What happened when a Texas corporation failed to file its initial franchise-tax and public-information reports?

Plain-English summary

The missing initial and public-information reports had already cost the corporation its privileges and put its charter at risk.

The Texas-chartered corporation's initial report had been due October 2, 1996 and covered the privilege period from July 5, 1995 through December 31, 1996. The letter states historical initial-report rates of 0.374% for taxable capital and 4.5% for earned surplus.

As of February 7, 1997, corporate privileges were forfeited under Section 171.251. Unless the corporation filed both the initial franchise-tax report and Public Information Report, its charter would be forfeited 120 days after that date under Section 171.301.

What this means for you

Corporations researching old delinquency records

The tax report and Public Information Report were both required to avoid the next forfeiture step.

Tax professionals

Treat the dates, rates, and 120-day sequence as historical and taxpayer-specific; verify current status directly with the agencies.

Common questions

Q: Had corporate privileges already been forfeited?
A: Yes.

Q: What filings were still required?
A: The initial franchise-tax report and Public Information Report.

Q: What happened if they remained unfiled?
A: The letter said the charter would be forfeited 120 days after February 7, 1997.

Citations and references

• Texas Tax Code Secs. 171.251 and 171.301

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=FIT
• Opinion: https://star.comptroller.texas.gov/view/9702412L

Original ruling text

February 7, 1997

RE: CORPORATION A
Texas Taxpayer Number: ***

Dear ***:

Thank you for your e-mail concerning the franchise tax status of your client.

Your client received a charter in Texas on July 5, 1995 and had an initial
franchise tax report due on October 2, 1996. The initial report covered the
privilege period beginning July 5, 1995 and ending December 31, 1996. The tax
rate for the taxable capital component on the initial report is 0.374 %. The
tax rate for the earned surplus component is 4.5%.

As of February 7, 1997, your client's corporate privileges have been forfeited
in accordance with Section 171.251 of the Texas Tax Code (TTC). Your client's
corporate charter will be forfeited 120 days from that date if the corporation
does not file it's initial franchise tax report and public information report.
[Sec. 171.301 TTC.]

I have enclosed the appropriate report forms for your client, along with
instructions for completing the reports.

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

Enclosures