For the Texas franchise tax jobs creation credit, can a company claim the credit for the individual jobs that meet the wage requirement even if other new jobs do not?

Plain-English summary

A taxpayer asked about the (pre-2008) franchise tax jobs creation credit and whether it could claim the credit for the new jobs that met the wage requirement even though other new jobs did not. The Comptroller explained there are two tests - a per-job wage floor and a county-wide averaging requirement.

• The per-job floor. A job claimed for the credit must pay at least 110% of the county average weekly wage.
• Qualifying jobs can count. In the taxpayer's example, 27 new jobs met all the requirements while 58 others did not. The credit could possibly be taken for those 27 even though the other 58 did not meet the wage requirement.
• But a county-wide averaging test also applies. All of the corporation's jobs in the county where the new jobs are created must average 110 percent or more of the county average weekly wage. In the taxpayer's example, that averaging test was not met - so the credit was not available on those facts (Tax Code Section 171.751(9)).

Currency note: This describes the pre-2008 franchise tax jobs creation credit, part of the taxable-capital/earned-surplus regime replaced by the current margin tax (House Bills 3 and 3928) effective January 1, 2008. Treat as historical.

What this means for you

Employers claiming the jobs creation credit

It was not enough that some individual new jobs cleared the 110%-of-county-average-weekly-wage bar. You also had to clear a portfolio test: your total jobs in that county had to average at least 110% of the county average weekly wage. A cluster of high-paying qualifying jobs could still be disqualified if the company's broader county workforce dragged the average below the threshold.

Accountants and tax professionals

Run both checks under Section 171.751(9): (1) identify the individual new jobs paying at least 110% of the county average weekly wage; and (2) confirm that all of the corporation's jobs in that county average at least 110% of the county average weekly wage. Failing the second test defeats the credit even for otherwise-qualifying jobs.

Common questions

Q: Can I claim the credit only for the jobs that meet the wage requirement?
A: Possibly - qualifying jobs can be counted even if other new jobs do not meet the wage requirement, but only if the county-average test is also satisfied.

Q: What is the county-average test?
A: All of the corporation's jobs in the county where the new jobs are created must average at least 110% of the county average weekly wage.

Q: Why was the credit denied in the example?
A: Because the corporation's jobs in that county did not average at least 110% of the county average weekly wage.

Citations and references

Statute:

• Tex. Tax Code Sec. 171.751(9) (a qualifying job must pay at least 110% of the county average weekly wage)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=FIT
• Opinion: https://star.comptroller.texas.gov/view/200307010L

Original ruling text

July 17, 2003

To:

Dear **:

Thank you for your question concerning the jobs credit for franchise tax
purposes.

The job for which you are claiming the credit must be 110% of the county
average weekly wage. Therefore, in your example, if 27 new jobs were created
that met all of the requirements for the jobs credit, then the credit may
possibly be taken for those 27 jobs, even if the other 58 jobs created did not
meet the wage requirement. However, all of the jobs for your corporation in
the county where the new jobs are created must average to 110 percent or more
of the county average weekly wage. That was not the case in your example.
Please see Texas Tax Code Section 171.751(9).

This response is based on the facts presented in your email. If the facts
change or if there are additional relevant facts, the response may change.

If you have any questions, please do not hesitate to write me or call me toll
free at 1-800-531-5441, extension 34662.

Sincerely,

Jerry Oxford
Tax Policy Division