Ezel / Tax Rulings / TX
TX 9905712L Franchise Tax (PRIOR TO 01/01/2008) 1999-05-11

Did Texas allow the federal Section 179 maximum-deduction phase-in when computing the 1999 franchise-tax report?

Short answer: Yes. Because Section 171.001(b)(5) defined the applicable Internal Revenue Code by reference to the 1996 calendar-year code, and Public Law 104-188's 1996 changes included a phase-in of the Section 179 maximum deduction, the Comptroller allowed that phase-in for Texas franchise-tax reporting. The source redacts both annual maximum deduction amounts, so this page does not state them.

Apply this to your situation

This page answers the general question as of 1999. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1999
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. The two annual Section 179 dollar limits are redacted in the source and are intentionally omitted here. The response applies the pre-2008 franchise tax and historical federal conformity; confirm current federal Section 179 limits and Texas treatment. 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

Texas allowed the Section 179 maximum-deduction phase-in when computing the 1999 franchise-tax report.

Section 171.001(b)(5) defined the applicable Internal Revenue Code as the code in effect for the 1996 calendar year. Public Law 104-188's changes to that code included a phase-in of the Section 179 maximum expense deduction, and the Comptroller said the phase-in also applied for Texas franchise-tax reporting.

The letter compares the maximum allowed for the 1998 report, based on the 1997 federal year, with the maximum for the 1999 report, based on the 1998 federal year. Both dollar figures are replaced with redaction marks in the official text. They cannot be published from this source.

Currency note: This is a historical federal-conformity ruling under the former franchise tax. Confirm current Section 179 limits and Texas margin-tax treatment.

What this means for you

Businesses reviewing historical depreciation elections

The holding confirms phase-in treatment but not the dollar caps. Use an independently authoritative source for the applicable historical limit.

Tax professionals

Do not reconstruct the redacted numbers from memory. The ruling itself supports only the legal conclusion that the phase-in was allowed.

Common questions

Q: Did Texas allow the phase-in?
A: Yes.

Q: What were the maximum deductions?
A: The source redacts both amounts.

Q: Why did Texas follow the phase-in?
A: Its statutory federal-code reference included the 1996 changes enacted by Public Law 104-188.

Citations and references

  • Texas Tax Code Sec. 171.001(b)(5)
  • I.R.C. Sec. 179
  • Public Law 104-188

Source

Original ruling text

May 11, 1999

To: **

Dear **:

Thank you for your email regarding the Internal Revenue Code (IRC) Sec. 179
deduction allowed in computing the 1999 franchise tax report..

Texas Tax Code Sec. 171.001(b)(5) defines the Internal Revenue Code (IRC) as
the code in effect for the 1996 calendar year. Because the changes to the 1996
IRC (under Public Law 104-188) included a "phase-in" of the maximum deduction
under IRC Section 179, we will allow the phase-in for franchise tax reporting
purposes as well.

For 1998 franchise tax reports, based on the 1997 federal tax year, the maximum
Sec. 179 expense deduction was $** as you stated in your email.
For 1999 franchise tax reports, based on the 1998 federal tax year, the maximum
Sec. 179 expense deduction will be $**.

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 about this or any other franchise tax matter, you may
call me at 1-800-531-5441, extension 3-4612, or e-mail me at the address below.

Sincerely,

Janet Spies
[email protected]
Comptroller of Public Accounts

Get today's answer for your situation

You just read a 1999 ruling on this question. Ezel checks current Texas tax law and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the authority it relies on.