. In determining if taltable capital is less
8 than $1 million, the corporation shall apply the methods the
9 corporation used in computing that federal income talE return unless
10 another method is required under this chapter.
11 [(d) A corporation shall report its surplus based solely on
12 its o1m financial condition. Consolidated reporting of surplus is
13 prohibited.
14 [(e) Unless the provisions of Section 171.111 apply due to
15 an election under that section
1
a corporation may not change the
16 accounting methods used to compute its surplus more often than once
17 every four years 'n'ithout the 11ritten consent of the comptroller. A
18 change in accounting methods is not justified solely because it
19 results in a reduction of talE liability.
20 [(f) A corporation declaring dividends shall eKclude those
21 dividends from its taltable capital, and a corporation receiving
22 dividends shall include those dividends in its gross receipts and
23 taltable capital as of the earlier of 1
24 [ ( 1) the date the dividends are declared, if the
25 dividends are actually paid '..'ithin one year after the declaration
26 date 1 or
27 [ ( 2) the date the dividends are actually paid.
1 [(g) All oil and gas exploration and production activities
2 conducted by a corporation that reports its surplus according to
3 generally accepted accoun::ing principles as required or permitted
4 by this chapter must be reported according to the successful
5 efforts or the full cost method of accounting.
6 [(h) A parent or investor corporation must use the cost
7 method of accounting in reporting and calculating the franchise talE
8 on its investments in subsidiary corporations or other investees.
9 The retained earnings of a subsidiary corporation or other investee
10 before acquisition by the parent or investor corporation may not be
11 elEcluded from the cost of the subsidiary corporation or investee to
12 the parent or investor corporation and must be included by the
13 parent or investor corporation in calcula'.::ing its surplus.
14 [ (i) The follol,'ing accounts may also be elEcluded from
15 surplus, to the extent they are in conformance ,rith generally
16 accepted accounting principles or the appropriate federal income
17 talE method
1
'n'hichever is applicable:
18
19
20
accounts;
[ ( 1)
and
[ (rl)
a reserve or
a contra asset
21 depreciation, or amortization.
allor,1ance for uncollec'.::able
account for depletion,
22
23
[ ( j) A corporation may not e1wlude from surplus:
[(1) liabilities for compensation and other benefits
24 provided to employees, other than ,rages, that are not debt as of the
25 end of the accounting period on r,.rhich the taJEable capital component
26 is based, including retirement, medical, insurance,
27 postretirement
1
and other similar benefits 1 and
1 [ ( 2) defened investment talE credits.
2 [ (k) Notr,,rithstanding any other provision in this chapter
1
a
3 corporation subj oct to the taJt imposed by this chapter shall use
4 double entry bookkeeping to account for all transactions that
5 affect the computation of that taJc.
6 [ (1) The "first in first out" and "last in first out"
7 methods of accounting are acceptable methods for computing surplus.
8 [ (m) A corporation may not use the push dordn method of
9 accounting in computing or reporting its surplus.
10 [ (n) A corporation must use the equity method of accounting
11 '..'hen reporting an investment in a partnership or joint venture.
12 [ e c, 171. 110, ogTgRHHlATION OF ~ m T TAXABU; g A R ~ m D URPLU.
13 (a) The net tmwble earned surplus of a corporation is computed byt
14 [(1) determining the corporation's reportable federal
15 taJEable income, subtracting from that amount any amount eJEcludable
16 under Subsection (k)
1
any amount included in reportable federal
17 taJcable income under oct ion 78 or Sections 951 964
1
Internal
18 Revenue Code, and dividends received from a subsidiary, associate,
19 or affiliated corporation that does not transact a substantial
20 portion of its business or regularly maintain a substantial portion
21 of its assets in the United tates
1
and adding to that amount any
22 compensation of officers or directors, or if a bank, any
23 compensation of directors and eJcecutive officers, to the eJctent
24 eJEcluded in determining federal taJEable income to determine the
25 corporation's taJwble earned surplus,
26 [ (2) apportioning the corporation's tmwble earned
27 surplus to this state as provided by Section 171.106(b) or (c)
1
as
1 applicable, to determine tho corporation's appo..:--t-ihonod taJCablo
2 -e-a-r-n-ed surplus 1
3 [+J+- adding tho corporation's tmwblo earned surplus
4 allocated to this state as provided by Section 171.1061, and
5 [ (4) subtractin' from that amount any allo'.lablo
6 deductions and any business loss that is carried fonlard to tho tall
7 roportin9 period and deductible under Subsection (e).
8 [(b) EJCcopt as provided by Subsection (c), a corporation is
9 not required to add tho compensation of officers or directors as
10 required by Subsection (a) (1) if the corporation is:
11 [(1) a corporation that has not more than 35
12 shareholders, or
13 [ (2) an S corporation, as that term is defined by
14 Section 1361
7
Internal Revenue Code.
15 [(c) A subsidiary corporation may not claim tho oJCclusion
16 under Subsection (b) if it has a parent corporation that does not
17 qualify for tho oJclusion. For purposes of this subsection, a
18 corporation qualifies as a parent if it ultimately controls tho
19 subsidiary, oven if the control arises throu9h a series or 'roup of
20 other subsidiaries or entities. Control is presumed if a parent
21 corporation directly or indirectly o',ms, controls, or holds a
22 majority of the outstandin' votin9 stock of a corporation or
23 o1mership interests in another entity.
24 [(d) A corporation's reportable federal taJCablo income is
25 tho corporation's federal taKable income after Schedule C special
26 deductions and before not operatin9 loss deductions as computed
27 under the Internal Revenue Code, ellcept that an S corporation's
1 reportable federal taJEable income ic tJ:!.e.-a:mount of the income
2 reportable to the Internal Revenue ervice ac taKable to the
3 corporation's shareholders.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
[(e) For purposes of this section, a bucinecc lose ic any
negative amount after apportionment and allocation. The bucinecc
lose shall be carried fon1ard to the year succeeding the lose year
ac a deduction to net taxable earned curpluc
1
then successively to
the succeeding four taKable years after the lose year or until the
lose ic eJEhaucted
1
>lhichever occurs first, but for not more than
five taJwble years after the lose year. Not\,'ithctanding the
preceding sentence
1
a bucinecc lose from a talE year that ends before
January 1
1
1991
1
may not be used to reduce net taxable earned
surplus, l'. bucinecc lose can be carried fon1ard only by the
corporation that incurred the lose and cannot be transferred to or
claimed by any other entity, including the survivor of a merger if
the lees '.lac incurred by the corporation that did not survive the
merger.
[(f) A corporation may uce either the "first in first out"
19 or "last in first out" method of accounting to compute itc net
20 taxable earned surplus
1
but only to the eJEtent that the corporation
21 used that method on itc meet recent federal income talE report
22 originally due on or before the date on 11hich the corporation's
23 franchise talE report is originally due.
24 [(g) For purposes of this section, an approved Employee
25 took 0'..'nerchip Plan controlling a minority interest and voted
26 through a single trustee shall be considered one shareholder.
27 [(h) A corporation shall report itc net taxable earned
1 surplus based solely on its o1m financial condition. Consolidate!
2 reporting is prohibited.
3 [ (i) For purposes of this section, any person designated as
4 an officer is presumed to be an officer if that person.
5 [ ( 1) holds an office created by the board of directors
6 or under the corporate charter or bylar..'s 1 and
7 [ (2) hac legal authority to bind the corporation 'dith
8 third parties by eJtecuting contracts or other legal documents.
9 [ (j) Z', corporation may rebut the presu!Rption described iR-
10 Subsection (i) that a person is an officer if it conclusively sho'.:s
1
11 through the person's job description or other documentation, that
12 the person does not participate or have authority to participate in
13 significant policy making aspects of the corporate operations.
14 [(k) Dividends and interest received from federal
15 obligations are not included in earned surplus or gross receipts
16 for earned surplus purposes.
17 [(1) Inthiscection:
18 [ (1) "Federal obligations" means:
19 [(A) stocks and other direct obligations of
1
and
20 obligations unconditionally guaranteed by, the United States
21 government and United States government agencies, and
22 [{B) direct obligations of a United States
23 goverR-ment sponsored agency.
24 [(2) "Obligation" means any bond, debenture,
25 security, mortgage backed security, pace through certificate, or
26 other evidence of indebtedness of the issuing entity. The term does
27 not include a deposit, a repurchase agreement, a loan, a lease, a
1 participation in a loan or pool of loans, a loan by
2 an obligation of a United States government agency, or a loan
3 guaranteed by a United States government agency,
4 [ (3) "United States government" means any department
5 or ministry of tho federal government, including a federal reserve
6 bank. The term does not include a state or local government
1
a
7 commercial enterprise ouned ',;holly or partly by the United States
8 government
1
or a local governmental entity or commercial enterprise
9 Hhose o.bligations are guaranteed .by the Uni'.:ed States government.
10 [+4+- "United States government agency" means an
11 instrumentality of the United States government 11hose obligations
12 are fully and explicitly guaranteed as to the timely payment of
13 principal and interest by the full faith and credi'.: of the United
14 States government. The term includes the Government National
15 Mortgage I'.ssociation
1
the Department of Veterans Affairs
1
the
16 Federal Housing Administration, the Farmers Home Administration,
17 the J!;J(port Import Bank, the Overseas Private Investment-
18 Corporation, the Commodity Credit Corporation, the Small Business
19 Administration, and any successor agency.
20 [ ( 5) "United States government sponsored agency"
21 means an agency originally established or chartered by the United
22 States government to serve public purposes specified by the United
23 States Congress but 11hose obligations are not elEplicitly guaranteed
24 .by the full faith and credit of the United States government. The
25 term includes the Federal Home Loan Mortgage Corporation
1
the
26 Federal National Mortgage Association, the Farm Credit System, the
27 Federal Home Loan Bank System, the Student Loan Marketing
1 Association, and any successor agency.
2 [Sec. 171.111. TEMPORARY CREDIT ON NET TAXABLE EARNED
3 SURPLUS. (a) ~ l o t later than March 1
1
1992
1
a corporation may
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
notify the comptroller in >Hiting of its intent to preserve its
right to take a credit in an amount allo>led by this section on the
tax due on 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
1
1992
1
until the
corporation revokes the election or this section e1rpires
1
r.:hichever
is earlier. A corporation may claim the credit for not more than 20
consecutive privilege periods beginning 'dith the first report due
under this chapter after January 1
1
1992. A 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 alloHed under this section for any privilege
period is computed by:
[ ( 1) dot ermining the amount
1
as of the, end of the
corporation's accounting year ending in 1991
1
that is the
difference bet'deen 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 'dill reverse,
[(2) apportioning the amount determined under
Subdivision (1) to this state in the same manner earned surplus is
apportioned under Section 171.106(b) or (c)
1
as applicable, on the
first report due on or after January 1
1
1992,
[(3) multiplying the amount determined unde-r-
1
2
3
4
5
6
7
8
9
10
11
ubdivision (2) by five percent; and
[ ( 4) multiplying the amount determined under
Subdivision ( 3) by the talc rate prescribed by ection
171. 002 (a) ( 2) .
[(c) In computing the amount under Subsection (b) (1)
1
the
corporation may not consider differences that result from deferred
investment talE credits, allo'..'ances for funds used during
construction, or any other timing difference for \lhich a deferred
tax liability is not required under generally accepted accounting
principles.
[(d) After the election under Subsection (a) the
12 corporation must
1
for purposes of computing its tmcable capital
13 under this chapter
1
use the same accounting methods under generally
14 accepted accounting principles to account for the assets and
15 liabilities that determine the amount of the credit that the
16 corporation uses to compute the credit. Section
17 171.109(e)
1
if a corporation changes an accounting method for an
18 asset or liability that determines
1
in Hhole or in part
1
the amount
19 of the credit during the period the election is in effect
1
the
20 election is automatically revoked.
21 [(e) ,\ corporation that notifies the comptroller of its
22 intent to preserve its right to take a credit allo'..'ed by this
23 section shall submit \lith its notice of intent a statement of the
24 amount determined under Subsection (b) ( 1). The comptroller may
25 request that the corporation submit in the annual report for each
26 succeeding privilege period in ',lhich the corporation is eligible to
27 take a credit information relating to the amount determined under
1 wbsection (b) ( 1). The corporation shall submit in the form and
2 content the comptroller requires any information relating to th
3 assets and liabilities that determine the amount of the credit, the
4 amount determined under ubsection (b) (1}
1
or any other matter
5 relevant to the computation of the credit for \,'hich the corporation
6 is eligible.
7 [(f) A credit allo\led under this section may not be carried
8 forr.,rard or back'.lard or used to create a business less carryover
9 under action 171.110.
10 [(g) p, corporation may not use a credit allo'.,red under this
11 section in connection '.lith the computation of the corporation's tale
12 -e-n-net taJeable capital.
13 [(h) In addition to the tale imposed by action 171.002
1
an
14 additional tme is imposed en each corporation during each year the
15 corporation t a l ~ : e s the credit alle110d under this section. The
16 additional tale is equal to 0.2 percent of the corporation's net
17 taleable capital per year of privilege per ied.
18 [ (i} This section eJepires eptember 1
1
2012.
19 [ec. 171.112. GRO RECEIPT FOR TAXABLE CAPITZ\L. (a} For
20 purposes of this section, "gross receipts" means all revenues that
21 '.,reuld be recognized annually under a generally accepted accounting
22 principles method of accounting, '.litheut deduction fer the cost of
23 property sold, materials used, labor performed, or other costs
24 incurred, unless othen1ise specifically provided in this chapter.
25 [(b) EJecept as etherrdise provided in this section, a
26 corporation must compute gross receipts in accordance 'a'ith
27 generally accepted accounting principles. If generally accepted
1 accounting= principles are unsettled or do not specif'z' an accounting=
2 practice for a particular purpose related to the computation of
3 gross receipts
1
the comptroller by rule may establish rules to
4 specify the applicable accounting practice.
5 [(c) A corporation \/hose taltable capital is less than $1
6 million may report its gross receipts according to the method used
7 in the corporation's most recent federal income tax return
8 originally due on or before the date on Hhich the corporation's
9 franchise tax report is originally due. In determining if taxable
10 capital is less than $1 million, the corporation shall apply the
11 methods the corporation used in computing that federal income tax
12 return unless anot-h-e-r-method is required under this chapter.
13 [(d) A corporation shall report ito gross receipts based
14 solely on its 011n financial condition. Consolidated reporting is
15 prohibited.
16 [(e) Unless the provisions of Section 171.111 apply due to
17 an election under that section, a corporation may not change its
18 accounting methods used to calculate gross receipts more often than
19 once every four years 11ithout the express IHitten consent of the
20 comptroller. A change in accounting methods is not justified
21 solely because it results in a reduction of talE liability.
22 [(f) Notl>'ithstanding any other provision in this chapter
1
a
23 corporation subject to the talE imposed by this chapter shall use
24 double entry boolikeeping to account for all transactions that
25 affect the computation of that talE.
26 [ (g) Chapter 141 does not apply to this chapter.
27 [(h) ElEcept as otherr.1ioe provided by this section, a
1 ~ ~ r a t i o n shall use the same accounting methods to apportion its
2 taKable capital as it used to compute its ta1cable capital.]
3 Sec. 171.1121. GROSS RECEIPTS FOR MARGIN [TAXABLE EARNED
4 URPLU]. (a) For purposes of this section, "gross receipts" means
5 all revenues reportable by a taxable entity [corporation] on its
6 federal tax return, without deduction for the cost of property
7 sold, materials used, labor performed, or other costs incurred,
8 unless otherwise specifically provided in this chapter. ["Grose
9 receipts" does not include revenues that are not included in
10 ta1cable earned surplus. For eltample
1
fichedule C special deductions
11 and any amounts subtracted from reportable federal taJtable incom-e-
12 under fiection 171.110(a) (1) are not included in taJtable earned
13 surplus and therefore are not considered gross receipts.]
14 (b) Except as otherwise provided by this section, a taxable
15 entity [corporation] shall use the same accounting methods to
16 apportion margin [taltable earned surplus] as used in computing
17 reportable federal taxable income.
18 (c) A taxable entity [A corporation shall report its gross
19 receipts based solely on its O'dn financial condition. Consolidated
20 reporting is prohibited.
21 [(d) Unless the provisions of fiection 171.111 apply due to
22 an election under that section, a corporation] may not change its
23 accounting methods used to calculate gross receipts more often than
24 once every four years without the express written consent of the
25 comptroller. A change in accounting methods is not justified
26 solely because it results in a reduction of tax liability.
27 [(e) .'\corporation's share of a partnership's grace receipts
1 that is included in tho corporation's fedorol taxoblo income must
2 be used in computing the corporation's gross receipts under this
3 section. Unless othen>'ice provided by this chapter
1
a corporation
4 may not deduct coste incurred from the corporation's share of a
5 partnership's gross receipts. The gross receipts must be
6 apportioned as though the corporation directly earned them.
7 [Soc. 171.113. ALTERNATE HETtiOD OF TAXABLE
8 CAPITAL AND CROSS RECEIPTS FOR CERTAIN CORPORATIONS. (a) This
9 section applies only to:
10 [(1) a corporation organized as a close corporation
11 under Part 12
1
Texas Business Corporation Act, that has not more
12 than 35 shareholders 1
13 [(2) a foreign corporation organized under the close
14 corporation la'd of another state that has not more than 35
15 shareholders, and
[ (3) an s corporation as that 16
17 Section 1361
1
Internal Revenue Code of 1986
18 1361).
term is defined by
(26 u,s,c. Section
19 [(b) A corporation to 'oihich this section applies may elect
20 to compute its surplus, assets, debts, and gross receipts according
21 to tho method tho corporation uses to report its federal income talE
22 instead of as provided by Sections 171.109(b) and (g) and Section
23 171.112(b), This section does not affect the application of the
24 other subsections of Sections 171.109 and 171.112 and other
25 provisions of this chapter to a corporation maldng the election.
26 [ (c) The comptroller may adopt rules as necessary to specify
27 the reporting requirements for corporations to uhich this section
1 applies.
2 [(d) This section does not apply to a subsidiary corporation
3 unless it applies to the parent corporation of the subsidiary,
4 [(e) The election under Subsection (b) becomes effective
5 '..'hen '..'ritten notice of the election is received by the comptroller
6 from the corporation, Z\n election under Subsection (b) must be
7 postmarked not later than the due date for the electing
8 corporation's franchise talE report to r,.rhich the election applies.]
9 SECTION 2.04. Subchapter D, Chapter 171, Tax Code, is
ll
12
SUBCHAPTER D. PAYMENT OF TAX
Sec. 171.151. PRIVILEGE PERIOD COVERED BY TAX.
13 franchise tax shall be paid for each of the following:
The
14 (1) an initial period beginning on the taxable
15 entity's [corporation's] beginning date and ending on the day
16 before the first anniversary of the beginning date;
17 (2) a second period beginning on the first anniversary
18 of the beginning date and ending on December 31 following that date;
19 and
20 ( 3) after the initial and second periods have expired,
21 a regular annual period beginning each year on January 1 and ending
22 the following December 31.
23 Sec. 171.152. DATEONWHICHPAYMENTISDUE. (a) Paymentof
24 the tax covering the initial period is due within 90 days after the
25 date that the initial period ends or, if applicable, within 91 days
26 after the date of the merger.
27 (b) Payment of the tax covering the second period is due on
1 the same date as the tax covering the initial period.
2 (c) Payment of the tax covering the regular annual period is
3 due May 15, of each year after the beginning of the regular annual
4 period. However, if the first anniversary of the taxable entity's
5 [corporation's] beginning date is after October 3 and before
6 January 1, the payment of the tax covering the first regular annual
7 period is due on the same date as the tax covering the initial
8 period.
9 [Sec. 171.153. BUSHJES ON IIHICH TtxX ON ~ J E T Tt,x,n,BLE CZ\PITZ\L
10 I BASED. (a) The tax covering the initial period is reported on
11 the initial report and is based on the business done by the
12 corporation during the period beginning on the corporation's
13 beginning date andt
14 [(1) ending on the last accounting period ending date
15 that is at least cilE months after the beginning date and at least 6G
16 days before the original due date of the initial report, or
17 [(2) if there is no such period ending date in
18 Subdivision (1) of this subsection, then ending on the day that is
19 the last day of a calendar month and that is nearest to the end of
20 the corporation's first year of business, or
21 [ ( 3) ending on the day after the merger occurs, for the
22 survivor of a merger 'dhich occurs after the day on 'n'hich the talE is
23 based in Subdivision (1) or Subdivision (2)
1
>>'hichever is
24 applicable, of Subsection (a) and before January 1
1
of the year an
25 initial report is due by the survivor.
26 [(b) The tax covering the second period is reported on the
27 initial report and is based on the came business on 'dhich the talE
1 00vering the initial period is based and is to be prorated based on
2 the length of the second period.
3 [(c) The tal! covering the regular annual period is based on
4 the business done by the corporation during its last accounting
5 period that ends in the year before the year in <lhich the tal! is due,
6 unless a corporation is the survivor of a merger '..'hich occurs
7 betl.'een the end of its last accounting period in the year before the
8 report year and January 1 of the report year
1
in \o'hich case the ta11
9 r.,ri11 be based on the financial condition of the surviving
10 corporation for the 12 month period ending on the day after th&
11 merger. Hor.,rever
1
if the first anniversary of the corporation's
12 beginning date is after October 3 and before January 1
1
the tax
13 covering the first regular annual period is based on the came
14 business on \,rhich the ta11 covering the initial period is based and
15 is reported on the initial report.
16 [eo. 171.1531. CREDIT FOR URVIVOR OF MERCER. (a) "Credit
17 period" means the period from the date of the merger or the date the
18 survivor r o ~ a c required to pay franchise tan
1
11hichever is later
1
19 through the end of the privilege period for r o ~ h i c h tal! 'dac actually
20 paid by the nonsurvivorc.
21 [(b) The survivor of a merger is entitled to a credit
22 against the ta11 computed on its net talEable capital under action
23 171.002(b) (1) in the amount of the franchise tal! computed on net-
24 tmwble capital paid by the noncurvivorc for the credit period,
25 provided the tal! computed on net ta1wble capital paid by th&
26 survivor for the credit period is based on the survivor 'c financial
27 condition after the merger. Only a survivor that is subject to the
1 franchise taJr is entit-e-!---1=-e the merger credit. The merger credit
2 shall be allocated among survivors based on net taxable capital
3 reported, and as provided by Section 171.153,
4 [ (c) The credit 11ill be limited to the lesser of the amo-u-n-t-
5 of tax on net taxable capital paid for the credit period by the
6 survivor or by the nonsurvivors .)
7 Sec. 171.1532. BUSINESS ON WHICH TAX ON NET TAXABLE MARGIN
8 [EARNED SURPLUS) IS BASED. (a) The tax covering the privilege
9 periods included on the initial report[, as required by Section
10 171.153,) is based on the business done by the taxable entity
11 [corporation) during the period beginning on the taxable entity's
12 [corporation's) beginning date and:
13 (1) ending on the last accounting period ending date
14 that is at least 60 days before the original due date of the initial
15 report; or
16 (2) if there is no such period ending date in
17 Subdivision ( 1) [of this subsection), then ending on the day that is
18 the last day of a calendar month and that is nearest to the end of
19 the taxable entity's [corporation's) first year of business.
20 (b) The tax covering the regular annual period, other than a
21 regular annual period included on the initial report, is based on
22 the business done by the taxable entity [corporation) during the
23 period beginning with the day after the last date upon which [ ~ )
24 taxable margin [earned surplus) on a previous report was based and
25 ending with its last accounting period ending date for federal
26 income tax purposes in the year before the year in which the report
27 is originally due.
1
2
3
4
5
6
7
8
9
10
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
[ CORPORATiml) 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
11 certificate of withdrawal as provided by law.
12 (b) The foreign taxable entity [corporation) may not
13 withdraw from doing business in this state unless it has paid,
14 before filing the certificate of withdrawal, any tax or penalty
15 imposed by this chapter on the taxable entity [corporation).
16 SECTION 2.05. Subchapter E, Chapter 171, Tax Code, is
18 SUBCHAPTER E. REPORTS AND RECORDS
19 Sec. 171.201. INITIAL REPORT. (a) Except as provided by
20 Section 171.2022, a taxable entity [corporation) on which the
21 franchise tax is imposed shall file an initial report with the
22 comptroller containing:
23 (1) information showing the financial condition of the
24 taxable entity [corporation) on the day that is the last day of a
25 calendar month and that is nearest to the end of the taxable
26 entity's [corporation's) first year of business;
27 ( 2) the name and address of:
1 each officerL [aR4) director, and manager of
2 the taxable entity [corporation);
3 (B) for a limited partnership, each general
4 partner;
5 (C) for a general partnership or limited
6 liability partnership, each managing partner or, if there is not a
7 managing partner, each partner; or
8 (D) for a trust, each trustee;
9 (3) the name and address of the agent of the taxable
10 entity [corporation] designated under Section 171.354; and
11 (4) other information required by the comptroller.
12 (b) The taxable entity [corporation) shall file the report
13 on or before the date the payment is due under [Subsection (a) of]
14 Section 171.152(a) [171.12).
15 Sec. 171.202. ANNUAL REPORT. (a) Except as provided by
16 Section 171.2022, a taxable entity [corporation] on which the
17 franchise tax is imposed shall file an annual report with the
18 comptroller containing:
19 (1) financial information of the taxable entity
20 [corporation] necessary to compute the tax under this chapter;
21 (2) the name and address of each officer and director
22 of the taxable entity [corporation);
23 (3) the name and address of the agent of the
24 entity [corporation] designated under Section 171.354; and
25
26
( 4) other information required by the comptroller.
(b) The taxable entity [corporation] shall file the report
27 before May 16 of each year after the beginning of the regular annual
1 period. The report shall be filed on forms supplied by the
2 comptroller.
3 (c) The comptroller shall grant an extension of time to a
4 taxable entity [corporation] that is not required by rule to make
5 its tax payments by electronic funds transfer for the filing of a
6 report required by this section to any date on or before the next
7 November 15, if a taxable entity [corporation):
8 (1) requests the extension, on or before May 15, on a
9 form provided by the comptroller; and
10 (2) remits with the request:
11 (A) not less than 90 percent of the amount of tax
12 reported as due on the report filed on or before November 15; or
13 (B) 100 percent of the tax reported as due for the
14 previous calendar year on the report due in the previous calendar
15 year and filed on o.r before May 14.
16 (d) In the case of a taxpayer whose previous return was its
17 initial report, the optional payment provided under Subsection
18 (c) (2) (B) or (e) (2) (B) must be equal to [the greater of:
19 [++] an amount produced by multiplying the [f!-e-t.]
20 taxable margin [capital], as reported on the initial report filed
21 on or before May 14, by the rate of tax in Section
22 [ 171.002 (a) ( 1)] that is effective ,January 1 of the year in which the
23 report is due [-t-B-!'-
24 [ (2) an amount produced by multiplying the net taJEable
25 earned surplus
1
as reported on the initial report filed on or before
26 May 14
1
by the rate of tmr in Section 171.002(a) (2) that is
27 effective January 1 of the year in 'dhich the report is due].
1 (e) The comptroller shall grant an extension of time for the
2 filing of a report required by this section by a taxable entity
3 [corporation] required by rule to make its tax payments by
4 electronic funds transfer to any date on or before the next August
5 15, if the taxable entity [corporation]:
6 (1) requests the extension, on or before May 15, on a
7 form provided by the comptroller; and
8
9
( 2) remits with the request:
(A) not less than 90 percent of the amount of tax
10 reported as due on the report filed on or before August 15; or
11 (B) 100 percent of the tax reported as due for the
12 previous calendar year on the report due in the previous calendar
l3 year and filed on or before May 14.
14 (f) The comptroller shall grant an extension of time to a
15 taxable entity [corporation] required by rule to make its tax
16 payments by electronic funds transfer for the filing of a report due
17 on or before August 15 to any date on or before the next November 15,
18 if the taxable entity [corporation]:
19 ( 1) requests the extension, on or before August 15, on
20 a form provided by the comptroller; and
21 ( 2) remits with the request the difference between the
22 amount remitted under Subsection (e) and 100 percent of the amount
23 of tax reported as due on the report filed on or before November 15.
24 (h) If the sum of the amounts paid under Subsections (e) (2)
25 and (f) (2) is at least 99 percent of the amount reported as due on
26 the report filed on or before November 15, penalties for
27 underpayment with respect to the amount paid under Subsection
1 (f) (2) are waived.
2 (i) If a taxable entity [corporation) requesting an
3 extension under Subsection (c) or (e) does not file the report due
4 in the previous calendar year on or before May 14, the
5 entity [corporation) may not receive an extension under Subsection
6 (c) or (e) unless the taxable entity [corporation) complies with
7 Subsection (c) (2) (A) or (e) (2) (A), as appropriate.
8 Sec. 171. 2022. EXEMPTION FROM REPORTING REQUIREMENTS. A
9 taxable entity [corporation) that does not owe any tax under this
