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Multistate Tax Alert: Texas Comptroller Announces Rule Change Regarding Election to Compute Margin for Franchise Tax Purposes


On June 12, 2012 the Texas Comptroller officially announced that it has reconsidered its position with regard to the election to take the Cost of Goods Sold (“COGS”) or Compensation deduction to compute margin for purposes of the Texas Franchise Tax. The Comptroller had stated its position in this regard in 34 Tex. Admin. Code § 3.584(f)(1), which prohibits a retroactive change in computing margin. 

However, in its June 12th announcement, the Comptroller stated that it will allow taxpayers to amend reports to change the election, or to make an election, to use the COGS or the Compensation deduction. Accordingly, taxpayers will be able to amend reports for any reporting period that is within the statute of limitations. For certain taxpayers, this change in the Comptroller’s position may present a time-sensitive opportunity with respect to the 2008 Franchise Tax report. 

For more on this topic, please see the attached Tax Alert.

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