Franchise tax compliance and reporting is increasingly important when you consider the Texas Comptroller’s audit targets for the 2012–2013 biennium. For example, the Comptroller’s audit division is expected to conduct 15,000 audits per year and, as previously announced, will routinely conduct franchise tax audits as secondary audits in connection with sales tax audits.
Whether you work in public practice representing clients or in-house for taxpayers, you will find the expert guidance you need to understand and comply with the difficult franchise (margin) tax in a comprehensive, yet easy-to-use format. Based on PPC's well-known key issue approach, the Deskbook provides technical guidance in a well-organized and readily accessible format. You will feel more confident and comfortable advising your clients or others on routine compliance issues or researching the more complex areas of this tax.
This Deskbook is truly a unique, all-inclusive resource for dealing with the complex Texas franchise tax. In addition to thorough coverage of all the difficult aspects of this tax, an entire chapter is devoted to dealing effectively with the Comptroller’s Office. It covers both routine contacts as well as franchise tax audits, from desk audits through independent audit reviews and the redetermination process. Another chapter identifies and explains all the important resource material available from the Comptroller. Planning strategies are rounded up and presented in a chapter devoted to tax planning issues.
Along with the comprehensive, practical coverage of this difficult tax, you will find time-saving worksheets, checklists, tables, and other practice aids, as well as reproductions of the relevant Texas franchise tax law, Comptroller Rules, and available forms and instructions.
Here's a sample of the topics covered in the Deskbook:
- Constitutional Questions: Recent cases, including the Allcat Claims Service and Nestle USA, et al, cases challenging the constitutionality of the Texas franchise tax have been thoroughly reviewed and explained.
- Filing Requirements, Due Dates, and Extensions: Covers all filing and payment requirements, including the current, inflation-adjusted total revenue thresholds for filing EZ tax reports and no tax due information reports. Electronic filing and payment thresholds are also explained.
- Rules for First and Final Franchise Tax Reports: Covers the Comptroller's taxpayer-friendly rules for an entity's first franchise tax filing, and explains the implications for determining the report's due date, privilege periods covered, and business period reported. Sample filled-in first annual and final franchise tax reports are provided.
- Tax Rates and Discounts: Explains the margin tax formula, including the simplified EZ tax computation method; tax rates, including the lower rate for retailers and wholesalers; and when tax discounts are available.
- Taxable, Nontaxable, and Passive Entities: Answers the questions about who's taxable and who's not. Also explains the annual notification requirement for passive entities to retain nontaxable status.
- Combined Reporting: Explains the ins-and-outs of this complicated, yet required reporting method in detail. New discussion addresses issues that arise when an erroneously filed combined report is “decombined” on audit, and explains what happens to the erroneously combined temporary credit.
- Revenue and Apportionment: The franchise tax statute ties the computation of total revenue from the entire business directly to the taxable entity's applicable federal tax return. To save you the time and effort of tracking specific IRS form line references to the current forms, two tables have been provided to give you specific line references to the current IRS forms. Five sample filled-in worksheets with updated line references are provided for various types of entities, and comprehensive examples illustrate how to take the numbers from the entity's federal tax return to its Texas franchise tax report.
- Cost of Goods Sold and Compensation Deductions: Explains what's deductible and what's not. The Comptroller’s new taxpayer-friendly policy permitting amended reports to change an election to deduct cost of goods sold or compensation has been thoroughly explained.
- Special Status Entities: A chapter devoted to special status entities and the special treatment they receive. Some of the special status entities covered include banks and financial institutions, health care providers, legal services providers, staff leasing companies, contractors, live entertainment event promotion companies, and courier and logistic companies. New discussion covers the automotive and transportation industries.
- Allowable Deductions, Credits, and Refunds: The latest Comptroller requirements for verifying and maintaining eligibility for the temporary credit are explained. An updated chapter on tax credits covers the investment, jobs creation, and R&D credits that continue to carry over, along with the clean energy credit that becomes available in 2013.
- Accounting Methods and Periods: Business periods and privilege periods are explained. Also included is a discussion of the implications of the "frozen" Internal Revenue Code as defined for franchise tax purposes, along with a listing of the applicable Section 179 amounts for franchise tax purposes.
- Dealing Effectively with the Comptroller: Discusses handling franchise tax audits, refund claims, and more.
- New Letter Ruling Policy: Recently released Comptroller rules revised the agency’s policy on issuing general information letters and private letter rulings, and the extent to which taxpayers can rely on any guidance provided in those letters. The new letter ruling policy has been explained, along with the Comptroller’s revised detrimental reliance policy.
- Tax Planning: A chapter devoted to tax planning for the franchise tax provides a round-up of tax planning ideas that can serve as either the basis for development of a similar planning opportunity for the taxpayer, or as a starting point for taxpayers and their representatives to develop their own individualized tax planning strategies.