HBA-KDB S.B. 1689 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 1689 By: Ellis, Rodney Ways & Means 5/7/2001 Engrossed BACKGROUND AND PURPOSE Under current law, a corporation that is an insurance company, surety, guaranty, or fidelity company required to pay or who pays an annual tax measured by their gross receipts is exempted from the franchise tax. However, there is no provision that exempts from the franchise tax an insurance organization performing management or accounting activities in this state on behalf of a nonadmitted captive insurance company. In addition, current law is not clear as to which corporation may claim a business loss in a merger of two corporations. Senate Bill 1689 exempts from the franchise tax certain insurance organizations, title insurance companies, or title insurance agents and authorizes the surviving corporation of a merger to claim the business loss of the nonsurviving corporation. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS Senate Bill 1689 amends the Tax Code to exempt from the franchise tax an insurance organization, title insurance company, or title insurance agent authorized to engage in insurance business in this state, rather than a corporation that is an insurance company, surety, guaranty, or fidelity company, now required to pay an annual tax measured by its gross premium receipts. The bill provides that an insurance organization performing management or accounting activities in this state on behalf of a nonadmitted captive insurance company that is required to pay a gross premium receipts tax during a tax year is exempted from the franchise tax for that same year. The bill authorizes a surviving corporation of a merger, for reports originally due on or after January 1, 2004, to claim the business loss of the nonsurviving corporation. Such business losses may be carried forward not more than five years following the merger or until the losses are exhausted. EFFECTIVE DATE September 1, 2001.