Instructions for completing franchise tax reports originally due

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Form 05-364-2 (Rev.5-07/10)ELECTRONIC FUNDS TRANSFER: The conditions for requiring a corporation to pay via electronic funds transfer (EFT) areoutlined in General Rule 3.9 concerning electronic filing and electronic funds transfers. In order to extend the due date of the reportfrom May 15 to August 15, a corporation that is required to pay by EFT must do the following on or before May 15:1) file a request for an extension (Form 05-141 or Form 05-110 or WebFile online athttps://ecpa.cpa.state.tx.us/fran_ext/index.html), and2) pay at least 90 percent of the amount of tax that will be due with this year’s report or 100 percent of the tax reported as due for theprevious calendar year on the report due in the previous calendar year. If the corporation elects to pay 100 percent of the taxreported as due for the previous calendar year, the previous year’s report must be filed on or before May 14 of the current reportyear in order for the extension to be granted.A corporation that must pay by EFT may request an additional extension to November 15 to file the report by doing the followingon or before August 15:1) file a second extension request (Form 05-141 or 05-110 or WebFile online at https://ecpa.cpa.state.tx.us/fran_ext/index.html), and2) pay the balance of the amount of tax that will be reported on the franchise tax report for the current year.The report must then be filed on or before November 15. If the total amount paid by August 15 is at least 99 percent of the tax due,any penalties for the underpayment will be waived, provided the total amount due is paid by November 15.NOTE: See Form 96-590, TEXNET Payment Instruction Booklet, for additional information concerning requirements forelectronic funds transfer payments.AMENDED REPORTS: If the corporation needs to amend a report, it must file both pages of the report along with a cover letterexplaining why it is amending the report. Therefore, even if the amendment only causes a change to Schedule A, the corporationmust also complete and file Schedules B and C. Write “AMENDED” at the top of each page of the amended report. Write“AMENDED REFUND” at the top of each page if the amendment results in an overpayment. Write “AMENDED RAR REFUND”if the amendment is an overpayment due to a Revenue Agent Report adjustment.FINAL REPORT: If the corporation is no longer subject to the earned surplus component, Form 05-139, TEXAS FINALCORPORATION FRANCHISE TAX REPORT, must be filed with the Comptroller’s office within 60 days after the corporation becomesno longer subject to the earned surplus component. In the case of a Texas corporation or a non-Texas corporation with a certificateof authority (COA) to do business in Texas, a certificate of account status may be requested. See back of final report OR Form 05-359,REQUEST FOR CERTIFICATE OF ACCOUNT STATUS. The certificate will be issued by the Comptroller’s office and may be filed inthe Texas Secretary of State’s office along with the proper articles or application and filing fee.TERMINATION OF CORPORATE EXISTENCE: Once a business has filed formal Articles of Incorporation or Organization with theTexas Secretary of State’s office, it is recognized by the State of Texas as a legal entity, whether or not it conducts business or simplyexists as an inactive shell. As such, the corporation must file tax reports until it formally terminates its legal existence in Texasthrough the Secretary of State’s office. Texas corporations must satisfy all tax requirements before filing Articles of Dissolution.All documents required by the Texas Secretary of State to terminate legal existence in Texas must be received in that office before5:00 p.m. on December 31 to avoid liability for the next annual franchise tax period. If December 31 falls on a weekend, thedocuments must be received by 5:00 p.m. on the last working day of the year. Postmark dates will not be accepted.Foreign corporations that have been doing business in Texas, with or without a Certificate of Authority (COA), must satisfy allfranchise tax requirements. In order to close the franchise tax account, the corporation must notify the Comptroller’s office inwriting, provide the date the corporation ceased doing business in Texas, file all reports due and pay any amount due.More information about changing your corporate status is available online at window.state.tx.us/taxinfo/taxpubs.html#franchise.NOTE: This section does not apply to financial institutions.CONSOLIDATED REPORTING: Corporations are required to file based on their own financial condition. Consolidated reporting isnot allowed.SPECIFIC INSTRUCTIONS FOR SCHEDULE AACCOUNTING METHODS:GAAP Method: Unless the FIT method is allowed and elected, acorporation should report gross receipts and surplus inaccordance with Generally Accepted Accounting Principles(GAAP). The law contains some exceptions to the GAAPreporting requirements.FIT Method: The following corporations may determine theirgross receipts and surplus using the same accounting methodsused in completing the corporation’s most recent federal incometax (FIT) return (unless otherwise required by the law):1) A corporation with taxable capital of less than $1 million. Indetermining if taxable capital is less than $1 million, thecorporation shall apply the accounting methods used incomputing the federal income tax return unless anothermethod is required under the law,2) A close corporation that has 35 or fewer shareholders, or3) An S corporation.A corporation using the FIT method is not eligible to take thetemporary credit in Item 30.NOTE: Close and S corporations with taxable capital of $1million or more must notify the Comptroller of their intent touse the FIT method by marking the appropriate boxes on thefranchise tax report (Item i). The notification must be made onor before the due date of each report in which they intend touse the FIT method.ITEM i – Box 1 Blacken this box if the corporation is usingGAAP methods for filing Schedule A of this franchise taxreport.Box 2 Blacken this box if the corporation is electing to use thesame methods used in determining its FIT liability on ScheduleA of this franchise tax report. This method may only be used byqualifying corporations, as described above.
