(3)Change in the reporting entity. The reporting entity shall change only when the entity (other than the parent) is no longer subject to Texas' jurisdiction to tax or the reporting entity is no longer a member of the combined group, at which time the combined group shall designate another entity that qualifies as its reporting entity and notify the comptroller of the designation. (f)Accounting period of the combined group. (1)The combined group's accounting period is determined as follows: (A)if two or more members of a combined group file a federal consolidated return, the group's accounting period is the federal taxable period of the federal consolidated group; (B)in all other instances, the accounting period is the federal taxable period of the reporting entity. (2)Members with different accounting periods. If the federal taxable period of a member differs from the federal taxable period of the combined group, the reporting entity will determine the portion of that member's revenue, cost of goods sold, compensation, etc. to be included by preparing a separate income statement based on federal income tax reporting methods for the period [months ] included in the group's accounting period. (g)Liability for the combined tax, penalty, and interest. The members of a combined group shall be jointly and severally liable for the combined tax reported on the combined report and any interest and penalty. (h)Credits. Unless otherwise provided by law, credits generally may be applied against the combined tax liability of the combined group. See §3.594 of this title (relating to Margin: Temporary Credit for Business Loss Carryforwards), and §3.593 of this title (relating to Margin: Credits). (i)Standard Industrial Classification Code. For a combined group, the revenue from each retail and wholesale trade activity of each of the members of the combined group shall be aggregated for purposes of determining whether the combined group is engaged in retail or wholesale trade. The determination of whether a combined group is engaged in a retail or wholesale trade activity shall be made after eliminations. (j)Tax rate, discounts, and E-Z Computation. The determination of whether a combined group is eligible for the 0.5% tax rate, discounts from tax liability, and the E-Z Computation under Tax Code, §§171.002, 171.0021, and 171.1016, shall be made based on the total revenue of [for] the combined group as a whole after eliminations. See §3.584 of this title [(relating to Reports and Payments)]. (k)Combined report filing. A taxable entity will only be included in a combined group report for the accounting period in which it belongs to the combined group. (1)Initial reports. (A)Combined groups. A combined group will not file an initial report. For the period that a combined group exists, the combined group will file only annual reports regardless of whether the reporting entity or any or all of the members of the combined group would have been required to file an initial report if filing as a separate entity. (B)Members of a combined group. This subparagraph applies to members of a combined group that became subject to the franchise tax prior to October 4, 2009. Members of a combined group that become subject to the tax on October 4, 2009 or later will file only annual reports (see paragraph (2)(B) of this subsection). (i)A newly-formed member of a combined group will not report its data on a separate initial report but will include its data with the combined group's report for the corresponding accounting period. If a member of a combined group receives a franchise tax initial report filing notice, the entity must return the notice to the comptroller identifying the reporting entity of the combined group unless the entity is required to file a separate initial report under clause (ii) or (iii) of this subparagraph. (ii)A newly formed member of a combined group that leaves the combined group during the accounting period that would be covered by its initial report is required to file a separate initial report for the period beginning on the date it leaves the group through the date of its last federal [normal] accounting year end that is at least 60 days prior to the original due date of its initial report. Example: Corporation A is formed on April 3, 2009 [2008] as a member of Combined Group Z. It is spun off as a separate non-unitary entity effective August 15, 2009 [ 2008]. The federal [normal] accounting year end for all parties is December 31. Corporation A will file a 2010 [2009] initial report due July 1, 2010 [ 2009] for August 15, 2009 [2008] - December 31, 2009 [2008], the period after the spin-off of the corporation. Combined Group Z will file a 2010 [2009 ] annual report including Corporation A for April 3, 2009 [ 2008] - August 14, 2009 [2008], the period before the spin-off of the corporation. (iii)A newly-formed entity that is subsequently acquired by a combined group is required to file a separate initial report for the period that is prior to the acquisition date. Example: Corporation A is a separate entity that was formed on November 15, 2008 [ 2007] and has a June 30 federal accounting year end. Corporation A was acquired by Combined Group Z effective February 1, 2009 [2008]. Combined Group Z has a December 31 federal accounting year end. Corporation A will file a 2010 [2009] initial report due February 12, 2010 [2009]. Because Corporation A was acquired by Combined Group Z effective February 1, 2009 [2008], Corporation A will include only the period from November 15, 2008 [ 2007] - January 31, 2009 [2008] on its initial report. Combined Group Z will file a 2010 [2009] annual report including Corporation A for the period February 1, 2009 [2008] - December 31, 2009 [2008]. (2)Annual reports. (A)Combined groups. For the period that a combined group exists, the combined group will file only annual reports. (B)Members of a combined group. (i)For any accounting period that an entity is not part of a combined group, the entity must file a separate report. Example: Corporation B is a separate entity that began filing franchise tax reports in 2000 and has a December 31 federal accounting year end [from January 1, 2008 - June 30, 2008]. Corporation B was acquired by Combined Group X effective July 1, 2009 [2008]. Combined Group X has a March 31 federal accounting year end. Corporation B is sold