Ezel / Tax Rulings / TX
TX 9710340L Franchise Tax (PRIOR TO 01/01/2008) 1997-10-08

What franchise-tax filings were required after a corporation's Texas certificate of authority was forfeited and its account became inactive?

Short answer: The Comptroller returned the submitted initial report because the corporation's franchise-tax account was inactive after its certificate of authority was forfeited. If it did business in Texas after January 1, 1997, it had to contact the Comptroller before filing. If it had not, it still had to file a final report for January 1 through August 27, 1996 before doing business again; reinstatement also required all reports.

Apply this to your situation

This page answers the general question as of 1997. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1997
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. This 1997 response depends on the Comptroller's records showing an August 27, 1996 certificate forfeiture, an inactive account, and annual reports through 1996. It addresses franchise tax only; sales tax was referred separately. Confirm current filing and reinstatement rules. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The corporation's inactive franchise-tax account did not accept an initial report, but a historical final report was still required.

The Comptroller's records showed that the corporation's certificate of authority was forfeited on August 27, 1996 and that regular annual reports had been filed through the 1996 report. The account was therefore inactive, and the Comptroller returned the submitted initial report.

If the corporation did business in Texas on or after January 1, 1997 under Rule 3.546, it had to contact the Comptroller about the account before filing. If it did not, it still had to file a final report covering January 1 through August 27, 1996 before doing business in Texas again.

Reinstating the certificate of authority also required filing all required reports, including the final report. The letter did not decide sales-tax requirements; that issue went to the sales-tax policy section.

What this means for you

Corporations with forfeited Texas authority

An inactive account can coexist with unresolved historical filing duties.

Tax professionals

Reconcile the legal forfeiture date, the last annual privilege period, later Texas activity, final-report period, and reinstatement requirements before submitting a report.

Common questions

Q: Why was the initial report returned?
A: The franchise-tax account was inactive.

Q: What period did the final report cover?
A: January 1 through August 27, 1996.

Q: Could the corporation resume Texas business first and file later?
A: No; the letter required outstanding reports before it began doing business again.

Q: Did the letter resolve sales tax?
A: No.

Citations and references

  • 34 Tex. Admin. Code Secs. 3.546 and 3.567

Source

Original ruling text

October 8, 1997

Dear **:

In the attachment to the franchise report you submitted, you requested that
"all authorizations" that ** has in Texas be canceled as of January
1, 1997.

You indicate that ** manufactures and installs windows and wall
treatments. Almost all the company's business is with contractors on new or
remodeled buildings. You also indicate that ** has no locations,
no employees, and no representatives soliciting business in Texas.

I will respond to the franchise tax portions of your inquiry. Our sales tax
policy section will respond to the sales tax requirements for **.

Our records indicate that ** had a certificate of authority to
transact business in Texas which was forfeited on August 27, 1996. Our records
also indicate that the company has filed regular annual franchise tax reports
through the 1996 annual report (which covered the privilege period through
December 31, 1996). Therefore, our records indicate that the company does not
have an active franchise tax account.

First, I have returned the initial franchise report you submitted for
** because (as I indicated above) the company does not have an
active account.

Second, if ** did business in Texas on or after January 1, 1997 (as
defined in enclosed Rule 3.546), the company should contact our office
regarding the account prior to filing a franchise tax report. You should
direct your correspondence to:

Comptroller of Public Accounts
Austin, TX 78774-1000
ATTN.: Account Correspondence

You may also contact Account Correspondence by calling toll free
1-800-531-5441, extension 3-4402 or the regular number is 512/463-4402.

If ** has not done business in Texas on or after January 1, 1997,
the company must file any required reports before it begins doing business in
Texas again. In particular, the company must file a final franchise tax report
covering the period from January 1, 1996 (the date after the ending date for
earned surplus on the 1996 report) and ending on August 27, 1996 (the date the
certificate of authority was forfeited). I have enclosed Rule 3.567 which
addresses the filing requirements for the final report.

If ** needs to reinstate the certificate of authority, you should
contact the Secretary of State at:

Secretary of State
Statutory Filing Division, Corporation Section
P.O. Box 13697
Austin, TX 78711-3697
512/463-5581

You should note that the requirements to reinstate the certificate of authority
include filing all required reports (including the final report).

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

If you have any questions, contact Tax Policy Division. You may call toll free
1-800-531-5441, or our regular number is 512/463-4600. My extension is 3-4662.
You may write me at Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Bob Jeffcoat
Tax Policy Division

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