Form 05-364-3 (Rev.5-07/10)Box 3 Blacken this box if the corporation is a close corporationthat has 35 or fewer shareholders.Box 4 Blacken this box if the corporation is an S corporation.ITEM 1 - INITIAL REPORTS: If the corporation is the survivorof a merger which occurred between the date entered in Item 2(see instructions) and January 1 of the year in which this reportis due, the corporation owes tax on net taxable capital based onits financial condition as of the day after the date of the merger.The corporation should check “YES” in Item 1 and enter the dayafter the date of merger in Item 2. The new due date is 91 daysafter the date of the merger, if that date is after the original duedate.ANNUAL REPORTS: If the corporation is the survivor of amerger which occurred between the end of its last accountingperiod in the year prior to this report year and January 1 of thisreport year, the corporation owes tax on net taxable capitalbased on its financial condition as of the day after the date ofmerger. The corporation should check “YES” in Item 1 andenter the day after the date of merger in Item 2.ITEM 2 - INITIAL REPORTS: Enter the last accountingperiod ending date that is at least six months after thebeginning date and at least 60 days before the original due dateof the initial report.Example 1: The corporation’s last normal accounting periodending date is 12-31-02. The corporation’s beginning date inTexas is 04-03-02. The original due date of its initial report is07-01-03. Six months from the corporation’s beginning datewould be 10-03-02. Sixty days before the corporation’s originaldue date would be 05-02-03. The normal accounting periodending date of 12-31-02 falls between the period of 10-03-02and 05-02-03. Therefore, the corporation must use its lastnormal accounting period ending date of 12-31-02.If the corporation’s normal accounting period ending date doesnot fall between six months after the beginning date and atleast 60 days prior to the original due date, then enter the endof the month that is closest to the first anniversary of thebeginning date.Example 2: The corporation’s last normal accounting periodending date is 09-30-02. The corporation’s beginning date inTexas is 04-03-02. The original due date of its initial report is07-01-03. 09-30-02 does not fall between six months after thebeginning date and 60 days prior to the due date. Therefore, thecorporation must use accounting information as of 03-31-03.ANNUAL REPORTS: Enter the date of the corporation’s lastaccounting period ending in the calendar year prior to thereport year.Example 3: Report year 2003; corporation’s last accountingperiod ending date - January 31. Corporation should use01-31-02 to file the 2003 report.ITEM 3 - A corporation with zero Texas receipts on ScheduleA will have a zero apportionment factor for taxable capital andwill owe no tax on Schedule A. The survivor of a mergershould combine its receipts and the receipts of the nonsurvivorsfor the same accounting period used by the survivor.Gross receipts for taxable capital means all revenues that wouldbe recognized annually under a GAAP method of accounting,without deduction for the cost of property sold, or other costsincurred, unless otherwise provided for by law. Initial filersshould use gross receipts from the first date of doing businessthrough the month ending date used on line 2. Annual filersshould use 12 months of gross receipts based on the lastaccounting year-end date.Gross receipts in Texas include:· sales of real property located in Texas, including royaltiesfrom oil, gas, or other mineral interests;· sales of tangible personal property when the property isdelivered or shipped to a purchaser within Texas;· sales of tangible personal property when the property isshipped from Texas to a state in which the corporation isnot subject to taxation (the “throwback rule”);· services performed within Texas;· rentals of property situated in Texas;· royalties from use of patents or copyrights within Texas;· revenues from the use of trademarks, franchises, or licenseswithin Texas, effective for reports originally due on or afterJanuary 1, 1998. For reports that are originally due prior toJanuary 1, 1998, these revenues are apportioned to thelocation of payor. These revenues do not include receiptsfrom the sale or license of computer software or programs,which are apportioned to the legal domicile of the payor;· the net gain from the sales of investments or capital assets(See definition in Item 4). A net loss is treated as zeroreceipts. If the combination of net gains and losses resultsin a net gain and both Texas and non-Texas sales haveoccurred, a separate calculation of net gains and losses onTexas sales must be made. Sales of intangibles held ascapital assets or investments (e.g., stocks, bonds, goodwill,patents, trademarks, partnership interests, etc.) tocorporations incorporated in Texas are gross receipts inTexas. If the Texas net gain is greater than the total netgain, the Texas net gain to report equals the total net gain;and· all other business receipts within Texas includingdividends as of the date declared and interest from Texaspayors. For example, dividends received from acorporation incorporated in Texas are Texas receipts.BANKING CORPORATIONS & SAVINGS AND LOANASSOCIATIONS - For reports originally due before January 1,2000, dividends and interest received by a banking corporationor savings and loan association are Texas receipts if thebanking corporation or savings and loan association has itscommercial domicile in Texas. For reports originally due on orafter January 1, 2000, dividends and interest received by abanking corporation or savings and loan association are Texasreceipts if they are paid by a corporation incorporated in Texasor, if they are paid by an entity or person legally domiciled inTexas. For reports originally due on or after January 1, 2002, abanking corporation should exclude from its Texas receiptsinterest earned on federal funds and interest earned onsecurities sold under an agreement to repurchase that are heldin a correspondent bank domiciled in Texas.ITEM 4 - Gross receipts everywhere include:· all sales of tangible personal property;· all rentals;· all services;· all royalties;· all other business receipts;· all dividends as of the date declared and interest; and· the net gain from the sales of investments or capital assets.A net loss is treated as zero receipts. A capital asset is anyasset, other than an investment, which is held for use in theproduction of income, and is subject to depreciation,depletion or amortization. An investment is any non-cashasset not a capital asset and not held as inventory orproceeds from the sale of inventory.
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Instructions for completing franchise tax reports originally due

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