Pub 61 2020-2021 Issue 3

25 SPRING 2021 12 13 G L E N N H E G A R • T E X A S COMP TROL L ER OF PUBL I C ACCOUNT S $0 $1 $2 $4 $5 $3 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 A C T U A L E S T I MAT E D $4.65 Compound Annual Growth Rate (Fiscal 2011-2020): 1.3% F R ANCH I S E TAX FRANCHISE TAX COLLEC T IONS All Funds, Excluding Trusts (billions) TAX FUND FISCAL 2020 Franchise/ General Revenue Fund 2 $3,054,350,542 Margins Tax Property Tax Relief Fund 3 $1,363,043,390 Franchise Tax General Revenue Fund 4 $1,026,458 TOTAL 5 $4,418,420,390 H I G H L I G H T S : REVENUE FISCAL 2020 $ 4.4 2B STATE RATE 0.75% / .375% LOCAL RATE NONE NONE FEDERAL RATE WHO PAYS? 8 BUSINESS 100% CONSUMER 0% FOOTNOTES 1 Taxable margin is defined as total revenue less the greater of (1) the cost of goods sold, (2) total compensation, (3) 30 percent of total revenue or (4) $1 million. An apportionment factor based on the portion of receipts that occurred in Texas then is applied. 2 The estimated amount of franchise tax revenues that would have been generated had the 2006 reforms not occurred. 3 All revenue exceeding the estimated amount that would have been brought in under the previous version of the franchise tax. 4 Reflects net payments and refunds related to franchise tax liability from reports due before the 2008 tax year. 5 May not sum due to rounding. 6 A tax rate of 0.375 % applies to taxpayers in the retail or wholesale trade; other taxpayers pay a rate of 0.75 % . Firms with less than $20 million in total revenues may elect to file an EZ return. The tax rate for EZ filers is 0.331 % . 7 There is no federal franchise tax, but a corporate income tax is levied at 21 % of net income. 8 Estimated initial distribution of total franchise tax revenue in fiscal 2023, as projected in the December 2020 Tax Exemptions and Tax Incidence Report. H I STOR I CAL VOLAT I L I T Y Year-over-year Change, All Funds, Excluding Trusts 2015 2014 2013 2012 2019 2020 2018 2017 2016 FISCAL -20% -15% -10% -5% 0% 5% 10% 15% 20% 16.1% 5.1% 4.8% 13.7% 14.4% -16.6% -1.4% -1.6% -16.5% 7.1% 7 E N A C T E D 1 9 0 7 T he franchise or “margins” tax is the current version of one of the state’s oldest taxes, levied for the privilege of doing business in Texas. The tax due is based on an entity’s apportioned taxable margin. 1 In 2006, the Legislature made significant changes to the tax, including transitioning to the taxable margin as the sole base component and expanding the tax to limited partnerships, business trusts and other legal entities. In 2015, the Legislature voted to reduce franchise tax rates by 25 %. Percentage of Total Tax Collection F I SCA L 20 20 All Funds, Excluding Trusts $4.42 BILLION REVENUE BY SOURC E 6 7 $0 $1 $2 $4 $5 $3 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 A C T U A L E S T I MAT E D $4.65 Compound Annual Growth Rate (Fiscal 2011-2020): 1.3% COLLEC T IONS All Funds, Excluding Trusts (billions) TAX FUND FISCAL 2020 Franchise/ General Revenue Fund 2 $3,054,350,542 Margins Tax Property Tax Relief Fund 3 $1,363,043,390 Franchise Tax General Revenue Fund 4 $1,026,458 TOTAL 5 $4,418,420,390 H I G H REV FISC $ 4. STAT 0.75 .37 LOC N N FEDE WHO BU 10 CON 0 FOOTNOTES 1 Taxable margin is defined as total revenue less the greater of (1) the cost of goods sold, (2) total compensation, (3) 30 percent of total revenue or (4) $1 million. An apportionment factor based on the portion of receipts that occurred in Texas then is applied. 2 The estimated amount of franchise tax revenues that would have been generated had the 2006 reforms not occurred. 3 All revenue exceeding the estimated amount that would have been brought in under the previous version of the franchise tax. 4 Reflects net payments and refunds related to franchise tax liability from reports due before the 2008 tax year. 5 May not sum due to rounding. 6 A tax rate of 0.375 % applies to taxpayers in the retail or wholesale trade; other taxpayers pay a rate of 0.75 % . Firms with less than $20 million in total revenues may elect to file an EZ return. The tax rate for EZ filers is 0.331 % . 7 There is no federal franchise tax, but a corporate income tax is levied at 21 % of net income. 8 Estimated initial distribution of total franchise tax revenue in fiscal 2023, as projected in the December 2020 Tax Exemptions and Tax Incidence Report. H I STOR I CAL VOLAT I L I T Y Year-over-year Change, All Funds, Excluding Trusts 2015 2014 2013 2012 2019 2020 2018 2017 2016 FISCAL -20% -15% -10% -5% 0% 5% 10% 15% 20% 16.1% 5.1% 4.8% 13.7% 14.4% -16.6% -1.4% -1.6% -16.5% 7.1% 0 7 ax is the state’s oldest of doing e is based on e margin. 1 made , including margin as the anding the usiness . oted to 25 %. of ction rusts ON REVENUE BY SOURC E 7 FRANCHISE TAX E N AC T E D 19 0 7 T he franchise or “margins” tax is the current version of one of the state’s oldest taxes, levied for the privi- lege of doing business in Texas. The tax due is based on an entity’s apportioned taxable margin. 1 In 2006, the Legislature made significant changes to the tax, including transitioning to the taxable margin as the sole base component and expanding the tax to limited partnerships, business trusts and other legal entities. In 2015, the Legislature voted to reduce franchise tax rates by 25%. 12 G L E N N H E G A R • T E X A S COMP TROL L ER OF PUBL I C ACCOUNT S FRANCHISE TAX TAX FUND Franchise/ General Reven Margins Tax Property Tax R Franchise Tax General Reven FOOTNOTES 1 Taxable margin is defined as total revenue less the gre total compensation, (3) 30 percent of total revenue or based on the portion of receipts that occurred in Texas 2 The estimated amount of franchise tax revenues that w 2006 reforms not occurred. 3 All revenue exceeding the estimated amount that woul previous version of the franchise tax. 4 Reflects net payments and refunds related to franchis the 2008 tax year. 5 May not sum due to rounding. 6 A tax rate of 0.375 % applies to taxpayers in the retail or taxpayers pay a rate of 0.75 % . Firms with less than $20 file an EZ return. The tax rate for EZ filers is 0.331 % . 7 There is no federal franchise tax, but a corporate income net income. 8 Estimated initial distribution of total franchise tax revenu December 2020 Tax Exemptions and Tax Incidence Rep 7.1% Percentage of Total Tax Collection F I SCA L 20 20 All Funds, Excluding Trusts $4.42 BILLION REVENUE BY S 7 1 Taxable margin is defined as total revenue less the greater of (1) the cost f goods sold, (2) total compensation, (3) 30 percent of total revenue or (4) $1 million. An apportionment factor based on the portion of receipts that occurred in Texas then is applied. 2 The estim ted amount of franchise tax revenues that would have been generated had the 2006 reforms not occurred. 3 All revenue exceeding the estimated amount that would have b en brought in unde the previou version of the franchise tax. 4 Reflects net payments and refunds related to franchise tax liability from reports due before the 2008 tax year. 5 May not sum due to rounding. FOOTNOTES