10 chapter for any period is not required to file a report under
11 Section 171.201 or[
7
) 171.202[
1
or 171.2021). The exemption
12
13
applies only to a period for which no tax is due.
Sec. 171.203. PUBLIC INFORMATION REPORT. (a) A
14 corporation on which the franchise tax is imposed, regardless of
15 whether the corporation is required to pay any tax, shall file a
16 report with the comptroller containing:
17 (l) the name of each corporation in which the
18 corporation filing the report owns a 10 percent or greater interest
19 and the percentage owned by the corporation;
20 (2) the name of each corporation that owns a 10 percent
21 or greater interest in the corporation filing the report;
22 ( 3) the name, title, and mailing address of each
23 person who is an officer or director of the corporation on the date
24 the report is filed and the expiration date of each person's term as
25 an officer or director, if any;
26 (4) the name and address of the agent of the
27 corporation designated under Section 171.354 [of this code); and
1 (5) the address of the corporation's principal office
2 and principal place of business.
3 (b) The corporation shall file the report once a year on a
4 form prescribed by the comptroller.
5 (c) The comptroller shall forward the report to the
6 secretary of state.
7 (d) The corporation shall send a copy of the report to each
8 person named in the report under Subsection (a) (3) who is not
9 currently employed by the corporation or a related corporation
10 listed in Subsection (a) (1) or (2). An officer or director of the
11 corporation or another authorized person must sign the report under
12 a certification that:
13 (1) all information contained in the report is true
14 and co.r.rect to the best of the person's knowledge; and
15 ( 2) a copy of the report has been mailed to each person
16 identified in this subsection on the date the return is filed.
17 (e) If a person's name is included in a report under
18 Subsection (a) (3) and the person is not an officer or director of
19 the corporation on the date the report is filed, the person may file
20 with the comptroller a sworn statement disclaiming the person's
21 status as shown on the report. The comptroller shall maintain a
22 record of statements filed under this subsection and shall make
23 that information available on request using the same procedures the
24
25
comptroller uses for other requests for public information.
(f) A public information report that is filed
26 electronically complies with the signature and certification
27 requirements prescribed by Subsection (d).
1 Sec. 171.204. INFORMATION REPORT. (a) Except as provided
2 by Subsection (b), to determine eligibility for the exemption
3 provided by Section 171.2022, or to determine the amount of the
4 franchise tax or the correctness of a franchise tax report, the
5 comptroller may require [an officer of] a taxable entity
6 [corporation) that may be subject to the tax imposed under this
7 chapter to file an information report with the comptroller stating
8 the amount of the taxable entity's margin [corporation's taxable
9 capital and earned surplus], or any other information the
10 comptroller may request.
11 (b) The comptroller may require a taxable entity [an officer
12 of a corporation] that does not owe any tax because of the
13 application of Section 171.002(d) (2) to file an abbreviated
14 information report with the comptroller stating the amount of the
15 taxable entity's total revenue [corporation's gross receipts] from
16 its entire business. The comptroller may not require a taxable
17 entity [corporation] described by this subsection to file an
18 information report that requires the taxable entity [corporation]
19 to report or compute its margin [earned surplus or taJEable
20 capital].
21
22
23
24
25
26
27
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.
1 Sec. 171.206. CONFIDENTIAL INFORHATION. Except as provided
2 by Section 171.207 [of this code], the following information is
3 confidential and may not be made open to public inspect ion:
4 ( 1) information that is obtained from a record or
5 other instrument that is required by this chapter to be filed with
6 the comptroller; or
7 (2) information, including information about the
8 business affairs, operations, profits, losses, or expenditures of a
9 taxable entity [corporation], obtained by an examination of the
10 books and records, officers, partners, trustees, agents, or
11 employees of a taxable entity [corporation] on which a tax is
12 imposed by this chapter.
13 Sec. 171.207. INFORHATION NOT CONFIDENTIAL. The following
14 information is not confidential and shall be made open to public
15 inspection:
16 (1) information contained in a document filed under
17 this chapter with a county clerk as notice of a tax lien; and
18 (2) information contained in a report required by
19 Section 171.203 [of this code].
20 Sec. 171.208. PROHIBITION OF DISCLOSURE OF INFORHATION. A
21 person, including a state officer or employee or an owner [a
22 shareholder] of a taxable entity [corporation], who has access to a
23 report filed under this chapter may not make known in a manner not
24 permitted by law the amount or source of the taxable entity's
25 [corporation's] income, profits, losses, expenditures, or other
26 information in the report relating to the financial condition of
27 the taxable entity [corporation].
79S30338 DAK/KLA/BDH/SHH-0 74
1 Sec. 171.209. RIGHT OF OWNER [ llAR!bHOLD!bR] TO EXAMINE OR
2 RECEIVE REPORTS. If an owner [a person oHning at least one share of
3 outstanding stock] of a taxable entity [corporation] on whom the
4 franchise tax is imposed presents evidence of the ownership to the
5 comptroller, the person is entitled to examine or receive a copy of
6 an initial or annual report that is filed under Section 171.201 or
7 171.202 [of this code] and that relates to the taxable entity
8 [corporation].
9 Sec. 171. 210. PERMITTED USE OF CONFIDENTIAL INFORMATION.
10 (a) To enforce this chapter, the comptroller or attorney general
11 may use information made confidential by this chapter.
12 (b) The comptroller or attorney general may authorize the
13 use of the confidential information in a judicial proceeding in
14 which the state is a party. The comptroller or attorney general may
15 authorize examination of the confidential inf or mat ion by:
16 (1) another state officer of this state;
( 2) a law enforcement official of this state; or 17
18 (3) a tax official of another state or an official of
19 the federal government if the other state or the federal government
20
21
has a reciprocal arrangement with this state.
Sec. 171.211. EXAMINATION OF [CORPORAT!b] RECORDS. To
22 determine the franchise tax liability of a taxable entity
23 [corporation], the comptroller may investigate or examine the
24 records of the taxable entity [corporation].
25 Sec. 171.212. REPORT OF CHANGES TO FEDERAL INCOME TAX
26 RETURN. (a) A taxable entity [corporation] must file an amended
27 report under this chapter if:
1
2
3
4
5
6
7
8
9
10
11
12
l3
14
15
16
17
margin
other
(1) the taxable entity's [corporation's net) taxable
[earned surplus) is changed as the result of an audit or
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 autho.r ity 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
18 income tax return or other return. For purposes of this subsection,
19 a taxable entity [corporation] is considered to have filed an
20 amended federal income tax return if the taxable entity
21 [corporation) is a member of an affiliated group during a period in
22 which an amended consolidated federal income tax report is filed.
23 (d) If a taxable entity [corporation) fails to comply with
24 this section, the taxable entity [corporation] is liable for a
25 penalty of 10 percent of the tax that should have been reported
26 under this section and that had not previously been reported to the
27 comptroller. The penalty prescribed by this subsection is in
1 addition to any other penalty provided by law.
2 SECTION 2. 06. The heading to Subchapter F, Chapter 171, Tax
3 Code, is amended to read as follows:
4 SUBCHAPTER F. FORFEITURE OF CORPORATE AND BUSINESS PRIVILEGES
5 SECTION 2.07. Subchapter F, Chapter 171, Tax Code, is
7 Sec. 171.2515. FORFEITURE OF RIGHT OF TAXABLE ENTITY TO
8 TRANSACT BUSINESS IN THIS STATE. (a) The comptroller may, for the
9 same reasons and using the same procedures the comptroller uses in
10 relation to the forfeiture of the corporate privileges of a
11 corporation, forfeit the right of a taxable entity to transact
12 business in this state.
13 (b) The provisions of this subchapter, including Section
14 171.255, that apply to the forfeiture of corporate privileges apply
15 to the forfeiture of a taxable entity's right to transact business
16 in this state.
17 SECTION 2.08. Section 171.351, Tax Code, is amended to read
18 as follows:
19 Sec. 171.351. VENUE OF SUIT TO ENFORCE CHAPTER. Venue of a
20 civil suit against a taxable entity [corporation] to enforce this
21 chapter is either in a county where the taxable e n t i t ~
22 [corporation's] principal office is located according to its
23 charter or certificate of authority or in Travis County.
25 as follows:
26 Sec. 171.353. APPOINTMENT OF RECEIVER. If a court forfeits
27 a taxable entity's [corporation's] charter or certificate of
1 authority, the court may appoint a receiver for the taxable entity
2 [corporation] and may administer the receivership under the laws
3 relating to receiverships.
5 as follows:
6 Sec. 171.354. AGENT FOR SERVICE OF PROCESS. Each
7 entity [corporation] on which a tax is imposed by this chapter shall
8 designate a resident of this state as the taxable entity's
9 [corporation's] agent for the service of process.
10 SECTION 2.11. Sections 171.362(a), (d), and (e), Tax Code,
11 are amended to read as follows:
12 (a) If a taxable entity [corporation] on which a tax is
13 imposed by this chapter fails to pay the tax when it is due and
14 payable or fails to file a report .required by this chapter when it
15 is due, the taxable entity [corporation] is liable for a penalty of
16 five percent of the amount of the tax due.
17 (d) If a taxable entity [corporation] electing to remit
18 under [Paragraph (A) of Subdivision (2) of Subsection (c) of]
19 Section 171.202(c) (2) (A) [171.202 of this code] remits less than
20 the amount required, the penalties imposed by this section and the
21 interest imposed under Section 111.060 [of this code] are assessed
22 against the difference between the amount required to be remitted
23 under [Paragraph (A) of Subdivision (2) of Subsection (c) of]
24 Section 171.202(c)(2)(A) [171.202] and the amount actually
25 remitted on or before May 15.
26 (e) If a taxable entity [corporation] remits the entire
27 amount required by [Subsection (c) of] Section 171.202(c) [171.202
1 Of thio code], no penalties will be imposed against the amount
2 remitted on or before November 15.
3 SECTION 2.12. Sections 171.363(a) and (b), Tax Code, are
5 (a) A taxable entity [corporation] commits an offense if the
6 taxable entity [corporation] is subject to the provisions of this
7 chapter and the taxable entity [corporation] wilfully:
8
9
10 chapter;
(1) fails to file a report;
( 2) fails to keep books and records as required by this
11 (3) filesafraudulentreport;
12 ( 4) violates any rule of the comptroller for the
13 administration and enforcement of the provisions of this chapter;
14 or
15 ( 5) attempts in any other manner to evade or defeat any
16 tax imposed by this chapter or the payment of the tax.
17 (b) A person commits an offense if the person is an
18 accountant or an agent for or an office.r or employee of a taxable
19 entity [corporation] and the person knowingly enters or provides
20 false information on any report, return, or other document filed by
21 the taxable entity [corporation] under this chapter.
23 as follows:
24 Sec. 171.401. REVENUE DEPOSITED IN GENERAL REVENUE FUND.
25 The revenue from the tax imposed by this chapter [on corporations]
26 shall be deposited to the credit of the general revenue fund.
27 SECTION 2.14. (a) The repeal of Section 171.111, Tax Code,
1 by this article does not affect a credit that accrued under that
2 section before the effective date of this article.
3 (b) A corporation that has any unused credits accrued before
4 the effective date of this article under Section 171.111, Tax Code,
5 may claim those unused credits on or with the tax report for the
6 period in which the credits were accrued, and the former law under
7 which the corporation accrued the credits is continued in effect
8 for purposes of determining the amount of the credits the
9 corporation may claim and the manner in which the corporation may
10 claim the credits.
11
12
13
14
15
16
17
18
19
20
21
22
SECTION 2.15. (a) The following provisions of Chapter 171,
Tax Code, are repealed:
( 1) Subchapter L;
( 2) Subchapter M;
( 3) Subchapter N;
(4) Subchapter 0;
( 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
23 78th Legislature, Regular Session, 2003; and
24 (11) Subchapter U as added by Chapter 1274, Acts of the
25 78th Legislature, Regular Session, 2003.
26 (b) This section does not affect a credit authorized by a
27 provision listed in Subsection (a) of this section that accrued
1 under Chapter 171, Tax Code, before the effective date of this
2 article or a credit that continues to accrue under Section 2.16 of
3 this Act.
4 (c) A corporation that has any unused credits accrued before
5 the effective date of this article under a provision other than
6 Subchapter 0, P, or Q, Chapter 171, Tax Code, may claim those unused
7 credits on or with the tax report for the period in which the
8 credits were accrued, and the former law under which the
9 corporation accrued the credits is continued in effect for purposes
10 of determining the amount of the credits the corporation may claim
11 and the manner in which the corporation may claim the credits.
12 (d) A corporation that has any unused credits accrued before
13 the effective date of this article under Subchapter 0, Chapter 171,
14 Tax Code, may claim those unused credits on or with the tax report
15 for the period in which the credit was accrued. However, if the
16 corporation was allowed to carry forward unused credits under that
17 subchapter, the corporation may continue to apply those credits on
18 or with each consecutive report until the earlier of the date the
19 credit would have expired under the terms of Subchapter 0, Chapter
20 171, Tax Code, had it continued in existence, or December 31, 2027,
21 and the former law under which the corporation accrued the credits
22 is continued in effect for purposes of determining the amount of the
23 credits the corporation may claim and the manner in which the
24 corporation may claim the credits.
25 (e) A corporation that has any unused credits accrued before
26 the effective date of this article under Subchapter P, Chapter 171,
5 credit would have expired under the terms of Subchapter P, Chapter
11 (f) A corporation that has any unused credits accrued before
12 the effective date of this article under Subchapter Q, Chapter 171,
18 credit would have expired under the terms of Subchapter Q, Chapter
24 (g) The comptroller shall adopt rules to administer this
25 section.
26 SECTION 2.16. A written agreement between this state and a
27 taxpayer effective before June 1, 2006, that allows for credits
1 against the tax imposed under Chapter 171, Tax Code, continues in
2 effect and the credits allowed under the agreement continue to
3 accrue and may be claimed in the manner provided by the agreement
4 against the tax imposed under Chapter 171, Tax Code, as amended by
5 this article, for the duration of the agreement. The former law
6 under which the agreement was made and under which the taxpayer
7 received the entitlement to the credits is continued in effect for
8 purposes of determining the amount of the credits the taxpayer may
9 claim and the manner in which the taxpayer may claim the credits.
10 SECTION 2.17. The franchise tax imposed by Chapter 171, Tax
11 Code, as amended by this article, is not an income tax and Pub. L.
12 No. 86-272 does not apply to the tax.
13 SECTION 2.18. (a) Subject to other provisions of this
14 section, this article applies to reports originally due on or after
15 the effective date of this article.
16 (b) For an entity becoming subject to the franchise tax
17 under this article:
18 (1) margin or gross receipts occurring before June 1,
19 2006, may not be considered for purposes of determining taxable
20 margin or for apportionment purposes;
21 (2) an entity subject to the franchise tax on January
22 1, 2008, that was not previously subject to the tax and for which
23 January 1, 2008, is not the beginning date, shall file an annual
24 report due May 15, 2008, based on the period:
25 (A) if the entity has an accounting period that
26 ends on or after cTanuary 1, 2007, and before ,June 1, 2007:
27 ( i) beginning on the later of:
1 (a) June 1
1
2006; or
2 (b) the date the entity was organized
3 in this state or
1
if a foreign entity
1
the date it began doing
4 business in this state; and
5
6 period ends in 2007;
( ii) ending on the date that accounting
7 (B) if the entity has an accounting period that
8 ends on or after ,June 1
1
2007
1
and before December 31
1
2007:
9 (i) beginning on the date that accounting
10 period begins; and
11 (ii) ending on the date that accounting
12 period ends in 2007; and
13 (C) if the entity has an accounting period that
14 ends on December 31
1
2007
1
or if the entity does not have an
15 accounting period that ends in 2007:
16 ( i) beginning on the later of:
17 (a) January1
1
2007; or
18 (b) the date the entity was organized
19 in the state or
1
if a foreign entity
1
the date it began doing
20 business in this state; and
21 ( ii) ending on December 31
1
2007; and
22 ( 3) an entity subject to the franchise tax as it
23 existed before the effective date of this article at any time after
24 December 31
1
2006
1
and before January 1
1
2008
1
but not subject to
25 the franchise tax on January 1
1
2008
1
shall file a final report for
26 the privilege of doing business at any time after June 30
1
2007
1
and
27 before January 1
1
2008
1
based on the period:
1
2
3
(A) beginning on the later of:
( i) January 1, 2007; or
(ii) the date the entity was organized in
4 this state or, if a foreign entity, the date it began doing business
5 in this state; and
6 (B) ending on the date the entity became no
7 longer subject to the franchise tax.
8 (c) For purposes of this article, an existing partnership is
9 considered as continuing if it is not terminated.
10 (d) A partnership is considered terminated only if no part
11 of any business, financial operation, or venture of the partnership
12 continues to be carried on by any of its partners in a partnership.
13 (e) For a merger or consolidation of two or more
14 partnerships, the resulting partnership is, for purposes of this
15 article, conside.red the continuation of any merging or
16 consolidating partnership whose members own an interest of more
17 than 50 percent in the capital and profits of the resulting
18 partnership.
19 (f) For a division of a partnership into two or more
20 partnerships, the resulting partnerships, other than any resulting
21 partnership the members of which had an interest of 50 percent or
22 less in the capital and profits of the prior partnership, are, for
23 purposes of this article, considered a continuation of the prior
24 partnership.
25 SECTION 2.19. (a) The comptroller shall require the
26 entities specified by this section to file an information report in
27 the manner provided by this section. The information report is
1 confidential and exempt from disclosure under Chapter 552,
2 Government Code.
3 (b) The information report required under this section must
4 contain the same information that an entity required to file the
5 report would have submitted in its report due to the comptroller in
6 2006 under Chapter 171, Tax Code, if the changes made by this
7 article to Chapter 171, Tax Code, had been in effect January 1,
8 2006. The comptroller shall provide the forms and instructions to
9 the entities required to file a report under this section.
10 (c) The comptroller shall take action to revoke the charter,
11 as that term is defined by Section 171.0001, Tax Code, as added by
12 this article, of an entity that does not file an information return
13 in the manner and under the time limits provided by this section.
14 (d) The comptroller shall identify and require the
15 following entities to file an information report under this
16 section:
17 (1) the 1,000 entities that paid or are required to pay
18 the most f.ranchise tax for the annual reporting period ending
19 December 31, 2005, under Chapter 171, Tax Code, as that chapter
20 existed on the effective date of this section;
21 (2) the 1,000 entities doing business in this state
22 that had the greatest amount of gross receipts in 2005, as
23 determined under Sections 171.105 and 171.1051, Tax Code, as those
24 sections existed on the effective date of this section; and
25 (3) the 1,000 entities doing business in this state
26 with the greatest number of employees in this state, according to
27 records maintained by the Texas Workforce Commission, in 2005.
1 (e) An entity may be listed in one or more of the categories
2 under Subsection (d) of this section. An entity that is listed more
3 than once is required by this section to file only one information
4
5
6
return.
(f) The comptroller:
(1) shall identify
7 Subsection (d) of this sect ion;
the entities described by
8 (2) shall prepare all forms and instructions required
9 for those entities to file their information reports as required by
10 this section;
11 ( 3) shall provide those forms and instructions to
12 those entities on or after November 15, 2006, but befo.re December 2,
13 2006;
14 (4) shall require the entities to submit their
15 information reports on or before February 15, 2007;
16 (5) may not grant any extensions for filing the
17 information reports; and
18 ( 6) shall report to the governor, the lieutenant
19 governor, and the members of the legislature, on or before April 1,
20 2007, the results of the information reports, stating the amount of
21 revenue the tax under Chapter 171, Tax Code, would have generated
22 from the entities submitting information reports under this section
23 if the changes made by this article to Chapte.r 171, Tax Code, had
24 been in effect January 1, 2006.
25 (g) The report required under Subsection (f) (6) of this
26 section may not be formatted in a manner or include any information
27 that discloses or effectively discloses the specific identity of a
1 reporting entity.
2 (h) This section takes effect as provided by Section 6.01(a)
3 of this Act.
4 SECTION 2.20. (a) This section applies to a suit brought by
5 an entity subject to the tax under Chapter 171, Tax Code, as amended
6 by this article, contending that the imposition of the tax on the
7 entity is unconstitutional.
8 (b) The suit must be brought in a district court in Travis
9 County.
10 (c) The judgment of the district court may be reviewed only
11 by direct appeal to the supreme court filed on or before the 15th
12 day after the date the district court enters its judgment. The
13 district court shall try the suit and the supreme court shall hear
14 any appeal relating to the suit as expeditiously as possible.
15 (d) This section takes effect as provided by Section 6.0l(a)
16 of this Act.
17 SECTION 2. 21. Except as otherwise provided by this article,
18 this article takes effect January 1, 2008, and applies to reports
19 originally due on or after that date.
20 ARTICLE 3. MOTOR VEHICLE SALES AND USE TAXES
21 SECTION 3.01. Section 152.002, Tax Code, is amended by
22 adding Subsection (f) to read as follows:
23 (f) Notwithstanding Subsection (a), the total consideration
24 of a used motor vehicle is the amount on which the tax is computed as
25 provided by Section 152.0412.
26 SECTION 3.02. Section l52.04l(a), Tax Code, is amended to
27 read as follows:
1 (a) The tax assessor-collector of the county in which an
2 application for registration or for a Texas certificate of title is
3 made shall collect taxes imposed by this chapt
4 Section 152.0412, unless another person is required by this chapter
5 to collect the taxes.
6 SECTION 3.03. Subchapter c, Chapter 152, Tax Code, is
8 Sec. 152.0412. STANDARD PRESUMPTIVE VALUE; USE BY TAX
9 ASSESSOR-COLLECTOR. (a) In this section, "standard presumptive
10 value" means the average retail value of a motor vehicle as
11 determined by the Texas Department of Transportation, based on a
12 nationally recognized motor vehicle industry reporting service.
13 (b) If the amount paid for a motor vehicle subject to the tax
14 imposed by this chapter is equal to or greater than the standard
15 presumptive value of the vehicle, a county tax assessor-collector
16 shall compute the tax on the amount paid.
17 (c) If the amount paid for a motor vehicle subject to the tax
18 imposed by this chapter is less than the standard presumptive value
19 of the vehicle, a county tax assessor-collector shall compute the
20 tax on the standard presumptive value unless the purchaser
21 establishes the retail value of the vehicle as provided by
22 Subsection (d).
23 (d) A county tax assessor-collector shall compute the tax
24 imposed by this chapter on the retail value of a motor vehicle if:
25 (l) the retail value is shown on an appraisal
26 certified by an adjuster licensed under Chapter 4101, Insurance
27 Code, or by a motor vehicle dealer operating under Subchapter B,
1 Chapter 503, Transportation Code;
2 ( 2) the appraisal is on a form prescribed by the
3 comptroller for that purpose; and
4 ( 3) the purchaser of the vehicle obtains the appraisal
5 not later than the 20th day after the date of purchase.
6 (e) On request, a motor vehicle dealer operating under
7 Subchapter B, Chapter 503, Transportation Code, shall provide a
8 certified appraisal of the retail value of a motor vehicle. The
9 comptroller by rule shall establish a fee that a dealer may charge
10 for providing the certified appraisal. The county tax
11 assessor-collector shall retain a copy of a certified appraisal
12 received under this section for a period prescribed by the
13 comptroller.
14 (f) The Texas Department of Transportation shall maintain
15 information on the standard presumptive values of motor vehicles as
16 part of the department's registration and title system. The
17 department shall update the information at least quarterly each
18 calendar year.
19 (g) This section does not apply to a transaction described
20 by Section 152.024 or 152.025.
21 SECTION 3.04. Not later than October 1, 2006, the Texas
22 Department of Transportation shall:
23 (1) establish standard presumptive values for motor
24 vehicles as provided by Section 152.0412, Tax Code, as added by this
25 article;
26 (2) modify the department's registration and title
27 system as needed to include that information and administer that
1 section; and
2 ( 3) make that information available through the system
3 to all county tax assessor-collectors.
4 SECTION 3. 05. The changes in law made by this article do not
5 affect tax liability accruing before the effective date of this
6 article. That liability continues in effect as if this article had
7 not been enacted, and the former law is continued in effect for the
8 collection of taxes due and for civil and criminal enforcement of
9 the liability for those taxes.
10 SECTION 3.06. (a) Except as provided by Subsection (b) of
11 this section, this article takes effect July 1, 2006, if this Act
12 receives a vote of two-thirds of all the members elected to each
13 house, as provided by Section 39, Article III, Texas Constitution.
14 If this Act does not receive the vote necessary for effect on that
15 date, this article takes effect on the first day of the first month
16 that begins on or after the 91st day after the last day of the
17 legislative session.
18 (b) Section 152.0412, Tax Code, as added by this article,
19 takes effect October 1, 2006.
20 ARTICLE 4. TAX ON TOBACCO PRODUCTS AND ALCOHOL
21
22
PART A. CIGARETTES AND TOBACCO PRODUCTS
SECTION 4A.01. Section 154.021(b), Tax Code, is amended to
23 read as follows:
24
25
(b) The tax rates are:
(1) $70.50 [$20.50) per thousand on cigarettes
26 weighing three pounds or less per thousand; and
27 (2) the rate provided by Subdivision (1) plus $2.10
1 per thousand on cigarettes weighing more than three pounds per
2 thousand.
3 SECTION 4A.02. Section 155.02ll(b), Tax Code, is amended to
4 read as follows:
5 (b) The tax rate for tobacco products other than cigars is
6 40 [35.213) percent of the manufacturer's list price, exclusive of
7 any trade discount, special discount, or deal.
8 SECTION 4A.03. The changes in law made by this part do not
9 affect tax liability accruing before the effective date of this
10 part. That liability continues in effect as if this part had not
11 been enacted, and the former law is continued in effect for the
12 collection of taxes due and for civil and criminal enforcement of
13 the liability for those taxes.
14 SECTION 4A.04. This part takes effect September 1, 2006.
15 PART B. STATEMENT OF MIXED BEVERAGE TAX ALLOWED
16 SECTION 4B. 01. Subchapter B, Chapter 183, Tax Code, is
17
18
amended by adding Section 183.0212 to read as follows:
Sec. 183.0212. SEPARATE STATEMENT OF TAX ALLOWED. (a) A
19 permittee may provide that each invoice, billing, sales slip, or
20 ticket for the purchase of an item include a separate statement of
21 the amount of tax imposed under this chapter in relation to the
22 gross receipts received from that item. The separately stated
23 amount is only to inform the recipient of the invoice, billing,
24 sales slip, or ticket of the tax and may not be included on the
25 invoice, billing, sales slip, or ticket as an additional amount due
26 from the recipient.
27 (b) For purposes of the tax imposed under this chapter, the
l gross receipts of a permittee do not include amounts separately
2 stated in a statement authorized by Subsection (a).
3 SECTION 4B. 02. This part takes effect Septembe.r l, 2006.
4 ARTICLE 5. APPROPRIATION
5 SECTION 5.01. The amount of $1.9 billion is appropriated
6 out of the general revenue fund to the Texas Education Agency for
7 the state fiscal biennium ending August 31, 2007, for the purpose of
8 reimbursing school districts for revenue the districts lose by
9 reducing the districts' maintenance and operations taxes.
10 SECTION 5.02. The amount of $2 million is appropriated out
ll of the general revenue fund to the comptroller of public accounts
12 for the state fiscal biennium ending August 31, 2007, for the
13 implementation of this Act and for audit and enforcement
14 activities.
15 ARTICLE 6. EFFECTIVE DATE
16 SECTION 6.01. (a) Except as provided by Subsection (b) of
17 this section, this Act takes effect June l, 2006, if this Act
18 receives a vote of two-thirds of all the members elected to each
19 house, as provided by Section 39, Article III, Texas Constitution.
20 If this Act does not receive the vote necessary for effect on that
21 date, this Act takes effect September l, 2006.
22 (b) If a section, part, or article of this bill provides a
23 different effective date than provided by Subsection (a) of this
24 section, that section, part, or article takes effect according to
25 its terms.
25.
ave v. Wilcox, 28 S.W.2d 515
(Tex. 1930)
Love v. Wilcox, 119 Tex. 256 (1930)
28 S.W2d 515, 70 ALR. 1484
KeyCitc Yellow Flag- Negative Treatment
Distinguished by CANTRELL V CARLSON, Tcx .. CivApp -Dallas, May 30. 1958
28 S.W.2d 515
Supreme Court of Texas.
LOVE
v.
WILCOX et al.
No. 5651. May 17, 1930. Rehearing Denied June 4, 1930.
Original application by Thomas B. Love for mandamus to be directed to D. W. Wilcox and others, members of the State and
County Democratic Executive Committees.
Writ granted.
West Heaclnotes ( 17)
2
3
4
5
.Judges Nature and Effect in General
Chief Justice of Supreme Court held not disqualified from considering mandamus proceeding by candidate, who had
bolted party ticket, to have his name entered in primary election, though Chief Justice was himself candidate in primary
(Const. art 5, II).
Constitutional Law Political Parties
Statute conferring originaljurisdiction on appellate courts to issue mandamus against executive committees of political
parties held not void as conferring political power. Senate Bill No. 16 approved Feb. 14, 1930.
Constitutional Law Establishment, Organization, and Jurisdiction of Courts
Mandamus Constitutional and Statutory Provisions
Statute relative to mandamus against committees of political parties held not void because of provision making original
jurisdiction of Supreme Court and Court of Civil Appeals concurrent Senate Bill No. 16, approved Feb. 14, 1930;
