No, compensation is specifically defined for franchise tax reporting purposes in Tax Code Section 171.1013, Determination of Compensation.
The following components are included in the compensation deduction:
A single-member LLC treated as a sole proprietorship for federal tax purposes may include in compensation the net distributive income (NDI) assigned or disbursed to the single member that is a natural person. NDI is the net amount of income, gain, deduction or loss reportable on the sole proprietor's federal tax return, Form 1040, to the extent that it relates to the LLC. For example:
No, the employer's share of payroll taxes cannot be included in wages and cash compensation or benefits.
No. IRS Form 1099-MISC nonemployee wages cannot be included as compensation when calculating margin.
Net Distributive Income or NDI, for a pass-through entity, is the net amount of income, gain, deduction or loss reportable to the owners on an IRS Form K-1 for the entity’s tax year. (Actual distribution is not required.) Guaranteed payments to partners are included when computing NDI.
Yes. If an entity elects to subtract compensation in computing its margin, it must include all compensation as defined in Tax Code Section 171.1013, Determination of Compensation. If NDI is a loss, then treat it as a negative number when computing the entity’s compensation deduction.
See also Rule 3.589 (b)(9), Margin: Compensation.
If an entity issues a W-2 and a K-1 to an individual, add the individual’s W-2 and K-1 amounts together and apply the 12-month period wage limit allowed each individual when computing the entity’s compensation deduction.
No. If your entity’s accounting period is more or less than 12 months, you must pro-rate the wage limit over the length of the accounting period.
For example, if you are filing the 2016 report for the accounting period Jan. 1, 2015, to June 30, 2015, the deduction for wages and cash compensation is not $360,000 for a 12-month period; rather, it is limited to $180,000 for each person for the 6-month period. To calculate this pro-rated compensation deduction amount, you
Yes, but you treat benefit costs differently for franchise tax based on how you report them for federal tax purposes.
In 2015, the Texas Legislature passed House Bill 855, which requires state agencies to publish a list of the three most commonly used Web browsers on their websites. The Texas Comptroller’s most commonly used Web browsers are Google Chrome, Microsoft Internet Explorer and Apple Safari.