Tex. Tax Code Section 171.1013
Determination of Compensation


(a)

Except as otherwise provided by this section, “wages and cash compensation” means the amount entered in the Medicare wages and tips box of Internal Revenue Service Form W-2 or any subsequent form with a different number or designation that substantially provides the same information. The term also includes, to the extent not included above:

(1)

net distributive income from a taxable entity treated as a partnership for federal income tax purposes, but only if the person receiving the distribution is a natural person;

(2)

net distributive income from limited liability companies and corporations treated as S corporations for federal income tax purposes, but only if the person receiving the distribution is a natural person;

(3)

stock awards and stock options deducted for federal income tax purposes; and

(4)

net distributive income from a limited liability company treated as a sole proprietorship for federal income tax purposes, but only if the person receiving the distribution is a natural person.

(b)

Subject to Section 171.1014 (Combined Reporting; Affiliated Group Engaged in Unitary Business), a taxable entity that elects to subtract compensation for the purpose of computing its taxable margin under Section 171.101 (Determination of Taxable Margin) may subtract an amount equal to:

(1)

subject to the limitation in Subsection (c), all wages and cash compensation paid by the taxable entity to its officers, directors, owners, partners, and employees; and

(2)

the cost of all benefits, to the extent deductible for federal income tax purposes, the taxable entity provides to its officers, directors, owners, partners, and employees, including workers’ compensation benefits, health care, employer contributions made to employees’ health savings accounts, and retirement.

(b-1)

This subsection applies to a taxable entity that is a small employer, as that term is defined by Section 1501.002 (Definitions), Insurance Code, and that has not provided health care benefits to any of its employees in the calendar year preceding the beginning date of its reporting period. Subject to Section 171.1014 (Combined Reporting; Affiliated Group Engaged in Unitary Business), a taxable entity to which this subsection applies that elects to subtract compensation for the purpose of computing its taxable margin under Section 171.101 (Determination of Taxable Margin) may subtract health care benefits as provided under Subsection (b) and may also subtract:

(1)

for the first 12-month period on which margin is based and in which the taxable entity provides health care benefits to all of its employees, an additional amount equal to 50 percent of the cost of health care benefits provided to its employees for that period; and

(2)

for the second 12-month period on which margin is based and in which the taxable entity provides health care benefits to all of its employees, an additional amount equal to 25 percent of the cost of health care benefits provided to its employees for that period.

(c)

Notwithstanding the actual amount of wages and cash compensation paid by a taxable entity to its officers, directors, owners, partners, and employees, a taxable entity may not include more than $300,000, or the amount determined under Section 171.006 (Adjustment of Eligibility for No Tax Due, Discounts, and Compensation Deduction), per 12-month period on which margin is based, for any person in the amount of wages and cash compensation it determines under this section. If a person is paid by more than one entity of a combined group, the combined group may not subtract in relation to that person a total of more than $300,000, or the amount determined under Section 171.006 (Adjustment of Eligibility for No Tax Due, Discounts, and Compensation Deduction), per 12-month period on which margin is based.

(c-1)

Subject to Section 171.1014 (Combined Reporting; Affiliated Group Engaged in Unitary Business), a taxable entity that elects to subtract compensation for the purpose of computing its taxable margin under Section 171.101 (Determination of Taxable Margin) may not subtract any wages or cash compensation paid to an undocumented worker. As used in this section “undocumented worker” means a person who is not lawfully entitled to be present and employed in the United States.

(d)

A taxable entity that is a professional employer organization:

(1)

may not include as wages or cash compensation payments described by Section 171.1011 (Determination of Total Revenue from Entire Business)(k); and

(2)

shall determine compensation as provided by this section only for the taxable entity’s own employees that are not covered employees.

(e)

Subject to the other provisions of this section, in determining compensation, a taxable entity that is a client that contracts with a professional employer organization for covered employees:

(1)

shall include payments made to the professional employer organization for wages and benefits for the covered employees as if the covered employees were actual employees of the entity;

(2)

may not include an administrative fee charged by the professional employer organization for the provision of the covered employees; and

(3)

may not include any other amount in relation to the covered employees, including payroll taxes.

