Did changing fiscal year-end require an extra former Texas franchise-tax filing, and which earned-surplus periods applied?

Plain-English summary

The fiscal year-end change required no extra filing; it changed the accounting periods used on later annual reports.

The next report was the 1997 annual report due May 15, 1997. Under Rule 3.544(a)(1)(C), earned surplus used August 1, 1995 through April 11, 1996, the last federal accounting period ending during calendar year 1996.

The letter says the 1997 taxable-capital year-end remained the date stated in prior correspondence, but that earlier date is not reproduced in this source.

The 1998 annual report used April 12, 1996 through January 31, 1997 for earned surplus and January 31, 1997 for taxable capital.

What this means for you

Corporations changing fiscal years

A year-end change did not automatically create a separate Texas report under the historical rule described here.

Tax professionals

Use the federal accounting periods stated for earned surplus and do not invent the missing 1997 taxable-capital date from the incorporated prior letter.

Common questions

Q: Was an extra report required?
A: No.

Q: What earned-surplus period applied to the 1997 report?
A: August 1, 1995 through April 11, 1996.

Q: What periods applied to the 1998 report?
A: April 12, 1996 through January 31, 1997 for earned surplus, with January 31, 1997 as the taxable-capital year-end.

Citations and references

• 34 Tex. Admin. Code Sec. 3.544(a)(1)(C)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=FIT
• Opinion: https://star.comptroller.texas.gov/view/9611094L

Original ruling text

November 21, 1996

Dear **:

Thank you for your follow-up letter concerning your filing status for Texas
franchise tax reporting purposes.

As stated in our previous letter, there are no additional filing requirements
for your corporation because of the change in your fiscal year end. The next
report that is due from your corporation will be the 1997 annual report (which
is due May 15, 1997). Based on the facts in your most recent letter, the
beginning date of the accounting period for the earned surplus component of the
tax will be August 1, 1995 and the ending date will be April 11, 1996 (the last
accounting period ending date used for federal income tax reporting purposes
during calendar year 1996). See Rule 3.544(a)(1)(C). The accounting year end
date for the taxable capital component will be the same as stated in our
previous letter.

On the corporation's 1998 annual franchise tax report, the accounting period
for earned surplus will be April 12, 1996 through January 31, 1997. The
accounting year end for the taxable capital component will be January 31, 1997.

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

If you have any questions about this or any other franchise tax matter, please
call me at
1-800-531-5441, extension 34612. My direct number is (512) 463-4612. You may
write me at Tax Policy Division, Comptroller of Public Accounts, Austin, Texas
78774.

Sincerely,

Janet Spies
Tax Policy Division