Texas Comptroller of Public Accounts    STAR System


200404503R



STAR SUPERSEDED WITHOUT SUMMARY 

Accession No.(s): 200404503R

Document superseded on: 08/15/2013 



STATE OF TEXAS
COMPTROLLER OF PUBLIC ACCOUNTS
FRANCHISE TAX 

Section 3.544.  Reports and Payments 

(a)  Reports and due dates. 

(1)  Each domestic and foreign corporation subject to the franchise tax levied 
by Tax Code, sec. 171.001, must file an initial franchise tax report, and 
thereafter an annual franchise tax report, and at the same time must pay the 
franchise tax and any applicable penalties and interest due by the corporation. 
It is the responsibility of a receiver to file franchise tax reports and pay 
the franchise tax of a corporation in receivership. A debtor in possession or 
the appointed trustee or receiver of a corporation in reorganization or 
arrangement proceedings under the Bankruptcy Act is responsible for filing 
franchise tax reports and paying the franchise tax prior to confirming and 
consummating the plan of reorganization or arrangement. 

(A)  "Beginning date" means: 

(i)  for a corporation chartered in this state, the date on which the 
corporation's charter takes effect; and 

(ii)  for a foreign corporation, the date on which the corporation begins doing 
business in this state. 

(B)  Both the initial report and payment of the tax due, if any, are due no 
later than 89 days after the first anniversary date of the beginning date. The 
initial franchise tax report and payment are for the privilege periods 
beginning on the beginning date and ending on December 31 following the first 
anniversary of the beginning date. For example, if a Texas corporation is 
chartered on June 1, 2002, the payment due with the initial report will be for 
the privilege periods from June 1, 2002-December 31, 2003. In addition, when 
the first anniversary occurs during the period from October 4 through December 
31, there must also be computed and paid with the initial report an additional 
year's tax for the privilege period beginning on January 1 following the first 
anniversary and ending on the following December 31. For example, if a Texas 
corporation is chartered on November 1, 2002, the payment due with the initial 
report will be for the privilege periods from November 1, 2002-December 31, 
2004. The taxable capital component of the tax computed on the initial report 
is based on the financial condition as of the last accounting period ending 
date that is at least six months after the beginning date and at least 60 days 
before the original due date. If there is no such ending date, then the initial 
report is based on the financial condition on the last day of the calendar 
month nearest to the end of the corporation's first year of business. The 
earned surplus component of the tax computed on the initial report is based on 
the business done during the period beginning on the beginning date and ending 
on the last accounting period ending date for federal income tax purposes that 
is at least 60 days before the original due date of the initial report, or, if 
there is no such ending date, then ending on the day that is the last day of 
the calendar month nearest to the end of the corporation's first year of 
business. 

(C)  The annual franchise tax report must be filed and the tax paid no later 
than May 15 of each year. The annual tax is paid for the privilege period of 
the calendar year in which the report is due. The taxable capital component of 
the tax computed on an annual report is based on the financial condition as of 
the last day of the last accounting period ending in the calendar year before 
the calendar year in which the tax is originally due. If there is no accounting 
period ending in the previous calendar year, then the taxable capital component 
should be based on the financial condition as of December 31 of the previous 
calendar year. The earned surplus component of the tax computed on an annual 
report is based on the business done during the period beginning with the day 
after the last date upon which the earned surplus component was based on a 
previous report, and ending with the last accounting period ending date for 
federal income tax purposes ending in the calendar year before the calendar 
year in which the report is originally due. For the 1992 annual report, the 
earned surplus component is based on the business done during the period 
beginning with the day after the date upon which the previous report was based, 
and ending with the last accounting period ending date for federal income tax 
purposes ending in 1991. A corporation that uses a 52-53 week accounting year 
end and has an accounting year ending the first four days of January of the 
year in which the annual report is originally due may use the preceding 
December 31 as the date through which taxable earned surplus is computed. 

(D)  See sec. 3.565 of this title (relating to Survivors of Mergers) for 
special rules concerning corporations that are survivors of mergers. 

