200609759L



06226087

September 7, 2006

To:  ************** 
**************

Dear **************:

Thank you for your email regarding the revised franchise tax with margin 
calculation recently passed by the Texas Legislature.

The publication and calculator I mention below, as well as other related 
information, can be found at http://www.window.state.tx.us/m23taxes.html.

You have asked, in essence, if an entity with less than $300,000 in total 
revenue will be excluded from a combined report or does the $300,000 apply to 
the combined group as a whole.  

House Bill (HB) 3 was passed during the 79th 3rd Called Session of the Texas 
Legislature.  House Bill 3 amends Texas Tax Code Chapter 171 to revise the 
existing franchise tax by changing the tax base, lowering the rate, and 
extending coverage to active businesses receiving state law liability 
protection.  Changes made by HB3 are effective for franchise tax reports 
originally due on or after January 1, 2008.

Tax Code Sec. 171.002(d) provides that a taxable entity is not required to pay 
any tax if the amount of tax computed for the taxable entity is less than 
$1,000 or the amount of the taxable entity’s total revenue from its entire 
business is less than or equal to $300,000 for the 2008 report.  Tax Code Sec. 
171.0002(a) provides that taxable entity also means a combined group.  
Therefore, the $300,000 limitation applies to a combined group as whole and 
will not apply to each separate entity in the combined group.    

This agency’s publication, The Revised Franchise Tax Overview (98-806), 
provides a concise summary of the revised franchise tax.  The publication 
briefly addresses the entities subject to the tax, the calculation of the tax 
and other general information.  There is also a franchise tax calculator 
available on our website for you to estimate a tax liability under the new 
provisions if you operate a taxable entity. 

A copy of HB3 is available through the legislature's website, "Texas 
Legislature Online" at www.capitol.state.tx.us.  

This response is based on the facts presented and current law.  If there are 
different or additional facts, the response may change.  

Our goal is to provide you with prompt, professional service.  Please take a 
moment to complete our on-line survey at:  
http://aixtcp.cpa.state.tx.us/surveys/tpsurv2/index.html.

If you need any additional information, please feel free to contact me at 
1.800.531.5441, extension 34629.  

Sincerely,


Lowell Olsen Dunn
Tax Policy Division





ACCESSION NUMBER: 200609759L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 09/07/2006
TAX TYPE: FRANCHISE