Vernon's Ann.SLConst. art. 5, 3, 6, 8.
Courts Jurisdiction in General; Subjects and Purposes of Relief
Mandamus must be pursued in lower courts, unless urgent necessity calls for exercise of original jurisdiction of
Supreme Court. Vernon's Ann.St.Const. art. 5, 3, 6, 8; Senate Bill No. 16, approved Feb. 14, 1930.
Love v. Wilcox, 119 Tex, 256 (1930)
28 S.W.2d 515, 70 A.LR. 1484
6
7
8
11
12
1.3
14
Statute conferring original jurisdiction on Supreme Court to issue mandamus against committees of political parties
held not void as conferring jurisdiction vested exclusively in district court. Senate Bill No. 16, approved Feb. 14, 1930;
Vemon's Ann.St.Const. art 5, 3, 6, R.
Statutts Powers and Duties of Legislature in General
People have power through Legislature to enact laws for protection of their constihttional rights to direct state
government. Vernon's Ann.St.ConsL art. L 2, 27.
Statute giving Supreme Court original jurisdiction to issue mandamus is void so far as it authorizes other writs. Senate
Bill No. 16, approved Feb. 14, 1930; Vernon's Ann.SLConst. art. 5, 3,
Statutes Courts and Judicial Officers
Invalidity of portion of statute authorizing Supreme Court to issue other mandatory writs does not render void
authorization to issue mandamus. Senate Bill No. 16, approved Feb. 14, 19.30.
Statutts By Courts of Last Resort
Legislature in re-enacting statute is presumed to have intended unchanged words should have meaning given them by
previous Supreme Court decisions.
R Cases that cite this headnote
Elections Qualifications of Voters and Candidates
State Democratic Executive Committee held without power to deny participation in party primaries as candidate to one
who offered to take test and comply with party pledge to utmost of conscience" Vernon's Ann.Civ.St. arts. 3107, 3110.
Eltctions Qualifications of Voters and Candidates
State Democratic Committee held without power to deny candidate right to participate in Democratic primaries because
of candidate's having voted against Democratic nominees at last general election, after participating in party primaries.
Vernon's Ann.Civ.St. arts. 3107,3110.
Eltctions Qualifications of Voters and Candidates
28 SW.2d 515, 70 ALR. 1484
15
14
15
16
17
Resolutions of State Democratic Committee discriminating between candidates and voters in primary and imposing
additional qualifications for candidates held void. Vernon's Ann.Civ.St. art. 3107.
Mandamus P1 esumptions and Burden of Proof
Court on application for mandamus cannot assume that committee of political party intends to disregard its duty as
declared by Supreme Court (Vernon's Ann. Civ. St. art. 31 07).
Courts .Jurisdiction in General; Subjects and Purposes of Relief
Supreme Court should take jurisdiction of original application tor mandamus to require Democratic Executive
Committee to enter relator's name on official ballot in primmy, where final decision could not otherwise be procured
before primary election. Senate Bill No. 16, approved Feb. 14, 1930; Vernon's Ann .. St.ConsL art. 5, 3.
Elections Party Organizations and Regulations
Executive committee of political party cannot take action forbidden by statute relative to primaries. Vernon's
Ann.Civ.St. art. 3107.
l Cases that cite this headnote
Mandamus Presumptions and Burden of Proof
Court on application for mandamus cannot assume that committee of political party intends to disregard its duty as
declared by Supreme Court (YA.T.S. Election Code, art. 13.07 note) .
.3 Cases that cite this headnote
Statutes By Courts of Last Resort
The re-enactment of a statute after it has been construed by the highest court of the state carries with it the construction
previously placed upon the law by the court.
Z Cases that cite this headnote
Attorneys and Law Firms
''2S8 '''"516 Thos. B. Love, of Dallas, Walter C. Woodward, of Coleman, W. R. Cousins, of Beaumont, Chas. H. Jenkins,
ofBrownwood, Frank C. Davis, of San Antonio, Robert L. Cole, of Houston, Maco Stewart, ofGalveston, Cato Sells, of Fort
Worth, John M. Henderson, of Daingerfield, W. E. Spell, and Alva B1yan, both of Waco, John J. Foster, of Del Rio, .John
Perkins, of Alpine, E. J. Mantooth, ofLufldn, and W. M. Taylor, Cullen F. Thomas, J. W. Hassell, George 0. Wallace, W. J.
Rutledge, Jr., H. Bascom Thomas, Jr., and Reuben W. Gray, all of Dallas, for relator.
*259 F. A. Williams, of Galveston, H. M. Garwood, ofHouston, Wm. H. Burges, ofEl Paso, Rice Maxey, of Sherman, V.
W. Taylor, of Brownsville, C. C. Renfro, of Dallas, and Davenport, West & Ransome, of Brownsville, for respondents.
28 S.W2d 515,70 ALR 1484
Opinion
GREENWOOD, l
Relator seeks by mandamus from this court, in the exercise of its original jurisdiction, to compel the State and County
Democratic Executive Committees to cause his name to be printed on the official ballot in the approaching primary of the
Democratic Party as a candidate for the nomination for Governor. Relator also asks that the court, under its writ of mandamus,
compel the State and County Democratic Executive Committees to desist and refrain from enforcing certain resolutions adopted
by the State Committee on February 1, 1930.
Disregarding mere conclusions, the facts on which relator seeks relief are undisputed. Relator possesses all qualifications
specified in the Constitution and statutes for one to hold the office of Governor. He has for many years been a member of the
Democratic Party, and active in his affiliations therewith, '"''517 holding important offices in Democratic state and national
administrations. At this time he holds the office of State Senator as a nominee of the Democratic Party. He has voted for all
nominees of the Democratic Party for all offices at eve1y election since he became a voter in 1892, except that he voted for
the Republican nominee for Governor of Texas in 1924 and for the Republican Presidential Electors in 1928. Relator not only
voted for the Republican Presidential Electors in 1928, but actively participated in the 1928 campaign to defeat the Democratic
Presidential Electors. Relator participated in all 1928 precinct and county Democratic conventions and primaries, taking the
pledge which the State Committee had prescribed for participation therein, which read as follows: 'I am a Democrat, and agree
to support the nominees of the Party.' The Democratic State Convention held at Beaumont in May, 1928, to elect delegates to
the Democratic National Convention, excluded relator from participation therein, together with all others who failed or refused
to take a pledge to support all nominees of the party or who stated they would not vote for the 1928 Democratic Presidential
Electors. Relator offers 'to take the test prescribed by article 3110, Revised Civil Statutes, and to comply with the pledge
contained in that test to the utmost of conscience and good faith.'
The State Democratic Executive Committee on Februmy I, 1930, adopted resolutions which the Committee deems it its duty
to enforce, as follows:
''261 'First. Be it resolved, That this committee hereby extends an invitation to all qualified voters, regardless of previous
political views or affiliations, to enter and participate as voters in its nominating primaries and conventions who are willing
to and do take the statutory party pledge.
'Second. Be it resolved, That the Executive Committee prescribes the following qualifications in addition to those now
prescribed by law, for candidates for State offices in the Democratic primaries of 1930, and that no applicant or candidate for
the Democratic nomination for State office who does not possess the following qualifications shall appear on the official ballot
or be certified as a candidate in the Democratic primaries, to-wit:
'1. That in the last preceding general election he must not have voted against any nominee or presidential elector of the
Democratic Party, if he participated either in the primary elections or conventions of the Democratic Party in 1928, and took
a pledge to support the nominees of the Democratic Party.
'2. That he must in good faith without any reservations pledge himself in writing filed with the Chairman of the Executive
Committee not later than the date set for filing applications, to support all nominees of the Democratic Pmty during the year
1930.
'3. And that he does not now advocate a voter's entering a party primary or convention and taking the prescribed pledge with
reservations mental or otherwise.
'Third. That it is the sense of this Committee that while we cannot legally act on the certification of applicants who desire to
have their names placed on the Democratic primary ballot for state offices in 1930,-that it is the sense of this Committee that
any present or proposed applicant for certification who voted in the Democratic primary in 1928, or participated in any of the
28 S.W.2d 515, 70 A.LR 1484
primaries or conventions of the Democratic Party in 1928, and in said primaries or conventions took the prescribed pledge to
support the nominees of the party and then broke his pledge and bolted the ticket, and voted for the nominees of any other
party that by so doing he forfeited his right to the support of the Democratic Party, and forfeited his right to have his name
placed on the Democratic primary ballot in 1930; and it is the further sense of this Committee that any present or proposed
applicant who desires to have his '' 262 name certified and placed on the Democratic primary ballot in 1930, shall be refused
such certification who claims the right and intention, though he has participated in a Democratic primary for the nomination of
candidates, thereafter, to repudiate the pledge taken and to vote against the party nominee if his judgment or conscience dictates.
'Fomih. Art. 3111 of the R. C. S. of Texas directs that the State Executive Committee shall meet on the Second Monday in
June, preceding each general primary, and that, at this meeting, shall take action certifying to County Chairman the names of
the various candidates. In view of this law, it is the opinion of the State Democratic Executive Committee that such action could
not lawfully be taken at this time, and it is, therefore,
'Resolved That the Committee decline to ceriify names to the County Chairman or take any action relative thereto prior to said
second Monday of June, 1930.'
The question here presented is simply whether the law, when applied to these facts, entitles relator to a writ of mandamus from
the Supreme Comi under which he would obtain all or any part of the relief he seeks?
In view of the holdings of the Supreme Court of Colorado that a judge who was a candidate in a primary was disqualified
by his interest to adjudicate matters pertaining to the primary (Cowie v. Means, 39 Colo. I, 88 P 485; MacMillan .v. Spencer.
28 Colo. 80, 62 P. 849; Phillips v. Curley, 28 Colo. 34, 62 P. 837). Chief Justice Cureton, being a candidate this year for the
Democratic primary ;'""'518 nomination for the office of Chief Justice of the Supreme Court, declined to participate in the
decision of this case until the court could determine the question as to his disqualification. As have many eminent justices of
this court (Investment Co. v. Grymes, 94 Tex. 618, 63 S. W. 860,64 S. W. 778; City of Oak Cliffv. State, 97 Tex. 394, 79 S. W.
I 068), Chief Justice Cureton declined to take any part in deciding whether he was disqualified. After careful investigation, the
court, acting through the otherjustices, before the submission of the case, reached the conclusion that there was no doubt that the
Chief Justice was qualified to sit under the Constitution of Texas. Some of the grounds for that conclusion will be briefly stated.
The Colorado decisions furnish no reliable guide for the adjudication to be made by this court. The question before the Supreme
''263 Court of Colorado in each of the cited cases was whether a judge was disqualified under a statute directing a change of
venue 'when from any cause the judge is disqualified to try the action.' Section 31, Compiled Laws of Colorado (Code Civ.
Proc.). These cases, therefore, called for judicial constmction of what was meant by disqualification from any cause, while our
Constitution not only specifies the grounds for disqualification but such grounds have always been held by the Supreme Court
to be exclusive. Investment Co. v. Grymes, 94 Tex. 618, 63 S. W. 860, 64 S. W" 778; Taylor v. Williams, 26 Tex. 586,587.
Under the Texas Constitution, it is the duty of the judge to sit save 'in any case wherein he may be interested, or where either of
the parties may be connected with him, either by affinity or consanguinity, within such a degree as may be prescribed by law,
or when he shall have been counsel in the case.' Section II, art. 5, Constitution.
Every Constihttion of Texas since that of 1845 has forbidden a judge to sit in any case wherein he is interested. City of Dallas
v. Peacock. 89 Tex. 61, 13 S. W. 220. So often has this phrase, 'case wherein he is interested,' been interpreted that its meaning
no longer admits of reasonable doubt.
Under the broad language of the Colorado statute, the highest court in that state might have regarded interest in the question
to be decided as a good ground for granting a change of venue. In Texas, our constihttional prohibition has been uniformly
construed as requiring the judge to sit who is interested in the question to be decided but who has no direct and immediate
interest in the judgment to be pronounced.
The comi, constming the Constit11tion of 1869, in an opinion of Chief Justice Roberts, said: 'The fact that the presidingjudge was
the person from whom the property was alleged to be stolen in an indictment for theft, is not a good ground of disqualification,
28 SW.2d 515,70 A.L.R. 1484
because he is not thereby shown to be 'interested' in the 'case,' not being a party thereto or liable to any loss or profit therefrom,
otherwise than as any other person in the body politic.' Davis v. State, 44 Tex. 524.
Soon after the adoption of the present Constitution, the judge of the district court of Jefferson county announced that he was
embarrassed to proceed with at trial because 'of his personal interest adverse to the appellants in the questions involved in this
cause.' The objection to the judge's qualification to detennine the cause was overruled by the Supreme Court in an opinion
by Judge Bonner, stating:
'''264 'The constitution prohibits a judge from sitting in a case in which he may be interested. Cons!. 1876, at t. V, sec. II.
'The statute is to the same effect. R. S., art. I 090.
'The interest of the teamed judge presiding, however, was simply in the question involved, and not in the result of the suit.
This was not such disqualifying interest as would prevent him from trying the cause, or would authorize the appointment of
a special judge.
'The presiding judge not having been disqualified, it was his duty, however embarrassing, to have proceeded with the triaL
Taylor v. Williams, 26 Tex. 583; Railway Co. v. Ryan, 44 Tex. 426; Davis v. State, 44 Tex. 523; I Green!. Ev., s 389.' McFaddin
v. Preston, 54 rex. 406.
When our present judicial amendment was adopted in 1891, without change of verbiage with respect to disqualification of
judges, the court could not rightly give the language a meaning different from that ascribed to the same language in the previous
constitutional provisions. Therefore the rule announced in McFaddin v. Preston, supra, was reaffirmed in decisions as recent as
Hubbard v. Hamilton County, 113 Tex. 552, 261 S. W. 990, and Robbins v. Limestone County, I 13 Tex. 542. 261 S. W. 994.
It is obvious that the Chief Justice, who is not a party to this suit and who has neither violated any pledge taken in 1928 nor
voted during that year against any Democratic nominee or presidential elector, can have no interest other than an interest in the
questions to be determined, no matter how they may be decided. Much the same sort of interest affects the associate justices.
Hence, under the settled interpretation of the Constitution, it is his duty to participate in this decision.
There are numerous decisions in other jurisdictions like that of the Supreme Court of Alabama, wherein it is said: 'The interest
which will disqualify must be a pecunimy one, or one affecting the individual rights of ''"''519 the judge. * * * Moreover, 'the
liability of pecunimy gain or relief to the judge must occur upon the event of the suit, not result remotely, in the f11ture, from
the general operation of law upon the status fixed by the decision.' 12 A mer. & Eng. Enc. Law, p. 45 et seq.' Ex part Alabama
State Bar Association. 92 Ala. 113, 8 So. 768, 770, 12 L R.. A. 136; Foreman v. Marianna, 43 Ark. 324: Long v. Watts, 183
N. C 99, II 0 S. E. 765. 22 L. R. A. 279.
The only conceivable interest of the Chief Justice in the questions here to be adjudicated is indirect, uncertain, conjectural,
contingent, '''265 and remote. No man can say other than speculatively whether the court's judicial act, whatever it may be,
will redound to his advantage or detriment. On such a state of facts, the law is too well settled in this court to be open to dispute.
In Judge Brown's carefully considered opinion in the case of the City of Oak Cliff v. State, 97 Tex. 391, 79 S. W I 068, it is
said: 'In his treatise on Courts, Mr. Work expresses the result ofthe authorities upon the question thus: 'The interest which will
disqualifY a judge must be direct and immediate, and not contingent and remote.' Page 396.'
After reviewing the Texas cases relied upon as sustaining a contrary conclusion, Judge Brown's opinion continues with the
statement: 'It is apparent from these authorities that in each case the interest of the presiding judge was directly and immediately
affected by the judgment that he entered-it acted immediately upon the subject without the interposition of other authority-and
each came strictly within the rule laid down by Mr. Work.'
Love v. Wilcox, 119 TeJc 256 (1930)
28 S.W.2d 515, 70 ALR 1484
Finally, Judge Brown's opinion definitely and positively approves the declaration in a cited New York case (In re Ryers, 72 N
Y I, n Am. Rep. gg) that the true rule is 'that where a judicial officer has not so direct an interest in the cause or matter as
that the result must necessarily affect him to his personal or pecuniary loss or gain, * * * then he may sit'
In accordance with the court's decision that the Constitution, rightly construed, does not disqualify him, the Chief Justice has
participated in the decision of all other questions in this case save that relating to his disqualification.
If the Supreme Court has originaijurisdiction to adjudicate this case, it is derived from Senate Bill No. I 6, approved February
14, 1930. By this bill the Legislature undertakes to confer original jurisdiction on the Supreme Comi or any Court of Civil
Appeals to issue the writ of mandamus or any other mandatory or compulsory writ or process, against any chairman or member
of any executive committee or primary committee or primary election officer of any political party to compel the performance
in accordance with the laws of this state of any duty imposed upon them respectively by law.
The respondents move to dismiss relator's suit on the ground that the bill is void because it attempts to confer on the Supreme
Court and on the Courts of Civil Appeals power wholly political; and because it attempts to give concurrent jurisdiction to
the Supreme Court and to the Courts of Civil Appeals in such a way that !'266 neither alone has jurisdiction; and because it
attempts to confer on other courts a jurisdiction which the Constitution vests exclusively in the district comi.
By section 8, article 5, the Constitution gives to the district court power to issue writs of mandamus. This is a broad, general grant
of original jurisdiction, not dependent on the necessity to enforce a jurisdiction otherwise acquired. By section 6, of article 5, the
Courts of Civil Appeals are given 'such otherjurisdiction, original and appellate, as may be prescribed by law,' in addition to
specified appellate jurisdiction. In section 3, of article 5, of the Constitution, after declaring that the jurisdiction ofthe Supreme
Court shall be appellate only except as specified, it is provided: 'The legislature may confer original jurisdiction on the supreme
court to issue writs of quo warranto and mandamus in such cases as may be specified, except as against the govemor of the state.'
This court has heretofore laid down certain limitations on the power of the Legislature to specifY classes of cases which may
be brought within the court's original jurisdiction. One is that the right to the duty required to be performed by mandamus shall
not be 'dependent upon the detennination of any doubtful question of fact' Teat v. McGaughey, 85 Tex. 486. 487. 22 S. W .
.302, 303. Another limitation is that the writ of quo warranto or mandamus be a proper or necessary process for enforcement
of the right asserted. Pickle v. McCall, 86 Tex. 218,24 S. W, 265 .. A third is there must be some strong and special reason for
the exercise of this extraordinary original jurisdiction by a court designed primarily as the court for the correction by appellate
review of enors of inferior courts in detennining questions of law. In this connection, the court found no objection to the
Legislature requiring it to exercise original jurisdiction by mandamus, where the proceeding 'involves questions which are of
general public interest and call for a speedy determination.' Betts v. Johnson, 96 Tex. 363, 7.3 S. W. 4, 5.
The statute under consideration, in so far as it relates to mandamus proceedings, comes within evety one of these limitations.
Before one can be entitled to a mandamus from this court under the statute, he must establish his case on uncontroverted facts,
as under the *''.520 other statutes already upheld. When the uncontradicted facts show that a relator has the right to exact
performance by public functionaries of duties imposed on them by law, his appropriate remedy is the writ of mandamus. No
questions could arise of wider public interest or of graver importance to the state than those involving abridgment of rights
of citizens to participate in government
1
'26 7 through the selection of those who may become public officials by means of
party nominations. A speedy, final determination of such questions is at times possible only through the exercise of jurisdiction
elsewhere than in the district court
2 Is the stahJte void because it seeks to confer political instead of judicial power on the appellate courts?
Since Marbury v. Madison, I Cranch, 166, 16 7. 2 L Ed. 60; the courts oflast resort of the several states have almost universally
followed the opinion of Chief Justice Marshall to the effect that it is clear that: 'Where a specific duty is assigned by law, and
individual rights depend upon the performance of that duty, * * * the individual who considers himself injured, has a right to
resort to the laws of his countty for a remedy. * * * The question whether a right has vested or not, is, in its nature, judicial,
and must be tried by the judicial authority.'
28 S.W2d 515, 70 ALR 1484
The precise question now before us was presented in Gilmore v. Waples, 108 Tex. 167-176. 188 S. W I 037, I 040. The question
was whether the power to be exercised by the courts would be political or judicial in restraining action of the State Democratic
Executive Committee violative of the primary statutes and to the legal rights of a candidate for a primary nomination.
Affirming that the comis, in ordering such restraint, would exercise judicial power, the profound opinion of Chief Justice
Phillips says:
'The contention of the committee upon this phase of the case is that there is presented but a political question and at most
but a political right. * * * For what purpose and to what end, it may appropriately be inquired, have the various statutes in
relation to party nominations been enacted in this State if the rights and duties therein defined and the matters they purpmi to
govern still present mere political questions, to be settled alone by party law and in the party forum, and are therefore beyond
the cognizance of the courts? The very purpose of this legislation was to relieve these matters of their mere political character,
as was their nature aforetime, and them to the regulation of the statute law. The comis exist only to enforce the law.
This includes the statute law. * * *
'We do not believe there is any appreciable conf1ict in the authorities upon the proposition that where the making of party
nominations by political parties is once regulated by the statute law the rights created and protected by a statute are legal, as
distinguished from political, rights.'
;, 268 In Cook v. Houser, 122 Wis. 556, I 00 K W. 964, 970, the court declares that 'the time has long since passed for serious
controversy as to whether in this class of cases judicial questions are involved.'
3 Does the provision invalidate the bill which undertakes to make concurrent the jurisdiction of the Supreme Court and of
the Comis of Civil Appeals?
Precisely similar concurrent jurisdiction has for years been conferred on these courts to compel a judge of the district court to
proceed to trial and judgment. Yet, this court held in G, C. & S. F. Ry. Co. v. Muse. I 09 Tex. 353.207 S. W. i\97, 4 A. L R. 613,
as shown by the headnote, that: 'The power given Courts of Civil Appeals, by article 1595, Rev. Stats., to require, by mandamus,
a district judge to proceed to the trial of a cause does not preclude the Supreme Court from action in the same matter through
the power conferred * * *under article 5, section 3, of the Constitution, by article 1526, Rev. Stats.' G., C. & S. F Ry. Co. v.
Muse, I 09 Tex. 353, 207 S. W. 897,4 A. L. R. 61.1. The very fact that the jurisdiction of the Court of Civil Appeals had been
invoked and exhausted without securing the performance of a duty imposed by statute made a case peculiarly appropriate for the
exercise of the authority of the Supreme Court by mandamus in Muse's Case. State v. Woodbmy, 74 Kan. 878, 879, R7 P. 70 I.
In Houtchens v. Mercer, District Judge, 27 S.W.(2d) 795, decided May 7, 1930, this court recognizes that possession by an
inferior court of concurrent original jurisdiction with a court of last resort does not defeat the jurisdiction of the latter co mi.
A sound interpretation of constitutional provisions conferring or authorizing the Legislature to confer original jurisdiction on
the court of last resort of a state where other constitutional provisions confer concurrent jurisdiction on inferior courts is that
declared by the Supreme Court of Illinois after an elaborate review of the authorities, as follows: 'First. That the jurisdiction of
the comi of last resort in such states is principally appellate; that its original jurisdiction is not a general one, like that conferred
on the circuit or district courts, but is a limited one, and concurrent, as far as it extends, with those courts. Second. That, in
conferring original jurisdiction by constitutional provision in such cases as mandamus, it was not contemplated that the supreme
court would take jurisdiction of all mandamus cases which parties might think best to bring before it, but that such original
jurisdiction was conferred that the court of highest authority in the state should have the power to protect the rights,
interests, and franchises of the state, and the rights and interests '"269 ofthe whole people, to enforce the perfom1ance of high
official duties affecting the public at large, and, in emergency (of which the court itself is to detennine ), to assume jurisdiction
of cases affecting local public interests, or private rights, where there is no other adequate remedy, and the exercise of such
jurisdiction is necessary to prevent a failure ofjustice. Third. That the supreme court is vested with a sound legal discretion to
determine for itself, as the question may arise, whether or not the case presented is of such a character as to call for the exercise
of its original jurisdiction.' People ex rei. Kocourek v. Chicago, 193 Ill. 507, 62 N. E. 179, 184, 58 L. R. A. 840, 84 I, 854, 855.
Love v. Wilcox, ii9 Tex. 256 (1930)
28 SW.2d 515, 70 ALR 1484
4 We therefore hold that according to the true intent of our Constit11tion and statutes, the remedy of mandamus must be pursued
in the lower courts unless it is made plain that urgent necessity calls for the exercise of the original jurisdiction of the Supreme
Court. Houtchens v. Mercer, District Judge, supra; 18 R. C. L l 01, 22 R. C. L. 685: 38 C. l 827.
Ordinarily rights may be enforced in a mandamus proceeding by suit in the district court, appealed to the Court of Civil Appeals,
and brought to the Supreme Court by writ of erroL Where these ordinary remedies are complete and adequate, the extraordinary
originaljurisdiction of the Supreme Court or of the Court of Civil Appeals cannot be successfully invoked. Buvcns v .. Robison,
Land Commissioner. 117 Tex. 541, 8 S.W.(2d) 664: R. R. Co. v. Pleasants. 116 Tex. 568, 296 S. W. 282; Queen v. Lam bourn
Valley R. Co., L. R. 22 Q. B. Div. 463; Ex parte Riddle, 255 U.S. 450,41 S. Ct. 370, 65 Led. 725.
Blackstone called mandamus a high prerogative writ, which 'issues in all cases where the party hath a right to have anything
done and hath no other way of compelling its performance.' L R. 22, p. 466. Mr. Spelling points out that the feature which
distinguishes mandamus from all other remedies is that 'it recognizes legal duty and compels its performance where there is
either no remedy at law or no adequate remedy.' 2 Spelling, Extraordinary Relief, p. 1114.
5 6 Considering the province of the writ since long before the adoption of our constitutional provisions, we find no warrant
for saying that the Legislature exceeded its authority in making it possible for this court to take original jurisdiction to issue the
writ of mandamus when there is urgent necessity for the exercise of the court's authority to maintain and protect the general
rights and the important interests of the state and of the people. Attorney General v. Railroad Companies, 35 Wis. 5 I 9, 521,
1
'2 70 Attorney General v. City of Eau Claire, 37 Wis. 442, 446; Homesteaders v. McCombs, 24 OkL 201, I 03 P. 691. 38 L
R. A. (N. S.) 1006, 1007,20 Ann. Cas. 181.
This case comes clearly within the class of cases involving the enforcement of the sovereignty of the state and the protection
of the citizen's right to effective pmiicipation in his state's government. All political power is inherent in the people of Texas,
whose government is founded on their authority and maintained for their benefit. Section 2, art. I, of the Constitution. Section
2 7 of article 1 of the Constitution guarantees that 'the citizens shall have the right, in a peaceable manner, to assembel together
for their common good, and apply to those invested with the powers of government for redress of grievances or other purposes,
by petition, address or remonstrance.' Section 2 of article I further pledges the faith of the people of Texas to the preservation
of a republican fon11 of government, and declares that to this limitation only, they (the people) have at all times the
in alienable right to alter, reform or abolish their government in such manner as they may think expedient.' The primary laws
of this state are based upon a recognition of political parties as agencies of the people for the exercise of the powers thus
reserved to them by the Constitution. It necessarily follows as a part of the right of the people to organize political parties for
the constitutional purposes stated that the people of the state have the power through their Legislature to enact laws having for
their purpose the protection of the constitutional rights, declared in the provisions just quoted. As said in Waples v. Marrast,
I 08 Tex .. 5, 184 S. W. 180, 183, L. R. A. 1917 A, 253: 'In the interest of fair methods and a fair expression oftheir members of
their preference in the selection of their nominees, the State may regulate such elections by proper laws.'
As declared in State ex rei Rinderv. GofT, 129Wis. 668, 109N .. W. 628,629.9 L R. A. (N. S.) 918,919,920: 'Serious questions
as to the construction of the primary law and the duties of executive officers thereunder may properly be considered as questions
affecting the prerogatives of the state and the liberties ofthe whole people, and on that account this court may properly consider
them in the exercise of its original jurisdiction, because the decision of such questions necessarily prescribes a rule of conduct
for all election officers in the state, though the case in which they arise may affect only the nomination for a local office.'
7 8 9 The act under which this proceeding was brought in part reads: 'The Supreme
Court* * *shall have the power,

