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HB98
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Relating to the E-Z computation and rate of the franchise tax. Read & Follow the Bill
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Comments from Ken Paxton

Background: In 2007, an E-Z computation of the franchise tax was adopted by the Legislature for small businesses that gross under $10 million in total revenue per year. This computation was designed to give small business owners a simplified method of computation for their total franchise tax liability. The E-Z computation does not allow for deductions from the gross receipts apportioned to Texas, but the tax rate is 0.575% instead of 1.0% for most companies. Current Calculation of the E-Z Computation: 1. Determine the taxable entity's total gross revenue. 2. Apportion the amount of revenue on business performed or sales in Texas. 3. Multiple the total gross revenue by 0.575%. Current Tax Liability: According to the Texas Comptroller, many companies ended up paying more in the franchise tax by using the E-Z computation instead of the expanded computation of the franchise tax. The margins tax increased the tax liability of most small businesses, some by considerable amounts. The Texas Society of CPA's also noted that the margins tax increased the work loads of accountants by up to 400% due to the overall complexities of the tax. These problems are compounded for small business owners who ended up paying additional costs in taxes and accounting fees for a minimal overall gain in the total tax revenue to the State of Texas and minimal property tax relief. Proposed Calculation of the E-Z Calculation: 1. Determine the taxable entity's total gross revenue. 2. Apportion the amount of revenue on businesses performed in Texas using the current method. 3. Subtract the amount of federal corporation taxes paid by the business from total gross revenue. 4. Multiply the total gross revenue by a rate of: a. Zero percent for margins under $1 million, which preserves the $1 million exemption. b. 0.25% for margins between $1 million and $2 million. c. 0.50% for margins between $2 million and $10 million. Effect of Legislation: Small businesses are the backbone of our economy and create many jobs in our state. By limiting the tax liability of small business owners, more jobs can be created. Legislation that provides for economic growth and job create should be a priority for this legislative session.

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Backmic Update
(Travis County) February 10, 2011, 12:17 pm report abuse
Introduced and referred to committee on House Ways and Means (2/9/11)
 
 
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