|(a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Credit--An available balance for transfer or refund,
including funds from another tax type.
(2) Offset--A period-by-period reduction in amounts
owed by a taxpayer.
(3) Period--Filing period, such as month, quarter,
(b) Offsets and application of credits and payments
(1) Requirements for offset requests.
(A) A taxpayer must file a written request to offset
a liability before the determination, order, or decision establishing
the liability becomes final. A separate request must be made for each
credit a taxpayer proposes to apply to a liability. If a request is
made to offset multiple liabilities, each of the liabilities must
be listed in the order in which the taxpayer wants the credits applied.
(B) The written request for offset must include the
following information for both the credits and liabilities:
(i) taxpayer number;
(ii) the audit or refund period, exam, or return period
in which the credit and liability was created;
(iii) tax type; and
(iv) the tax amount.
(2) Rules for when offsets are and are not allowed.
(A) A credit that has already been refunded to the
taxpayer or applied as a payment cannot be used to offset a liability.
(B) Offsets will only be allowed for liabilities owed
by the same legal entity to which the credit is due.
(C) Any claim for refund filed on or after September
1, 2005 for a report period due on or after January 1, 2000 cannot
be used to offset any liabilities due on a period-by-period basis
and will be processed separately from any amounts found due in an
audit. For more information about how to file a refund claim see §3.325
of this title (relating to Refunds and Payments Under Protest). This
policy does not preclude auditors from making adjustments in the course
of an audit that reflect overpayments of tax that have not already
been separately identified in a refund claim such that any interest
due from or owed to a taxpayer is computed on the final balance. The
comptroller will apply the following policies to the following facts,
but this does not control how the comptroller will handle other facts
that may be presented.
(i) Audit in progress; refund items found by or presented
to auditor during the audit. If an audit entrance conference is after
September 1, 2005 and the auditor finds credits in the normal course
of the audit, or the taxpayer brings credit items to the auditor's
attention and they are not perfected in a separate claim for refund,
the auditor will include the credits in the audit unless the taxpayer
specifically requests that they be processed separately. If the credit
items are processed within the audit, any offsets between deficiencies
and credits will occur before the calculation of penalty and interest
due as a result of the audit.
(ii) Audit completed; request for redetermination filed.
If an audit is completed and a taxpayer timely files a request for
redetermination that includes new refund items, or identifies refund
items for additional consideration that were presented during the
audit and not approved by the auditor, the refund items will be processed
within the audit. Any offsets between deficiencies and credits will
occur before the calculation of penalty and interest due as a result
of the audit. If a taxpayer makes an additional claim for refund after
the time in which a redetermination may be timely requested, those
refund items will be treated as a separate, original claim for refund
and they will not be processed as part of the request for redetermination.
(iii) Audit completed; claim for refund filed after
notification of audit becomes final. If a taxpayer does not request
redetermination and files a claim for refund after the audit becomes
final, the refund claim and any interest due will be processed separately
from the audit. Refunds due the taxpayer may be applied as a payment
to any outstanding liability based on the date those funds are available
for payment to the taxpayer.
(iv) Claim for refund filed; audit begins at a later
date. If a taxpayer files a claim for refund after September 1, 2005
and an audit is started after the date the claim is filed, any refund
amount granted will be processed separately from any amount found
due based on the audit. Any refund due the taxpayer may be applied
as a payment to any outstanding liability based on the date those
funds are available for payment to the taxpayer, but the refund will
not be processed as an offset.
(D) Amounts paid to settle a disputed obligation, including
but not limited to settlements relating to litigation, are not credits
and cannot be used to offset a tax liability or any resulting interest
or penalty amounts.
(E) Amounts paid pursuant to a court judgment resulting
from a claim for refund are not credits and cannot be used to offset
a tax liability or any resulting interest or penalty amounts.
(F) An offset may be recalculated and billed if the
credit used for the offset is subsequently reduced or eliminated.
(G) The comptroller will determine on a case-by-case
basis whether an offset applies in any situation not specifically
covered by this section, but will not approve an offset request for
(i) property tax;
(ii) unclaimed property;
(iii) inheritance tax;
(iv) motor fuel tax refunds for fuel not used on Texas
(v) franchise tax refunds resulting from an audit or
adjustment made by the Internal Revenue Service;
(vi) enterprise zone projects;
(vii) refunds due by the Texas Workforce Commission;
(viii) bad debt credits; and
(ix) amounts governed under the Texas Insurance Code.
(3) Application of credits and payments.
(A) When credits are established in a period, they
will automatically be netted against liabilities in the same period.
If there are no liabilities to net against the credits, or the credits
are greater than the liabilities in the same period, the credits will
first be applied as payments to liabilities in prior periods.
(B) The application of credits will begin in the oldest
liability period and apply within that period first to tax, next to
penalty, and finally to interest. If credits remain, they will be
applied to the next oldest period in the same manner, until all prior
liabilities are paid or the credits are extinguished.
(C) If a credit remains after all preceding liabilities
have been satisfied, and the taxpayer is current in all tax filings,
applicable credit interest will be calculated for periods due on or
after January 1, 2000, and a refund will be issued for the credit
amount and interest.
(D) When a credit is applied to a tax liability in
a prior period, the liability will continue to accrue interest under
Tax Code, §111.060 through the due date of credit period. Unpaid
tax balances after application of a credit will continue to accrue
interest through the due date of the next applied credit or until
midnight of the payment postmark date.
(E) When a credit is applied to a later liability period,
any unpaid balance will continue to accrue applicable interest through
the date of the next applied credit. Interest is accrued in accordance
with Tax Code, §111.060.
(F) When a credit is applied to a later liability period,
the credit will accrue applicable credit interest under Tax Code, §111.064
through the due date of the liability period in which the credit was
applied. If there is a remaining credit balance, it will continue
to accrue applicable credit interest until applied to another deficiency
(G) Under circumstances where multiple type tax liabilities
exist, such as city and state sales tax, payments will be divided
proportionately between the taxes so that each tax shall share the
payment on the basis of the amount due each tax.
(c) Unjust enrichment.
(1) If amounts are collected as tax in transactions
on which tax is not due, the comptroller will require, under the doctrine
of unjust enrichment, that these amounts be remitted to the state
or be refunded to the customers from whom they were collected.
(2) In the case of refunded amounts, documentary evidence
must be retained establishing the transaction, the amount collected,
the party from whom collected, the amount refunded, and the party
to whom refund is made.
|Source Note: The provisions of this §3.2 adopted to be effective January 1, 1976; amended to be effective July 28, 2002, 27 TexReg 6537; amended to be effective December 4, 2003, 28 TexReg 10773; amended to be effective July 20, 2011, 36 TexReg 4568; amended to be effective February 21, 2016, 41 TexReg 1260