or authority, or jurisdiction, to issue the Writ of Mandamus, or any other Mandatory or compulsmy Writ or Process, against any
Chairman
1
'271 or member of any Executive Committee, or primmy committee, or primary election officer, of any political
party, to compel the performance, in accordance with the laws of this State, of any duty imposed upon them respectively, by law.'
Love v. Wilcox, 119 Tex. 256 ('I 930)
28 SW.2d 515, 70 ALR. 1484
The Constitution, in defining the original jurisdiction which may be conferred upon the Supreme Court, in section 3, art. 5,
states: 'The legislature may confer original jurisdiction on the supreme court to issue writs of quo warranto and mandamus in
such cases as may be specified, except as against the governor ofthe state.'
A comparison ofthe above quotation from the act with the quoted constitutional provision makes it obvious that the Legislature
has attempted to confer power upon the Supreme Court to issue writs under its original jurisdiction other than mandamus and
quo warranto, when the Constitution limits the original jurisdiction of the court to the issuance of writs of quo warranto and
mandamus. Applying the rule that the Legislature cannot confer a jurisdiction not pennitted by the Constit11tion (Ex parte
Towles, 48 Tex. 413; Marbury v. Madison, I Cranch, 137,2 LEd. 60) results in the conclusion that so much of the legislative
act under examination as attempts to confer upon the Supreme Court the power to issue 'any other mandatory or compulsory
writ or process' save the writ of mandamus, is violative of the Constit11tion, and is therefore void. However, the act is not wholly
void because the Legislature is without power to confer original jurisdiction on the Supreme Court for the issuance of writs or
process other than quo warranto and mandamus. The portion of the act which remains, relating to the issuance of the writ of
mandamus, must be upheld as plainly severable and capable of execution in accordance with the legislative intent. Zwernemann
v. Von Rosendberg, 76 Tex. 522, 13 S. vV. 485; T. & P. Ry. Co. v. Mahaffey, 98 Tex. 395,84 S. W. 646.
Should this court now refuse to take jurisdiction, relator would be unable to procur any decision from the state's highest judicial
authority. Nojudgment of the district court could become final in time to be of any avail in view of stautory rights of review
by appellate courts.
Relator therefore is without other adequate remedy. Foote v. Bartholomew, 103 Conn 617, 132 A. 30; Howells v. Metcalf, 18
S.D. 393, 100 n W.. 923,67 L. R. A. 331; Conk v. Houser, 122 Wis. 554, lOON. W. 964; Rinderv. Goff, 129 Wis. 668, 109 N.
W. 628, 9 L r. A. (N. S.) 920. Snce his case comes within a class which the Legislature has validly put within the jurisdiction
of the Supreme Court, the motion to dismiss is overruled.
;,272 Coming to a decision of the case on its merits, the questions for our determination are:
First. Has the State Democratic Executive Committee the power to deny any person the right to participate in the party primaries
as a candidate who offers to take the test prescribed by article 3110, Revised StahJtes, and to comply with the pledge contained
in that test to the utmost limits of conscience and good faith, because he advocates or claims the right to violate such pledge in
the 1930 general election in so far as such violation may be required by the dictates of his conscience?
Second. Has the State Democratic Executive Committee the power to deny any person the right to participate in the Democratic
primaries because he voted in 1928 against Democratic nominees or electors, after participating in the 1928 conventions or
primaries under pledge to support the nominees?
10 We are not called upon to detennine whether a political party has power, beyond statutory control, to prescribe what persons
shall participate as voters or candidates in its conventions or primaries. We have no such state of facts before us. The respondents
claim that the State Committee has this power by virtue of its general authority to manage the affairs of the party. The statute,
article 3107, Complete Tex. St. 1928 (Vernon's Ann. Civ. St. art 31 07), recognizes this general authority of the State Committee,
but places a limitation on the discretionary power which may be conferred on that committee by the party by declaring that,
though the party through its State Executive Committee, shall have the power to prescribe the qualifications of its own members,
and to detennine who shall be qualified to vote and otherwise participate, yet the committee shall not exclude anyone from
participation in the party primaries because of fanner political ' ~ ~ ' 5 2 3 views or affiliations, or because of membership or
nonmembership in organizations other than the political party. The committee's discretionary power is further restricted by the
statute directing that a single, uniform pledge be required of the primary participants. The effect of the statutes is to decline to
give recognition to the lodgment of power in a State Executive Committee, to be exercised at its discretion. The statutes have
recognized the right of the patiy to create an Executive Committee as an agency of the party, and have recognized the right of
the party to confer upon that committee certain discretionaty powers, but have declined to recognize the right to confer upon
the committee the discretionary power to exclude from participation in the party's affairs any one because of fanner political
28 SW.2d 515, 70 A.L.R 1484
views or affiliations, or because ofrefusal to take any other than the stautory
1
'2 73 pledge. It it obvious, we think, that the
party itself never intended to confer upon its Executive Committee any such discretionary power. The party when it selected its
State Committee did so with f11ll knowledge ofthe statutory limitations on that committee's authority, and must be held to have
selected the committee with the intent that it would act within the powers conferred, and within the limitations declared by the
statute. Hence, the committee, whether viewed as an agency of the state or as a mere agency of the party, is not authroized to
take any action which is forbidden by an express and valid stahtte.
The initial 1903 regulation by stahtte of party primaries in Texas authorized the county executive committee of the party holding
a primary to prescrbed additional qualifications for primary participation. Acts 28th Legislature (1903) c. 101, s 94, p. 150;
12 Gammel's Laws of Texas.
The State Democratic Platform in 1906 and the message of Governor Campbell, who was elected thereon, demanded an
amendment to perfect the primary election laws and to provide for a uniform primary test The Governor advised that a unifom1
test was 'essential to party hannony.' House Journal :50th Legislature, Regular Session, 1907, pp. 78, 139.
The House of Representatives adopted an amendment to the bill introduced in obedience to the platform demand, such
amendment reading as follows: 'Section 114a. No official ballot for primary election shall have on it any symbol or device or
any printed matter except a primary test, to be uniform throughout the state, as rescribed by the State Executive Committee
at its meeting on the second Monday in June preceding the general primary, and the position and names of candidates and
their residences; provided further, that any ballot not having printed at the top such test so prescribed by the State Executive
Committee shall be void.' House Journal 30th Legislature, Regular Session, 1907, pp. 1475, 149.3, 1494, 15.33.
The Senate Committee on Privileges and Elections, after considering the House bill, as amended, recommended that it do not
pass. The Senate Committee further recommended the adoption of a substihtte for the above-quoted section 114a, providing
that no one shall vote in any primary election 'unless he agree to the following test of party fealty, which shall be printed on
the ballot, and which he shall be conclusively presumed to have agreed to by voting such ticket, viz.: 'In voting this ticket I
affirm that I have not, and will not vote or participate in the primaries of any other political party "'274 or organization to
nominate candidates of such party or organization for any office to be voted upon by the voters at the ensuing general election,
and I further affirm that I will not vote for or in any way aid or encourage the election at the ensuing general election, of any
person nominated by any other political party or organization for any office who has been by any other such political party or
organization nominated in opposition to the candidate for such office nominated in this primary in which I participate."
The Senate substitute further provided: 'Any person who, at any primary election votes a ballot with a pedge of party fealty
printed thereon, as provided in Section I 03 of this act, and at the time of voting said ballot said voter had prior thereto on the
same day voted for or participated in, the nomination of candidates for office by any opposing political party or organization, or
if said voter should after voting said ballot, violate the pledge taken by him, he shall in either event be guilty of a misdemeanor
within the meaning ofthis act, and shall be punished accordingly.'
The Senate rejected the substitute of the Senate Committee on Privileges and Elections, and adopted the House bill, after first
amending it, at the instance of Senator Senter, so as to make section 114a read as follows: 'No official ballot for primary election
shall have on it any symbol or device or any printed matter except a primary test, to be unifom1 throughout the State, which
shall read as follows: 'I am a (inserting name of the political party or organization of which the voter is a member) and
pledge myself to support the nominees ofthis primary,' and any ballot which shall not contain such test printed above the names
of the candidates thereon shall be void and shall not be counted. Such ballot shall also contain the names and residences of the
candidates.' Senate Journal Regular Session, 30th Legislahtre, 1907, pp. 917, 920, 921, 1 081, 1100, 1125, 1177, 1178; Acts
Regular Session 30th Legislature ( 1907) c. 177, s 114a; 13 Gammel's Laws of Texas, p. 329.
The Second Called Session of the 38th Legislah1re in 1923 amended the statute, which since 1903 had conferred power on the
county executive committee to prescribe additional qualifications for primary voters, so as to direct that 'all qualified voters
under the laws and constihttion of the State of Texas who are bona fide members of the Democratic party, shall be eligible
to participate in any Democratic party primary election, provided such voter complies with all laws and rules governing party
Love v. Wilcox, 119 Te){. 256 (1930)
28 SW.2d 515,70 A.L.R. 1484
primary elections; however, '''275 in no event shall a negro be eligible to participate in a Democratic party primary election held
in the State of Texas.' Acts 38th Legislature (I 92.3 ), Second Called Session, chapter 32, p. 74, s I; 21 Gammel's Laws of Texas.
1
';'524 The amendment of 1923 was declared unconstitutional by the Supreme Court of the United States. Nixon v. Hernodon,
273 U. S. 536, 47 S. CL page 446, 71 L. Ed. 759. The 40th Legislahtre, at its First Called Session, in 1927, repealed the 1923
amendment, and enacted what is now article .3107 in Texas Complete Statutes of 1928 (Vernon's Ann. Civ. St. art 3107), in
language as follows: 'Evety political party in this State through its State Executive Committee shall have the power to prescribe
the qualitications of its own members and shall in its own way determine who shall be qualified to vote or otherwise participate
in such political party; provided that no person shall ever be denied the right to participate in a primmy in this State because
of former political views or affiliations or because of membership or nonmembership in organizations other than the political
party.' Acts 40th Legislature (1927) First Called Session, chapter 67, p. 193, s I; 25 Gammel's Laws of Texas.
At a regular session of the 41st Legislature a bill passed the House and Senate to amend article 3107 so as to make it read:
'Every political party in this State, through its State Executive Committee, shall have the power to prescribe the qualifications
of its own members, and shall in its own way determine who shall be qualified to vote or otherwise participate in such political
party and the qualifications of those entitled to have their names placed on the official ballot at any primary election of such
party.' The Governor vetoed the bill as dismptive of party harmony. Senate Journal, Regular Session 41st Legislature, 1929,
pp. 647, 1249, 1250, 1251.
It is shown by the above-recited history of the legislation governing both the pledge and the power of party committees:
First. That the Legislature in formulating the persent mandatory uniform test expressly rejected by votes of both houses the
proposition to confer on the State Executive Committee the power to prescribe the tests for participation in party primaries after
the House had passed an act conferring such power.
Second. That the Legislahtre expressly refused, in rejecting the Senate Committee's amendments, to either make the test pledge
legally binding by imposing a penalty for its violation, or to require the voter to agree not to vote for or support candidates of
other '''276 parties in the general election after he had participated in the primary.
Third. That after the Legislahtre had expressly prohibited the denial to any person ofthe right to participate, by vote or otherwise,
in a primmy because of former political affiliations, legislation to strike out the prohibition failed of enactment because of the
Executive veto.
No court could justify putting into a statute by implication what both Houses of the Legislature had expressly rejected by
decisive votes. The House and Senate Journals leave no room for doubt of the legislative intent to deny the power exercised by
the State Committee in seeking to debar names from the primary ballots under the resolutions of Februmy I, 1930. Once the
legislative intent is ascertained, the duty of the court is plain. To refuse to enforce statutes in accordance with the tme intent
of the Legislature is an inexcusable breach ofjudicia1 duty, because an unwananted interference with the exercise of lawful,
legislative authority.
The Supreme Court uniformly ascribed to the test stahtte that meaning which is in complete harmony with the journal record
of its adoption. In Koy v. Schneider, 110 Tex. 383, 218 S. W. 4 79, 221 S. W. 8SO, it was declared that the qualified elector who
participated in a primary and took the statutory pledge was legally free to vote as he chose in the general election, though in
so doing he might violate good conscience or his moral obligation. In Westerman v. Mims, I 1 I Tex. 37, 38, 227 S. W. 178,
180, the court declined to construe the statute as invariably requiring the casting of ballots by primmy voters for all nominees
of the prim my. The court declared that 'the purpose of the Legislature was the same as the pre-existing purpose of the party
managers, and that was to exclude from party action all persons save those holding a present party allegiance and having a
bona fide present intention to support the party nominees.' It was therefore determined that the obligation assumed in taking
the stahttory pledge was a purely moral obligation binding no longer than it could be conscientiously perfonned.
11 Under familiar and often declared principles, the Legislature is presumed to have intended, when the test-pledge statute
was put in the Revised Stahttes of 1925, that the unchanged words should have the effect and meaning given to them by the
Love v, Wilcox, 119 Te:c 256 (1930)
28 SW.2d 515, 70 ALR. 1484
previous decisions of the Supreme Court. Pearson v. West, 97 Tex. 238, 77 S. W. 944;- Cargill & Dennis v. K.ountze Bros., 86
Tex. 400,22 S. W. 1015, 25 S. W. 13, 24 L R. A. 183,40 Am. St. Rep. 853.
The San Antonio Court of Civil Appeals, in holding that executive committees had no authority to exact of prospective voters
any ''277 other promise or pledge than that prescribed by the statute, defined the test as 'an express declaration of the voter
that he is a member of the party holding the election, and that he will support the nominees of that election.' Briscoe v. Boyle,
286 S. W. 275, 276. The court said with regard to one's right to vote in a party primary, under the statutory regulations: 'If he
considers himself a member of the party holding the election, and if he has a present intention to vote for the nominees selected
at such election, he is entitled ' ~ ~ ' 5 2 5 to vote therein, and by doing so he obligates himself to support such nominees at the
ensuing general election. The law does not purport to measure his eligibility by his past political perfonnances, but by his present
intentions; not by what he has done or omitted to do in the past, but what he promises, and in honor obligates himself, to do in
the immediate future'-citing Westennan v. Mims. Ill Tex. 29, 227 S. W. 17ft Briscoe v Boyle (Tex .. Civ. App.) 286 S .. W. 275.
In an opinion of Chief .Justic Pleasants, delivered November 22, 1928, in the case of Clancy v. Clough, 28 S.W.(2d) -,
1
the
Galveston Court of Civil Appeals determined that the Democratic Executive Committee of the City of Houston was governed
by the statutes of the state in placing names on primary ballots and in prescribing a pledge for candidates, and that a resolution
of the committee requiring a candidate to take a pledge that he had supported the Democratic nominees in the last election
and would support all democratic nominees in the general election was unlawful, and beyond any authority possessed by the
committee under the stah1tes.
12 13 The statute of 1927 amending article 3107, instead of conferring power on the State Committee, as is argued, to deny
the right of a candidate to appear on the official ballot in 1930, because of his vote against party nominees or electors in 1928,
plainly and positively forbade the exercise of any such power. Prohibition against such action by the State Committee could
not well be more clearly expressed than by the language that the committee's power to prescribe qualifications of members and
to detennine who might vote or othe1wise participate in the party primaries was subject to the express qualification 'that no
person shall ever be denied the right to participate in a primmy in this State because of former political views or affiliations.'
This statute was never meant to authorize the committee by its action to override or change the uniform test prescribed by
the state itself in the test-pledge statute. The committee is utterly wanting in authority to subtract from or add to the words
of the statutory pledge, which is to be taken in the light of the definition of its terms ;,278 by this court. The relator fully
complies with the law's requirements in so far as promises about his future political action is concerned when he offers to take
'the test prescribed by article 3110, Revised Civil Statutes, and to comply with the pledge contained therein to the utmost of
conscience and good faith.'
The power to pass on the sincertiy of the candidate's plege and to indorse or condemn his past party record is to be exercised by
the party voters. The statutes jealously guard the voters' power in denying power to the party committees. It was correctly mled
by the Attorney General, through Mr. Dumas, in 1916: 'If proper application is made the committee should place the name of
the candidate on the ballot and the members of the party-the voters themselves-would be the best judges of his fidelity to the
party and make that decision at the polls.' The ruling was repeated through Assistant Attomey General Keeling when he said:
'The law, for reasons which seem to the writer to be obvious, declines to repose in any committee the ultimate right to pass
upon a candidate's democracy. The right is inherent in the sovereign voters of such political party to determine that question.'
Atty. General's Reports, 1914-1916, at pages 200 and 204.
14 Moreover, the language of article 3107 is fairly susceptible of no other interpretation than that the Legislature intended
the same qualifications to be prescribed by the State Committee for all participating in a party primary, whether as voters or
candidates, and further that the same qualifications must be prescribed for all candidates. By the resolutions of Febmmy I,
1930, all qualified voters, regardless of previous political views or affiliations, are expressly invited to participate in the 1930
primaries as are all candidates save those for State offices. Because of the attempted discrimination between candidates and
between certain candidates and voters, in violation of the statute, the resolutions cannot be upheld.
Love v. Wilcox, 119 Te;c 256 (1930)
28 S.W2d 515, 70 ALR 1484
The State Democratic Executive Committee has no yet certified any names of candidates to the County Committee, but has
deferred such certification until the second Monday in June, 1930, which is the date fixed by article 3111 of the Revised Statutes
of Texas for such action to be taken.
15 So far as the State Committee's duty of certification of names is concerned, the date for its performance has not arrived.
The committee has adopted certain void resolutions, which relator is entitlect to have the court compel respondents to ignore, by
mandamus, in order to enforce his clear legal right to the performance of the duties relative to his candidacy which the statutes
mandatorily impose ''279 on the committees. Ex parte Dubuque & Pacitic R. R, 1 Wall. (68 U.S.) 73, 17 L Eel 514; Brewster
v. Sherman. 195 Mass. 222,80 N. E. 21, II Ann. Cas. 418; Attorney General v. R. R. Companies, 35 Wis. 520: Elliott v. City
of Detroit, 121 Mich. 612. 615, 84 N. W .. 820: State v. Board of President and Directors. St. Louis Public Schools. 134 Mo.
296, 35 S .. W. 617, 622. 56 Am. St. Rep. 5Cl3. Despite the adoption of these resolutions and the respondents' answer herein,
this court will not assume that the State Committee or any County Committee intends to fail to do its duty under the law as
declared by the Supreme Court.
'"'''526 Mr. Spelling states a rule governing mandamus which appears sound, as follows: 'A relator is not entitled to the writ
unless he can show a legal duty then due at the hands of the respondent; and until the time arrives when the duty should be
perfonned, no threats or predetermination not to perform it can take the place of such default. The law does not contemplate such
a degree of diligence as the performance of a duty not yet due. The general rule is that the writ will not be granted in anticipation
of a supposed omission of duty, however strong the presumption may be that the person sought to be coerced by the writ will
refuse performance at the proper time. An important reason for refusing the writ in such cases is, that until the duty is due, no
practical question can be presented to the court, but simply a supposed case.' 2 Spelling Extraordinary Relief, pp. 1135, I 136.
At this time, the law entitles relator to the reliefhe seeks to the extent of awarding to him a mandamus, commanding and requiring
respondents to proceed with their statutory duties as through the resolutions of February 1, 1930, had not been adopted and
specificalty commanding respondents and each of them to desist and refrain from enforcing said resolutions in certif)dng names
of candidates for the 1930 Democratic primaries and requiring respondents to be governed by this opinion in the performance
of the duties to which it relates. Judgment will be entered accordingly, without to relator's right to invoke the court's
jurisdiction in this cause for further relief, should that become necessary for the enforcement of his complete statutory rights.
On Motion for Rehearing.
The respondents complain that error was committed in the statement of the case herein as follows:
'''280 First In the statement that relator was excluded from participation in the Democratic State Convention held at Beaumont
on May 28th to select delegates to the Democratic National Convention, when he was not actually excluded from that
convention, but was excluded from the State Convention held at Dallas in September, 1928.
Second. In the order in which the court numbered the resolutions adopted by the State Democratic Executive Committee on
February 1, 1930, in that, the resolution called 'fourth' in the opinion was adopted 'first.'
It is true that the Beaumont Convention held at Beaumont in May did not exclude relator, and that relator did there take a pledge
'to support the nominees of the party,' and that relator was excluded from participation in the State Democratic Convention at
Dallas in September, instead of the State Democratic Convention at Beaumont in May, and the opinion is corrected to so read.
The opinion is also corrected to show that the committee numbered the resolution 'fourth,' which, for convenience, was
numbered 'first' in the opinion.
These corrections are obviously and wholly immaterial to any conclusion announced in the original opinion.
After careful consideration of the motion, we adhere to the conclusions leading to the judgment heretofore entered, and motion
for rehearing is therefore overruled.
i! i
28 S.W.2d 515,70 AL.R 1484
Parallel Citations
28 S.W.2d 515,70 A.LR. 1484
Footnotes
Motion for rehearing tiled.
or Document
26.
Tex. ax Code 1 1.001, art. II
MULTISTATE TAX COMPACT
ch. 141
141.001. Adoption of Multistate Tax Compact
141.001
The Multistate Tax Compact is adopted and entered into with all jurisdictions
legally adopting it to read as follows:
MULTISTATE TAX COMPACT
ARTICLE I. PURPOSES
The purposes of this compact are to:
1. Facilitate proper determination of state and local tax liability of multi-
state taxpayers, including the equitable apportionment of tax bases and settle-
ment of apportionment disputes.
2. Promote uniformity or compatibility in significant components of tax
systems.
3. Facilitate taxpayer convenience and compliance in the filing of tax
returns and in other phases of tax administration.
4. Avoid duplicative taxation.
ARTICLE II. DEFINITIONS
As used in this compact:
1. "State" means a state of the United States, the District of Columbia, the
Commonwealth of Puerto Rico, or any territory or possession of the United
States.
2. "Subdivision" means any governmental unit or special district of a state.
3. "Taxpayer" means any corporation, partnership, firm, association, gov-
ernmental unit or agency or person acting as a business entity in more than one
state.
4. "Income tax" means a tax imposed on or measured by net income
including any tax imposed on or measured by an amount arrived at by
deducting expenses from gross income, one or more forms of which expenses
are not specifically and directly related to particular transactions.
5. "Capital stock tax" means a tax measured in any way by the capital of a
corporation considered in its entirety.
6. "Gross receipts tax" means a tax, other than a sales tax, which is
imposed on or measured by the gross volume of business, in terms of gross
receipts or in other terms, and in the determination of which no deduction is
allowed which would constitute the tax an income tax.
7. "Sales tax" means a tax imposed with respect to the transfer for a
consideration of ownership, possession or custody of tangible personal property
or the rendering of services measured by the price of the tangible personal
property transferred or services rendered and which is required by state or
local law to be separately stated from the sales price by the seller, or which is
separately stated from the sales price, but does not include a tax
unposed exclusively on the sale of a specifically identified commodity or article
or class of commodities or articles.
185
141.001 TAX CODE
Title 2
8. "Use tax" means a nonrecurring tax, other than a sales tax, which (a) is
imposed on or with respect to the exercise or enjoyment of any right or power
over tangible personal property incident to the ownership, possession or custo-
dy of that property or the leasing of that property from another including any
consumption, keeping, retention, or other use of tangible personal property and
(b) is complementary to a sales tax.
9. "Tax" means an income tax, capital stock tax, gross receipts tax, sales
tax, use tax, and any other tax which has a multistate impact, except that the
provisions of Articles III, IV and V of this compact shall apply only to the taxes
specifically designated therein and the provisions of Article IX of this compact
shall apply only in respect to determinations pursuant to Article IV.
ARTICLE III. ELEMENTS OF INCOME TAX LAWS
Taxpayer Option, State and Local Taxes
1. Any taxpayer subject to an income tax whose income is subject to
apportionment and allocation for tax purposes pursuant to the laws of a party
state or pursuant to the laws of subdivisions in two or more party states may
elect to apportion and allocate his income in the manner provided by the laws
of such state or by the laws of such states and subdivisions without reference to
this compact, or may elect to apportion and allocate in accordance with Article
IV. This election for any tax year may be made in all party states or
subdivisions thereof or in any one or more of the party states or subdivisions
thereof without reference to the election made in the others. For the purposes
of this paragraph, taxes imposed by subdivisions shall be considered separately
from state taxes and the apportionment and allocation also may be applied to
the entire tax base. In no instance wherein Article IV is employed for all
subdivisions of a state may the sum of all apportionments and allocations to
subdivisions within a state be greater than the apportionment and allocation
that would be assignable to that state if the apportionment or allocation were
being made with respect to a state income tax.
Taxpayer Option, Short Form
2. Each party state or any subdivision thereof which imposes an income tax
shall provide by law that any taxpayer required to file a return, whose only
activities within the taxing jurisdiction consist of sales and do not include
owning or renting real estate or tangible personal property, and whose dollar
volume of gross sales made during the tax year within the state or subdivision,
as the case may be, is not in excess of $100,000 may elect to report and pay any
tax due on the basis of a percentage of such volume, and shall adopt rates
which shall produce a tax which reasonably approximates the tax otherwise
due. The Multistate Tax Commission, not more than once in five years, may
adjust the $100,000 figure in order to reflect such changes as may occur in the
real value of the dollar, and such adjusted figure, upon adoption by the
commission, shall replace the $100,000 figure specifically provided herein.
Each party state and subdivision thereof may make the same election available
to taxpayers additional to those specified in this paragraph.
Coverage
186
Multistate Tax Commission,
Member States
'T11or,Wzo tooetficr mzu 1967
to pr11serr-e foMrarzS'm
atuf tax_foirrzcss.
Search !search I
Member States
Definition of
Members
Programs &
Committees
Multistate Tax
Compact
Bylaws
Policy Statements &
Resolutions
Officers & Executive
Committee
Public Participation
Policy
Annual Report
Employment
Opportunities
Contact Us
State Contact Lookup
Adopted
Recommendations
Home> Member States
Member States
Alabama
Alaska
Arkansas
California (FTB) (SBE)
Colorado
District of Columbia
HaW!li
Idaho
Kansas
Michigan
Minnesota
Missouri
Montana
New Mexico
North Dakota
Oregon
South Dakota
Texas
Utah
Washington
" ...
Georgia Arizona
Kentucky Connecticut
Louisiana Florida
New Jersey Illinois
South Carolina Indiana
West Virginia Iowa
Maine
Mi!L.Yiand
Massachusetts
Mississippi
Nebraska
New Hampshire
New Yor.!s.
North Carolina
Ohio
Oklahoma
Pennsylvania
Rhode Island
Tennessee
Vermont
Wisconsin
Wyoming
~ - - - - - - - - - - - - - - ~
28.
Jack P. Friedman, ed., Barron's
Dictionary of Business Terms
29 (2d ed. 1994)
OUT-OF-POCKET EXPENSES 428
OUT-OF-POCKET EXPENSES expenditures out of a taxpayer's own
funds for business or personal use. For example, unreimbursed outof.
pocket expenditures for telephone, uniforms, or equipment incurred
in rendering services to a charitable organization may be deductible
as a charitable contribution.
OUT OF THE MONEY option whose STRIKE PRICE for a stock is higher
than the current market value in the case of a call, or lower in the case
of a put. See also EXERCISE PRICE.
OUTPUT the amount produced; also, results provided by a computer, as
in computer output.
OUTSIDE DIRECTOR member of a company's BOARD OF DIRECTORs
who is not an employee of the company. Such directors are considered
important because they are presumed to bring to
major corporate decisions and they also can contnbute d1 verse expe-
rience to the decision-making process.
OUTSOURCING having a service or product supplied or manufactured
by others, who could be a manufacturer, merchant wholesaler, agent, or
broker.
OUTSTANDING
1. unpaid; ACCOUNTS RECEIVABLE and debt obligations of all types.
2. not yet presented for payment, as a check or draft.
3. stock held by shareholders, shown on corporate balance sheets under
the heading of capital stock ISSUED AND OUTSTANDING.
OUTSTANDING BALANCE amount currently owed on a DEBT.
OUTSTANDING CHECK see OUTSTANDING.
OUTSTANDING CAPITAL STOCK shares in the hands of stockhold-
ers. Outstanding shares are issued shares minus treasury
Dividends are based on outstanding shares. See also TREASURY
OVERAGE
1. too much; opposite of shortage.
2. in leases for retail stores, amount to be paid, based on gross
over the base rent. See also OVERRIDE; PERCENTAGE LEASE.
OVER AGE 55 HOME SALE EXEMPTION in taxation, right
vidual over age 55 to sell, once in a lifetime, a principal
gain and to exclude up to $125,000 of the gain from
less of the purchase of another home. The individual must have
property as a PRINCIPAL RESIDENCE for three of the last five
election is binding on both taxpayer and spouse.
OVERALL EXPENSES METHOD technique for evaluating the
goods sold by dividing the seller's total expense over time by
ber of items sold during that time period. This prevents the
failing to include any relevant expenses in the calculation.
429
OVERIMPROVEMENT
TE :RETURN (OAR) percentage relationship of net
operatmg mcome diVIded by the purchase price of property. See also
CAPITALIZATION RATE.
oVER-AND-SHORT difference between recorded sales data and audited
statements. Over-and-short is usually the result of errors in making
change and the handling of receipts.
