corporate apportionment and sourcing rights in multistate...
TRANSCRIPT
Corporate Apportionment and Sourcing
Rights in Multistate Tax Compact States Key Implications Triggered by California's Gillette Case
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WEDNESDAY, JANUARY 23, 2013
Presenting a live 110-minute teleconference with interactive Q&A
Bruce Ely, Partner, Bradley Arant Boult Cummings, Birmingham, Ala.
Walter Pickhardt, Partner, Faegre Baker Daniels, Minneapolis
Donald Griswold, Partner, Crowell & Moring, Washington, D.C.
Jeremy Abrams, Attorney, Crowell & Moring, Washington, D.C.
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Corporate Apportionment and Sourcing Rights in Multistate Tax Compact States Seminar
Don Griswold, Crowell & Moring
Walter Pickhardt, Faegre Baker Daniels
Jan. 23, 2013
Jeremy Abrams, Crowell & Moring
jabrams.crowell.com
Bruce Ely, Bradley Arant Boult Cummings
Today’s Program
California's Gillette Case
[Jeremy Abrams]
Implications For Sourcing Revenue From Services, Intangibles
[Don Griswold]
Issues Arising From Other State Cases And Guidance
[Bruce Ely]
Practical Decisions Facing Multi-State Companies
[Walter Pickhardt]
Slide 8 – Slide 24
Slide 46 – Slide 72
Slide 25 – Slide 41
Slide 42 – Slide 45
Notice
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY
THE SPEAKERS’ FIRMS TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY
OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT
MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR
RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
You (and your employees, representatives, or agents) may disclose to any and all persons,
without limitation, the tax treatment or tax structure, or both, of any transaction
described in the associated materials we provide to you, including, but not limited to,
any tax opinions, memoranda, or other tax analyses contained in those materials.
The information contained herein is of a general nature and based on authorities that are
subject to change. Applicability of the information to specific situations should be
determined through consultation with your tax adviser.
7
CALIFORNIA’S GILLETTE CASE
Jeremy Abrams, Crowell & Moring
The Gillette Company, et. al. v. California Franchise Tax Board
I. Background
A. Multistate Tax Compact (the Compact)
B. California apportionment
II. Discussion
A. Procedural history
B. The Court of Appeal’s decision, on rehearing
C. Pending Supreme Court review
9
Multistate Tax Compact: Brief History
• UDITPA
• Northwestern Cement
• P.L. 86-272
• Willis Report
• Multistate Tax Commission
10
Multistate Tax Compact: Purpose
• Uniformity
• Equitable apportionment
• Taxpayer convenience
11
Multistate Tax Compact: Full Members
• Alabama, Alaska, Arkansas, California,* Colorado, District of
Columbia, Hawaii, Idaho, Kansas, Michigan, Minnesota,
Missouri, Montana, New Mexico, North Dakota, Oregon, South
Dakota, Texas, Utah, Washington
• *California withdrew from the Compact effective June 27,
2012.
12
Multistate Tax Compact: Apportionment Formula
• Article IV, Sect. 9
All business income shall be apportioned to this State
by multiplying the income by a fraction the numerator
of which is the property factor plus the payroll factor
plus the sales factor and the denominator of which is
three.
13
Multistate Tax Compact: Taxpayer Election
• Article III , Sect. 1
Any taxpayer subject to an income tax whose income
is subject to apportionment and allocation for tax
purposes pursuant to the laws of a party State or
pursuant to the laws of subdivisions in two or more
party States may elect to apportion and allocate his
income in the manner provided by the laws of such
States or by the laws of such States and subdivisions
without reference to this compact, or may elect to
apportion and allocate in accordance with Article IV.
14
California Apportionment
• Adopted UDITPA in 1966
• Uses its own numbering system
• Became signatory to Compact in 1974
• Pre-1993
• Dual apportionment statutes
• Cal. Rev. & Tax. Code
38006, art. IV, subd. 9
(Compact)
• Three factors, evenly weighted
• Cal. Rev. & Tax. Code
25128 (UDITPA)
• Three factors, evenly weighted
15
California Apportionment (Cont.)