(f)

A taxable entity that is a management company:

(1)

may not include as wages or cash compensation any amounts reimbursed by a managed entity; and

(2)

shall determine compensation as provided by this section for only those wage and compensation payments that are not reimbursed by a managed entity.

(g)

A taxable entity that is a managed entity shall include reimbursements made to the management company for wages and compensation as if the reimbursed amounts had been paid to employees of the managed entity.

(h)

Subject to Section 171.1014 (Combined Reporting; Affiliated Group Engaged in Unitary Business), a taxable entity that elects to subtract compensation for the purpose of computing its taxable margin under Section 171.101 (Determination of Taxable Margin) may not include as wages or cash compensation amounts paid to an employee whose primary employment is directly associated with the operation of a facility that is:

(1)

located on property owned or leased by the federal government; and

(2)

managed or operated primarily to house members of the armed forces of the United States.
Amended by:
Acts 2006, 79th Leg., 3rd C.S., Ch. 1 (H.B. 3), Sec. 5, eff. January 1, 2008.
Acts 2007, 80th Leg., R.S., Ch. 1282 (H.B. 3928), Sec. 16, eff. January 1, 2008.
Acts 2013, 83rd Leg., R.S., Ch. 117 (S.B. 1286), Sec. 26, eff. September 1, 2013.
Sec. 171.10131. PROVISIONS RELATED TO CERTAIN MONEY RECEIVED FOR COVID-19 RELIEF. (a) In this section, “qualifying loan or grant proceeds” means the amount of money received by a taxable entity that:

(1)

is:

(A)

a loan or grant under the Coronavirus Aid, Relief, and Economic Security Act (15 U.S.C. Section 9001 et seq.), as amended by the Paycheck Protection Program Flexibility Act of 2020 (Pub. L. No. 116-142), the Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260), the American Rescue Plan Act of 2021 (Pub. L. No. 117-2), and the PPP Extension Act of 2021 (Pub. L. No. 117-6);

(B)

a shuttered venue operator grant under Section 324 of the Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260), as amended by Section 5005 of the American Rescue Plan Act of 2021 (Pub. L. No. 117-2);

(C)

microloan program recovery assistance under Section 329 of the Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260); or

(D)

a grant from the restaurant revitalization fund established under Section 5003 of the American Rescue Plan Act of 2021 (Pub. L. No. 117-2); and

(2)

is not included in the taxable entity’s gross income for purposes of federal income taxation under:

(A)

Section 276 or 278 of the Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260); or

(B)

Section 9672 or 9673 of the American Rescue Plan Act of 2021 (Pub. L. No. 117-2).

(b)

Notwithstanding any other law, a taxable entity:

(1)

shall exclude from its total revenue, to the extent included under Section 171.1011 (Determination of Total Revenue from Entire Business)(c)(1)(A), (c)(2)(A), or (c)(3), qualifying loan or grant proceeds;

(2)

may include as a cost of goods sold under Section 171.1012 (Determination of Cost of Goods Sold) any expense paid using qualifying loan or grant proceeds to the extent the expense is otherwise includable as a cost of goods sold under that section; and

(3)

may include as compensation under Section 171.1013 (Determination of Compensation) any expense paid using qualifying loan or grant proceeds to the extent the expense is otherwise includable as compensation under that section.
Added by Acts 2021, 87th Leg., R.S., Ch. 4 (H.B. 1195), Sec. 1, eff. May 8, 2021.

Source: Section 171.1013 — Determination of Compensation, https://statutes.­capitol.­texas.­gov/Docs/TX/htm/TX.­171.­htm#171.­1013 (accessed Mar. 23, 2024).

