HBA-KDB S.B. 1689 77(R)BILL ANALYSIS


Office of House Bill AnalysisS.B. 1689
By: Ellis, Rodney
Ways & Means
5/11/2001
Committee Report (Amended)



BACKGROUND AND PURPOSE 

Under current law, a corporation that is an insurance company, surety,
guaranty, or fidelity  company required to pay or who pays an annual tax
measured by their gross receipts is exempted from the franchise tax.
However, there is no provision that exempts from the franchise tax an
insurance organization performing management or accounting activities in
this state on behalf of a nonadmitted captive insurance company.  In
addition, current law is not clear as to which corporation may claim a
business loss in a merger of two corporations.  Senate Bill 1689 exempts
from the franchise tax certain insurance organizations, title insurance
companies, or title insurance agents and authorizes the surviving
corporation of a merger to claim the business loss of the nonsurviving
corporation. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

Senate Bill 1689 amends the Tax Code to exempt from the franchise tax an
insurance organization, title insurance company, or title insurance agent
authorized to engage in insurance business in this state, rather than a
corporation that is an insurance company, surety, guaranty, or fidelity
company, now required to pay an annual tax measured by its gross premium
receipts.   The bill provides that an insurance organization performing
management or accounting activities in this state on behalf of a
nonadmitted captive insurance company that is required to pay a gross
premium receipts tax during a  tax year is exempted from the franchise tax
for that same year. 

The bill authorizes a surviving corporation of a merger, for reports
originally due on or after January 1, 2004, to claim the business loss of
the nonsurviving corporation.  Such business losses may be carried forward
not more than five years following the merger or until the losses are
exhausted. 

EFFECTIVE DATE

September 1, 2001.

EXPLANATION OF AMENDMENTS

Committee Amendment No. 1 provides that farm mutuals, local mutual aid
associations, and burial associations are not subject to the franchise tax.
The amendment removes provisions that authorized a surviving corporation of
a merger, for reports originally due on or after January 1, 2004, to claim
the business loss of the nonsurviving corporation and to carry such losses
forward for a specified time period.