(E)  See sec. 3.545 of this title (relating to Extensions) for extensions of 
time to file an annual report. 

(F)  See sec. 3.567 of this title (relating to Additional Tax on Earned 
Surplus) for information concerning the additional tax imposed by Tax Code, 
sec. 171.0011. 

(G)  See sec. 3.572 of this title (relating to 1992 Transition) for 
transitional information concerning tax rates and privilege periods as a result 
of certain legislative changes. 

(2)  The postmark date (or meter-mark if there is no postmark) on the envelope 
in which the report or payment is received determines the date of filing. 

(3)  An information report must be filed, even if no tax is due. A corporation 
must file an initial report as the information report for the privilege periods 
covered by an initial report. A corporation must file an annual report as an 
information report for a regular annual privilege period not covered by an 
initial report. 

(4)  For reports originally due on or after January 1, 2000, a corporation will 
not owe any tax if the gross receipts from its entire business for both taxable 
capital and taxable earned surplus are each less than $150,000 during the 
accounting period upon which the report is based. A corporation that does not 
owe any tax under this subsection must file an information report as authorized 
by subsection (a)(3) of this section. 

(A)  For purposes of computing gross receipts from its entire business for 
taxable earned surplus under this subsection, a corporation must include any 
gross receipts that would otherwise be excluded from the apportionment factor 
under Tax Code, sec. 171.1061, concerning the allocation of certain taxable 
earned surplus to this state. 

(B)  A corporation whose gross receipts from its entire business for taxable 
capital are $150,000 or greater will be required to compute its tax on both tax 
base components as provided for under Tax Code, sec. 171.002(b), even though 
its gross receipts from its entire business for taxable earned surplus are less 
than $150,000. For example, if a corporation's gross receipts from its entire 
business for taxable capital are $175,000 and its gross receipts from its 
entire business for taxable earned surplus are $125,000, the corporation must 
compute its tax on both taxable capital and taxable earned surplus. 

(C)  A corporation whose gross receipts from its entire business for taxable 
earned surplus are $150,000 or greater will be required to compute its tax on 
both tax base components as provided for under Tax Code, sec. 171.002(b), even 
though its gross receipts from its entire business for taxable capital are less 
than $150,000. For example, if a corporation's gross receipts from its entire 
business for taxable earned surplus are $175,000 and its gross receipts from 
its entire business for taxable capital are $125,000, the corporation must 
compute its tax on both taxable capital and taxable earned surplus. 

(b)  Penalty and interest on delinquent taxes. 

(1)  Tax Code, sec. 171.362, imposes a 5.0% penalty on the amount of franchise 
tax due by a corporation that fails to report or pay the tax when due. If any 
part of the tax is not reported or paid within 30 days after the due date, an 
additional 5.0% penalty is imposed on the amount of tax unpaid. There is a 
minimum penalty of $1.00. Delinquent taxes accrue interest beginning 60 days 
after the due date. For example, if payment is made on the 61st day after the 
due date, one day's interest is due. 

(A)  For reports originally due on or before December 31, 1999, the following 
rates of interest are in effect as indicated. Simple interest accrues at an 
annual rate of 6.0% through March 31, 1980; at an annual rate of 7.0% from 
April 1, 1980-December 31, 1981; and, beginning January 1, 1982, at 10% per 
annum, for taxes due before September 1, 1991. For taxes due on or after 
September 1, 1991, simple interest accrues at an annual rate of 12% on all 
delinquent taxes. 

(B)  For reports originally due on or after January 1, 2000, the annual rate of 
interest on delinquent taxes is the prime rate plus one percent, as published 
in The Wall Street Journal on the first day of each calendar year that is not a 
Saturday, Sunday, or legal holiday. 

(2)  When a corporation is issued an audit assessment or other underpayment 
notice based on a deficiency, penalties under Tax Code, sec. 171.362, and 
interest are applied as of the date that the underpaid tax was originally due, 
including any extensions, not from the date of the deficiency determination or 
date the deficiency determination is final. 

(3)  A deficiency determination is final 30 days after the date on which the 
service of the notice of the determination is completed. Service by mail is 
complete when the notice is deposited with the United States Postal Service. 

