Texas Tax Code

§ 171.0003 — DEFINITION OF PASSIVE ENTITY

TX § 171.0003Title 2. STATE TAXATION · Part F. FRANCHISE TAX; CREDITS · Ch. 171. FRANCHISE TAX · Art. A. DEFINITIONS; TAX IMPOSED

Statute text

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(a)An entity is a passive entity only if:

(1)the entity is a general or limited partnership or a trust, other than a business trust;

(2)during the period on which margin is based, the entity's federal gross income consists of at least 90 percent of the following income:

(A)dividends, interest, foreign currency exchange gain, periodic and nonperiodic payments with respect to notional principal contracts, option premiums, cash settlement or termination payments with respect to a financial instrument, and income from a limited liability company;

(B)distributive shares of partnership income to the extent that those distributive shares of income are greater than zero;

(C)capital gains from the sale of real property, gains from the sale of commodities traded on a commodities exchange, and gains from the sale of securities; and

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Legislative history

Acts 2006, 79th Leg., 3rd C.S., Ch. 1 (H.B. 3), Sec. 2, eff. January 1, 2008. Acts 2007, 80th Leg., R.S., Ch. 1282 (H.B. 3928), Sec. 3, eff. January 1, 2008.