• 1993 Amendment (switch to double-weighted sales)
• Cal. Rev. & Tax. Code
38006, art. IV, subd. 9 (Compact –
unchanged)
• Cal. Rev. & Tax. Code
25128 (double-weighted sales)
• “Notwithstanding Section 38006, all business income
shall be apportioned to this state by multiplying the
income by a fraction, the numerator of which is the
property factor plus the payroll factor plus twice the
sales factor, and the denominator of which is four …”
16
Gillette v. FTB: Taxpayers
• The Gillette Co. and subs
• Procter & Gamble Manufacturing Co.
• Kimberly-Clark Worldwide, Inc. and subs
• Sigma-Aldrich, Inc.
• RB Holdings (USA) Inc.
• Jones Apparel Group, Inc.
17
Gillette v. FTB: Procedural History
• Refund claims denied
• Superior Court decision
• Court of Appeal’s (first) decision
• Motion for rehearing
18
Gillette v. FTB: Issue
“[W]hether, for the tax years at issue since 1993,
Taxpayers were entitled to elect the Compact formula,
or, as respondent Franchise Tax Board (FTB) asserts, did
the 1993 amendment to section 25128 repeal and
supersede that formula, thereby making the state
formula mandatory?”
19
Gillette v. FTB: Decision On Rehearing (Oct. 2, 2012)
• Taxpayers have standing
• Refund claim for taxes paid pursuant to statute
• Third-party beneficiary of Compact
20
Gillette v. FTB: Decision On Rehearing (Cont.)
• Compact is binding on member states
• Indicia of an interstate compact
• Binding contract
• Valid state law
• State retains control over the tax base and rate.
21
Gillette v. FTB: Decision On Rehearing (Cont.)
• Cannot unilaterally repeal Compact provisions
• Compact supersedes subsequent, conflicting state statutes.
• States are prohibited from impairing obligations of contracts.
• FTB’s construction would violate the state Constitution.
22
Slide Intentionally Left Blank
Gillette v. FTB: Pending Supreme Court Review
• Nov. 13, 2012: FTB files petition for review
• Dec. 28, 2012: Court extends time for grant/denial to Feb.
11, 2013
• Jan. 16, 2013: Court grants FTB’s petition for review
• Stay tuned!
24
IMPLICATIONS FOR SOURCING REVENUE FROM SERVICES, INTANGIBLES
Don Griswold, Crowell & Moring
To Apportionment And Beyond: Additional Refund Opportunities
I. Statutory departures from Article IV provisions
A. Apportionment formula
B. Sourcing of sales other than sales of tangible personal
property
C. Business income definition
D. Industry specific apportionment
E. Other definitions
II. Broader implications of Article IV?
26
Departures From Compact Apportionment Formula
I. Double-weighted sales
A. Alabama, Arkansas, California, District of Columbia, Idaho
B. Example:
All business income shall be apportioned to this state by multiplying
the income by a fraction, the numerator of which is the property
factor plus the payroll factor plus double the sales factor, and the
denominator of which is four (4). Ark. Code Ann.
26-5-101
II. Shift to single-sales factor formula
A. Colorado, Michigan, Minnesota, Oregon, Texas
B. Example:
All business income shall be apportioned to this state by multiplying
the income by the sales factor. O.R.S.
314.650
27
Departures From Sourcing Of Sales Other Than Sales Of Tangible Personal Property
Compact rule: Greater costs of performance
Sales, other than sales of tangible personal property,
are in this State if:
(a) The income-producing activity is performed in this
State; or
(b) The income-producing activity is performed both in
and outside this State and a greater proportion of the
income-producing activity is performed in this State
than in any other State, based on costs of
performance.
Art. IV, Sect. 17
28
Market-Based Sourcing
Sales of services
• Location where service is delivered
• Alabama, Texas
• Example
• The taxpayer’s market for a sale is in this state ... In the
case of sale of a service, if and to the extent the service is
delivered to a location in this state. Ala. Code Sec. 40-27-1
Art. IV. Subd. 17.(a)(3).
• Location where benefit is received
• Minnesota, Utah
• Michigan
• Special rules for sales from securities brokerage services,
transportation services, telecommunications services
29
Market-Based Sourcing (Cont.) Royalties from the use of patents, copyrights, etc.