by Combined Group X to Combined Group Y effective October 1, 2009 [2008]. Combined Group Y has a December 31 federal accounting year end. Corporation B will file a 2010 [2009] annual report for the period January 1, 2009 [2008] - June 30, 2009 [2008]. Combined Group X will file a 2010 [2009] annual report for the period April 1, 2008 [2007] - March 31, 2009 [ 2008]. Combined Group X will not include Corporation B in its 2010 [2009] annual report because Corporation B was not part of the combined group during the accounting period on which the report is based. Combined Group X will include Corporation B in its 2011 [2010] annual report for the period July 1, 2009 [2008] - September 30, 2009 [ 2008]. Combined Group Y will file a 2010 [2009] annual report for the period January 1, 2009 [2008] - December 31, 2009 [2008] and will include Corporation B for the period October 1, 2009 [2008] - December 31, 2009 [2008]. (ii)A taxable entity formed on October 4, 2009, or later, that is a member of a combined group and that leaves the combined group during the accounting period that would be covered by its first annual report, is required to file a separate annual report for the period beginning on the date it leaves the group through the date of its last federal accounting year end in the calendar year prior to the year its first annual report is originally due. Example: Corporation A is formed on April 3, 2010 as a member of Combined Group Z. It is spun off as a separate non-unitary entity effective August 15, 2010. The federal accounting year end for all parties is December 31. Corporation A will file a 2011 annual report due May 15, 2011 for August 15, 2010 - December 31, 2010, the period after the spin-off of the corporation. Combined Group Z will file a 2010 annual report including Corporation A for April 3, 2010 - August 14, 2010, the period before the spin-off of the corporation. (iii)A taxable entity formed on October 4, 2009, or later, and is subsequently acquired by a combined group is required to file a first annual report for the period that is prior to the acquisition date. Example: Corporation A is a separate entity that was formed on June 15, 2010 and has a December 31 federal accounting year end. Corporation A was acquired by Combined Group Z effective December 1, 2010. Combined Group Z has a December 31 accounting year end. Corporation A will file a 2011 annual report due May 15, 2011. Because Corporation A was acquired by Combined Group Z effective December 1, 2010, Corporation A will include only the period from June 15, 2010 - November 30, 2010 on its annual report. Combined Group Z will file a 2010 annual report including Corporation A for the period December 1, 2010 - December 31, 2010. (3)Final reports. (A)Combined groups. If every member of a combined group ceases doing business in Texas, a final report will need to be filed and paid before a taxable entity will receive clearance from the comptroller for termination, cancellation, withdrawal or merger. In all other cases, for the period a combined group exists, the combined group will file only annual reports. [A combined group will not file a final report. For the period that a combined group exists, the combined group will file only annual reports.] (B)Members of a combined group. (i)A member of a combined group that ceases doing business in Texas will not file a final report. The data that would have been reported on the final report will be included in the combined group's annual report for the corresponding accounting period. If a member of a combined group receives a franchise tax final report filing notice, the entity must return the notice to the comptroller identifying the reporting entity of the combined group unless the entity is required to file a separate final report under clause (ii) or (iii) of this subparagraph. (ii)A separate entity that joins a combined group and then ceases doing business in Texas in the accounting period that would be covered by a final report is required to file a final report for the period that is prior to the acquisition date. The period from the acquisition date through the date the entity ceased doing business in Texas will be reported on the combined group's annual report for the corresponding period. Example: Corporation C is a separate entity that has a December 31 accounting year end. Corporation C was acquired by Combined Group W effective July 1, 2008. Combined Group W also has a December 31 accounting year end. On October 31, 2008 Corporation C is dissolved. Corporation C will file a final report due December 30, 2008 for the period January 1, 2008 - June 30, 2008, which is the period before Corporation C was purchased by Combined Group W. Combined Group W will file a 2009 annual report and include Corporation C for the period July 1, 2008 - October 31, 2008. (iii)A member of a combined group that leaves the combined group and then ceases doing business in Texas during the accounting period that would be covered by a final report is required to file a final report for the period from the date the entity left the combined group through the date that the entity ceased doing business in Texas. Example: Corporation C is a member of Combined Group W. Both Corporation C and Combined Group W have a September 30 accounting year end. Corporation C leaves the combined group effective May 1, 2008. On August 15, 2008, Corporation C is dissolved. Corporation C will file a final report due October 14, 2008 for the period May 1, 2008 - August 15, 2008, which is the period after Corporation C left Combined Group W. Combined Group W will file a 2009 annual report and will include Corporation C for the period October 1, 2007 - April 30, 2008. (4)Electronic funds transfer. If any one member of a combined group receives notice that it is required to electronically transfer franchise tax payments, then the combined group is required to electronically transfer payments.
This agency hereby certifies that the proposal
has been reviewed by legal counsel and found to be within the agency's
legal authority to adopt.
Filed with the Office
of the Secretary of State on October 16,
2009
TRD-200904653 Ashley Harden
General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: November 29, 2009
For further information, please call: (512) 475-0387
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