(A)  The amount of a determination is due and payable 10 days after it becomes 
final. If the amount of the determination is not paid within 10 days after the 
day it became final, a penalty under Tax Code, sec. 111.0081, of 10% of the tax 
assessed will be added. For example, if a deficiency determination is made in 
the amount of $1,000 tax (plus the initial penalty and interest), but the total 
amount of the deficiency is not paid until the 41st day after the deficiency 
notice is served, $1,200 plus interest would be due (i.e., $1,000 tax, $100 
initial penalty for not paying when originally due, $100 penalty for not paying 
deficiency determination within 10 days after it became final, plus interest 
accrued to the date of payment at the applicable statutory rate). 

(B)  A petition for redetermination must be filed within 30 days after the date 
on which the service of the notice of determination is completed, or the 
redetermination is barred. 

(C)  A decision of the comptroller on a petition for redetermination becomes 
final 20 days after service on the petitioner of the notice of the decision. 
The amount of a determination is due and payable 20 days after a comptroller's 
decision is final. If the amount of the determination is not paid within 20 
days after the day the decision becomes final, a penalty under Tax Code, sec. 
111.0081 of 10% of the tax assessed will be added. Using the previous example, 
on the 41st day after service of the comptroller's decision, $1,200 plus 
interest would be due (i.e., $1,000 tax, $100 initial penalty, $100 additional 
penalty and the applicable accrued interest). 

(4)  A jeopardy determination is final 20 days after the date on which the 
service of the notice is completed unless a petition for redetermination is 
filed before the determination becomes final. Service by mail is complete when 
the notice is deposited with the United States Postal Service. The amount of 
the determination is due and payable immediately. If the amount determined is 
not paid within 20 days from the date of service, a penalty, under Tax Code, 
sec. 111.022, of 10% of the amount of tax and interest assessed will be added. 

(5)  If the comptroller determines that a corporation exercised reasonable 
diligence to comply with the statutory filing or payment requirements, the 
comptroller may waive penalties or interest for the late filing of a report or 
for a late payment. The corporation requesting waiver must furnish a detailed 
description of the circumstances that caused the late filing or late payment 
and the diligence exercised by the corporation in attempting to comply with the 
statutory requirements. See sec. 3.5 of this title (relating to Waiver of 
Penalty or Interest) for additional information. 

(6)  If a corporation fails to comply with Tax Code, sec. 171.212, the 
corporation is liable for a penalty of 10% of the tax that should have been 
reported and had not previously been reported to the comptroller under sec. 
171.212. This penalty is in addition to any other penalty provided by law and 
is effective for audits or other adjustments by the Internal Revenue Service or 
a competent authority other than the Internal Revenue Service that became final 
on or after June 20, 1997. 

(c)  Consolidated reporting. A consolidated or combined report is not allowed. 

(d)  Amended reports. In filing an amended report, the corporation must type or 
print on the report, immediately above the corporation name, the phrase 
"Amended Report." The report should be forwarded with a cover letter of 
explanation, with enclosures necessary to support the amendment. Applicable 
penalties and interest must be reported and paid along with any additional 
amount of tax shown to be due on the amended report. See subsection (i) of this 
section for information concerning the statute of limitations. 

(1)  A corporation may file an amended report for the purpose of correcting a 
mathematical or other error in a report or for the purpose of supporting a 
claim for refund. 

(2)  A corporation that has been audited by the Internal Revenue Service must 
file an amended franchise tax report within 120 days after the Revenue Agent's 
Report (RAR) is final, if the RAR results in changes to earned surplus amounts 
reported for franchise tax purposes. An RAR is final when all administrative 
appeals with the Internal Revenue Service have been exhausted or waived. An 
administrative appeal with the Internal Revenue Service does not include an 
action or proceeding in the United States Tax Court or any other federal court. 

