Ogden Surprises Business on the Margin Tax

Sen. Ogden (R-Bryan), Chairman of the Senate Finance Committee, offered a new committee substitute for HB 3928, the margin tax technical corrections bill, at the Senate Finance committee hearing today. The bill shocked some members of the committee and the business lobby by switching the apportionment method from Joyce to Finnegan. The Joyce method, currently in place, does not require a combined group to include revenues from entities that do not operate in Texas as part of the group's total revenue. The Finnegan method would include those entities as part of the combined group total revenue. During the hearing CPA Sen. Williams (R-The Woodlands) pointed out that the original margin tax was supported by most Texas businesses based on the understanding that there would be no change in the method of apportionment and stated he could not support the committee substitute. A representative of the Texas Tax and Research Association testified the TTARA, which was supportive of HB 3928 as passed by the House, opposed Ogden's bill. He also testified that only four states currently use the Finnegan method and that the method would create a barrier for new multi-state businesses from coming to Texas. Ogden's bill also introduced a new alternative franchise tax of .63% of total revenue that businesses could pay in lieu of the margin tax. That alternative tax would also apply to all businesses if the margin tax is ever declared unconstitutional. The new bill also provides a small business discount for businesses with total revenue between $300,000 and $900,000. To read a summary of the HB 3928 Senate Committee Substitute, click here. To read the bill itself, click here.