171.0001
General Definitions
171.001
Tax Imposed
171.0002
Definition of Taxable Entity
171.002
Rates
171.0003
Definition of Passive Entity
171.003
Increase in Rate Requires Voter Approval
171.0004
Definition of Conducting Active Trade or Business
171.0005
Definition of New Veteran-owned Business
171.006
Adjustment of Eligibility for No Tax Due, Discounts, and Compensation Deduction
171.0011
Additional Tax
171.051
Application for Exemption
171.052
Certain Corporations
171.053
Exemption--railway Terminal Corporation
171.055
Exemption--open-end Investment Company
171.056
Exemption--corporation with Business Interest in Solar Energy Devices
171.057
Exemption--nonprofit Corporation Organized to Promote County, City, or Another Area
171.058
Exemption--nonprofit Corporation Organized for Religious Purposes
171.059
Exemption--nonprofit Corporation Organized to Provide Burial Places
171.060
Exemption--nonprofit Corporation Organized for Agricultural Purposes
171.061
Exemption--nonprofit Corporation Organized for Educational Purposes
171.062
Exemption--nonprofit Corporation Organized for Public Charity
171.063
Exemption-nonprofit Corporation Exempt from Federal Income Tax
171.064
Exemption--nonprofit Corporation Organized for Conservation Purposes
171.065
Exemption--nonprofit Corporation Organized to Provide Water Supply or Sewer Services
171.066
Exemption--nonprofit Corporation Involved with City Natural Gas Facility
171.067
Exemption--nonprofit Corporation Organized to Provide Convalescent Homes for Elderly
171.068
Exemption--nonprofit Corporation Organized to Provide Cooperative Housing
171.069
Exemption--marketing Associations
171.070
Exemption--lodges
171.071
Exemption--farmers’ Cooperative Society
171.072
Exemption--housing Finance Corporation
171.073
Exemption--hospital Laundry Cooperative Association
171.074
Exemption--development Corporation
171.075
Exemption--cooperative Association
171.076
Exemption--cooperative Credit Association
171.077
Exemption--credit Union
171.079
Exemption--electric Cooperative Corporation
171.080
Exemption--telephone Cooperative Corporations
171.081
Exemption--corporation Exempt by Another Law
171.082
Exemption--certain Homeowners’ Associations
171.083
Exemption--emergency Medical Service Corporation
171.084
Exemption--certain Trade Show Participants
171.085
Exemption
171.086
Exemption: Political Subdivision Corporation
171.087
Exemption--nonprofit Corporation Organized for Student Loan Funds or Student Scholarship Purposes
171.088
Exemption--noncorporate Entity Eligible for Certain Exemptions
171.101
Determination of Taxable Margin
171.103
Determination of Gross Receipts from Business Done in This State for Margin
171.105
Determination of Gross Receipts from Entire Business for Margin
171.106
Apportionment of Margin to This State
171.107
Deduction of Cost of Solar Energy Device from Margin Apportioned to This State
171.108
Deduction of Cost of Clean Coal Project from Margin Apportioned to This State
171.109
Deduction of Relocation Costs by Certain Taxable Entities from Margin Apportioned to This State
171.111
Temporary Credit on Taxable Margin
171.151
Privilege Period Covered by Tax
171.152
Date on Which Payment Is Due
171.154
Payment to Comptroller
171.158
Payment by Foreign Taxable Entity Before Withdrawal from State
171.201
Initial Report
171.202
Annual Report
171.203
Public Information Report
171.204
Information Report
171.205
Additional Information Required by Comptroller
171.206
Confidential Information
171.207
Information Not Confidential
171.208
Prohibition of Disclosure of Information
171.209
Right of Owner to Examine or Receive Reports
171.210
Permitted Use of Confidential Information
171.211
Examination of Records
171.212
Report of Changes to Federal Income Tax Return
171.251
Forfeiture of Corporate Privileges
171.252
Effects of Forfeiture
171.253
Suit on Cause of Action Arising Before Forfeiture
171.254
Exception to Forfeiture
171.255
