Relating to the exclusion of certain securities transaction payments from the total revenue of a taxable entity that is a registered securities market operator.

Contracts

Master Service Agreements (MSAs) with Market Makers and Liquidity Providers must be reviewed.

• Terminology: Amend contracts to explicitly label payments as "Transaction Rebate Payments" intended to "incentivize liquidity."
• Risk: If contracts define these as "marketing fees" or generic "administrative fees," the Comptroller is likely to disallow the exclusion.

Hiring/Training

• Finance/Accounting: Staff must be trained to distinguish between standard commission expenses and liquidity rebates.
• Settlement Teams: Personnel managing settlement software must ensure automated tagging is configured correctly to separate these specific outflows.

Reporting & Record-Keeping

• General Ledger: Create specific GL codes for "Transaction Rebate Payments." Do not commingle these with Cost of Goods Sold (COGS).
• Counterparty Verification: Maintain active files proving payment recipients meet the federal definition of a "Broker" (15 U.S.C. Section 78c(a)(4)) or "Dealer" (15 U.S.C. Section 78c(a)(5)).
• Transaction Linking: Ensure your system can reconcile rebates to specific securities transactions or transaction batches.

Fees & Costs

• Tax Liability: This results in a decrease in Franchise Tax liability. Adjust tax reserve models for FY 2026.
• Implementation Cost: Minimal one-time administrative costs to update accounting software and legal contract review.