Franchise tax bill moves toward passage

By Ed Sterling | Published Wednesday, May 15, 2013

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Procedural deadlines for legislation began to hit last week, ending the forward progress and the hopes of more than half of the 6,000-or-so House bills and Senate bills filed by Texas lawmakers since November 2012.

And while the main state budget bill for fiscal years 2014-2015 stayed apparently motionless in a conference committee of five Senate members and five House members, a number of bills survived votes and passed through their respective originating chambers.

For example, the House on May 8 approved House Bill 500, legislation that permanently exempts businesses with gross revenues of $1 million or less from paying the margin or “franchise” tax. The current exemption is set to expire next year.

The Legislature enacted the tax in 2009 to offset a reduction in residential property taxes. Other bills filed this session attempt to do away with the tax entirely.

Primary author of HB 500 is Rep. Harvey Hilderbran, R-Kerrville, chair of the powerful House Committee on Ways and Means. Hilderbran, who said the legislation would spell $667 million in tax relief to Texas businesses, pointed out that HB 500 also:

n Extends the exemption to businesses grossing more than $1 million annually by creating a guaranteed $1 million deduction.

n Ensures that the cost of goods sold deduction “is offered to most businesses equally” by including those engaged in rental, auto repair, transportation, real estate and medicine.

HB 500 is awaiting deliberation by the Senate Finance Committee’s subcommittee on Fiscal Matters.


State employees and current teachers would contribute more of their paycheck for their retirement under SB 1458 passed by the Senate on May 8.

Authored by Senate State Affairs Chair Robert Duncan, R-Lubbock, the legislation, he said, is to reform the state Teachers Retirement System and make it actuarially sound. The bill, which gained unanimous support in the Senate, was approved by the House Pensions Committee May 10 and soon will be scheduled for debate on the House floor.

“We were upside down earlier because we were relying too much on investment returns. This puts us in a situation where we are actually having long-term fixed contribution rates that should support this system for a long time,” Duncan explained in a Senate News Service report.

Active teachers now pay a state-matched 6.4 percent of their gross pay into the Teachers Retirement System. Under SB 1458, the rate would go up in increments over the next four years to 7.7 percent in 2017 and the state contribution would increase to 6.8 percent.

And, Duncan said, all school districts, for the first time, would help foot the bill by contributing 1.5 percent of their annual salary scale into the teacher retirement fund. The bill, many sessions in the making, also addresses retirement age calculations, health care for retirees and cost of living benefit increases.


HB 5 by Rep. Jimmie Don Aycock, R-Killeen, chair of the House Education Committee and sponsored by Senate Education Committee Chair Dan Patrick, R-Houston, is now in a 10-member conference committee tasked with reaching agreement on amendments attached to the bill as the Senate passed it May 6.

Currently, a high school student must pass 15 end-of-course exams to graduate. HB 5 seeks to cut that number to five while also creating a degree program to give students more flexibility when choosing classes. The five end-of-course exams, if the bill passes, would be U.S. history, English I, English II, algebra I, and biology.

Two more exams, algebra II and English III, would be optional and wouldn’t be required to graduate nor would they affect school accountability ratings, Patrick said.

Ed Sterling is director of member services for the Texas Press Association, headquartered in Austin.

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