• Where the intangible property is used by the purchaser
• Alabama, Colorado, Michigan, Minnesota, Utah
• Example where property used in more than one state
• If the property is used in more than one state, the royalties
or other income must be apportioned to this state pro rata
according to the portion of use in this state. If the portion
of use in this state cannot be determined, the royalties or
other income must be excluded from both the numerator
and the denominator. Intangible property is used in this
state if the purchaser uses the intangible property or the
rights therein in the regular course of its business
operations in this state, regardless of the location of the
purchaser's customers.
• Minn. Stat.
290.191 Subd. 5(h)
30
Other Sourcing Rules Pro rata cost of performance
• Colorado – services performed within and outside of the state
• The portion of the gross receipt included in the Colorado numerator
is found by multiplying the gross receipt by a fraction, the
numerator of which is the direct costs incurred in the performance
of that service in Colorado and the denominator of which is the
direct costs incurred in the performance of that service
everywhere. Colo. Code Regs. 39-22-303.5.4(c)
Unique rule
• Arkansas - sales, other than sales of tangible personal property, are in
this state if:
(a) The income-producing activity is performed in this state; or
(b) The income-producing activity is performed both within and
without the state, in which event the portion of income allocable to this
state shall be the percentage that is used in the formula for allocating
income to Arkansas during the year of the sale. Ark. Code
26-51-717
31
Departures From Business Income Definition
Compact definition
“Business income” means income arising from transactions
and activity in the regular course of the taxpayer’s trade
or business and includes income from tangible and
intangible property if the acquisition, management and
disposition of the property constitute integral parts of the
taxpayer’s regular trade or business operations.
Art. IV, Sect. 1.(a)
32
Business Income Definition
• Alabama
• “Notwithstanding any other provision of law to the
contrary and specifically, Section 40-27-1, for purposes of
Article IV of the Multistate Tax Compact, the term
“business income” means [transactional test]; or income
from tangible or intangible property if the acquisition,
management, or [additional categories of income].”
• Ala. Code Sect. 40-27-1.1
• District of Columbia
• “Business income” means all income that is apportionable
under the Constitution of the United States.
• D.C. Code Sect. 47-1801.04(5)
33
Business Income Definition (Cont.)
• Idaho
• “Business income” means [transactional test] and includes income
from the acquisition, management, or disposition of tangible and
intangible property when such acquisition, management, or
disposition constitutes integral or necessary parts of the taxpayer’s
trade or business operations. Gains or losses and dividend and
interest income from stock and securities of any foreign or domestic
corporation shall be presumed to be income from intangible
property, the acquisition, management, or disposition of which
constitutes an integral part of the taxpayer’s trade or business; such
presumption may only be overcome by clear and convincing evidence
to the contrary.
• Idaho Code
63-3027
34
Business Income Definition (Cont.)
• New Mexico
• “Business income” means income arising from transactions and activity in the
regular course of the taxpayer's trade or business and income from the
disposition or liquidation of a business or segment of a business.
“Business income” includes income from tangible and intangible property if
the acquisition, management or disposition of the property constitute
integral parts of the taxpayer's regular trade or business operations.
• N.M. Stat. Ann.
7-4-2
• Oregon
• “Business income” means income arising from transactions and activity in the
regular course of the taxpayer’s trade or business and includes income from
tangible and intangible property if the acquisition, the management, use or
rental, and the disposition of the property constitute integral parts of the
taxpayer’s regular trade or business operations.
• O.R.S.
314.610
35
Departures From Industry Specific Apportionment
• No industry specific formulae in the Compact except
exclusion of financial organizations and public utilities
• If a taxpayer has income from business activity as a public
utility but derives the greater percentage of its income
from activities subject to Article IV, then the taxpayer may
elect to allocate and apportion its entire net income as
provided in Article IV.
36
Industry Specific Apportionment
• California franchisors
• Following receipts attributed to the state in which the
franchisee’s place of business is situated, provided the taxpayer is
taxable in such state
• Advertising fees, administrative/advisory services fees, site
acquisition fees
• If the taxpayer is not taxable in the state in which the franchisee’s
place of business is, or would have been, located, the receipts
shall be attributed to the state in which the principal office of the
taxpayer’s employee or employees performing such services is
located, except that if such services are performed by an
independent contractor the receipts shall be attributed to the
state of the taxpayer’s commercial domicile.