Liability of Director and Officers
171.256
Notice of Forfeiture
171.257
Judicial Proceeding Not Required for Forfeiture
171.258
Revival of Corporate Privileges
171.259
Banking Corporations and Savings and Loan Associations
171.260
Savings and Loan Association
171.301
Grounds for Forfeiture of Charter or Certificate of Authority
171.302
Certification by Comptroller
171.303
Suit for Judicial Forfeiture
171.304
Record of Judicial Forfeiture
171.305
Revival of Charter or Certificate of Authority After Judicial Forfeiture
171.306
Suit to Set Aside Judicial Forfeiture
171.307
Record of Suit to Set Aside Judicial Forfeiture
171.308
Corporate Privileges After Judicial Forfeiture Is Set Aside
171.309
Forfeiture by Secretary of State
171.310
Judicial Proceeding Not Required for Forfeiture by Secretary of State
171.311
Record of Forfeiture by Secretary of State
171.312
Revival of Charter or Certificate of Authority After Forfeiture by Secretary of State
171.313
Proceeding to Set Aside Forfeiture by Secretary of State
171.314
Corporate Privileges After Forfeiture by Secretary of State Is Set Aside
171.315
Use of Corporate Name After Revival of Charter or Certificate of Authority
171.316
Banking Corporations
171.317
Savings and Loan Associations
171.351
Venue of Suit to Enforce Chapter
171.352
Authority to Restrain or Enjoin
171.353
Appointment of Receiver
171.354
Agent for Service of Process
171.355
Service of Process on Secretary of State
171.361
Penalty for Disclosure of Information on Report
171.362
Penalty for Failure to Pay Tax or File Report
171.363
Wilful and Fraudulent Acts
171.401
Revenue Deposited in General Revenue Fund
171.501
Refund for Job Creation in Enterprise Zone
171.0525
Exemption--certain Insurance Companies
171.551
Definitions
171.552
Entitlement to Credit
171.553
Application for and Issuance of Allocation Certificate
171.554
Amount of Credits
171.555
Apportionment of Credit
171.556
Length of Credit
171.557
Carry Forward or Backward
171.558
Recapture
171.559
Allocation of Credit
171.560
Filing Requirements After Allocation
171.561
Application for Credit
171.562
Rules
171.563
Compliance Monitoring
171.564
Inclusion of Information in Low Income Housing Plan
171.565
Expiration of Authority to Allocate Credits
171.566
Priority Allocation for Certain Qualified Developments
171.601
Definition
171.602
Tax Credit for Clean Energy Project
171.651
Definitions
171.652
Eligibility for Credit
171.653
Ineligibility for Credit for Certain Periods
171.654
Amount of Credit
171.655
Attribution of Expenses Following Transfer of Controlling Interest
171.656
Combined Reporting
171.657
Burden of Establishing Credit
171.658
Limitations
171.659
Carryforward
171.660
Assignment Prohibited
171.661
Application for Credit
171.662
Rules
171.663
Reporting of Estimates and Collection of Information
171.664
Deposit of Certain Revenue
171.665
Expiration
171.1011
Determination of Total Revenue from Entire Business
171.1012
Determination of Cost of Goods Sold
171.1013
Determination of Compensation
171.1014
Combined Reporting
171.1015
Reporting for Certain Partnerships in Tiered Partnership Arrangement
171.1016
E-z Computation and Rate
171.1055
Exclusion of Certain Receipts for Margin Apportionment
171.1121
Gross Receipts for Margin
171.1532
Business on Which Tax on Net Taxable Margin Is Based
171.2022
Exemption from Reporting Requirements
171.2125
Calculating Cost of Goods or Compensation in Professional Employer Services Arrangements
171.2515
Forfeiture of Right of Taxable Entity to Transact Business in This State
171.3015
Forfeiture of Certificate or Registration of Taxable Entity
171.3125
Revival of Certificate or Registration of Taxable Entity After Forfeiture by Secretary of State
171.4011
Allocation of Certain Revenue to Property Tax Relief Fund
171.10132
Provisions Related to Certain Grants Received for Broadband Deployment in Texas

Accessed:
Mar. 23, 2024

§ 171.1013’s source at texas​.gov