| (11) If the federal exemption is denied by the IRS,
the entity is responsible for all franchise tax reports and payments
that have become due since its beginning date and interest will be
based on the original due date of each report. Late filing and payment
penalties will be waived for any reports and payments postmarked within
90 days after the date of the final denial of the federal exemption.
The penalty waiver process will begin when the entity submits a written
request for penalty waiver and a copy of the letter denying the federal
exemption when filing reports and payment.
(j) Trade show exemption. See Tax Code, §171.084
(Exemption--Certain Trade Show Participants), for the requirements
for exemption for certain foreign entities that participate in trade
shows in Texas.
(1) Notification to comptroller. Entities need not
apply for an exemption under Tax Code, §171.084.
(A) If a foreign entity has obtained a registration
or has already notified the comptroller that it is doing business
in Texas, the entity must notify the comptroller in writing by the
due date of the first report for which the entity is exempt that the
report and payment are not due because the entity is exempt under
Tax Code, §171.084. After such notification, the entity must
notify the comptroller in writing only when the organization no longer
qualifies for exemption.
(B) If a foreign entity has not obtained a registration
or otherwise qualified to do business in the state, if applicable,
and if the entity has not notified the comptroller that it is doing
business in Texas, the entity must notify the comptroller in writing
only when the entity no longer qualifies for exemption under Tax Code,
§171.084. There is no need to apply for exemption as long as
the entity qualifies for the exemption.
(2) Solicitation periods. If the solicitation of orders
is conducted during more than five periods during the business period
upon which tax is based as set out in Tax Code, §171.1532 (Business
on Which Tax on Net Taxable Margin is Based), the entity does not
qualify for exemption.
(A) For example, an entity with its fiscal year ending
December 31, 2008, that filed a 2008 annual report, will not have
to file and pay a 2009 annual report if it did not solicit orders
for more than five periods during 2008.
(B) For example, assume a foreign entity participated
in its first trade show in Texas on April 1, 2008. It also participated
in trade shows in 2009 on January 1, March 1, May 1, June 1, August
1, and October 1. The entity's fiscal year ends are December 31, 2008,
and 2009. The entity would be exempt for its initial report and payment
(covering the privilege periods from April 1, 2008 - December 31,
2009) because it only solicited for one period from April 1, 2008
- December 31, 2008 (i.e., the business upon which the initial report
is based). The entity would be required to file a 2010 annual report
and pay tax, however, because it solicited for six periods from January
1, 2009 - December 31, 2009 (i.e., the period upon which the 2010
annual report is based).
(3) One hundred twenty hours. A solicitation period
may not exceed 120 consecutive hours. If the solicitation of orders
is conducted during a single period of more than 120 consecutive hours,
the entity does not qualify for exemption. For example, an entity
that meets the other requirements of Tax Code, §171.084, will
meet the 120 hours requirement if the solicitation occurs Monday -
Friday, but will not meet the 120 hours requirement if the solicitation
occurs Monday - Saturday. If none of the solicitation limits prescribed
in this subsection are exceeded, an entity may qualify for the exemption
even if it leases space at a wholesale center for the entire period
upon which the tax is based.
(k) Credit association exemption. A cooperative credit
association incorporated under Agriculture Code, Chapter 55 (Cooperative
Credit Associations), an entity organized under 12 U.S.C. §2071,
or an agricultural credit association regulated by the Farm Credit
Administration is exempt from franchise tax.
(l) Bingo unit exemption. For reports originally due
on or after October 1, 2009, a bingo unit formed under Occupations
Code, Chapter 2001, Subchapter I-1 (Unit Accounting), is exempt from
franchise tax. "Unit" means two or more licensed authorized organizations
that conduct bingo at the same location joining together to share
revenues, authorized expenses, and inventory related to bingo operation.
(m) TexAmericas Center nonprofit corporation exemption.
Effective June 16, 2015, a nonprofit entity created by the TexAmericas
Center under Special District Local Laws Code, §3503.111 (Nonprofit
Corporations), is exempt from franchise tax.
(n) Disaster response exemption for an out-of-state
business entity. Effective June 16, 2015, an out-of-state business
entity, as defined in this subsection, is not required to file a franchise
tax report with or pay franchise tax to this state if the business
done in this state is limited to the performance of disaster- and
emergency-related work during a disaster response period. An out-of-state
business entity that remains in Texas after a disaster response period
is not entitled to this exemption.
(1) Notification to comptroller. An entity need not
apply for an exemption from franchise tax under Business & Commerce
Code, §112.004 (Exemption of Out-of-State Business Entity From
Certain Obligations During Disaster Response Period). An entity must
notify the comptroller in writing only when the entity no longer qualifies
for the exemption.
(2) Definitions. For the purpose of this subsection,
the terms defined in subparagraphs (B) - (H) of this paragraph have
the meanings given in Business & Commerce Code, §112.003
(Definitions).
(A) Affiliate--A member of a combined group as that
term is described by Tax Code §171.1014 (Combined Reporting;
Affiliated Group Engaged in Unitary Business).
(B) Critical infrastructure--Equipment and property
that is owned or used by a telecommunications provider or cable operator
or for communications networks, electric generation, electric transmission
and distribution systems, natural gas and natural gas liquids gathering,
processing, and storage, transmission and distributions systems, and
water pipelines and related support facilities, equipment, and property
that serve multiple persons, including buildings, offices, structures,
lines, poles, and pipes.
(C) Declared state disaster or emergency--A disaster
or emergency event that occurs in this state and:
(i) in response to which the governor issues an executive
order or proclamation declaring a state of disaster or a state of
emergency; or
(ii) that the president of the United States declares
a major disaster or emergency.
(D) Disaster- or emergency-related work--Repairing,
renovating, installing, building, rendering services, or performing
other business activities relating to the repair or replacement of
critical infrastructure that has been damaged, impaired, or destroyed
by a declared state disaster or emergency.
(E) Disaster response period--
(i) the period that:
(I) begins on the 10th day before the date of the earliest
event establishing a declared state disaster or emergency by the issuance
of an executive order or proclamation by the governor or a declaration
of the president of the United States; and
(II) ends on the earlier of the 120th day after the
start date or the 60th day after the ending date of the disaster or
emergency period established by the executive order or proclamation
or declaration, or on a later date as determined by an executive order
or proclamation by the governor; or
(ii) the period that, with respect to an out-of-state
business entity:
(I) begins on the date that the out-of-state business
entity enters this state in good faith under a mutual assistance agreement
and in anticipation of a state disaster or emergency, regardless of
whether a state disaster or emergency is actually declared; and
(II) ends on the earlier of the date that the work
is concluded or the seventh day after the out-of-state business entity
enters this state.
(F) In-state business entity--A domestic entity or
foreign entity that is authorized to transact business in this state
immediately before a disaster response period.
(G) Mutual assistance agreement--An agreement to which
one or more business entities are parties and under which a public
utility, municipally owned utility, or joint agency owning, operating,
or owning and operating critical infrastructure used for electric
generation, transmission, or distribution in this state may request
that an out-of-state business entity perform work in this state in
anticipation of a state disaster or emergency.
(H) Out-of-state business entity--A foreign entity
that enters this state at the request of an in-state business entity
under a mutual assistance agreement or is an affiliate of an in-state
business entity and;
(i) that:
Cont'd... |
