Tax Policy News

January 2016

The Comptroller's office publishes this online newsletter to keep you informed about Texas taxes and what is happening in the Tax Policy Division. Tax Policy News provides general information and is not a substitute for legal or other professional advice.

In This Issue...


Agricultural and Timber Registration Numbers

Did you renew your agricultural and timber registration number by Dec. 31, 2015? If not, see How to Renew for instructions.

Cigarette/Tobacco Non-Retailer Permit Renewals

Current cigarette and tobacco products non-retailer permits expire Feb. 29, 2016.

In November, the Comptroller's office mailed renewal packets with preprinted applications to all cigarette, cigar and/or tobacco products manufacturers, importers, distributors, bonded agents and wholesalers to renew their cigarette and tobacco products non-retailer permits for March 1, 2016, through Feb. 28, 2017. If you did not receive your packet, call us at 1-800-862-2260 to request one.

Non-retailers should review the preprinted information, make any corrections, sign the renewal form and return all pages of the packet (and any other documentation) with the applicable permit fee to our office by the date printed on the application form.

A $50 late filing fee will be assessed on non-retailer renewals postmarked after Feb. 29, 2016.

Texas Tax Laws Effective Jan. 1, 2016

The following legislation became effective Jan. 1, 2016. See the 2015 Legislative Update – 84th Legislature for more information:

Franchise Tax

Franchise Tax Rates for 2016

Most taxable entities will pay a franchise tax rate of 0.75 percent of taxable margin. Taxable entities primarily engaged in retail or wholesale trade will pay a franchise tax rate of 0.375 percent of taxable margin.

New Tax Rate and Revenue Threshold for Businesses Choosing to File Using the EZ Computation

The revenue threshold for the EZ computation increased from $10 million to $20 million and allows a taxable entity choosing the EZ computation to pay tax at a rate of 0.331 percent.

Reporting Requirements for Limited Partnerships and Professional Associations

Limited partnerships and professional associations are now required to file Public Information Reports in place of Ownership Information Reports with the Comptroller's office. In addition, professional associations are no longer required to file annual statements with the Secretary of State under the Business Organizations Code.

Tax Credit for the Rehabilitation of Historic Structures

The definition of eligible costs and expenses of certified rehabilitation of certified historic structures now allows nonprofits to earn credit for eligible costs and expenses.

Franchise Tax Not Imposed on New Veteran-Owned Businesses

New veteran-owned businesses are not subject to franchise tax for an initial five-year period when they meet the following qualifications.

To be considered a new veteran-owned business, an entity must:

  • be formed on or after Jan. 1, 2016, and before Jan. 1, 2020;
  • be wholly owned by a natural person (or persons) who served in, and was honorably discharged from, a branch of the United States armed services; and
  • provide verification of their service and discharge to the Secretary of State upon registration.

For information on the first step in this process, see the Texas Veterans Commission website.

Motor Vehicle Sales and Use Tax

Special Olympics Texas Fund Voluntary Contribution

A person can make a voluntary contribution to the Special Olympics Texas Fund when registering or renewing a motor vehicle's registration in Texas.

The Special Olympics Texas Fund is a trust fund held by the Comptroller and administered by the Texas Department of Aging and Disability Services as trustee on behalf of Special Olympics Texas.

Website Update

Earned Income Tax Credit

The Comptroller has updated Earned Income Tax Credit (EITC) information to show the 2015 income amount required to qualify for the credit.

EITC is a federal program for working people with low to moderate income who meet certain requirements and who file a tax return, even if they do not owe tax or are not required to file a tax return. The credit reduces the amount of tax owed and may provide a refund.

As part of the Comptroller's campaign to publicize the program, we are asking employers to share the EITC information with their employees.

Interest Rate for 2016

The 2016 interest rates have been added to Interest on Credits and Refunds and on Tax Due. The interest rate on past due taxes and fees is 4.5 percent. The interest rate on credits and refunds is 0.634 percent.

