| (iii) net distributive income from a taxable entity
treated as a partnership or as an S corporation for federal income
tax purposes, except as provided by subsection (c)(4) of this section;
(iv) items of income attributable to an entity that
is a disregarded entity for federal income tax purposes; and
(v) other amounts authorized by subsection (e) of this
section.
(5) Single member limited liability company (LLC) filing
as a sole proprietorship. For the purpose of computing its taxable
margin, the total revenue of a taxable entity registered as a single
member limited liability company and filing as a sole proprietorship
for federal income tax purposes is computed by:
(A) adding:
(i) the amount reportable as income on line 3 of Internal
Revenue Service, Form 1040, Schedule C;
(ii) the amount reportable as income on line 17, Internal
Revenue Service Form 4797, to the extent that it relates to the LLC;
(iii) ordinary income or loss from partnerships, S
corporations, estates and trusts, Internal Revenue Service Form 1040,
Schedule E, to the extent that it relates to the LLC;
(iv) the amount reportable as income on line 16 of
Internal Revenue Service Form 1040, Schedule D, to the extent that
it relates to the LLC;
(v) the amounts reportable as income on lines 3 and
4, Internal Revenue Service Form 1040, Schedule E, to the extent that
it relates to the LLC;
(vi) the amounts reportable as income on line 11, plus
line 2 or line 45, Internal Revenue Service Form 1040, Schedule F,
to the extent that it relates to the LLC;
(vii) the amount reportable as income on line 6 of
Internal Revenue Service Form 1040, Schedule C, that has not already
been included in this subparagraph; and
(viii) any total revenue reported by a lower tier entity
as includable in the taxable entity's total revenue under Tax Code, §171.1015(b);
and
(B) subtracting, to the extent included in the calculation
under subparagraph (A) of this paragraph:
(i) bad debt expensed for federal income tax purposes
that corresponds to items of gross receipts included for the current
reporting period or a past reporting period;
(ii) foreign royalties and foreign dividends, including
amounts determined under Internal Revenue Code, §78 or §§951
- 964;
(iii) net distributive income from a taxable entity
treated as a partnership or as an S corporation for federal income
tax purposes, except as provided by subsection (c)(4) of this section;
(iv) items of income attributable to an entity that
is a disregarded entity for federal income tax purposes; and
(v) other amounts authorized by subsection (e) of this
section.
(6) Other taxable entities. For a taxable entity other
than a taxable entity treated for federal income tax purposes as a
corporation, S corporation, partnership, trust, or single member limited
liability company filing as a sole proprietorship, the total revenue
will be an amount determined in a manner substantially equivalent
to the amount calculated for the entities listed in this subsection.
(e) Exclusions from total revenue. Except as otherwise
provided in this section and only to the extent included in the calculation
of total revenue under subsection (d)(1) - (6) of this section, the
following items shall be excluded from total revenue:
(1) Flow-through funds mandated by law or fiduciary
duty. Flow-through funds that are mandated by law or fiduciary duty
to be distributed to other entities or persons, including taxes collected
from a third party by the taxable entity and remitted by the taxable
entity to a taxing authority;
(A) Allowed exclusions include, but are not limited
to, taxes imposed by law on a third party but collected by the taxable
entity and remitted by it to a taxing authority. Examples include,
but are not limited to, state sales tax and the Texas hotel occupancy
tax.
(B) For excise taxes, only those entities that collect
and remit the tax to the taxing authority may exclude the tax from
total revenue. Excise taxes include, but are not limited to, motor
fuels taxes and tobacco taxes.
(C) Taxes imposed by law on the taxable entity itself
are not allowed as flow-through funds and cannot be excluded from
total revenue. Examples include, but are not limited to, the Texas
mixed beverage tax and the Texas franchise tax.
(2) Flow-through funds mandated by contract. Flow-through
funds that are mandated by contract to be distributed to other entities
or persons, limited to:
(A) sales commissions, as that term is defined by subsection
(b)(11) of this section, to non-employees, including split-fee real
estate commissions;
(B) the tax basis as determined under the Internal
Revenue Code of securities underwritten; and
(C) 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;
(3) Principal repayments. A taxable entity that is
a lending institution shall exclude the principal repayment of loans;
(4) Tax basis of securities and loans. A taxable entity
shall exclude the tax basis, as determined under the Internal Revenue
Code, of securities and loans sold;
(5) Legal services. A taxable entity that provides
legal services shall exclude:
(A) 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:
(i) damages due the claimant;
(ii) funds subject to a lien or other contractual obligation
arising out of the representation, other than fees owed to the attorney;
(iii) funds subject to a subrogation interest or other
third-party contractual claim; and
(iv) fees paid an attorney in the matter who is not
a member, partner, shareholder, or employee of the taxable entity;
(B) 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
(C) regardless of whether it was included in the calculation
of total revenue under subsection (d) of this section, $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
accordance with the manner in which those services are reported to
the State Bar of Texas;
(6) Pharmacy cooperative. A taxable entity that is
a pharmacy cooperative shall exclude flow-through funds from rebates
from pharmacy wholesalers that are distributed to the pharmacy cooperative's
shareholders;
(7) Staff leasing services company. A taxable entity
that is a staff leasing services company shall exclude payments received
from a client company for wages, payroll taxes on those wages, employee
benefits, and workers' compensation benefits for the employees assigned
to the client company. A staff leasing services company cannot exclude
payments received from a client company for payments made to independent
contractors assigned to the client company and reportable on Internal
Revenue Service Form 1099;
(8) Dividends and interest from federal obligations.
A taxable entity shall exclude dividends and interest received from
federal obligations;
(9) Management company. A taxable entity that is a
management company shall exclude 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
Tax Code, §171.1013(a) and (b);
(10) Health care provider. A taxable entity that is
a health care provider shall exclude:
(A) the total amount of payments, including co-payments
and deductibles from the patient or supplemental insurance, received:
(i) under the Medicaid program, Medicare program, Indigent
Health Care and Treatment Act (Health and Safety Code, Chapter 61),
and Children's Health Insurance Program (CHIP), including any plans
under these programs;
(ii) for professional services provided in relation
to a workers' compensation claim under Labor Code, Title 5;
(iii) for professional services provided to a beneficiary
rendered under the TRICARE military health system, including any plans
under this program;
Cont'd... |
