TITLE: Relating to the deduction of certain officers' compensation as a cost of goods sold for purposes of the franchise tax.

SUMMARY: Relating to the deduction of certain officers' compensation as a cost of goods sold for purposes of the franchise tax.

FULL TEXT:
AN ACT relating to the deduction of certain officers' compensation as a cost of goods sold for purposes of the franchise tax. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Section 171.1012(e), Tax Code, is amended to read as follows: (e) The cost of goods sold does not include the following costs in relation to the taxable entity's goods: (1) the cost of renting or leasing equipment, facilities, or real property that is not used for the production of the goods; (2) selling costs, including employee expenses related to sales; (3) distribution costs, including outbound transportation costs; (4) advertising costs; (5) idle facility expense; (6) rehandling costs; (7) bidding costs, which are the costs incurred in the solicitation of contracts ultimately awarded to the taxable entity; (8) unsuccessful bidding costs, which are the costs incurred in the solicitation of contracts not awarded to the taxable entity; (9) interest, including interest on debt incurred or continued during the production period to finance the production of the goods; (10) income taxes, including local, state, federal, and foreign income taxes, and franchise taxes that are assessed on the taxable entity based on income; (11) strike expenses, including costs associated with hiring employees to replace striking personnel, but not including the wages of the replacement personnel, costs of security, and legal fees associated with settling strikes; (12) officers' compensation that is not compensation for direct labor;(13) costs of operation of a facility that is: (A) located on property owned or leased by the federal government; and (B) managed or operated primarily to house members of the armed forces of the United States; and (14) any compensation paid to an undocumented worker used for the production of goods. As used in this subdivision: (A) "undocumented worker" means a person who is not lawfully entitled to be present and employed in the United States; and (B) "goods" includes the husbandry of animals, the growing and harvesting of crops, and the severance of timber from realty. SECTION 2. This Act applies only to a report originally due on or after the effective date of this Act. SECTION 3. This Act takes effect January 1, 2016.