oVERBOOKEI? condition of h?tel, airline, or other business that accepts
more for a certam date or flight than it can offer accom-
modatiOns. No-shows (people who have reserved but who do not arrive
and do not cancel) are used to justi(y overbookings.
description of a security or a market that has recently
expenence? an unexpectedly sharp price rise and is therefore vulner-
able to a pnce drop, called a by technical analysts, because
a;e few buyers left to dnve up the price further. The opposite con-
dition IS oversol!-when there are few sellers left and the price would
be expected to nse.
OVERBIDLDING a in a given area where there has been more
real estate constructiOn than the market can economically support.
retail price charged that is greater than the actual retail
pnce of an 1tem. Overcharges are usually the result of errors and must
be refunded to the customer.
error that arises when the result of a calculation
IS a number too b1g to be represented on an electronic computer or
calculator.
OVERHAN<? sizable block of real estate, securities, or commodities con-
that, 1f released on the would put downward pressure on
pnces. overhang mclude shares held in a dealer's inven-
.a large mstttutwnal hold!ng, a distribution still in reg-
IStratiOn, and a large commod1ty pos1t10n about to be liquidated.
. . of running a business not directly asso-
cmted With a part1cular Item or service sold. For example, wages paid
to fact?'?' and the cost of production materials are direct costs.
Electnclty, and benefits paid to workers are overhead
expenses. By applymg a factor called the burden rate, cost account-
attempts to allocate overhead, where possible, to the cost of goods
TING term describing an economy that is expanding so
that economists fear a rise in INFLATION. In an overheated econ-
' too much is .chasing too few goods, leading to price rises,
the productive capacity of a nation is usually nearing its limit.
land use considered too valuable for the land,
ly home worth $500,000 situated on a relatively
lot worth $5,000.
29.
BLACK'S A.W DICTIONA.RY
1136 (8
1
h ed. 2004)
out of the money
and the actual value received. Cf. BENEFIT-OF-THE-BAR-
GAIN RULE (2). [Cases: Fraud <&::::>59(3).]
out of the money, adj. (Of a creditor) unpaid because
a debtor has insufficient assets to pay the claim.
out ofthe state. See BEYOND SEAS (2).
out of time. After a deadline; too late <because the
statute of limitations expired before the action's fil-
ing, this lawsuit is out of time and should be dis-
missed>.
output, n. 1. A business's production of goods or
materials; the quantity or amount produced. 2. The
process or fact of producing goods or materials.
output contract. See CONTRACT.
outrage, n. See INTENTIONAL INFLICTION OF EMOTIONAL
DISTRESS.
outrageous conduct. See CONDUCT.
outside director. See DIRECTOR.
outside financing. See FINANCING.
outside party. See THIRD PARTY.
outsourcing agreement. An agreement between a
business and a service provider in which the service
provider promises to provide necessary services, esp.
data processing and information management, using
its own staff and equipment, and usu. at its own
facilities.
outstanding, adj. 1. Unpaid; uncollected <outstanding
debts>. 2. Publicly issued and sold <outstanding
shares>.
outstanding capital stock See outstanding stock under
STOCK.
outstanding security. See SECURITY.
outstanding stock. See STOCK.
outstanding warrant. See WARRANT (1).
over, adj. (Of a property interest) intended to take
effect after the failure or termination of a prior
estate; preceded by some other possessory interest
<a limitation over> <a gift over>.
overage, n. 1. An excess or surplus, esp. of goods or
merchandise. 2. A percentage of retail sales paid to a
store's landlord in addition to fixed rent. [Cases:
Landlord and Tenant <&::::>200.3. C.J.S. Landlord and
Tenant 502(2).]
overbreadth doctrine. Constitutional law. The doctrine
holding that if a statute is so broadly written that it
deters free expression, then it can be struck down on
its face because of its chilling effect - even if it also
prohibits acts that may legitimately be forbidden.
The Supreme Court has used this doctrine to invali-
date a number of laws, including those that would
disallow peaceful picketing or require loyalty oaths.
Cf. VAGUENESS DOCTRINE. [Cases: Constitutional Law
<&::::>90(3). C.J.S. Constitutional Law 502, 542,
546-550.]
overdraft. 1. A withdrawal of money from a bank in
excess of the balance on deposit. [Cases: Banks and
Banking <&::::> 150. C.J.S. Banks and Banking
349-352, 358.] 2. The amount of money so with-
drawn. - Abbr. OD; o/d. 3. A line of credit extend-
1136
ed by a barik to a customer (esp. an established or
institutional customer) who might overdraw on an
account.
overdraw, vb. To draw on (an account) in excess of the
balance on deposit; to make an overdraft.
overhead, n. Business expenses (such as rent, utilities,
or support-staff salaries) that cannot be allocated to a
particular product or service; fixed or ordinary op-
erating costs. - Also termed administrative expense;
office expense. [Cases: Damages <&::::>42, 45. C.J.S. Dam-
- ages 62-65.]
overheated economy. See ECONOMY.
overinclusive, adj. (Of legislation) extending beyond
the class of persons intended to be protected or
regulated; burdening more persons than necessary
to cure the problem <an overinclusive classifica-
tion>.
overinsurance. 1. Insurance (esp. from the purchase
of multiple policies) that exceeds the value of the
thing insured. 2. Excessive or needlessly duplicative
insurance. [Cases: Insurance <&::::>3023, 3043. C.J.S.
Insurance 6, 572, 624-625, 679-682, 718.]
overissue, n. An issue of securities beyond the author-
ized amount of capital or credit. [Cases: Corpora-
tions <&::::>102. C.J.S. Corporations 142.]
overlapping jurisdiction. See concurrentjw-isdiction un-
der JURISDICTION.
overplus. See SURPLUS.
overreaching, n. 1. The act or an instance of taking
unfair commercial advantage of another, esp. by
fraudulent means. [Cases: Contracts <&::::> 1; Sales
<&::::>1(1). C.J.S. Contracts 2-3, 9, 12; Sales. 2, 9,
29, 48.] 2. The act or an instance of defeating one's
own purpose by going too far. overreach, vb.
overridden veto. See VETO.
override (oh-ver-nd), n. 1. A commrsswn paid to a
manager on a sale made by a subordinate. 2. A
commission paid to a real-estate broker who listed a
property when, within a reasonable amount of time
after the expiration of the listing, the owner sells
that property directly to a buyer with whom the
broker had negotiated during the term of the listing.
[Cases: Brokers <&::::>56(3). C . .J.S. Bmkers 172, 174.]
3. ROYALTY (2).
override (oh-ver-rid), vb. To prevail over; to nullify or
set aside <Congress mustered enough votes to over-
ride the President's veto>.
overriding royalty. See ROYALTY (2).
overrule, vb. 1. To rule against; to r ~ j e c t <the judge
overruled all of the defendant's objections>. 2. (Of a
court) to overturn or set aside (a precedent) by
expressly deciding that it should no longer be con-
trolling law <in Brown v. Board of Education, the
Supreme Court overruled Plessy v. Ferguson>. Cf. VA-
CATE (1). [Cases: Courts <&::::>100(1). C . .J.S. Courts
147-148.]
"If a decision is not a recent one, and especially if it seems
to be very poor, it should not be relied upon without
ascertaining whether it may not have been expressly or
impliedly overruled by some subsequent one; that is,
whether the court may not have laid down a contrary
30.
Tex. Tax Code 171.101
FRANCHISE TAX
Ch. 171
Taxation <P2317.
Westlaw Topic No . .371.
171.101
Library References
SUBCHAPTER C. DETERMINATION OF TAXABLE MARGIN;
ALLOCATION AND APPORTIONMENT
Acts 2006, 79th Leg., 3rd C.S., ch. 1, 5 rewrote the subchapter
heading, which previously read "Determ.ination of Taxable Capital and
Taxable Earned Swplus; Allocation and Apportionment".
1 71.10 1. Determination of Taxable Margin
(a) The taxable margin of a taxable entity 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
(i) determining the taxable entity's total revenue from its entire busi-
ness, 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 Subpara-
graph (ii)(a) or (b), compensation, as determined under Section
1 71.1 0 1.3, 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;
(2) apportioning the taxable entity's margin to this state as provided by
Section 1 71.1 06 to determine the taxable entity's apportioned margin; and
(3) subtracting from the amount computed under Subdivision (2) any other
allowable deductions to determine the taxable entity's taxable margin.
(b) Notwithstanding Subsection (a)(l)(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.
(d) An election under Subsection (a)(l)(B)(ii) shall be made by the taxable
entity on its annual report and is effective only for that annual report. A
taxable entity shall notify the comptroller of its election not later than the due
date of the annual report.
Acts 1981, 67th Leg., p. 1697, ch. 389, 1, eff. Jan. 1, 1982. Amended by Acts 1991,
72nd Leg., ch. 901, 5.3(b), eff. Aug. 26, 1991; Acts 1991, 72nd Leg., 1st C.S., ch. 5,
8.05, eff. Jan. 1, 1992; Acts 2006, 79th Leg., 3rd C.S., ch. 1, .5, eff. Jan. 1, 2008;
Acts 2007, 80th Leg., ch. 1282, 11, eff. Jan. l, 2008.
393
31.
FRANCHISE TAX
Ch. 171
for computing the franchise tax due in light of
the investment credit. Bullock v. Dallas Power
and Light Co, (Civ.App. 1979) 589 S.W2d 486,
ref. n.r.e.. Taxation<&:::::> 2540
Credits provided for in Acts 1957, 55th Leg.,
p. 686, ch. 288, could be taken against the
171.1011
additional Franchise Tax and Severance Benefi-
ciary Tax provided for by V.A.T.S. Tax.-Gen.
arts. 12.01 et seq. (repealed; see, now,
17L001 et seq.) and 22.01 et seq. (repealed),
but could not be taken against the gas utility
regulation fee exacted by Vernon's Ann.Civ.St.
art. 6060. Op.Atty.Gen.1959, No. WW-714.
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 reportable as income on a line
number on an Internal Revenue Service form is the amount entered to the
extent the amount entered complies with federal income tax law and includes
the corresponding amount entered on a variant of the form, or a subsequent
form, with a different line number to the extent the amount entered complies
with federal income tax law.
(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); and
(B) subtracting:
(i) bad debt expensed for federal income tax purposes that corre-
sponds to items of gross receipts included in Subsection (c)(l )(A) for the
current reporting period or a past reporting period;
(ii) to the extent included in Subsection (c)(l)(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)(l )(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;
401
171.1011 TAX CODE
Title 2
(v) to the extent included in Subsection (c)(l)(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)(l )(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 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 106.5;
(iii) the amounts reportable as income on lines .3a and .5 through 11,
Internal Revenue Service Form 106.5, Schedule K;
(iv) the amounts reportable as income on line 17, Internal Revenue
Service Form 882.5;
(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); and
(B) subtracting:
(i) bad debt expensed for federal income tax purposes that corre-
sponds 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 9.51-964, 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 au-
thorized 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 taxable entity 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 shall exclude
from the taxable entity's total revenue the taxable entity's share of the net
402
FRANCHISE TAX
Ch. 171
171.1011
income of the passive entity, but only to the extent the net income of the passive
entity was 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)(l )(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)(l)(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 com-
missions;
(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)(l)(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)(l )(A), (c)(2)(A), or (c)(3), the tax basis as deter-
mined 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:
(1) to the extent included under Subsection (c)(l)(A), (c)(2)(A), or (c)(3), 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 contractu-
al claim; and
(D) fees paid an attorney in the matter who is not a member, partner,
shareholder, or employee of the taxable entity;
(2) to the extent included under Subsection (c)(l)(A), (c)(2)(A), or (c)(3),
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) $500 per pro bono services case handled by the attorney, but only if the
attorney maintains records of the pro bono services for auditing purposes in
403
171.1011
TAX CODE
Title 2
accordance with the manner in which those services are reported to the State
Bar of Texas.
(g-4) A taxable entity that is a pharmacy cooperative shall exclude from its
total revenue, to the extent included under Subsection (c)(l)(A), (c)(2)(A), or
(c)(3), flow-through funds from rebates from pharmacy wholesalers that are
distributed to the pharmacy cooperative's shareholders.
(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), (g-3), or
(g-4) 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 determina-
tion of compensation under Section 1 71.1 0 13.
(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)(l ):
(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; or
(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 indepen-
dent 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 com-
mission.
(m) A taxable entity shall exclude from its total revenue, to the extent
included under Subsection (c)(l)(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:
404
FRANCHISE TAX 171.1011
Ch. 171
(1) to the extent included under Subsection (c)(l)(A), (c)(2)(A), or (c)(3), 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 Chil-
dren's Health Insurance Program (CHIP);
(B) for professional services provided in relation to a workers' compen-
sation 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 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 unconditional-
ly guaranteed by, the United States government and United States govern-
ment 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 retar-
dation 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;
405
171.1011 TAX CODE
Title 2
(K) an end stage renal disease facility licensed under Section 251.0
11
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) Repealed by Acts 2007, 80th Leg., ch. 1282, .37(2).
(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 guaran-
teed 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 Com-
modity Credit Corporation, the Small Business Administration, and any
successor agency.
(7) "United States government-sponsored agency" means an agency origi-
nally established or chartered by the United States government to serve
public purposes specified by the United States Congress but whose obli-
gations 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)(l)(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
406
FRANCHISE TAX
Ch. 171
171.1011
(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)(l)(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 2.50 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).
(t) The comptroller shall adopt rules as necessary to accomplish the legisla-
tive intent prescribed by this section.
Added by Acts 2006, 79th Leg., 3rd C.S., ch. 1, 5, eff. Jan. 1, 2008. Amended by Acts
2007, 80th Leg., ch. 1282, 12, 1.3, 37(2), eff. Jan. 1, 2008.
ed ", to the extent included under Subsection
(c)(l )(A), (c)(2)(A), or (c)(3)," following "total
revenue"; repealed subsec. (p)(4-b) prior to it
becoming effective; added subsec. (t); at the
end of subsec. (l )(1 )(A) substituted "or" for
"and"; and made nonsubstantive changes. Pri-
or thereto subsecs. (b), (c)(l )(B)(iii) and
(2)(B)(iii), and (p)(4-b) which read:
"(b) In this section, a reference to an amount
entered on a line number on an Internal Reve-
nue 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)(l )(B)(iii) to the extent included in Sub-
section (c)(l )(A), net distributive income from
partnerships and from trusts and limited liabili-
ty companies treated as partnerships for federal
income tax purposes and net distributive in-
come from limited liability companies and cor-
porations treated as S corporations for federal
income tax purposes;"
Acts 2007, 80th Leg., ch. 1282 rewrote sub-
sec. (b); in subsec. (c)(l )(A)(i) and (ii) substitut-
ed "reportable as income" for "entered"; add-
ed subsec. (c)(l )(A)(iii); rewrote subsec.
(c)(l )(B)(iii); in subsec. (c)(2)(A)(i) substituted
"reportable as income" for "entered"; in sub-
sec. (c)(2)(A)(ii) substituted "reportable as in-
come on lines 4, 6, and 7" for "entered on lines
4 through 7"; in subsec. (c)(2)(A)(iii) substituted
"reportable as income on lines 3a and 5" for
"entered on lines 2"; added subsec. (c)(2)(A)(iv)
to (vi); rewrote subsec. (c)(2)(B)(iii); in subsec.
(d) substituted "taxable entity" for "corpora-
tion"; in subsec. (e) substituted "shall exclude
from" for "that is not included in a group
report under Section 171.1014 shall include
in"; in introductory paragraph of subsec. (g-.3)
deleted ", to the extent included under subsec-
tion (c)(l )(), (c)(2)(A), or (c)(.3) from the end; in
subsec. (g-3)(1) and (2) inserted "to the extent
included under Subsection (c)(l )(A), (c)(2)(A),
or (c)(3),"; in subsec. (g-3)(.3) substituted "$500
per pro bono services case handled by the attor-
ney," for "the actual out-of-pocket expenses of
the attorney, not to exceed $500 per case, of
providing pro bono legal services to a person,";
added subsec. (g-4); in subsec. (h) inserted the "(c)(2)(B)(iii) to the extent included in Sub-
reference to subsec. (g-4); in the introductory section (c)(2)(A), net distributive income from
paragraph to subsec. (n) deleted "to the extent partnerships and from trusts and limited liabili-
Included under Subsection (c)(l )(A), (c)(2)(A), ty companies treated as partnerships for federal
or (c)(.3)" from the end and placed it at the income tax purposes and net distributive in-
beginning of subsec. (n)(l); in subsec. (o) delet- come from limited liability companies and cor-
407
32.
171.1011
porations treated as S corporations for federal
income tax purposes;"
"(B) telephone calls;
"(C) faxes; and
TAX CODE:
Title 2
"(p)(4-b) 'Out-of-pocket expenses' means, for
purposes of Subsection (g-3)(.3), expenses in-
curred by the attorney in relation to a case,
including:
"(D) paper and other office supplies."
Section 38 of Acts 2007, 80th Leg., ch. 1282
provides:
"(A) postage expenses;
Taxation e=> 2540 to 2551.
Westlaw Topic No. 371.
"This Act applies only to a report originally
due on or after the effective date of this Act"
Library References
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, develop-
ment, 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, live and prerecorded television
and radio programs, books, and other similar property embodying
words, ideas, concepts, images, or sound, without regard to the means or
methods of distribution or the medium in which the property is embod-
ied, for which, as costs are incurred in producing the property, it is
intended or is reasonably likely that any 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:
(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 perform-
ing production activities;
(4) handling costs, including costs attributable to processing, assembling,
repackaging, and inbound transportation costs;
408
FRANCHISE TAX
Ch. 171
171.1012
(5) storage costs, including the costs of carrying, storing, or warehousing
property, subject to Subsection (e);
(6) depreciation, depletion, and amortization, reported on the federal in-
come tax return on which the report under this chapter is based, 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 re-
search or experimental expenditures described by Section 17 4, Internal
Revenue Code;
(10) geological and geophysical costs incurred to identify and locate prop-
erty 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, recla-
mation, 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)(S);
(5) postproduction direct costs allocable to the property, including storage
and handling costs, as provided by Subsections (c)(4) and (c)(S);
(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;
409
171.1012 TAX CODE
Title 2
(9) the costs of quality control, including replacement of defective compo.
nents pursuant to standard warranty policies, inspection directly allocable to
the production of the goods, and repairs and maintenance of goods; and
(l 0) licensing or franchise costs, including fees incurred in securing the
contractual right to use a trademark, corporate plan, manufacturing proce-
dure, 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;
(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 solicita-
tion 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 har-
vesting of crops, and the severance of timber from realty.
(f) A taxable entity may subtract as a cost of goods sold indirect or adminis-
trative 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,
410
FRANCHISE TAX
Ch. 171
171.1012
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 4 71, Internal Revenue
Code, may capitalize that cost in the same manner and to the same extent that
the taxable entity capitalized that cost on its federal income tax return or may
expense those costs, except for costs excluded under Subsection (e), or in
accordance with Subsections (c), (d), and (f). If the taxable entity elects to
capitalize costs, it must capitalize each cost allowed under this section that it
capitalized on its federal income tax return. If the taxable entity later elects to
begin expensing a cost that may be allowed under this section as a cost of goods
sold, the entity may not deduct any cost in ending inventory from a previous
report. If the taxable entity elects to expense a cost of goods sold that may be
allowed under this section, a cost incurred before the first day of the period on
which the report is based may not be subtracted as a cost of goods sold. If the
taxable entity elects to expense a cost of goods sold and later elects to capitalize
that cost of goods sold, a cost expensed on a previous report may not be
capitalized.
(h) A taxable entity shall determine its cost of goods sold, except as otherwise
provided by this section, in accordance with the methods used on the federal
income tax return on which the report under this chapter is based. 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 circum-
stances, 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 con-
tract 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)(1.3).
411
171.1012 TAX CODE
Title 2
(k) Notwithstanding any other provision of this section, if the taxable entity.
a lending institution that offers loans to the public and elects to subtract cost
goods sold, the entity, other than an entity primarily engaged in an activity
by category 59.32 of the 1987 Standard Industrial Classification
Manual published by the federal Office of Management and Budget, may
subtract as a cost of goods sold an amount equal to interest expense. For
purposes of this subsection, an entity engaged in lending to unrelated parties
solely for agricultural production offers loans to the public.
(k-1) Notwithstanding any other provision of this section, the followino-
t:>
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.
(o) If a taxable entity, including a taxable entity with respect to which cost of
goods sold is determined pursuant to Section 171.1014(e)(l), whose principal
business activity is film or television production or broadcasting or the distribu-
tion of tangible personal property described by Subsection (a)(3)(A)(ii), or any
combination of these activities, elects to subtract cost of goods sold, the cost of
goods sold for the taxable entity shall be the costs described in this section in
relation to the property and include depreciation, amortization, and other
expenses directly related to the acquisition, production, or use of the property,
including expenses for the right to broadcast or use the property.
Added by Acts 2006, 79th Leg., 3rd C.S., ch. 1, 5, eff. Jan. 1, 2008. Amended by Acts
2007, 80th Leg., ch. 1282, 14, 15, eff. Jan. 1, 2008.
412
33.
FRANCHISE TAX
Ch. 171
171.1013
Acts 2007, 80th Leg., ch. 1282 in subsec.
(a)(3)(A)(ii) inserted "live and prerecorded tele-
vision and radio programs" following "video-
tapes,", substituted ", without regard to the
means or methods of distribution or the medi-
um in which the property is embodied," for "by
the creator of the property" following "or
sound", and deleted "tangible" preceding "me-
dium in which the property is embodied"; in
subsec. (c)(6) inserted "reported on the federal
income tax return on which the report under
this chapter is based,"; rewrote subsec. (g); in
subsec. (h) substituted "used on the federal in-
come tax return on which the report under this
chapter is based" for "permitted by federal stat-
utes and regulations"; rewrote subsec. (k); and
added subsec. (o ). Prior thereto subsecs. (g)
and (k) read:
"(g) A taxable entity that is allowed a subtrac-
tion by this section for a cost of goods sold and
that is subject to Section 263A, 460, or 4 71,
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 capi-
talize the cost under federal law and regula-
tions, except for costs excluded under Subsec-
tion (e), or in accordance with Subsections (c),
(d), and (f)."
"(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."
Library References
Taxation e=>2540 to 255 L
Westlaw Topic No . .371.
1 71.1 0 13. Determination of Compensation
(a) Except as otherwise provided by this section, "wages and cash compensa-
tion" 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 a taxable entity treated as a partnership
for federal income tax purposes, but only if the person receiving the distribu-
tion is a natural person;
(2) net distributive income from limited liability companies and corpora-
tions treated as S corporations for federal income tax purposes, but only if
the person receiving the distribution is a natural person;
(3) stock awards and stock options deducted for federal income tax pur-
poses; and
(4) net distributive income from a limited liability company treated as a
sole proprietorship for federal income tax purposes, but only if the person
receiving the distribution is a natural person.
(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 compen-
sation paid by the taxable entity to its officers, directors, owners, partners,
and employees; and
(2) the cost of all benefits, to the extent deductible for federal income tax
purposes, the taxable entity provides to its officers, directors, owners, part-
ners, and employees, including workers' compensation benefits, health care,
413
171.1013
TAX CODE
Title 2
employer contributions made to employees' health savings accounts, and
retirement.
(b-1) This subsection applies to a taxable entity that is a small employer, as
that term is defined by Section 1501.002, Insurance Code, and that has not
provided health care benefits to any of its employees in the calendar year
preceding the beginning date of its reporting period. Subject to Section
171.1014, a taxable entity to which this subsection applies that elects to
subtract compensation for the purpose of computing its taxable margin under
Section 171.101 may subtract health care benefits as provided under Subsec-
tion (b) and may also subtract:
(1) for the first 12-month period on which margin is based and in which
the taxable entity provides health care benefits to all of its employees, an
additional amount equal to 50 percent of the cost of health care benefits
provided to its employees for that period; and
(2) for the second 12-month period on which margin is based and in
which the taxable entity provides health care benefits to all of its employees,
an additional amount equal to 25 percent of the cost of health care benefits
provided to its employees for that period.
(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, per 12-month period on which margin is based, for any
person in the amount of wages and cash compensation it determines under this
section. If a person is paid by more than one entity of a combined group, the
combined group may not subtract in relation to that person a total of more than
$300,000, or the amount determined under Section 171.006, per 12-month
period on which margin is based.
(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 undocu-
mented 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 171.10ll(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 compensa-
tion, 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;
414
3 .
Instructions for Completing
Franchise Tax Reports
Originally Due on or After
January 1, 1992 and Before
January 1, 2008
INSTRUCTIONS FOR COMPLETING FRANCHISE TAX REPORTS
ORIGINALLY DlJE ON OR AFTER JANlJARY 1,1992 AND BEFORE JANlJARY 1, 2008
ITTENTIO!V: You MUST file a fia11chi1<' rat l'l"m and Puh/u 111/imnalloll R,poll (P/!1) e\"e/1 if \'0/11 <-<))pmario/1 ;, iiiUIIV<' a/1{//or 110 Ia\ 1> due
Failw <' 111 tile a report lilrll 1 null 111 rhe '"" oJ )'0111 11ght 1<1 tralllrl<./ huwu'" '" pn11'idcd b_, Title 2 o( the Tax Code
NOJ"E; In thne tll'l!JWIJOn\, unpoullion" include\ a hank, a ,rate limircd hankinR tH.HJc.iation. a HJving'i and loan a">'inciatwn, a limited /iahility
( ompany u p1 ofcHional limited liahi/ity company, a cmporat/011 that to he an S corporation lor federal tiiCtmH' tax pw poH'\, and a
corpmation Prq(essional and partneu;hip'i are not whject lU !he jianchi\e Wx pnor lo Januan
1
I, '2008
Do not se111/ copie' af IRS jorm1 '" baclwp. Keep all forms in yanr Jiles jill' possible audit purposes.
1J'EB SITE: Form'i, \tallltes, rules, ;mh/icutionL and othe1 conceuzing Texas lax can he found on the Complrol/er\ ft'eh ,ife ut
H'H'H'. wiudow.state,tx.us
IDo NOT STAPLE
L_ REPORTS
PRIVILEGE PERIOD:
GENERAL INSTRUCTIONS
DO NOT SEND
IRS FORMS
INITIAL REPORTS: For a Texas corporation, the beginning date is the chatier date; for a foreign corporation, the beginning date is
the date it began doing business in Texas. for all corporations, the initial franchise tax report will cover both an initial privilege period
and a second privilege period. The initial privilege period starts on the beginning date and ends on the day before the first
anniversary of the beginning date. The second privilege period begins on the anniversary date, and ends on the following
December 3 I. For example: ifa Texas corporation is chartered on April l, 2002, the initial privilege period will begin April l,
2002 and end March 31, 2003. The second privilege period will begin April I, 2003 and end on December 31, 2003. Therefore.
the initial report will cover the; privilege periods from April I, 2002 through December 31, 2003 If the beginning date is after
October 3 and before January I, an additional privilege period (January I through December 31) is included on the initial report.
For example: if a Texas corporation is chartered on November I, 200 I, the initial report will cover the pr ivilcgc periods from
November I, 200 I through December 31, 2003. NOTE Because the privilege period for the initial report covers more than one
vear, the tax rate for the tcrwhle capital calculation on Schedule A and the additional ten calculation on Schedule B will be
greater rlum the annual rote
ANNUAL REPORTS. The privilege period is January I through December 31 of the report year.
REPORT YEAR: The year in which the report is due.
DUE DATE: If the dul! date (original or extended) of a repor! jit!ls on a Saturday, Sunday or legal holiday lllduded on the list
puh!tshed hefhre Janua1y I oj each year in the Te-.;m Regis fer, the due date 1vill be the next business dm.
INITIAL REPORTS: The initial report and payment arc due 89 clays after the first anniversary of the beginning date
ANNUAL REPORTS: The annual report and payment must be postmarked on or before May 15 of the report year
If the corporation is the survivor of a merger, see Item I
FRANCHISE NO TAX DUE INFORMATION REPORT- SHORT FORM (Form 05-141): For reports originally due on or
after January I, 2000, the corporation is eligible to file the short form report in place of the long fmm report (Forms 05-142 and
05-143) IF the corporation, for the accounting period on which this report is based,
had no gross receipts in Texas, OR
had gross receipts everywhere ofless than $150,000 tltem 4 and Item 17 are each less than $150,000), OR
had total taxable capital of less than $.39,998 ($17,S25 if this is an initial report) and earned surplus (including officer and director
compensation, if applicable) ofless than $2,222
NOTE You MUST file the long form report for anv report due prior to Januarv 1, 2000
EXTENSIONS: An extension request tllll'il he postmarked on or hejiJre the origmal due date I)/I he report
INITIAL FILERS. A 45-dayextension may be obtained by completing Form 05-141, EXTENSION REQUEST FOR TEXAS
CORPORATION FRANCHISE TAX REPORT, staling the reason the extension is needed and enclosing a payment that is at least
I)() percent of the tax that will be due when the report is filed
ANNUAL FILERS: UseForm05-14l,EXTENSION REQUEST FOR TEXAS CORPORATION FRANCHISE TAX REPORT If
granted, the extension will be through November 15 of the report year The extension payment must be at least 90 percent of the tax
that will be due with this year's report or I 00 percent of the tax reported as due for the previous calendar year on the report due in the
previous calendar year If the corporation elects to pay I 00 percent of the lax reported as due for the previous calendar year, the
previous year's report must be filed on or before May 14 of the current report year in order for the extension to be granted If the
corporation will not owe any tax on the report, it does not have to send a payment, but it MUST submit the request to be granted an
extension to tile the report If the timely extension payment is not at least 90 percent of the tax that will be due or I 00 percent of the
tax reported as due f(n the previous calendar year (on the report due in the previous calendar year filed on or before May 14 of the
current year), then penally and interest will apply to any part of the 90 percent not paid by the original due dale and to any part of the
I 0 percent not paid by the extended due dale.
Ifthe corporation will owe no tax when it tiles, OR if the corporation owed no tax on last year's report, call us at (888) 4.34-5464 to
request an extension using a touch-tone phone. Tclefiling an extension request is only valid on or before the due date. Please make a
note f<.n the corporation's records of the confirmation number provided.

