The Comptroller of Public Accounts proposes new §3.586, concerning margin: nexus. This section implements House Bill 3, 79th Legislature, Third Called Session, 2006 and House Bill 3928, 80th Legislature, 2007, which revise the franchise tax. This section establishes guidelines for determining nexus under Tax Code, Chapter 171. Subsection (a) provides the effective date. Subsection (b) states that Texas will find nexus to the limits of the United States Constitution. Subsection (c) provides a non-exclusive list of common activities which will subject a taxable entity to Texas franchise tax. Subsection (e) states Public Law 86-272 does not apply to the franchise tax.

John Heleman, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. Heleman also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be in providing guidance to entities regarding activities in Texas that would subject an entity to franchise tax. This rule is adopted under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposal may be submitted to Bryant K. Lomax, Manager, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711.

The new section is proposed under Tax Code, §111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.

The new section implements Tax Code, §171.001 and §171.106.