• Cal. Code Regs. 25137-3
37
Industry Specific Apportionment (Cont.)
• Manufacturing
• Print media
• Broadcasting
• Shipping
• Telecommunications
38
Slide Intentionally Left Blank
Departures From Other Article IV Definitions
40
• Sales
• All gross receipts of the taxpayer not allocated under
paragraphs of this Article
• Compensation
• Wages, salaries, commissions and any other form of
remunerations paid to employees for personal services
Broader Implications Of Article IV?
41
ISSUES ARISING FROM OTHER STATE CASES, GUIDANCE
Bruce Ely, Bradley Arant Boult Cummings
Issues With Other State Cases And Administrative Guidance On Similar Issues
A. With California’s withdrawal, 18 states plus D.C. remain full members of the Compact. At least 10 of those states have apportionment provisions that differ from UDITPA, e.g., a single sales factor.
B. International Business Machines Corp. v. Michigan Dept. of Treasury, Dkt. No. 306618 (Mich. Ct. App. 11/20/12, unpublished); motion for leave to appeal to Mich. S. Ct. pending; motion to admit Gillette attorneys pro hac vice also pending
C. Health Net, Inc. v. Oregon Dept. of Revenue, Dkt. No. 120649D (pending in Oregon Tax Court)
43
Issues With Other State Cases And Administrative Guidance On Similar Issues (Cont.)
D. Announcement, Oregon Dept. of Revenue, www.oregon.gov/DOR/bus/Pages/corp-tax_main.aspx (last visited 1/16/13)
E. Graphic Packaging Corp. v. Comptroller, Dkt. No.
GN-12-003038 (pending in Travis Co. Dist. Ct.)
D. Texas Comptroller of Public Accounts, Hearing Decision Nos. 106,508 (7/13/12) and 104,752 (8/18/11)
E. Multistate Tax Commission statements/positions
F. Council On State Taxation (COST) responses
44
Slide Intentionally Left Blank
PRACTICAL DECISIONS FACING MULTI-STATE COMPANIES
Walter Pickhardt, Faegre Baker Daniels
Pending Litigation In MTC States
47
Graphic Packaging
Health Net
IBM
Gillette
Other MTC States Where Litigation May Arise
• Litigation may also arise in the following MTC states, because they do not follow the
Compact’s three-factor, equal-weighted apportionment formula.
48
CALIFORNIA
49
California: SB 1015
• After oral argument in Gillette, but prior to the decision, the California Legislature enacted SB 1015, which Gov. Brown signed on June 27, 2012.
• SB 1015 repealed the Multistate Tax Compact.
• The repeal of the Compact left standing the California three-factor formula that double-weights the sales factor.
• SB 1015 enacted the doctrine of election (citing federal law), and said it was declaratory of existing California law.
• SB 1015 may not be constitutional.
– Under Proposition 26, “any change in state statute which results in any taxpayer paying a higher tax” must pass by a two-thirds vote.
– SB 1015 was passed without a two-thirds vote.
50
The Federal Doctrine Of Election
• The doctrine of election is a not-often-cited, federal equitable doctrine whose
continuing validity has been questioned. See 62 Tax Lawyer 335
• The doctrine consists of the following two elements: (1) There must be a free choice
between two or more alternatives, and (2) There must be an overt act by the taxpayer
communicating the choice to the taxing authority. See Grynberg v. Commissioner, 83
TC 255 (1984); see also Pacific National Co. v. Welch, 304 U.S. 191 (1938)
• The doctrine is not common in state tax cases, but there are some California cases
applying the doctrine.
51
California’s Position On The Doctrine Of Election
• California’s position is that taxpayers that filed original returns using California’s
weighted (or single-factor) formula made a binding election and cannot later file
amended returns to change that election to the MTC formula. See FTB Tax News
(Oct. 5, 2012) and FTB Notice 2012-01 (October 5, 2012)
– A counter-argument would be that California has consistently denied that an
MTC election is available, so the taxpayer was not given a “free choice.”
– Another counter-argument would be that California’s threat of imposing
substantial penalties for using the MTC formula on a return filed before the due
date deprived taxpayers of a “free choice.”
– Yet another counter-argument would be that a party must have clean hands to
invoke equitable doctrines. The above facts indicate a lack of clean hands.
