Ezel / Tax Rulings / TX
TX 9909686L Franchise Tax (PRIOR TO 01/01/2008) 1999-09-16

What former Texas franchise-tax relief applied when a corporation's gross receipts for both tax components were below $150,000?

Short answer: For reports due on or after January 1, 2000, Senate Bill 441 provided that a corporation owed no franchise tax if gross receipts from its entire business were each below $150,000 for both taxable capital and taxable earned surplus. The corporation still had to file an abbreviated franchise-tax information report stating its receipts and a public information report.

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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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 $150,000 threshold and report forms belong to the pre-2008 taxable-capital and earned-surplus franchise tax, which Texas replaced with the margin tax effective January 1, 2008; current no-tax-due thresholds and filing requirements differ, so confirm present law. 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

A corporation owed no former Texas franchise tax when gross receipts for both tax components were each below $150,000, but it still had information-report duties.

Senate Bill 441 created the relief for reports due on or after January 1, 2000. The corporation had to measure gross receipts from its entire business separately for taxable capital and taxable earned surplus. Both measures had to be less than $150,000.

An eligible corporation filed an abbreviated franchise-tax information report stating its gross receipts, together with a public information report.

Currency note: This threshold belonged to the former two-component franchise tax. Texas replaced that tax with the margin tax effective January 1, 2008; current thresholds and forms differ.

What this means for you

Small corporations reviewing historical reports

The relief was a no-tax rule, not a complete filing exemption. Both receipts tests had to be met.

Tax professionals

Use the effective line stated in the letter: reports due on or after January 1, 2000.

Common questions

Q: What was the receipts threshold?
A: Less than $150,000 for each of the two former tax components.

Q: Did the corporation file nothing?
A: No. It filed an abbreviated information report and a public information report.

Q: When did the change apply?
A: For reports due on or after January 1, 2000.

Citations and references

  • Senate Bill 441, 76th Legislature

Source

Original ruling text

September 16, 1999

Dear Mr. **:

Thank you for your recent inquiry about Texas franchise tax. You have asked
for information about the small business relief passed during the 1999
legislative session.

Under Senate Bill 441, a corporation will not owe any franchise tax if the
gross receipts from its entire business for both taxable capital and taxable
earned surplus purposes are each less than $150,000 during the period upon
which the tax is based. The corporation is responsible for filing an
abbreviated franchise tax information report, stating the amount of its gross
receipts, along with a public information report. This change in the law is
effective for reports due on or after January 1, 2000.

A brochure summarizing the major legislative changes is being finalized, and I
will forward a copy to you when it becomes available.

If you have additional questions about this or any other franchise tax matter,
please write me or call me toll free at 1-800-531-5441, extension 3-3958.

Sincerely,

Teresa Comer
Tax Policy Division

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