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Analysis

Texas Comptroller adopts amendments to franchise tax apportionment rules

Multistate Tax alert | January 07, 2021

The amendments pursuant to the Adopted Rule are to be published in the January 15, 2021 issue of the Texas Register.

Overview

The Texas Comptroller of Public Accounts (Comptroller) recently filed adopted rule amendments with the Office of the Texas Secretary of State to incorporate numerous changes to apportionment rules surrounding the Texas franchise tax under title 34 of Texas Administrative Code (TAC) § 3.591 (amendments hereinafter collectively referred to as “Adopted Rule”).i

Amendments to Texas Franchise Tax Apportionment Rules

In an effort to streamline and incorporate recent statutory amendments and current guidance, the Comptroller amended TAC § 3.591, altering previous sourcing methodologies for receipts from various goods and services, including, but not limited to, receipts derived from: advertising; computer hardware; software; digital property; internet hosting services; transportation services; securities; sale of membership interests in a single member limited liability company; and certain types of loans.ii The Adopted Rule also incorporates the use of the Texas census percentage (as increased from 7.9 percent to 8.7 percent) in multiple circumstances for sourcing purposes. Although the Adopted Rule’s effective date is January 24, 2021, numerous aspects of the Adopted Rule will be applied retroactively to franchise tax reports originally due on or after January 1, 2008.iii

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References

Franchise Tax Margin: Apportionment, to be published in Volume 46, Issue 3 of the Texas Register (Jan. 15, 2021) (as filed with the Office of the Secretary of State on January 4, 2021) (to be codified at 34 Tex. Admin. Code § 3.591) (Tex. Comptroller of Pub. Accounts). A copy of the Adopted Rule that will ultimately be published in the Texas Register is available here; see also Deloitte Multistate Tax Alert, “Texas Comptroller proposes amendments to franchise tax apportionment rules,” (Nov. 11, 2020) (previous Deloitte Tax Alert on the amendments as proposed may be found here).

ii Id.

iii Id. (“Effective date. The provisions of this section apply to franchise tax reports originally due on or after January 1, 2008, except as otherwise noted”) (to be codified at 34 Tex. Admin. Code § 3.591(a)).

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The Multistate Tax alert archive includes external tax alerts issued by Deloitte Tax LLP's Multistate Tax practice during the last three years. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons.

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