ELECTRONIC FUNDS TRANSFER: The conditions for requiring a corporation to pay via electronic funds transfer (EFT) are
outlined in General Rule 3,9 concerning electronic filing and electronic funds transfers In order to extend the due date of the report
from May 15 to August 15, a corporation that is required to pay by EFT must do the following on or before May 15:
I) file a request for an extension (Form 05-141 or Form 05-110 or WebFile online at
https:/ /ccpa.cpa,state. tx. us/fran_ cxt/indcx.html ), and
2) pay at least 90 percent of the amount of tax that will be due with this year's report or I 00 percent of the tax reported as due f(w the
previous calendar year on the report due in the previous calendar year .. If the corporation elects to pay I 00 percent of the tax
reported as due for the previous calendar year, the previous year's report must be filed on or before May 14 of the current report
year in order for the extension to be granted.
A corporation that must pay by EFT may request an additional extension to November 15 to file the report by doing the ftlllowing
on or before August 15:
1) file a second extension request (Form 05-141 or 05-110 or WebFile online at https://ecpa.cpa.state .tx.us/fran_ ext/index.html ), and
2) pay the balance of the amount of tax that will be reported on the franchise tax report for the current year.
The report must then be filed on or before November 15 If the total amount paid by August 15 is at least 99 percent of the tax due,
any penalties for the underpayment will be waived. provided the total amount due is paid by November 15
NOTE: See Form 96-590, TE)(NET Payment Instruction Booklet, (or additional in(ormation concerning requi1ements fhr
electronic fiouls tmns(er pav//le/1/s
AMENDED REPORTS: If the corporation needs to amend a report, it must file both pages of the report along with a cover letter
explaining why it is amending the report. Therefore, even if the amendment only causes a change to Schedule A, the corporation
must also complete and file Schedules Band C. Write "AMENDED" at the top of each page of the amended report Write
"A!Yl ENDED REFUND" at the top of each page if the amendment results in an overpayment. Write "AMENDED RAR REFUND"
if the amendment is an overpayment due to a Revenue Agent Report adjustment
FINAL REPORT: l fthe co rpm at ion is no longer subject to the earned surplus component, Fom1 05-139. TEXAS FINAL
CORPORATION FRANCHISE TAX REPORT, must be filed with the Comptroller's office within 60 days afierthe corporation becomes
no longer subject to the earned surplus component. In the case of a Texas corporation or a non-Texas corporation with a certificate
of authority (COA) to do business in Texas, a certificate of account status may be requested Sec back oftinal report OR Form 05-359,
REQUEST FOR CERTIFICA TEOF ACCOUNT STATUS The certificate will be issued by the Comptroller's office and may be filed in
the Texas Secretary of State's office along with the proper articles 01 application and filing fee.
TERMINATION OF CORPORATE EXISTENCE: Once a business has tiled Articlesoflncorporation or Organization with the
Texas Secretary of State's office, it is recognized by the State of Texas as a legal entity, whether or not it conducts business or simply
exists as an inactive shell As such, the corporation must file tax reports until it formally terminates its legal existence in Texas
through the Secretary of State's office. Texas corporations must satisfy all tax requirements before filing Articles of Dissolution
All documents required by the Texas Secretary of State to terminate legal existence in Texas must be teceived in that office before
5:00pm. on December 31 to avoid liability for the next annual franchise tax period. If December 31 falls on a weekend. the
documents must be received by 5:00p.m. on the last working day of the year Postmark dates will not be accepted.
Foreign corporations that have been doing business in Texas, with or without a Certificate of Authority (COA), must satisty all
franchise tax requi1ements Tn order to close the franchise tax account, the corporation must notify the Comptroller's office in
writing, provide the date the corporation ceased doing business in Texas, file all reports due and pay any amount due.
More information about changing your corporate status is available online at winclow.state.tx,us/taxinfo/taxpubs.html#tl"anchise.
NOT' This section doe1 not app(l' to financial institutums
CONSOLIDATED REPORTING: Corporations arc required to file based on their own financial condition Consolidated reporting is
not allowed.
SPECIFIC INSTRUCTIONS FOR SCHEDULE A
ACCOUNTING METHODS:
GAAP Method: Unless the FIT method is allowed and elected, a
corporation should report gross receipts and surplus in
accordance with Generally Accepted Accounting Principles
(GAAP). The law contains some exceptions to the GAAP
reporting requirements
FIT Method: The following corporations may determine their
gross receipts and surplus using the same accounting methods
used in completing the corporation's most recent tederal income
tax (FIT) return (unless otherwise required by the law).
I) A corporation with taxable capital oflcss than $1 million In
determining if taxable capital is less than $!million, the
corporation shall apply the accounting methods used in
computing the federal income tax return unless another
method is required under the law,
2) A close corporation that has 35 or fewer shareholders, or
3) An S corporation.
A corporation using the FIT method is not eligible to take the
temp01ary credit in Item 30.
NOTE Clml? and S COIJIOmtions ll'ith taxahle cap11al of $1
million or more must notifi' the Comptroller of their intent to
/He the FIT lncthod h1, //WI king the appmp1 iate hoxes on the
/i"tlllclllse tax report (Item i) The notification mwl he made 011
or hej(He the due date qf each report in which thev intend to
use the FIT meThod
ITEM i- Box l Blacken this box if the corporation is using
CJAAP methods for tiling Schedule A of this franchise tax
report
Box 2 Blacken this box if the corporation is electing to use the
same methods used in determining its FIT liability on Schedule
!\of this franchise tax report This method may only be used by
qualifying corporations, as described above.
Fom1 05-364-3 (Rev 5-07110)
Box 3 Blacken this box if the corporation is a close corporation
that has 3.5 or fewe1 shareholders
Box 4 Blacken this box if the corporation is an S corporation
ITEM 1 -INITIAL REPORTS. If the corporation is the survivor
of a merger which occurred between the date entered in Item 2
(see instructions) and January 1 of the year in which this repo!l
is due, the corporation owes tax on net taxable capital based on
its financial condition as of the day after the date of the merger
The corporation should check "YES" in Item I and enter the day
after the date of merger in Item 2 The new clue elate is 91 days
after the date of the merger, if that date is after the original due
date.
ANNUAL REPORTS: If the corporation is the survivor of a
merger which occurred between the end of its last accounting
period in the year prior to this report year and January I of this
report year, the corporation owes tax on net taxable capital
based on its financial condition as of the day after the date of
merger. The corporation should check "YES" in Item I and
enter the day after the date of merger in Item 2
ITEM 2- fN!TlAL REPORTS: Enter 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 elate
of the initial report
Example 1: The corporation's last normal accounting period
ending date is J 2-31-02 The corporation's beginning date in
Texas is 04-03-02. The original due date of its initial report is
07-01-03 Six months from the corporation's beginning date
would be I 0-03-02. Sixty days before the corporation's original
due date would be 0.5-02-03. The normal accounting period
ending date of 12-31-02 falls between the period of I 0-03-02
and 05-02-0.3. Therefore, the corporation must usc its last
normal accounting period ending date of 12-31-02
If the corporation's normal accounting period ending date does
not fall between six months after the beginning date and at
least 60 days prior to the original due date, then enter the end
of the month that is closest to the first anniversary of the
beginning dale.
Example 2: The corporation's last normal accounting pe1 iod
ending elate is 09-.30-02. The corporation's beginning elate in
Texas is 04-03-02 .. The original due date of its initial report is
07-01-03. 09-30-02 does not fall between six months after the
beginning date and 60 days prior to the due date Therefore, the
corporation must use accounting information as of 03-31-03.
ANNUAL REPORTS: Enter the date of the corporation's last
accounting period ending in the calendar year prior to the
report year
Example 3: Report year 2003; c01voration 's last accounting
period ending date - January 31 Corporation should use
01-31-02 to file the 2003 report
ITEM 3 - A corporation with zero Texas receipts on Schedule
1\ will have a zero apportionment factor for taxable capital and
will owe no tax on Schedule A. The survivor of a merger
should combine its receipts and the receipts of the non-
survivors for the same accounting period used by the survivor.
Gross 1cceipts for taxable capital means all revenues that would
be recognized annually under a GAAP method of accounting,
without deduction for the cost of property sold, or other costs
incuned, unless otherwise provided for by law, Initial filers
should use gross receipts from the first date of doing business
through the month ending date used on line 2. Annual filers
should use 12 months of gross receipts based on the last
accounting year-end date,
Gross receipts in Texas include.
sales of real property located in Texas. including royalties
from oil, gas, or other mineral interests;
sales or tangible personal property when the property is
delivered or shipped to a purchaser within Texas,
sales of tangible personal pmperty when the property is
shipped t!om Texas to a state in which the coq)oration is
not subject to taxation (the "throwback rule"):
services performed within Texas;
rentals of property situated in Texas;
royalties from use of patents or copyrights within Texas;
revenues from the use of trademarks, t!-anchises, or licenses
within Texas, effective for reports originally due on or after
January 1, 1998. For reports that arc originally due prior to
January I, 1998, these revenues are apportioned to the
location of payor These revenues do not include receipts
from the sale or license of computer sofiware or programs.
which are apportioned to the legal domicile of the payor;
the net gain Jlom the sales of investments or capital assets
(Sec definition in Item 4) A net loss is treated as zero
receipts. If the combination of net gains and losses results
in a net gain and both Texas and non-Texas sales have
occurred, a separate calculation of net gains and losses on
Texas sales must be made. Sales of intangibles held as
capital assets or investments (e.g, stocks, bonds, goodwilL
patents, trademarks, partnership interests, etc ) to
corporations incorporated in Texas arc gross receipts in
Texas If the Texas net gain is greater than the total net
gain, the Texas net gain to report equals the total net gain,
and
all other business receipts within Texas including
dividends as of the elate cleclarccl and interest tlom Texas
payors Fm example, dividends received from a
corporation incorporated in Texas are Texas receipts
BANKING CORPORATIONS & SAVINGS AND LOAN
ASSOCIATIONS - For reports originally due before January I,
2000, dividends and interest received by a banking corporation
or savings and loan association are Texas receipts if the
banking corporation or and loan association has its
commercial domicile in Texas. For reports originally due on or
after January 1, 2000, dividends and interest rcceiVGd by a
banking corporation or savings and loan association arc Texas
receipts if they are paid by a corporation incorporated in Texas
or, if they me paid by an entity or person legally domiciled in
Texas. For reports originally due on or after January 1, 2002, a
banking corporation should exclude tlom its Texas receipts
interest earned on federal funds and interest earned on
securities sold under an agreement to repurchase that are held
in a correspondent bank domiciled in Texas.
ITEM 4- Gross receipts eve1ywhere indude,
all sales of tangible personal property;
all rentals;
all services;
all royalties:
all other business receipts;
all dividends as of the date declared and interest; and
the net gain f!om the sales of investments or capital assets.
A net loss is treated as zero receipts. A capital asset is any
asset, other than an investment, which is held for use in the
production or income, and is subject to depreciation,
depletion or amortization. /\n investment is any non-cash
asset not a capital asset and not held as inventory or
proceeds from the sale of inventory
Note. Fot reports due on or ajier January I, 2000,
the cnrJIOra/1011 is to jile the Francht\'e No Tax Due
lnji;rmation Short Form cotporation had gross
t ecetpls ever1where of le.1s than $150,000 (Item 4 and Item 17
are each less than $1 50.()00)
ITEM 5 - If Texas gross receipts are zero, enter zero. If Item 3
and Item 4 are the same and greater than zero, enter I .0000
Otherwise, divide Item 3 by Item 4 and round to 4 places past
the decimal
ITEM 6 - Enter the stated capital Include the par or stated
value of all shares of stock for all classes, outstanding and in
the treasury. If there is no par or stated value, use the amount
actually received tor the stock Treasury Stock (stock that has
been issued and reacquired by the corporation) must be
included as part of stated capital at the par or stated value of
the stock until those shares have been canceled.
LIMITED LIABILITY COMPANIES (LLCsl- Enter the
amount of the membas' contributions
NOTE Item 15 cannot he a amount
ITEM 7- Slllvlus calculation. Total ASSETS minus Total
DEBTS minus STATED CAPITAL equals SURPLUS.
ASSETS: When determining a corporation's assets, the assets
may be reduced by a reserve f()r bad debts and by contra-asset
accounts for depletion, depreciation or amortization, provided
these items are in confonmmce with the franchise tax reporting
method, as explained under "Accounting Methods" above.
Investments in other corporations must be reported using the
cost method of accounting
DEBTS: Debt is defined as legally enforceable obligations
measured in a certain amount of money that must be performed
or paid within an ascertainable period of time or on demand.
Liabilities that do not meet the debt criteria cannot be subtracted
flom assets Ddcrrcd investment tax credits, deferred income
taxes and contingent liabilities are not debts and cannot be
subtracted from assets for fi anchise tax purposes.
STATED CAPITAL: See Item 6.
SURPLUS: Some components of taxable surplus are: retained
eamings; paid-in capital, and donated capital.
If the above calculation (Assets minus Debts minus Stated
Capital) is used to determine surplus, no adjustment is
necessary for the cost of treasury shares purchased since the
assets have already been reduced by the amount paid for the
treasury stock. However, if surplus is determined by adding the
separate component accounts, the cost of treasury shares
purchased must be subtracted from those accounts.
Corporations receiving dividends must include those dividends
in surplus as of the declaration date of the declaring
corporation. Corporations declaring dividends shall exclude
those dividends Hom surplus as of the declaration date
Dividends must be paid within one year from the date of
declaration to be excluded tlom surplus. Corporations involved
in oil and gas exploration and production activities must report in
accordance with the successful efforts or fi.lil cost method of
accounting unless they are qualified to use the FIT method as
explained under "Accounting Methods.., A surplus deficit will
reduce stated capital, but not below zero. Tf the corporation has
a surplus deficit, the deficit must be enclosed in brackets as
tallows: <xx,xxx>.
LLCs - Surplus means the net assets (total assets minus total
debts) of the company minus its members' contributions
ITEM 9- Ifltcm 8 is zero, Item 9 will be zero.
ITEI\110- Each of the following deductions may be taken
against either apportioned taxable capital or apportioned and
allocated earned surplus, but not both The deductions may not
reduce apportioned taxable capital below zero and no carryover
of unused deductions is allowed.
I) A corporation that has been designated as an enterprise
project, prior to September I, 200 I, as provided by the
Texas Enterprise Zone Act, may deduct 50 percent of its
capital investment in the enterprise zone in which the
enterprise project is located,
2) A cmvoration may deduct the amortized cost of a solar
energy device if the device meets the criteria in Sec.
17Ll07(b).
3) Effective May I 9, 1997, a corporation designated as a
defense readjustment project prior to September 1, 200 I,
may deduct 50 percent of its capital investment in the
defense readjustment zone in which the defense
readjustment project is located. The 1998 annual report is
the first annual report in which this deduction can be taken.
4) Effective June I R, 2005. a corporation may deduct the
amortized cost of equipment used in a clean coal project if
the equipment meets the criteria in 17 I 1 OR(b).
NOTE lf!ten1 9 1s ::ero, Item 10 will be ::era
ITEM I2- The tax mte is .00250 per year of privilege pc1 iocL
NOTE The tax ratefbr an initial repotl is prorated in
accordance wzth the privilege period W\'ered by that report
SPECIFIC INSTRUCTIONS FOR SCHEDULE B
ACCOUNTING METHODS: A corporation must use the
same accounting methods in reporting gross receipts (Texas
and everywhere) as used in reporting federal taxable income.
Reports Originally Due Prior to January I, 1996- Under the
franchise tax statute, the Internal Revenue Code (IRC) in effect
for the 1990 calendar year must be used in computing earned
surplus. Therefore, a corporation should modify the federal
taxable income as reported on the federal income tax return to
adjust for any changes to the IRC after December 3 I, 1990
For example, although the Revenue Reconciliation Act of 1993
increased the amount of depreciable property that can be
expensed for federal income tax purposes to $17,500 (IRC Sec
179), for franchise tax purposes this deduction is limited to
$10,000 as required by the 1990 IRC
Reports Originally Due On or After January I, I996 and
Before .January I, I998- The IRC in effect for the 1994
calendar year must be used in computing earned slllvlus except
as indicated in the ''NOTE" below.
Reports Originally Due on or After January I, I998 - The
JRC in effect for the I 996 calendar year must be used in
computing earned surplus except as indicated in the "NOTI:c"
below.
NOTE Becau>e the fianchise tax lmv appliCable to reports
due prior to January I, 1996 lt'tfUIIed the 1990 !RC to be used
in computi11g earned surplus (as indicated ahove), a
corpora/1011 may have had diff'erel/ces he11reen {ederaltaxable
income for /ederal income Ia\ purpove,\ and jederalta.mhle
income used in computing earned surplus 011 ji mnhise tm
reports due prior to 19915 If a corpomtion had such
d(f{erences, 1t should continue to repotl the difJ'erences hased
on the 1990 IRC when computing eamed surplus on reports
due ajier Januan 1, 1996
Example: If a corporation claimed a$ I 7,500 Sec 179
deduction in reporting its federal income tax (in accordance
with 1993 IRC amendments), but was limited to a $10,000
deduction in computing earned surplus on franchise tax reports
Fonn05-364-5(Rev 5-07/10)
due prior to 1996 (in accordance with the 1990 IRC). the
corvoration should compute depreciation on the asset based on
the $1 0,000 Sec 1 79 deduction in computing eamed smvlus on
reports due after January I, 1996 This treatment allows the
corporation to maintain its basis in depreciating the affected
assets for earned surplus computations. It will result in a
greater depreciation deduction in computing earned surplus
than what is reported on the federal income tax return.
ITEM 13 "BEGINNING DATE"- For INITIAL REPORTS,
enter the date a Texas corporation obtained its charter or the
date a non-Texas corporation began doing business in Texas.
For ANNUAL REPORTS, enter the day after the ending date
on the previous report Fm example, if the 2002 annual
franchise tax report was based on I 2-.3 I -01 information, then
the beginning date on the 2003 annual report should be
() 1-01-02
.. ENDING DATE"- For INITIAL REPORTS, enter the last
accounting period ending date f()r federal income tax purposes
that is at least 60 days before the original due date of the initial
report
Example 1: The corporation's last normal accounting period
ending date is !2-3!-02 The corporation's beginning date in
Texas is 04-03-02 The original due elate of the initial report is
07-0 l-03 Sixty days before the original due date would be
05-02-03. The corporation's normal accounting period ending
date of 12-3!-02 occurs at least 60 days before 07-0 l-03
Therefi.>re, the corporation must use 12-3 l-02 as its ending
date.
Example 2: The corporation's normal accounting period
date is 06-10. The corporation's beginning date in
Texas is 04-03-02 The original due date of the initial report is
07-0!-03 Sixty days before the original due date is 05-02-03.
The corporation's normal accounting period ending date of 06-
.30-03 does not occur at least sixty days prior to the original due
date of 07-0 I -03. Therefore, the corporation must use 06-.30-02
as the ending date.
For ANNUAL REPORTS, enter the last accounting period
ending date for federal income tax purposes in the year before
the year the report is originally due.
ITEM 14 -Public Law 86-272 applies if the only business
activity of the corporation within this state is the solicitation of
orders for sales of tangible personal property If orders are sent
outside the state for approval or rejection and, if approved, are
filled by shipment or delivery from a point outside this state. PL
86-272 applies. and the corporation is not subject to the earned
surplus component. Enter the date the coq1oration became
protected by PL 86-272 If this protected date is before the
calendar year in which this report is due, skip to Item 28, enter
zero, and complete the remainder of the report If the protected
date is within the calendar year in which this report is due, the
corporation is subject to the earned surplus component for this
reporting period and the remainder of the report must be
completed. Corporations chartered in Texas are not protected
by PL 86-272 and ARE subject to the camed surplus
component.
ITEM 15 Enter the amount of losses from previous
franchise tax reports that is available to be used to offset
apportioned earned surplus and allocated earned surplus A
business loss is a negative earned surplus amount after
apportionment and allocation. Amounts in Item 15 should not
be in brad<ets The business loss shall be carried forward five
years or until the loss is exhausted, whichever occurs first A
corporation may not convey, assign, or transfer a business loss
to another entity.
Example: If a corporation had no losses on any franchise tax
reports before the 2000 report, but had a$! 0,000 loss in Item 25
of the 2000 report and a $5,000 loss in Item 25 of the 200 I report,
the$ 15,000 should be entered in Item 15 of the 2002 franchise tax
report as the business loss carryover
A business loss from a tax year that ends before January I,
I 991 may not be used to reduce net taxable earned smvlus,
therefore, this item should be zero f()! the 1992 franchise tax
report Allocated earned surplus does not apply to reports due
before January I, 1994. No business loss amount from prior
years can be entered in Item 15 when filing an initial franchise
tax report
NOTE: For reports due on or after JanumJ' 1, 1994, see Item
24 before completing Items 16, 17 and 19. Do not include
allocated earned surplus amounts in Items 16, 17 am/ 19.
ITEM Hi- Texas gross receipts and gross receipts everywhere
should be reported for the period entered in Item 13 Gross
receipts for taxable earned surplus means all revenues
reportable by a corporation on its federal tax rctum, without
deduction fur the cost of property sold, or other costs incurred,
unless otherwise provided fi.)r by law.
Gross receipts in Texas include.
sales ofi cal property located in Texas, including royalties
from oil, gas, or other mineral interests:
sales of tangible personal property when the pmpcrty is
delivered or shipped to a purchaser within Texas,
sales of tangible personal property when the property is
shipped flom Texas to a state in which the corporation is
not subject to any tax on, or mcasLllcd by, net income
without regard to whether the tax is imposed (the
"throwback rule");
services performed within Texas;
rentals of property situated in Texas;
royalties from use of patents or copyrights within Texas,
revenues from the use of trademarks, franchises, or licenses
within Texas, effective for reports originally due on or alier
January I, 1998. For reports that are originally due prior
to January I, 1998, these revenues are apportioned to the
location of payor. These revenues do not include receipts
from the sale or license of computer software or programs,
which arc apportioned to the legal domicile of the payor;
the net gain from the sales of investments or capital assets
(See definition in Item 17.) A net loss is treated as zero
receipts. If the combination of net gains and losses 1 esults
in a net gain and both Texas and non-Texas sales have
occurred, a separate calculation of net gains and losses on
Texas sales must be made. Sales of intangibles held as
capital assets or investments (e g, stocks. bonds, goodwill,
patents, trademarks, partnership interests, etc ) to
corporations incorporated in Texas are gross receipts in
Texas. If the Texas net gain is greater than the total net
gain, the Texas net gain to report equals the total net gain;
and
all other business receipts within Texas. For example,
interest received tium a corporation incorporated in Texas
is a Texas receipt.
BANKING CORPORATIONS & SAVINGS AND LOAN
ASSOCIATIONS - For reports originally due before January I,
2000, dividends and interest received by a banking corporation
or savings and loan association are Texas receipts if the
banking corporation or savings and loan association has its
commercial domicile in Texas. For reports originally due on or
after January I, 2000, dividends and interest received by a
FomJ05-3646 ( F ~ e v 5-07/10)
banking corporation or savings and loan association arc Texas
receipls if they art' paid by a corporation incorporated in Texas
or, if they are paid by an entity or person legally domiciled in
Texas For reports originally due on or after January I, 2002. a
banking corp01 ation should exclude from its Texas receipts
interest earned on federal funds and interest earned on
securities sold under an agreement to repurchase that arc held
in a correspondent bank domiciled in Texas
Any item of revenue that is excluded from net taxable eamed
surplus under Texas law or United States law is not included in
Texas gross receipts or gross receipts everywhere. For
example, a corporation should not include in Texas gross
receipts:
income recorded because ofiRC Sections 78 or 951-964;
dividends received from a subsidiary, associate, or
aftiliatcd corporation that docs not transact a substantial
portion of its business or regularly maintain a substantial
portion of its assets in the United States.
dividends and/or interest received from federal obligations
excluded from the earned surplus tax base; or
dividends for which a "dividends received" deduction is
allowed on Schedule C of Form 1120 (also reported in Item
20a of this fianchisc tax report.)
NOTE For reports due on or afierlanuarr I, I994, do not
include allofated earned surplus a/11011/liS in Item 16 Sec
Item ]4
ITEM 17 Gross receipts everywhere include:
all sales of tangible personal property;
all rentals;
all services;
all royalties;
all other business receipts:
all dividends and interest not otherwise excluded by
operation of law or rules; and
the net gain from the sales of investments or capital assets.
A net loss is treated as zero receipts. A capital asset is any
asset, other than an investment, which is held for use in the
production of income, and is subject to depreciation,
depletion, or amortization. An investment is any non-cash
asset not a capital asset and not held as inventory or
proceeds from the sale of inventory.
Any item of revenue that is excluded from net taxable earned
surplus under Texas law or United States law is not included in
g10ss receipts. For example, a corporation should not include
in gross receipts:
income recorded because of IRC Sections 78 or 951-964;
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:
dividends and/or interest received from federal obligations
excluded from the earned surplus tax base; or
dividends for which a "dividends received" deduction is
allowed on Schedule C of Form 1120 (also reported in Item
20a of this franchise tax rcp011.)
NOTE For report> due on or ajier January I, I 994, do not
include allocated earned Slii].Jlus amounts in Item Il See
Item 24
ITEM 18-lfTexasgrossreceiptsmezero,enterzero. lflteml6
and Item I 7 arc the same and greater than zero, ente1 I .0000.
Otherwise. divide Item 16 by Item 17 and round to 4 places past
the decimal
ITEM 19- Except for the adjustments indicated below,
I) corporations and LLCs filing a Form 1120 for federal income
tax purposes should enter the federal taxable income before
net operating loss deductions and special deductions:
2) LLCs that arc treated as partnerships for federal income tax
purposes and S corporations should enter the amount of
income reportable to the Internal Revenue Service as
taxable to the members or shareholders (which includes
ordinary income and certain income and expense items
rctlcctcd on Schedule K of Form I 065 or Form ll20S);
3) LLCs that are treated as sole proprietorships for federal
income tax purposes should report the taxable income and
deductions reflected on Form I 040. including amounts
listed on attachments and schedules that relate to the LLC.
An LLC treated as a division of a corporation for federal
income tax purposes is subject to franchise tax as a separate
legal entity. A consolidated thnchise tax report with the
corporation cannot be filed
A qualified Subchapter S subsidimy is subject to franchise tax
as a separate legal entity. A consolidated llanchise tax report
with its parent cannot be filed.
Befo1e entering these federal taxable income amounts on Line
19, the following adjustments must be made
If the income includes dividends and/or interest on federal
obligations, these amounts should be subtracted.
Any amounts that must be included in allocated earned
surplus on Line 24 must be subtracted.
For reports due after September II, 200 I, no deduction is
allowed for any "bonus depreciation" created as a result of
the Job Creation and Workers Assistance Act of 2002.
Therefore, any bonus depreciation taken on the federal
income tax return must be added back in the computation
of earned surplus. Also. sec the discussion unde1
"Accounting Methods" for Schedule B.
Reports Originally Due Prior to January 1, 1996 -The
Internal Revenue Code (IRC) in effect for the 1990 calendar
year must be used in computing earned surplus. See the
discussion under "Accounting Methods" for Schedule B
Reports Originally Due On or After January I, 1996 - If the
required use of the 1990 IRC in computing earned surplus on
reports originally clue prior to 1996 (as discussed above) caused
ditTerences between federal taxable income for federal income
tax purposes and federal taxable income used in computing
earned surplus, the corp01 ation should report the differences
when computing earned surplus based on the 1990 !RC Sec
the discussion under "Accounting Methods" for Schedule B for
additional information about the IRC that must be used in
computing earned surplus. If the amount is negative, bracket
the amount as follows: <xx,xxx>.
ITEM 20
a. Enter total deductions allowed on Schedule C, U. S
Corporation Income Tax Return Form 1120.
b. Enter amount of income included in Item 19 that is income
because of IRC Sections 78 or 951-964. Enter amount of
dividends included in Item 19 that was received from a
subsidiary. associate. 01 affiliated corporation that does not
transact a substantial portion of its business or regulm ly
maintain a substantial portion of its assets in the United States.
ITEM 21- Skip this item and go to Item 22 if the corporation.
bank, or LLC is not a subsidiary and:
FormOS-364-7 (Rev 5-07110)
I) has 35 or fewer shareholders/members for the entire period
in Item 13, or
2) is an S corporation for the entire period.
Also skip this item if the corporation, bank, or LLC is a
subsidiary and the parent qualifies for the exception as
described above.
1fthe corporation does not qualify for one of the exceptions
above:
Corporations (other than banking corporations) should
enter the amount of compensation reportable to officers and
directors on Forms W-2 and 1099 for the portion of the
period in Item 13 during which the corporation does not
qualify for an exception. LLCs that are treated as
corporations for federal income tax purposes should enter
the amount of compensation reportable to managers and
officers on Forms W-2 and 1099 for the portion of the
period in Item 13 during which the LLC does not qualify
for an exception.
Banks should enter compensation of executive officers and
directors reportable on Forms W-2 and 1099 for the portion
of the period in Item 13 during which the bank does not
qualify fm an exception.
LLCs treated as partnerships for federal income tax
purposes should enter guaranteed payments or
compensation to managers and ofticers for services for the
portion of the period in Item 13 during which the LLC
does not qualify for an exception.
NOTE Any pet son designated as a11 o.fTicer is presumed to be
an officer 1( the person (1) holds an oflice created hy the hoard
of directors or h1 the corporate charter or hy-lmv,, and (2) has
legal authoritv to hind th!! corporation with third panies Sel!
Rule 3 558formore ir((onnation.
ITEM 22 - If this amount is negative, bracket the amount as
f(Jllows: <xx,xxx> If Item 19 is negative, Item 20 will increase
the negative amount and Item 21 will reduce the negative
amount
ITEM 23- If Item 22 is negative, the percentage of the
negative amount apportioned to Texas should be entered in
Item 23 in brackets as follows: <xx,xxx>
ITEM 24 - Skip this item if filing a report due on or after
January I, 1992 and before January I, 1994. If the
corporation's commercial domicile is not in Texas, Item 24
should be zero Corporations with a Texas commercial
domicile may need to allocate certain income items to Texas.
Income items that are considered non-unitary, except dividends
and interest, must be allocated to Texas and reported in Item
24. Non-unitary income must be entered in Item 24 net of
related expenses This amount must be excluded from Items
16, 17, and 19. If the amount is negative, bracket the amount
as f(lllows: <xx.xxx>.
NOTE: All income IS presumed to be 11111/ary lf all of a
corporation, inconw is usl!d in 1/s opaations, it will hi!
conl'idered 11nitar)' inunne For l!xample, inve.11ment tnco1ne
jiom stock>, honds, etc that is pari ol operating rel'ettlll! is
considered unitary Such income Hill be apporrioned and 1vill
nor be suh;ect to allocation
ITEM 26- Each of the following deductions may be taken
against either apportioned taxable capital or apportioned and
allocated eamed surplus, but not both The deductions may not
reduce apportioned and allocated earned suplus below zero and
no carryover of unused deductions is allowed.
1) A corporation that has been designated as an enterprise
project prior to September I. 2001, as provided by the
Texas Enterprise Zone Act, may deduct 5 percent of its
capital investment in the enteq1rise zone in which the
enterprise project is located The deduct ion may not reduce
apportioned and allocated earned surplus below zero and no
carryover of unused deductions is allowed.
2) A corporation may deduct I 0 percent of the amot1ized cost
of a solar energy device if the device meets the criteria in
Sec 171.107(b).
3) Et1cctivc May 19, 1997, a corporation designated as a
defense readjustment project prior to September 1, 200 I,
may deduct 5 percent of its capital investment in the
defense readjustment zone in which the defense
readjustment project is located. The 1998 annual report is
the first annual report in which this deduction can be taken.
4) Effective June 18, 2005, a corporation may deduct I 0 percent
of the amortized cost of equipment used in a clean coal
project if the equipment meets the criteria in Sec 1 71 I OR(b)
NOTE. {f item 25 is zero or less, enter zero inlte111 26
ITEM 27- Enter the amount of business losses from previous
franchise tax reports that will be used this year to reduce
apportioned and allocated eamed surplus. A business loss is a
negative earned surplus amount after apportionment and
allocation. No business loss amount can be entered in Item 27
when filing an initial tlanchise tax report. Allocated earned
stuvlus docs not apply to repot1s due before January I, 1994.
The following examples illustrate the application of the
business loss carryover for a corpm ation that has negative
apportioned and allocated earned surplus (Item 25) on its 2002
flanchise tax report of $10,000. The available business loss to
be used to offset apportioned and allocated earned surplus on
the 200.3 franchise tax report is $10.000.
Example 1: If the corporation's apportioned and allocated
earned surplus less allowable deductions is $14,000 on its 2003
franchise tax report, then the $10,000 loss carryover should be
entered in Items 15 and 27 of the 2003 franchise tax report.
Example 2: If the corporation's appm1ioned and allocated
earned surplus less allowable deductions is $3,000 on its 2003
franchise tax report, then the corporation should enter $10,000
in Item 15 and $3,000 in Item 27 of its 2003 tlanchise tax
report.
The business loss amount in Item 27 will not necessarily be the
same amount of loss that the corporation reported on its Federal
Income Tax Return (e.g Form 1120, l120S, etc.). Apportioned
plus allocated earned surplus, less allowable deductions, may
not be reduced below zero by a business loss carryover I C Item
25 is zero or less, enter zero in Item 27. Amounts in Items 15
and 27 should not be in brackets
For more information about business losses and business loss
carryovers, see Item 15 instructions.
ITEM 28- If Item 25 is zero or less, Item 28 will be zero
ITEM 29- If Item 2R is zero, Item 29 will be zero.
JTE;M 30- This credit is only available to corporations that
preserved their right in writing to take the credit by March 2,
1992. In order to begin taking the credit, the corporation must
notify the Comptroller that it will take the credit on or before the
original due date of the report on which the corporation begins
Fonn05-364-6(Rev 5-07/10)
to take the credit. This can be done on the extension form or by
entering the credit in Item 30 of the franchise tax report Jiled on
or before the original due date of the report Once the
corporation begins taking the credit, the credit should be entered
in Item 30 and the additional tax must be paid (sec instructions
for Item 3.'1). Thus, even if the corporation owes no tax on net
taxable eamed surplus (Item 29 is zero), the corporation must
enter the credit amount in Item 30 and add the additional tax in
Item 33. If the corporation fails to enter the appropriate amounts,
the credit will be revoked for the current and future rcporis. A
corporation may claim the credit for not more than 20
consecutive privilege periods beginning with the first report due
after January 1, 1992. A corporation may make only one election
under this section and the election may not be conveyed,
assigned. or transferred to another entity.
The credit is computed as follows:
I) determine the amount, as of the end of the corporation's
accounting year ending in 1991, that is the excess of the
basis used for financial accounting purposes over the basis
used for federal income tax purposes of qualifying assets
and liabilities that at some future date will reverse (usc this
amount every year the credit is taken);
2) multiply this amount by the apportionment factor entered
in Item 18 of the corporation's 1992 fhmchise tax rep01 t
(usc this apportionmcm f;H:lor every year the credit is
taken);
3) multiply this amount by 5 percent per privilege period;
4) multiply this amount by the tax rate for the earned surplus
component (Item 29) in effect for the year the credit is
taken.
NOTE: If the corporation wants to take the temporwy credit,
if must ji/e the /ongfiJmz report as its information report.
ITEM 33 - If the corporation has elected to take the temporary
credit on this or previous reports, then an additional tax due
must be calculated by multiplying Item II, Schedule A, by
002, for an annual report, or the temporary credit will be
revoked for the current and future reports The .002 wtc will
be prorated on initial reports. Even if the corporation did not
have tax due on net taxable earned surplus (Item 29), the
additional tax due must be paid or the temporary credit will be
revoked for the current and future reports If Item II, Schedule
A, is zero, then no additional tax is due and the temporary
credit may still be taken to reduce tax due on net taxable earned
surplus.
ITEM .34- For any credits claimed under Section {3) or (4) below,
ScheduleD must be completed and submitted with the tax report
Credits that may be entered in Item 34 include;
I) Credit amounts reported by banks for tax erroneously paid
on reports originally due prior to January I, 1992.
2) Credit amounts for sales tax paid on property used in
manufacturing pursuant to Sec. 171.0021 of the Texas Tax
Code The credit is the sum of. (A) 25 percent of the state
tax paid to the state under Chapter I 51 for property
purchased on or after October I, 1991, and on or before
December 31, 1992; and (B) 50 percent ofthe state tax paid
to the stale under Chapter 151 for property purchased on or
after January I, 1993, and on or before September 30, 1993.
The credit is not available for local taxes. The credit may be
claimed, until completely used, on any of the first five
reports that are originally due on or after January I, 1994.
The credit claimed on a report may not exceed the tax due. A
corporation may not convey, assign, or transfer the credit to
another entity .. NOTE The 1998 report is the last report (or
which a c01pormion cwz claim this credit.
3) Credits allowed to title insurance companies See Rule
.3.566 for credit qualifications and calculations.
4) Total tax credits from Item 14 of ScheduleD, the Texas
Franchise Tax Credit Summary. The total amount of
credits entered in Item 34 cannot be used to reduce Item .35
below zero.
NOTE. Credits j(Jr extension payments or prior payments
>hou/d not he ente1 ed in thi1 item Ente1 extension fiC/l'lllents 01
111 ior payments in Item 3 7.
SPECIFIC INSTIUJCTIONS FOR SCHEDULE C
ITEM 36 - If Item 35 is less than $100, the corporation owes
no tax For reports originally clue on or after .January I, 2000, if
Item 4 and Item 17 arc each less than $150,000, the corporation
owes no tax .. The corporation must file completed Schedules A,
B, and C as its information report for any report due prior to
January I, 2000 or if the corporation wants to take the
temporary credit
ITEM 37 - Enter prior payments, such as an extension
payment
ITEMS 39 & 40 - PENALTY AND INTEREST IN
EXTENSION SITUATIONS:
INITIAL REPORTS - If the extension payment is not at least 90
percent of the tax that is due when the initial report is filed,
then penalty and interest will be assessed based on the original
clue elate of the report.
ANNUAL REPORTS- If the extension payment for the 1993
through 1997 annual reports is not at least I 00 percent of the
tax paid in the prior year or 90 percent of the tax that will be
due with the current year's report, then penalty and interest will
apply to any part of the 90 percent not paid on or before lvlay
15. and any pan of the I 0 percent not paid on or before:
November 15. If the extension payment f(Jr the 1998 and
subsequent reports is not at least I 00 percent of the tax reported
as due for the previous calcndm year (on the report due in the
previous calendar year filed on or bef()re lvlay 14 of the current
year) or 90 percent of the tax that will be due with the current
year's report, then penalty and interest will apply to any part of
the 90 percent not paid on or before lvlay 15, and any part of the
I 0 percent not paid on or before November 15. Sec Rule 3 545
for more information. For corporations required to pay lhl:ir
franchise tax by electronic funds transfer (EFT), sec Rule 3.575
for penalty and interest in extension situations
INTEREST CALCULATION-
See www. window.state.tx.us!taxinjiJ/int_mte.html for more
infonnation about computing interest.
SIGNATURE: The report must be signed on the second page by
an officer, director, or other authorized person of the corporation,
LLC or financial institution.
35.
Financial.Account tandards
Board, Summary of Statement
0. 109
Accountmg Standards Codification
Accounting Strmdards Updatns
C.oncepts Stuterrents
Pre-Codification St;:Jndards
Standards Issued in 2011
Advanced Search
Accounting for Income Taxes (Issued 2/92)
Summary
This Statement establishes financial accounting and reporting standards for the effects
of income taxes that result from an enterprise's activities during the current and
preceding years. It requires an asset and liability approach for financial accounting and
reporting for income taxes. This Statement supersedes FASB Statement No 96,
Accounting for Income Taxes, and amends or supersedes other accounting
pronouncements listed in Appendix D
Objecti\s of Accounting for Income Taxes
The objecti\s of accounting for income taxes are to recognize (a) the amount of taxes
payable or refundable for the current year and (b) deferred tax liabilities and assets for
the future tax consequences of e\nts that ha\ been recognized in an enterprise's
financial statements or tax returns.
Basic Principles of Accounting for Income Taxes
The following basic principles are applied in accounting for income taxes at the date of
the financial statements:
A current tax liability or asset is recognized for the estimated taxes payable or
refundable on tax returns for the current year
2. A deferred tax liability or asset is recognized for the estimated future tax
effects attributable to temporary differences and carryforwards
3. The measurement of current and deferred tax liabilities and assets is based on
provisions of the enacted tax law; the effects of future changes in tax laws or
rates are not anticipated
4 The measurement of deferred tax assets is reduced, if necessary, by the
amount of any tax benefits that, based on available evidence, are not expected
to be realized
Temporary Differences
The tax consequences of most e\nts recognized in the financial statements for a year
are included in determining income taxes currently payable. However, tax laws often
differ from the recognition and measurement requirements of financial accounting
standards, and differences can arise between (a) the amount of taxable income and
pretax financial income for a year and (b) the tax bases of assets or liabilities and their
reported amounts in financial statements
APB Opinion No. 11, Accounting for Income Taxes, used the tenm timing differences
for differences between the years in which transactions affect taxable income and the
years in which they enter into the detenmination of pretax financial income. liming
differences create differences (sometimes accumulating o\r more than one year)
between the tax basis of an asset or liability and its reported amount in financial
statements Other events such as business combinations may also create differences
between the tax basis of an asset or liability and its reported amount in financial
statements. All such differences collectively are referred to as temporary differences in
this Statement
Deferred Tax Consequences of Temporary Differences
Temporary differences ordinarily become taxable or deductible when the related asset
is reco\red or the related liability is settled A deferred tax liability or asset represents
the increase or decrease in taxes payable or refundable in future years as a result of
temporary differences and carryforwards at the end of the current year
Deferred Tax Liabilities
A deferred tax liability is recognized for temporary differences that will result in taxable
amounts in future years For example. a temporary difference is created between the
reported amount and the tax basis of an installment sale receivable if, for tax purposes,
some or all of the gain on the installment sale will be included in the detenmination of
taxable income in future years Because amounts received upon recovery of that
receivable will be taxable, a deferred tax liability is recognized in the current year for the
related taxes payable in fiJture years
Deferred Tax Assets
A deferred tax asset is recognized for temporary differences that will result in
deductible amounts in future years and for carryforwards For example, a temporary
difference is created between the reported amount and the tax basis of a liability for
A"tnler Friendly
Erreil TI11s Page
Stthnit
Prfc!-Codilic;1tion S\rtnrJords AICP/>,
Copyriqhtcd St::mdards
estimated expenses if, for tax purposes, those estimated expenses are not deductible
until a future year. Settlement of that liability will result in tax deductions in future
years, and a deferred tax asset is recognized in the current year for the reduction in
taxes payable in future years A valuation allowance is recognized if, based on the
weight of available e\idence, it is more likely than not that some portion or all of the
deferred tax asset will not be realized
Measurement of a Deferred Tax Liability or Asset
This Statement establishes procedures to (a) measure deferred tax liabilities and
assets using a tax rate conwntion and (b) assess whether a valuation allowance
should be established for deferred lax assets. Enacted tax laws and rates are
considered in determining the applicable tax rate and in assessing the need for a
valuation allowance.
All available e\idence, both positiw and negatiw, is considered to determine whether,
based on the weight of that e\idence, a valuation allowance is needed for some portion
or all of a deferred tax asset Judgment must be used in considering the relatiw impact
of negatiw and posiliw e\idence. The weight giwn to the potential effect of negatiw
and positiw e\idence should be commensurate with the extent to which it can be
objectiwly wrified The more negatiw e\idence that exists (a) the more positiw
e\idence is necessary and (b) the more difficult it is to support a conclusion that a
valuation allowance is not needed.
Changes in Tax Laws or Rates
This Statement requires that deferred tax liabilities and assets be adjusted in the period
of enactment for the effect of an enacted change in tax laws or rates The effect is
included in income from continuing operations
Effecli\13 Date
This Statement is effectiw for fiscal years beginning after December 15, 1992. Earlier
application is encouraged
About this Site Copyright & Pernlssions Privacy Policy Terms & Conditions
36.
NEV. CONST., art. 10, 1
CONSTITUTION OF THE STATE OF NEVADA Art.lO, 1
-----------------
SEC. 1.
2.
[3).
3[A).
4.
5.
6.
ARTICLE. 10.
TAXATION.
Uniform and equal rate of assessment and taxation; exceptions and exemptions;
inheritance and income taxes prohibited.
Total tax levy for public purposes limited.
Household goods and furniture of single household exempt from taxation.
Food exempt from taxes on retail sales; exceptions.
Taxation of estates taxed by United States; limitations.
Tax on proceeds of minerals; appropriation to counties; apportionment;
assessment and taxation of mines.
Enactment of exemption from ad valorem tax on property or excise tax on retail
sales.
Section 1. Uniform and equal rate of assessment and taxation; exceptions
and exemptions; inheritance and income taxes prohibited.
1. The Legislature shall provide by law for a uniform and equal rate of
assessment and taxation, and shall prescribe such regulations as shall secure a just
valuation for taxation of all property, real, personal and possessory, except mines and
mining claims, which shall be assessed and taxed only as provided in Section 5 of
this Article.
2. Shares of stock, bonds, mortgages, notes, bank deposits, book accounts and
credits, and securities and choses in action of like character are deemed to represent
interest in property already assessed and taxed, either in Nevada or elsewhere, and
shall be exempt.
3. The Legislature may constitute agricultural and open-space real property
having a greater value for another use than that for which it is being used, as a
separate class for taxation purposes and may provide a separate uniform plan for
appraisal and valuation of such property for assessment purposes. If such plan is
provided, the Legislature shall also provide for retroactive assessment for a period of
not less than 7 years when agricultural and open-space real property is converted to a
higher use conforming to the use for which other nearby property is used.
4. Personal property which is moving in interstate cominerce through or over
the territory of the State of Nevada, or which was consigned to a warehouse, public
or private, within the State of Nevada from outside the State of Nevada for storage in
transit to a final destination outside the State of Nevada, whether specified when
transportation begins or afterward, shall be deemed to have acquired no situs in
Nevada for purposes of taxation and shall be exempt from taxation. Such property
shall not be deprived of such exemption because while in the warehouse the property
is assembled, bound, joined, processed, disassembled, divided, cut, broken in bulk,
relabeled or repackaged.
5. The Legislature may exempt motor vehicles from the provisions of the tax
required by this Section, and in lieu thereof, if such exemption is granted; shall
provide for a uniform and equal rate of assessment and taxation of motor vehicles,
which rate shall not exceed five cents on one dollar of assessed valuation.
6. The Legislat;ure shall provide by law for a progressive reduction in the tax
upon business inventories by 20 percent in each year following the adoption of this
provision, and after the expiration of the 4th year such inventories are exempt from
taxation. The Legislature may exempt any other personal property, including
livestock.
7. No inheritance tax shall ever be levied.
525 (2009)
Art.lO, 1 CONSTITUTION OF THE STATE OF NEVADA
~ ~ ~ - - - - - - - - - - -
8. The Legislature may exempt by law property used for municipal,
educational, literary, scientific or other charitable purposes, or to encourage the
conservation of energy or the substitution of other sources for fossil sources of
energy.
9. No income tax shall be levied upon the wages or personal income of natural
persons. Notwithstanding the foregoing provision, and except as otherwise provided
in subsection 1 of this Section, taxes may be levied upon the income or revenue of
any business in whatever form it may be conducted for profit in the State.
10. The Legislature may provide by law for an abatement of the tax upon or an
exemption of part of the assessed value of a single-family residence occupied by the
owner to the extent necessary to avoid severe economic hardship to the owner of the
residence.
[Amended in 1902, 1906, 1942, 1960, 1962, 1974, 1978, 1982, 1986, 1989 and 1990. The first
amendment was proposed and passed by the 1899 Legislature; agreed to and passed by the 1901
Legislature; and approved and ratified by the people at the 1902 General Election. See: Statutes of Nevada
1899, p. 139; Statutes of Nevada 1901, p. 136. The second amendment was proposed and passed by the
1903 Legislature; agreed to and passed by the 1905 Legislature; and approved and ratified by the people at
the 1906 General Election. See: Statutes of Nevada 190.3, p. 240; Statutes of Nevada 1905, p. 277. The
third amendment was proposed and passed by the 1939 Legislature; agreed to and passed by the 1941
1939, p. 360; Statutes of Nevada 1941, p. 559. The fourth amendment was proposed and passed by the
the 1960 General Election. See: Statutes of Nevada 1957, p. 805; Statutes of Nevada 1959, p. 939. TI1e
fifth amendment was proposed and passed by the 1960 Legislature; agreed to and passed by the 1961
1960, p. 509; Statutes of Nevada 1961, p. 825. The sixth amendment was proposed and passed by the
the 1974 General Election. See: Statutes of Nevada 1971, p. 2299; Statutes of Nevada 1973, p. 1938. The
seventh amendment was proposed and passed by the 1975 Legislature; agreed to and passed by the 1977
1975, p. 1925; Statutes of Nevada 1977, p. 1727. The eighth an1endment was proposed and passed by the
the 1982 General Election. See: Statutes of Nevada 1979, p. 1983, Statutes of Nevada 1981, p. 2070. The
ninth and tenth amendments were proposed and passed by the 1983 Legislature; agreed to and passed by
the 1985 Legislature; and approved and ratified by the people at the 1986 General Election. See: Statutes
of Nevada 1983; pp. 2141 and 2225; Statutes of Nevada 1985, pp. 2331 and 2401. The amendments were
combined pursuant to Nev. Art. 16, 1. The eleventh amendment was proposed and passed by the 1987
Legislature; agreed to and passed by the 1989 Legislature; and approved and ratified by the people at a
special election held on May 2, 1989. See: Statutes of Nevada 1987, p. 2442; Statutes of Nevada 1989, p.
2228. The twelfth amendment was proposed by initiative petition and approved and ratified by the people
at the General Elections of 1988 and 1990. The thirteenth amendment was proposed and passed by the
the 2002 General Election. See: Statutes of Nevada 1999, p. 3968; Statutes of Nevada 2001, p. 3462.]
(2009)
CONSTITUTIONAL DEBATES.
Nevada Constitutional Debates and Proceedings, pp. 222, 230, 318, 387, 406, 433, 436,
447,449,513,521,808,845.
WEST PUBLISHING CO.
Taxation= 40-45, 211, 348.1(1)-348.1(6), 856,933.
WESTLA W Topic No. 371.
C.J.S. Taxation 21-34, 232 et seq., 262, 280, 293, 316, 411, 1090, 1091, ll06, llll-
1120, 1131.
NEVADA CASES.
A. GENERALLY
L PURPOSE
2. CONSTRUCTION
B. PROPERTY TAXES
1. UNIFORM AND EQUAL RATES
2. ASSESSMENT AND VALUATION
3. EXEMPTIONS
526
37.
Julia Rathgeber and Richard P.
Sanchez, Senate Research
Center, to John Keel, Lt.
Governor's Office, Apr. 23,
1993, Bob Bullock Collection,
Lt. Governor Series, 1993,
Issues, Revenue - Inco.me Tax,
Baylor Collections of Political
Materials, Baylor University,
Waco, Tex.as
SENATE RESEARCH CENTER.
April 23, 1993
To: John Keel, Lt. Governor's Office
From: Julia Richard P. SanchezP
Subj: Prohibitions of and Voter Approval of Tax Changes
The attached is:
From the Papers of
BobBulloGk
a description of other states' prohibitions regarding income tax;
voter requirements regarding tax changes; and
tax issues submitted to voters at November 1992 elections.
State constitutions and statutes contain a broad range of voter approval
requirements for different tax initiatives.
To summarize: Three states, Florida, Nevada and Wyoming, have
constitutional prohibitions against a personal income tax. and would
require voters to approve a constitutional amendment before the tax could
be implemented. Six other states do not have an income tax, but their
constitutions do not have specific provisions prohibiting an income tax.
Colorado, Florida, Louisiana, Nevada, and Wyoming require voter
approval for certain tax changes. Oklahoma requires either a 3/4 vote of
the legislature .ru: voter approval for certain tax changes.
Twenty-one states submitted tax issues to voters in the November
1992 elections. Issues were placed on the ballot through the following
mechanisms:
constitutional or statutory requirement;
voter petition; or
legislative initiative.
Please let us know if there is anything else we can do for you.
cc: SRC file
Attachment
CONSTITIJTIONAL PROHIBffiONS AGAINST INCOME TAX
Nine states do not currently have an income tax: Alaska, Florida, Nevada,
New Hampshire, South Dakota, Tennessee, Texas, Washington, and
Wyoming. Of the nine, tbe following three have specific
constitutional prohibitions against personal income tax and
would require voters to approve a constitutional amendment
before the tax could be implemented.
Florida - No tax upon estates or inheritances or upon the income of
natural persons who are residents or citizens of the state shall
be levied by the state, or under its authority, :in excess of the
aggregate of amounts which may be allowed to be credited
upon or deducted from any similar tax levied by the United
States or any state.
Nevada - No income tax shall be levied on the wages or personal income
of natural persons; however, taxes may be levied upon the
income or revenue of any business in whatever form :it may be
conducted for profit in the state.
Wyoming -No tax. shall be imposed upon income without allowing full
credit against such tax liability for all sales, use, and ad
valorem taxes paid in the taxable year by the same taxpayer to
any taxing authority in the state.
Senate Research Center
VOTER APPROVAL REQUIRED FOR TAX CHANGES
Five states require voter approval for certain tax changes and Oklahoma
requires either a 3/4 vote of the legislature m: voter approval for certain
tax changes.
Colorado - Tax. increases passed with a 2/3 majority .may take effect, but
they automatically sunset 30 days following the next election
unless approved by the voters; only Colorado requires all tax.
changes that increase net tax revenues to be approved by the
voters.
Florida- Constitution prohibits the imposition of a personal income tax,
therefore a personal income tax would require -voter approval
through a constitutional amendment.
Louisiana - Income tax is ftxed in the constitution; any change in the rate
or base would require voter approval.
Nevada- Constitution prohibits imposition of a personal income tax,
therefore a personal income tax would require voter approval
through a constitutional amendment.
Oklahoma- AU state tax increases must be approved by a 3/4 majority of
the legislature or be referred to the voters for approval.
Wyoming- Constitution provides that no tax shall be imposed upon
income without allowing full credit against such tax liability for
all sales, use, and ad valorem taxes paid in the taxable year by
the same taxpayer to any tax.ing authority in the state; therefore
an income tax would require voter approval through a
constitutional amendment.
TAX ISSUES SUBMITTED TO VOTERS -November 1992 Elections
The following is a list of tax issues, organized by tax, submitted to voters
in the November 1992 elections. Some of these issues were required to be
sent to the voters by state statutes or constitutions, others were submitted
by voter petition, and still others were placed on ballots by legislative
initiative.
Income Tax
California- Statutory initiative to increase taxes on upper-income
tax.payers and businesses and reduce the sales tax by 0.25 percent.
Placed on ballot by voter petition and sponsored by
California Tax Reform Association. Failed.
Illinois* - Constitutional amendment to reform the way the state
finances public education. Taxes were not mentioned in the amendment;
however, most people believed that the reform would lead to higher
taxes, most likely the income tax. Placed on ballot by legislature.
Failed.
Massachusetts - Statutory initiative to require publicly held
corporations, banks, and insurance companies doing business in
Massachusetts to publicly disclose tax-related information. Placed on
ballot by legislature. Passed.
South Dakota - Statutory initiative to impose a state income tax, repeal
the state sales tax, and reduce property taxes. Placed on ballot by
voter petition. Failed.
Property Tax
Arkansas Constitutional amendment to exempt certain household
items from property taxes, replacing lost revenue with modification of
the personal property tax on automobiles. Placed on ballot by
legislature. Passed.
Florida= Constitutional amendment to limit property tax.es (similar to
California's Proposition 13). Placed on ballot by legislature.
Passed.
Idaho= Constitutional amendment to limit property taxes to 1 percent
of market value. Placed on the ballot by voter petitim1. Failed.
Kansas .. Constitutional amendment to allow state legislature to adopt a
classified property tax system. Includes real and personal property.
Placed on ballot by legislature. Passedc
Michigan .. Constitutional amendment to roll back school property
taxes by 30 percent and limit increases in assessments to the lesser of 3
percent or inflation rate annually. Proposed by the governor and
placed on ballot by voter petition. Failed.
Michigan .. Constitutional amendment to limit annual increases in state
equalized valuation for homestead property to the lesser of inflation rate
or 5 percent annually. Placed on ballot by legislature. Failed.
Oregon = Constitutional amendment to continue the limit on
homeowners' property tax. rates and increase the limit on business
property to twice the homeowner rate. Placed on ballot by
legislature. Failed.
Wisconsin .. Constitutional amendment to change the property tax
uniformity clause to authorize the legislature to reduce property taxes
imposed on residential and agricultural real property. Placed on
ballot by legislature. Failed.
Sales Tax
Colorado- Statutory initiative to increase the state sales and use tax
from 3 to 4 percent, earmarked for K -12 education. Placed on ballot
by voter petition. Failed.
Florida- Statutory initiative to continue the imposition of local option
sales taxes, scheduled to expire over the next few years. Placed on
ballot by legislature. Failed.
North Dakota - Statutory initiative to increase the state sales tax. by
0.5 percent to fund water development projects. Placed on ballot by
legislature. Failed.
Snack Tax
California - Constitutional amendment to repeal the snack tax and
prevent future snack taxes. Placed on ballot by voter petition.
Passed.
Cigarette Tax
from the Papers of