52
California’s Large Corporation
Understatement Penalty (LCUP)
• California imposes a 20% penalty on understatements of tax exceeding the greater of
(1) $1 million, or (2) 20% of the tax shown on an original return or shown on an
amended return filed on or before the original or extended due date of the return for
the taxable year.
• This is a strict liability penalty. There is no abatement, even for reasonable cause.
• However, no penalty is imposed if an understatement is attributable to a change in
law that occurs after:
– The date the taxpayer files the return for the taxable year for which the change
is operative.
– The extended due date for the return of the taxpayer for the taxable year for
which the change is operative.
53
California’s Position On The LCUP For 2011 Returns
• Returns for calendar 2011 were due Oct. 15, 2012, after Gillette had been decided but
before it technically became “final.”
• California announced that taxpayers filing returns relying on Gillette would be subject to
the LCUP. if the case were later reversed.
• Taxpayers were put between a rock and a hard place.
– File based on Gillette and risk the LCUP if Gillette were reversed; or
– Don’t file based on Gillette, file amended returns and face the argument that they
made a binding “election” to use weighted apportionment
54
California Proposition 39
• In November 2012, the California voters approved a ballot initiative, Proposition 39.
• Proposition 39 requires multi-state corporations (with some exceptions) to use a
single-factor apportionment formula with market-based sourcing, for sales of services
and intangibles.
• Proposition 39 is effective for tax years
beginning on or after Jan. 1, 2013.
55
California Apportionment – Through 2012
• The apportionment options for years through 2012 are:
– Three-factor, double-weighted sales factor
– Single sales factor with market-based sourcing
– MTC three-factor (equal-weighted) apportionment, if Gillette is affirmed
56
California Apportionment – 2013
• If SB 1015 is unconstitutional, then the apportionment options are:
– Single sales factor, pursuant to Proposition 39
– MTC apportionment, if Gillette is affirmed
• If SB 1015 is constitutional, then the only apportionment option is:
– Single sales factor, pursuant to Proposition 39
57
California Taxpayer Options Through 2011
Tax Year: Original Returns
• Some taxpayers may have filed returns using MTC apportionment during 2012.
– If Gillette is reversed, there is a possibility of the LCUP applying.
– A counter-argument would be that the LCUP does not apply when there is a
change of law after the date the taxpayer files the return.
– But, California may argue that Gillette was not the law until after the Court of
Appeals decision on hearing (Oct. 12, 2012) became “final” 30 days later (Nov.
1, 2012).
58
California Taxpayer Options Through 2011
Tax Year: Amended Returns
• Should taxpayers now file amended returns to use MTC apportionment?
– Filing a refund claim now should not implicate the LCUP, as the penalty applies
for refunds shown on amended returns filed on or before the original or
extended due date of the return for the taxable year.
– California allows protective claims. They should be prepared following the
procedures in FTB Notice 2012-01 (Oct. 2, 2012). No action will be taken on
such claims until after Gillette is resolved.
– Despite allowing protective refund claims, California can be expected to argue
that the taxpayer is bound by the apportionment method elected on the original
return, under the doctrine of election.
• There are counter-arguments to the doctrine of election, including (1) that it is
inapplicable (SB 1015 is unconstitutional) and (2) that the doctrine applies only when
the taxpayer has “free choice” between two or more alternatives. That was not the
case here (especially given the threat of the LCUP).
59
California Taxpayer Options For 2012
And 2013: Original Returns
• Should a taxpayer file an original return using MTC apportionment?
– The risk is that MTC apportionment will not be available if either
(1) SB 1015 is constitutional (because it revoked MTC apportionment), or (2)
Gillette is overturned (because then MTC apportionment was never available).
– If SB 1015 is constitutional, California will probably penalize the taxpayer using the
LCUP.
• If the Court of Appeals decision in Gillette is still the law when the original return is filed,
and subsequently Gillette is reversed, the change-in-law defense to the LCUP may be
applicable.
60
California Taxpayer Options For 2012
And 2013: Amended Returns
• Should a taxpayer file an original return using Proposition 39 apportionment and file a
protective claim using MTC apportionment?
– The LCUP does not apply for refunds shown on amended returns filed after the
original or extended due date of the return for the taxable year.
– Protective claims may be filed following the procedures in FTB Notice 2012-01
(Oct. 2, 2012).