Delinquent taxes accrue interest beginning on the 61st day after the due date until paid. Refund claims filed with the Comptroller's office accrue credit interest at either the Treasury Pool rate or Prime +1, whichever is less. The interest begins to accrue 60 days after the date of the payment or the due date of the tax report, whichever is later.

Texas County Tax Assessor-Collectors – New Taxpayer Status Search

We have a new search for county tax assessor-collectors to verify:

  • motor vehicle rental permit holders;
  • motor vehicle seller-financed permit holders; and
  • registered motor vehicle related finance companies.

The search shows the name, mailing address and the permit start and end date (if applicable) and is updated nightly.

A link to the search is under "Resources" on our Motor Vehicle Gross Rental Receipts Tax and Motor Vehicle Seller-Financed Sales Tax Web pages.

Private Letter Rulings

Franchise Tax

Wages and Cash Compensation

Private Letter Ruling No. 152100509 related to the franchise tax compensation deduction. Taxpayers can include wages and cash compensation paid to employees assigned to international offices in the compensation deduction.

Sales Tax

Combination Real and Tangible Personal Property Leases

Private Letter Ruling No. 143360028 related to the applicability of sales and use tax to tangible personal property included with a lease of real property. A charge for the lease of real property, including any tangible personal property, is not subject to sales and use tax.

Natural Gas Exemptions

Private Letter Ruling No. 151170339 related to claimed exemptions from sales tax for natural gas used to heat petroleum products and to maintain the products in a heated state. The Comptroller declined to issue the requested rulings because the taxpayer failed to provide sufficient facts or documentation to prove the requested exemption.

Public Outreach

Tax Policy Division Meetings and Presentations

Various organizations often ask members of the Tax Policy Division to attend meetings or to give presentations to discuss taxability issues. We are committed to helping taxpayers and their representatives understand their tax responsibilities and strive to fill requests as staffing permits.

One recent presentation was at the annual Agriculture Expo at the Producers Cooperative Association in Bryan, Texas. Division representatives discussed agricultural exemptions and how to apply for or renew agricultural and timber registration numbers.

Another event was a presentation to the V.G. Young Institute School for County Tax Assessor-Collectors in San Marcos, Texas, about motor vehicle taxability issues.


Proposed Rules

The Comptroller proposed the following rules for public comment through the Texas Register, and we are considering comments received during the comment period.

General Rules

Rule 3.2 – Offsets and Application of Credits and Payments to Liabilities; Unjust Enrichment
Proposed – Dec. 9, 2015.
Comment period ended – Jan. 24, 2016.

Effective Rules

Inheritance Tax

These rules were repealed effective Dec. 22, 2015:

Rule 3.225R – Estates for Which a Texas Tax Return Is Required (Date of Death on or after September 1, 1983)
Rule 3.226R – Definitions (Date of Death on or after September 1, 1983)
Rule 3.227R – Examination Procedures; Tax Computation (Date of Death on or after September 1, 1983)
Rule 3.228R – Payment of Tax, Penalty and Interest, Refunds (Date of Death on or after September 1, 1983)
Rule 3.229R – Collection Action (Date of Death on or after September 1, 1983)
Rule 3.230R – Closing Documents (Date of Death on or after September 1, 1983) State and Local Sales and Use Taxes

Motor Fuel Tax

Rule 3.434 – Liquefied Gas Tax Decal effective Dec. 29, 2015

State and Local Sales and Use Taxes

Rule 3.340 – Qualified Research effective Nov. 30, 2015
Rule 3.322 – Exempt Organizations effective Dec. 29, 2015
Rule 3.334 – Local Sales and Use Taxes effective Jan. 5, 2016
Rule 3.68 – United States and Foreign Military Personnel Stationed in Texas effective Jan. 7, 2016
Rule 3.344 – Telecommunications Services effective Jan. 10, 2016