(3)  A corporation whose net taxable earned surplus is changed as a result of 
an audit or other adjustment by a competent authority other than the Internal 
Revenue Service must file an amended franchise tax report within 120 days after 
the adjustment is final. An adjustment is final when all administrative or 
other appeals have been exhausted or waived. For the purposes of this section, 
a competent authority includes, but is not limited to, the United States Tax 
Court, United States District Courts, United States Courts of Appeals, and 
United States Supreme Court. 

(4)  A corporation must file an amended franchise tax report within 120 days 
after the corporation files an amended federal income tax return that changes 
the corporation's net taxable earned surplus. A corporation is considered to 
have filed an amended federal income tax return if the corporation is a member 
of an affiliated group during a period in which an amended consolidated federal 
income tax return is filed. 

(5)  Because the 10% penalty provided for in Tax Code, sec. 171.212 only 
applies to deficiencies, failure to file an amended return in which a refund 
would result will not cause a 10% penalty to be imposed. 

(e)  Comptroller. During the course of an audit or other examination of a 
corporation's franchise tax account, the comptroller may examine financial 
statements, working papers, registers, memoranda, contracts, corporate minutes, 
and any other business papers used in connection with its accounting system. In 
connection with his examination, the comptroller may also examine any of the 
corporation's officers or employees under oath. 

(f)  Jeopardy determination. Beginning with reports originally due on or after 
May 15, 1996, the payment of a jeopardy determination, issued to a corporation 
for an estimated tax liability shall not satisfy the reporting requirements set 
forth in the Tax Code, Chapter 171, Subchapter E. 

(g)  Rate. An annual tax rate of $6.70 per $1,000 of net taxable capital and an 
annual minimum tax of $150 applies to May 1, 1988-April 30, 1990, of any tax 
period. 

(h)  Public information report. Each corporation on which the franchise tax is 
imposed must file a public information report as described in Tax Code, sec. 
171.203. 

(1)  A public information report is due at the same time each initial and 
annual report is due. 

(2)  Beginning with reports originally due on or after January 1, 1996, an 
officer or director of the corporation must sign the public information report 
under a certification that: 

(A)  all information contained in the report is true and correct to the best of 
the officer's knowledge; and 

(B)  a copy of the report has been mailed to each person named in the report 
who is an officer or director and who is not employed by the corporation or a 
related (at least 10% ownership) corporation on the date the report is filed. 

(C)  A report that is filed electronically complies with the signature and 
certification requirements of this provision. 

(3)  Beginning with reports originally due on or after January 1, 1998, in 
addition to an officer or director, another authorized person may sign the 
public information report for purposes of satisfying the signature requirement. 

(4)  Failure to sign or file a public information report shall result in the 
forfeiture of corporate privileges as provided by Tax Code, sec. 171.251. If 
the corporate privileges are forfeited, each officer or director of the 
corporation may be liable for each debt of the corporation that is created or 
incurred in Texas after the date on which the report is due and before the 
corporate privileges are revived, as provided by Tax Code, sec. 171.255. 

(5)  The provisions of paragraph (4) of this subsection concerning forfeiture 
of corporate privileges do not apply to a banking corporation or a savings and 
loan association, as defined in Tax Code, sec. 171.001. 

(i)  Statute of limitations. Effective September 1, 1995, a final determination 
resulting from an Internal Revenue Service administrative proceeding 
(including, effective September 1, 1997, an audit), or a judicial proceeding 
arising from an administrative proceeding, that affects the amount of franchise 
tax liability must be reported to the comptroller before the expiration of 60 
days after the day on which the determination becomes final. Effective June 20, 
2003, a final determination that affects the amount of franchise tax liability 
must be reported to the comptroller before the expiration of 120 days after the 
day on which the determination becomes final.  See Tax Code, sec. 111.206. 

(j)  Effective date. This section applies to reports originally due on or after 
January 1, 1992, unless otherwise specified. 


Effective Date:  April 11, 2004 
Filed with Secretary of State:  March 22, 2004 


 
Comptroller of Public Accounts 




ACCESSION NUMBER: 200404503R   
SUPERSEDED: Y 
DOCUMENT TYPE: R 
DATE: 04/11/2004 
TAX TYPE: FRANCHISE