What interest did Texas pay on franchise-tax audit refunds before and after Senate Bill 1321's January 1, 2000 effective line?

Plain-English summary

A franchise-tax refund for a report period due before January 1, 2000 earned no interest; Senate Bill 1321 authorized interest for qualifying later periods.

The Comptroller said Texas had not paid interest on refunds since December 14, 1985. Senate Bill 1321 created a prospective rule for amounts erroneously paid for report periods due on or after January 1, 2000.

For a report period due before that date, no interest accrued. For qualifying later periods, the variable rate described in the letter was the prime rate plus one percentage point, using the Wall Street Journal rate published on the first day of the calendar year that was not a Saturday, Sunday, or legal holiday.

What this means for you

Taxpayers receiving historical audit refunds

The report period's due date—not simply the refund date—controlled the transition described in the letter.

Tax professionals

This page records the rule as of October 1999. Verify current refund-interest law and rates for any live claim.

Common questions

Q: Did pre-2000 report periods earn refund interest?
A: No.

Q: What rate did Senate Bill 1321 authorize?
A: The prime rate plus one percentage point under the measurement described in the letter.

Q: What date controlled eligibility?
A: Whether the report period was due on or after January 1, 2000.

Citations and references

• Senate Bill 1321, 76th Legislature

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=FIT
• Opinion: https://star.comptroller.texas.gov/view/9910267L

Original ruling text

October 19, 1999

To:

Thank you for your e-mail regarding the interest rate that the State of Texas
pays on refunds due to a taxpayer as a result of Franchise Tax Audits. Your
e-mail was forwarded to us from the Texas Secretary of State's office. I
apologize for the delay in responding to your inquiry.

Unfortunately, the State of Texas has not paid interest on refunds since
December 14, 1985.

However, Senate Bill 1321 was passed during the 76th session of the Texas
Legislature. This bill authorizes the Comptroller to pay a variable interest
rate on refunds of amounts erroneously paid for report periods due on or after
January 1, 2000. Interest does not accrue on a refund for a report period due
prior to January 1, 2000. The variable rate is the prime rate plus one percent
as published in the Wall Street Journal on the first day of each calendar year
that is not a Saturday, Sunday, or legal holiday.

Senate Bill 1321 may be viewed via the web site of the Texas Legislature,
"Texas Legislature ONLINE," at . You will see on the
left side of the home page a link to search for bills by bill number. Click on
this link, then enter the specific bill number that you would like to review.
At the top of the bill summary page, you'll see a link to the "text" of the
bill. Click on "text" and finally, on the "enrolled" version of the bill
text.

If you have questions about this, my internet address is
, or you may call toll-free at 1-800-531-5441,
extension 3-4612.

Sincerely,

Janet Spies
Tax Policy Division