HBA-JRA H.B. 2067 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2067 By: Marchant Ways & Means 3/19/1999 Introduced BACKGROUND AND PURPOSE Banks, like other corporations in Texas, are subject to the franchise tax. As many banks conduct business in more than one state, allocation of assets and profits to Texas becomes an important issue in calculating the franchise tax. Currently, Texas franchise law treats banks differently than other corporations. For banks, interest and dividend income is allocated to the state in which the bank's headquarters is located. For other corporations, interest and dividend income is allocated to the state in which the payor is located. This means that banks that only have branches in Texas allocate all their interest and dividend income to another state. As more small local banks consolidate with large interstate banks, less and less franchise tax will be payed to Texas. H.B. 2067 amends the Tax Code to make the manner in which franchise tax is calculated for banking corporations and savings and loan associations conform to the manner in which it is calculated for all other corporations in Texas. 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. SECTION BY SECTION ANALYSIS SECTION 1. Amends Sections 171.001(b)(1), (3), and (7), Tax Code, as follows: (1) Redefines "banking corporation" to include banks organized under the laws of this state, another state, or another country, or under federal law, including a limited banking association organized under Subtitle A (Banks), Title 3 (Financial Institutions and Businesses), Finance Code, rather than as defined by Section 1.002(a), Texas Banking Act. (3) Redefines "corporation" to remove the requirement that a savings and loan association be a state or federal savings and loan association. (7) Redefines "savings and loan association" to mean 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. Makes conforming changes. SECTION 2. Amends Sections 171.106(a) and (b), Tax Code, to make changes conforming to SECTION 7 which repeals Section 171.1031 (Apportionment of Taxable Capital and Taxable Earned Surplus of Banking Corporation and Savings and Loan Association), Tax Code. SECTION 3. Amends Section 171.259, Tax Code, as follows: Sec. 171.259. BANKING CORPORATIONS AND SAVINGS AND LOAN ASSOCIATIONS. (a) Provides that, except as provided by Subsection (b), this subchapter (Forfeiture of Corporate Privileges) does not apply to a banking corporation that is organized under the laws of this state or under federal law and has its main office in this state, rather than to a banking corporation or a savings and loan association. (b) Requires the banking commissioner (commissioner) to appoint a conservator under Subtitle A, Title 3, Finance Code, to pay the franchise tax of a banking corporation that is organized under the laws of this state and that the commissioner certifies as being delinquent in paying its franchise tax. SECTION 4. Amends Subchapter F, Chapter 171, Tax Code, by adding Section 171.260, as follows: Sec. 171.260. SAVINGS AND LOAN ASSOCIATION. (a) Provides that this subchapter (Forfeiture of Corporate Privileges) does not apply to a savings and loan association that is organized under the laws of this state or under federal law and has its main office in this state, except as provided by Subsection (b). (b) Requires the savings and loan commissioner (commissioner) to appoint a conservator under Subtitle B (Savings and Loan Associations) or C (Savings Banks), Title 3, Finance Code, to pay the franchise tax of a savings and loan corporation that is organized under the laws of this state and that the commissioner certifies as being delinquent in paying its franchise tax. SECTION 5. Amends Section 171.316, Tax Code, to provide that this subchapter (Forfeiture of Charter or Certificate of Authority) does not apply to a banking corporation that is organized under the laws of this state or under federal law and has its main office in this state. SECTION 6. Amends Section 171.317, Tax Code, to provide that this subchapter (Forfeiture of Charter or Certificate of Authority) does not apply to a savings and loan association that is organized under the laws of this state or under federal law and has its main office in this state. Deletes text relating to the savings and loan commissioner revoking a savings and loan association's charter if it is delinquent in paying its franchise tax. SECTION 7. Repealer: Section 171.1031 (Apportionment of Taxable Capital and Taxable Earned Surplus of Banking Corporation and Savings and Loan Association), Tax Code. SECTION 8. Effective date: January 1, 2000. Makes application of this Act prospective as to the due date of a report. SECTION 9. Emergency clause.