Massachusetts- Statutory initiative to increase the cigarette tax by 25
cents per pack. Placed on ballot by voter petition& Passed.
Gambling Taxes
Mississippi - Constitutional amendment to remove the prohibition
against a state lottery. Placed on ballot by legislature. Passed.
Nebraska -Constitutional amendment to authorize a state lottery.
Placed on ballot by legislature. Passed.
Oklahoma =Bond package for capital improvements for higher
education, to be funded by new taxes on certain charity games of
chance. Placed on ballot by legislature. Passed.
Oklahoma -Statutory initiative to create a new tax on distributors
selling bingo cards and on other gambling equipment. Placed on
ballot by legislature. Passed.
Waste Disposal
Massachusetts -Statutory initiative to impose a tax on oil or toxic
chemicals, with revenues to be used to clean up waste disposal sites.
Placed on ballot by voter petition. Failed.
North Dakota - Statutory initiative to impose a fee on the disposal of
waste in the state. Placed on ballot by legislature. Failed.
Spending Limit
Connecticut- Constitutional amendment to limit growth of state
spending to the greater of the percentage increase in personal income or
the percentage increase in inflation, unless declared an emergency by
the governor and overridden by a 3/5 vote of the legislature. Placed
on ballot by legislature. Passed. L ;-
7
,
1
(!
141
__...
L"J tt rjl ... 'I yv
(I ,., c!1L ...
, .\ .... }t.,"') r .1./ / t..,
'} ',: . . / Jf' ',,_.,..,, . \..)
Senate Research Center ' /;:_.,;1.1.? ,, ( ,... 5
_.,.....
' U .-.. -. r,. ()
tfi.; / -i-"._,-, HI r 1. f-. ....-:--,u/,
Louisiana- Constitutional at-nendment to control spending by limiting
earmarking, the use of general obligation debt, and the use of
nonrecurring revenues. Placed on ballot by legislature. Failed.
Rhode Is land .. Constitutional amendment to limit general funds
appropriations to 98 percent of expected revenues and establish a budget
reserve account. Placed on ballot by legislature. Passed.
Bill of Rights
Florida- Constitutional amendments to place restrictions on the
legislative budget process and create a "Taxpayers Bill of Rights."
Placed on ballot by legislature. Passed.
Supermaiority
Arizona .. Constitutional amendment to require tax or fee increases to
be approved by 2/3 vote of the legislature and overrides of
gubernatorial vetoes of tax. bills to be approved by 3/4 of the legislature.
Placed on ballot by voter petition. Passeclo
Local Taxes
Missouri .. Constitutional amendments (2) to lessen state restrictions on
the ability of local governments to raise local taxes. Placed on ballot
by legislatu.re. Both failed.
Medicaid
Oklahoma - Statutory initiative to approve a "Medicaid provider tax."
Placed on ballot by legislature. Failed.
*- Asterisked material was not a tax measure, but was related to taxes.
SOURCES: 1. The Fiscal Letter, National Conference of State Legislators,
September/October 1992.
2. National Conference of State Legislators, Scott Mackey, staff contact
3. State Tax Notes, November 9, 1992.