– However, California will likely argue that the taxpayer is bound by the
apportionment method elected on the original return under the doctrine of
election. So, a taxpayer taking this route will need to defeat the doctrine of
election argument.
• As the situation is constantly evolving, taxpayers will need to monitor developments.
61
OREGON
62
Oregon: Doctrine Of Election
• Oregon case law has recognized the doctrine of election.
• It would not be surprising if Oregon were to argue that a taxpayer not making the
election to use MTC apportionment on its original return is precluded from doing so
by the doctrine of election.
• However, in one case, the Tax Court refused to apply the doctrine when the tax form
did not provide sufficient information to apprise the taxpayer that the election could be
made. See Uniroyal, Inc. v. Department of Revenue, 5 Or. Tax 29 (1972)
63
Oregon: Amended Returns
• Oregon has advised taxpayers to file protective refund claims to secure the right to a
refund, should the state lose in litigation “similar to Gillette.”
• The release provides that claims may be either in the form of an amended return or a
letter to the Revenue Department.
• For details on how to prepare the filing, see the department’s news release dated
Sept. 24, 2012.
• Oregon might assert the doctrine of election, even though its news release does not
mention it. This is an unavoidable risk for prior years.
• If an original return can be filed, taxpayers may want to claim MTC apportionment on
an original return.
64
Oregon: Original Returns
• Should taxpayers file original returns claiming MTC apportionment?
– There is a risk that the substantial understatement penalty could apply.
However, the penalty can be avoided if there is substantial authority for the
position, or if the relevant facts are adequately disclosed in the return and the
position has a reasonable basis.
– It would seem that that there is a reasonable basis for MTC apportionment and
that disclosure of the position should be enough to preclude the Revenue
Department from imposing the penalty, but there can be no assurances.
65
MICHIGAN
66
Michigan: 2011 P.A. 40
• The Michigan Legislature, in an attempt to foreclose future apportionment using the MTC
three-factor, equal-weighted formula, enacted 2011 P.A. 40, which was signed by the governor
on May 25, 2011.
• The law states that beginning Jan. 1, 2011 any taxpayer subject to the Michigan Business Tax
act, or the income tax act of 1967, shall, for purposes of that act, apportion and allocate in
accordance with the provisions of that act and shall not use MTC apportionment.
– Michigan imposed its Michigan Business Tax (MBT) beginning in 2008, the year at issue
in IBM.
– Michigan replaced the MBT with a corporate income tax (CIT) in 2011, the same year it
repealed the MTC formula.
• Although Michigan repealed the MTC formula, Michigan remained a member of the MTC. If
Gillette is correct, a member of the MTC is bound under Compact law to allow an election of
the MTC formula unless it completely withdraws from the Compact by enacting a statute
repealing the Compact.
67
Michigan: Amended Returns
• IBM has lost in the Michigan Court of Appeals, but it filed an application for leave to
appeal with the state Supreme Court on Dec. 28, 2012.
– Michigan advised the Court of Appeals that there are more than 100 pending
cases similar to IBM.
• Taxpayers may want to file amended returns to protect their rights to a refund, in the
event the IBM case is reversed or another taxpayer is successful.
• The Michigan Treasury Department has not provided guidance on filing protective
claims.
• There does not appear to be any Michigan case law addressing the doctrine of
election.
• The Treasury Department has not provided guidance on whether it would claim the
doctrine of election applies, but if IBM were to be overturned, it would not be
surprising if Michigan were to make such an argument.
68
Michigan: Original Returns
• Should a taxpayer file an original return using MTC apportionment?
– The benefit is that using MTC apportionment on an original return eliminates the
possible argument based on the doctrine of election.
• There is a risk that the Treasury Department might impose the negligence penalty,
but it can be abated for reasonable cause.
69
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TEXAS
71
Texas – Original Or Amended Return?
• Texas has relatively light penalties. A penalty of 5% of the tax due is imposed on an
entity that fails to pay the tax when due. An additional 5% penalty is imposed if the
entity fails to pay the tax within 30 days after the due date.
• A taxpayer therefore could take the position on an original return without significant
penalty exposure.
• However, an amended return is also a possibility, because Texas does not appear to
have any authority applying the doctrine of election.
72