The Comptroller of Public Accounts (Comptroller) proposes new §3.591, concerning Margin: Apportionment. This proposed new section implements House Bill 3, 79th Legislature, Third Called Special Session, 2006, and House Bill 3928, 80th Legislature, 2007, which revise the franchise tax. This new section establishes guidelines for the apportionment of the franchise tax. Subsection (a) provides that this new section only applies to franchise tax reports originally due on or after January 1, 2008. Subsection (b) defines words and terms used in the new section. Subsection (c) gives the apportionment formula and provides for two exceptions to the apportionment formula. Subsection (d) provides general rules for reporting gross receipts. Subsection (e) provides the treatment of specific items of revenue in the computation of gross receipts. Subsection (f) provides guidance in the determination of gross receipts for natural gas production.

John Heleman, Chief Revenue Estimator, has determined that, for the first five-year period the proposed new 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 proposed new rule is in effect, the public benefit anticipated as a result of enforcing the new rule will be in providing guidance to businesses subject to the franchise tax regarding the apportionment of margin under Tax Code, Chapter 171. This new rule is proposed 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 new rule.

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

This new rule 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 proposed new section implements Tax Code, §§171.103, 171.1055, 171.106, and 171.1121.