In Re Allcat, Relator's Brief On The Merits (Tex. Sept. 12, 2011)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

In Re Allcat, Relator's Brief On The Merits (Tex. Sept. 12, 2011)

Uploaded by

Copyright:

Available Formats

No.

TABLE OF CONTENTS ................................................................................................... iii

TABLE OF AUTHORITIES ............................................................................................... x

STATEMENT OF THE CASE ...................................................................................... xviii

STATEMENT OF JURISDICTION ................................................................................ xix

ISSUES PRESENTED ...................................................................................................... xx

STATEMENT OF FACTS .................................................................................................. 1

I. History of the Bullock Amendment. ............................................................. 1

II. The Enactment of House Bill 3 in 2006 Made Sweeping Revisions to

III. Background of Relators, Allcat and Mr. Weakly. ......................................... 6

SUMMARY OF ARGUMENT ........................................................................................... 7

I. The Statement of Original Jurisdiction in Section 24 of House Bill 3 is

A. Our Legislature is Authorized by the Plain Language of Texas

B. The Original Jurisdiction Conferred in Section 24 of House Bill 3 is

C. Relators Instant Suit Satisfies the Standards for Granting

1. The Comptroller and Attorney General, as executive officers

2. Relators have no other adequate remedy at law because the

A. The Bullock Amendment Prohibits Enactment of a General Law

B. The Revised Franchise Tax is an Income Tax. ................................ 25

1. The revised franchise tax satisfies accepted definitions of

3. If this Court were to conclude the revised franchise tax is not

C. The Revised Franchise Tax is Imposed on a Natural Persons Share

1. Texas partnership law demonstrates that the revised franchise

3. This Court should not limit the Bullock Amendments

4. The revised franchise tax is imposed on individual partners,

5. The individual impact of the revised franchise tax

III. The Courts Exclusive Original Jurisdiction Encompasses Relators (A)

A. Relators Equal and Uniform Taxation Claim is Within the Scope of

CERTIFICATE OF SERVICE .......................................................................................... 52

__ . .:..-.---___i 9tU'l0recaPlured sec 1250 gain

1991 HoustonChron!Cl<l **** 13

!'ice ral Resources Conservallon Com-

DRUG TEBTB - MolhOd!SI Hos"

lhere had betn

AI.! IN ONE LOCATION

forexamplt untll we learn how 10 beUcr up to the Unllt!d statu' cumula11ve

;:r;:.tcd to double qain in the next live

'; u dltrerenUI betw=n corporation and

Court* * *shall have the power,

You might also like

. .:..-.---_i 9tU'l0recaPlured sec 1250 gain