| (B) Nontaxable upper tier entity. This paragraph does
not apply to that percentage of the total revenue attributable to
an upper tier entity by a lower tier entity if the upper tier entity
is not subject to the tax under this chapter. In this case, the lower
tier entity cannot report total revenue to the nontaxable upper tier
entity and the lower tier entity cannot exclude this total revenue
from its franchise tax report.
(C) Eligibility for no tax due, discounts and the E-Z
Computation. The no tax due thresholds, discounts and the E-Z Computation
do not apply to an upper or lower tier entity if, before the attribution
of any total revenue by a lower tier entity to upper tier entities
under this section, the lower tier entity does not meet the criteria.
See §3.584(d)(8) of this title (relating to Margin: Reports and
Payments).
(D) Not a partnership distribution. Total revenue reported
from a lower tier entity to an upper tier entity under the provisions
of Tax Code, §171.1015(b) is not a distribution from a partnership.
(E) Combined reporting. The tiered partnership provision
is not an alternative to combined reporting. Combined reporting is
mandatory for taxable entities that meet the ownership and unitary
criteria. See §3.590 of this title. Therefore, the tiered partnership
provision is not allowed if the lower tier entity is included in a
combined group.
(F) Accounting period. If the lower tier entity and
an upper tier entity have different accounting periods, the upper
tier entity must allocate the revenue reported from the lower tier
entity to the accounting period that the upper tier entity's report
is based on.
(G) Lower tier entity no tax due. For reports originally
due on or after January 1, 2010, if the lower tier entity owes no
tax before the attribution of total revenue to the upper tier entities,
filing under the tiered partnership provision is not allowed.
(9) Allocated revenue. Revenue that Texas cannot tax
because the activities generating that item of revenue do not have
sufficient unitary connection with the entity's other activities conducted
in Texas under the United States Constitution is not included in total
revenue.
(d) Reporting total revenue. The line items in this
subsection refer to line items on the 2006 Internal Revenue Service
forms. In computing total revenue for a subsequent report year, total
revenue should be based on the equivalent line numbers from the corresponding
federal report and computed based on the Internal Revenue Code of
1986 in effect for the federal tax year beginning on January 1, 2007.
(1) Corporations. For the purpose of computing its
taxable margin, the total revenue of a taxable entity treated as a
corporation for federal income tax purposes is computed by:
(A) adding:
(i) the amount reportable as income on line 1c, Internal
Revenue Service Form 1120;
(ii) the amounts reportable as income on lines 4 through
10, Internal Revenue Service Form 1120; and
(iii) any total revenue reported by a lower tier entity
as includable in the taxable entity's total revenue under Tax Code, §171.1015(b);
and
(B) subtracting, to the extent included in the calculation
under subparagraph (A) of this paragraph:
(i) bad debt expensed for federal income tax purposes
that corresponds to items of gross receipts included for the current
reporting period or a past reporting period;
(ii) foreign royalties and foreign dividends, including
amounts determined under Internal Revenue Code, §78 or §§951
- 964;
(iii) net distributive income from a taxable entity
treated as a partnership or as an S corporation for federal income
tax purposes, except as provided by subsection (c)(4) of this section;
(iv) allowable deductions from Internal Revenue Service
Form 1120, Schedule C, to the extent the relating dividend income
is included in total revenue;
(v) items of income attributable to an entity that
is a disregarded entity for federal income tax purposes; and
(vi) other amounts authorized by subsection (e) of
this section.
(2) S corporations. For the purpose of computing its
taxable margin, the total revenue of a taxable entity treated as an
S corporation for federal income tax purposes is computed by:
(A) adding:
(i) the amount reportable as income on line 1c, Internal
Revenue Service Form 1120S;
(ii) the amounts reportable as income on lines 4 and
5, Internal Revenue Service Form 1120S;
(iii) the amounts reportable as income on lines 3a
and 4 through 10, Internal Revenue Service Form 1120S, Schedule K;
(iv) the amounts reportable as income on lines 17 and
19, Internal Revenue Service Form 8825; and
(v) any total revenue reported by a lower tier entity
as includable in the taxable entity's total revenue under Tax Code, §171.1015(b);
and
(B) subtracting, to the extent included in the calculation
under subparagraph (A) of this paragraph:
(i) bad debt expensed for federal income tax purposes
that corresponds to items of gross receipts included for the current
reporting period or a past reporting period;
(ii) foreign royalties and foreign dividends, including
amounts determined under Internal Revenue Code, §78 or §§951
- 964;
(iii) net distributive income from a taxable entity
treated as a partnership or as an S corporation for federal income
tax purposes, except as provided by subsection (c)(4) of this section;
(iv) items of income attributable to an entity that
is a disregarded entity for federal income tax purposes; and
(v) other amounts authorized by subsection (e) of this
section.
(3) Partnerships. For the purpose of computing its
taxable margin, the total revenue of a taxable entity treated as a
partnership for federal income tax purposes is computed by:
(A) adding:
(i) the amount reportable as income on line 1c, Internal
Revenue Service Form 1065;
(ii) the amounts reportable as income on lines 4, 6,
and 7, Internal Revenue Service Form 1065;
(iii) the amounts reportable as income on lines 3a
and 5 through 11, Internal Revenue Service Form 1065, Schedule K;
(iv) the amounts reportable as income on line 17, Internal
Revenue Service Form 8825;
(v) the amounts reportable as income on line 11, plus
line 2 or line 45, Internal Revenue Service Form 1040, Schedule F;
and
(vi) any total revenue reported by a lower tier entity
as includable in the taxable entity's total revenue under Tax Code, §171.1015(b);
and
(B) subtracting, to the extent included in the calculation
under subparagraph (A) of this paragraph:
(i) bad debt expensed for federal income tax purposes
that corresponds to items of gross receipts included for the current
reporting period or a past reporting period;
(ii) foreign royalties and foreign dividends, including
amounts determined under Internal Revenue Code, §78 or §§951
- 964;
(iii) net distributive income from a taxable entity
treated as a partnership or as an S corporation for federal income
tax purposes, except as provided by subsection (c)(4) of this section;
(iv) items of income attributable to an entity that
is a disregarded entity for federal income tax purposes; and
(v) other amounts authorized by subsection (e) of this
section.
(4) Trusts. For the purpose of computing its taxable
margin, the total revenue of a taxable entity treated as a trust for
federal income tax purposes is computed by:
(A) adding:
(i) the amount reportable as income on lines 1, 2a,
3, 4, 7, and 8 of Internal Revenue Service Form 1041;
(ii) the amount reportable as income on lines 3, 4,
32, and 37 of Internal Revenue Service Form 1040, Schedule E;
(iii) the amounts reportable as income on line 11,
plus line 2 or line 45, Internal Revenue Service Form 1040, Schedule
F; and
(iv) any total revenue reported by a lower tier entity
as includable in the taxable entity's total revenue under Tax Code, §171.1015(b);
and
(B) subtracting, to the extent included in the calculation
under subparagraph (A) of this paragraph:
(i) bad debt expensed for federal income tax purposes
that corresponds to items of gross receipts included for the current
reporting period or a past reporting period;
(ii) foreign royalties and foreign dividends, including
amounts determined under Internal Revenue Code, §78 or §§951
- 964;
Cont'd... |
