(a)Effective date. The provisions of this section apply to franchise tax reports originally due on or after January 1, 2008. (b)Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1)Actual cost [costs] of uncompensated care--the amount determined by multiplying Operating Expenses by the Uncompensated Care Ratio where: [either (A) or (B) of this paragraph where total charges means all amounts for health care services, including uncompensated care and compensation includes amounts determined under Tax Code, §171.1013, regardless of whether the taxable entity elects to subtract compensation. See §3.589 of this title (relating to Margin: Compensation).] (A)operating expenses are the amounts reported on line 2 and line 21, Internal Revenue Service Form 1065 or the amounts reported on line 2 and line 20, Internal Revenue Service Form 1120S or the corresponding line items from any other federal form filed, less any items that have already been subtracted from total revenue (e.g., bad debts); [Uncompensated care divided by total charges multiplied by operating expenses. If this method is used to determine uncompensated care, a corresponding adjustment must be made in determining compensation by the ratio of uncompensated care divided by total charges.] (B)uncompensated care ratio means uncompensated care charges less partial payments divided by total charges; [ Uncompensated care divided by total charges multiplied by the result of total operating expenses less compensation.] (C)uncompensated care charges are the standard charges for health care services where the provider has not received any payment or where the provider has received partial payment for health care provided to the patient. Uncompensated care charges do not include charges for any services covered by the programs described in subsection (e)(10)(A)(i) - (iii) of this section, services performed for a contracted rate from a private health care plan, services performed for an agreed upon rate from an individual, or services performed where payments received cover the cost of the care provided; (D)standard charges must be comparable to the charges applied to services provided to all patients of the health care provider; (E)partial payment is an amount that has been received toward uncompensated care charges that does not cover the cost of the services provided; (F)total charges are charges for all health care services, including uncompensated care; (G)records that clearly identify each patient, the procedure performed, and the standard charge for such a service, as well as payments received from each patient must be maintained by the health care provider for all uncompensated care; (H)a corresponding adjustment must be made to reduce the cost of goods sold deduction or the compensation deduction for the portion of the cost of goods sold or compensation that has been excluded from revenue: (i)the cost of goods sold deduction is reduced by subtracting the product of the cost of goods sold under §3.588 of this title (relating to Margin: Cost of Goods Sold) multiplied by the uncompensated care ratio; (ii)the compensation deduction is reduced by subtracting the product of the compensation and benefits amounts under §3.589 of this title (relating to Margin: Compensation) multiplied by the uncompensated care ratio. (2)(No change.) (3)Health care institution--Means [Any of the following types of institutions:] an ambulatory surgical center; an assisted living facility licensed under Health and Safety Code, Chapter 247; an emergency medical services provider; a home and community support services agency; a hospice; a hospital; a hospital system; an intermediate care facility for the mentally retarded or a home and community-based services waiver program for persons with mental retardation adopted in accordance with the federal Social Security Act, §1915(c) (42 U.S.C. §1396n); a birthing center; a nursing home; an end stage renal disease facility licensed under Health and Safety Code, §251.011; or a pharmacy. (4) - (14)(No change.) [(15)Uncompensated care--Standard charges for the health care services provided by a health care provider, where the provider has not received any payment for health care provided to the patient.] (15)[(16)] United States government--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. (16)[(17)] United States government agency--An instrumentality of the United States government whose obligations are fully and explicitly guaranteed 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 Commodity Credit Corporation, the Small Business Administration, and any successor agency. (17)[(18)] United States government-sponsored agency--An agency originally established 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 Farm Credit System, the Federal Home Loan Bank System, the Student Loan Marketing Association, and any successor agency. (c)General rules for reporting total revenue. (1) - (2)(No change.) (3)Federal consolidated group. A taxable entity that is part of a federal consolidated group or is a disregarded entity shall compute its total revenue as if it had filed a separate return for federal income tax purposes; provided, however, that a disregarded entity may combine its revenue, cost of goods sold, compensation and gross revenue with its parent as provided by §3.590(d)(6) of this title (relating to Margin: Combined Reporting). Further information on combined entities can be found in §3.590 of this title [(relating to Margin: Combined Reporting)]. (4)(No change.) (5)Exclusions from total revenue. Any expense [ For any amount that is] excluded from total revenue (e.g. flow-through funds or the cost of uncompensated care allowed under subsection (e) of this section)[, the related costs] may not be included in the determination of cost of goods sold (see §3.588 of this title [(relating to Margin: Costs of Goods Sold)]) or the determination of compensation (see §3.589 of this title [(relating to Margin: Compensation)]). (6) - (7)(No change.) (8)Tiered partnership provision. This provision is not mandatory. Subject to the following subparagraphs, a [Lower tier entities. A] lower tier entity in a tiered partnership arrangement may exclude from total revenue the amount of total [ any] revenue reported to an upper tier entity. If a lower tier entity chooses to file under the tiered partnership provision, the lower tier entity may report total revenue to any or all of its upper tier entities. The total revenue reported to an upper tier entity must equal the upper tier entity's ownership percentage of the lower tier entity's entire total revenue. [subject to the following paragraphs:] (A)Reporting requirements. The lower tier entity must submit a report to the comptroller showing the amount of total revenue that each upper tier entity must [should ] include with the upper tier entity's own total revenue. Each upper tier entity must submit a report to the comptroller showing the amount of the lower tier entity's total revenue that was passed to the upper tier entity and is included in the total revenue of the upper tier entity [taxable margin calculation, according to the ownership interest of the upper tier entity]. (B)Nontaxable upper tier entity. This paragraph does not apply to that percentage of the total revenue attributable to an upper tier entity by a lower tier entity if the upper tier entity is not subject to the tax under this chapter. In this case, the lower tier entity cannot report total revenue to the nontaxable upper tier entity and the lower tier entity cannot exclude this total revenue from its franchise tax report [is liable for the tax on its taxable margin]. (C)Eligibility for no tax due, discounts and the E-Z Computation. The no tax due thresholds, discounts and the E-Z Computation do not apply to an upper tier entity if, before the attribution of any total revenue by a lower tier entity to an upper tier entity under this section, the lower tier entity does not meet the criteria. See §3.584(d)(8) [(6)] of this title (relating to Margin: Reports and Payments). (D)Not a partnership distribution. Total revenue reported from a lower tier entity to an upper tier entity under the provisions of Tax Code, §171.1015(b) is not a distribution from a partnership. (E)Combined reporting. The tiered partnership provision is not an alternative to combined reporting. Combined reporting is mandatory for taxable entities that meet the ownership and unitary criteria. See §3.590 of this title. Therefore, the tiered partnership provision is not allowed if the lower tier entity is included in a combined group. (F)Accounting period. If the lower tier entity and an upper tier entity have different accounting periods, the upper tier entity must allocate the revenue reported from the lower tier entity to the accounting period that the upper tier entity's report is based on. (9)(No change.) (d)(No change.) (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) - (2)(No change.) (3)Principal repayments. A taxable entity that is a lending institution shall exclude the principal repayment of loans; (4) - (6)(No change.) (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 [employees of] 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) - (9)(No change.) (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 [(not to include any co-payments or deductibles received from the patient)]: (i) - (iv)(No change.) (B)(No change.) (11) - (13)(No change.)
This agency hereby certifies that the proposal
has been reviewed by legal counsel and found to be within the agency's
legal authority to adopt.
Filed with the Office
of the Secretary of State on October 24, 2008
TRD-200805604 Martin Cherry
General Counsel
Comptroller of
Public Accounts
Earliest possible date of adoption: December 7, 2008
For further information, please call: (512) 475-0387
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