Part 1.
COMPTROLLER OF PUBLIC ACCOUNTS
Chapter 3.
TAX ADMINISTRATION
Subchapter O. STATE SALES AND USE TAX
34 TAC §3.320
The Comptroller of Public Accounts proposes an amendment
to §3.320, concerning the Texas emissions reduction plan surcharge; off-road,
heavy-duty diesel equipment. This proposed amendment is simultaneously submitted
as an emergency rule to be effective July 1, 2003. This amended rule is being
simultaneously submitted to the
Texas Register
as
an emergency rule.
This section is being amended to implement Tax Code §151.0515 as amended
by House Bill 1365 of the 78th Legislature. Effective July 1, 2003, the 1
percent surcharge will increase to 2 percent. The 2 percent surcharge will
be imposed on off-road, heavy-duty diesel equipment, including mining equipment,
rather than just construction equipment. The surcharge will be due on purchases,
leases, and rentals of equipment subject to use tax including equipment brought
into Texas for use and purchases by direct payment permit holders.
James LeBas, Chief Revenue Estimator, has determined that for the first
five-year period the rule will be in effect, there will be no significant
revenue impact on the state or units of local government.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect, the public benefit anticipated as a result of enforcing
the rule will be in (providing new information regarding tax responsibilities).
This rule is adopted under Tax Code, Title 2, and does not require a statement
of fiscal implications for small businesses. There is no significant anticipated
economic cost to individuals who are required to comply with the proposed
rule.
Comments on the proposal may be submitted to Bryant K. Lomax, Tax Policy
Division, P.O. Box 13528, Austin, Texas 78711.
This amendment is proposed under Tax Code, §111.002, which
provides the comptroller with the authority to prescribe, adopt, and enforce
rules relating to the administration and enforcement of the provisions of
Tax Code, Title 2.
The amendment implements Tax Code, §151.0515.
§3.320.Texas Emissions Reduction Plan Surcharge; Off-Road, Heavy-Duty Diesel [
(a)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
Off-road, heavy-duty diesel [
(A)
backhoes;
(B)
bore equipment and drilling rigs;
(C)
bulldozers;
(D)
compactors (plate compactors, etc.);
(E)
cranes;
(F)
crushing and processing equipment (rock and gravel crushers,
etc.[
(G)
dumpsters and tenders;
(H)
excavators;
(I)
forklifts (rough terrain forklifts, etc.);
(J)
graders;
(K)
light plants (generators) and signal boards;
(L)
loaders;
(M)
mining equipment;
(N)
[
(O)
[
(P)
[
(Q)
[
(R)
[
(S)
[
(T)
[
(U)
[
(V)
[
(W)
[
(2)
Surcharge--A [
(3)
Sale price
[
(b)
Imposition of Surcharge.
(1)
A 2.0% surcharge is due on the sales price of
off-road, heavy-duty diesel equipment sold in Texas if the purchaser takes
possession of or title to the equipment after June 30, 2003 and before October
1, 2008.
(2)
A 2.0% surcharge is due on the sales price,
excluding separately stated interest charges, of off-road, heavy-duty diesel
equipment leased under a financing lease, as defined in §3.294 of this
title (relating to Rental and Lease of Tangible Personal Property), if the
lessee takes possession of the equipment after June 30, 2003 and before October
1, 2008.
(3)
A 2.0% surcharge is due on the lease payments
for off-road, heavy-duty diesel equipment that is leased under an operating
lease, as defined in §3.294, if the lessee takes possession of the equipment
after June 30, 2003 and before October 1, 2008.
(4)
A 2.0% surcharge is due on the sales price of
off-road, heavy-duty diesel equipment purchased for use in Texas if the purchaser
brings the equipment into Texas after June 30, 2003 and before October 1,
2008. See §3.346 of this title (relating to Use Tax).
(5)
A 1.0% surcharge is due on off-road, heavy-duty
diesel construction equipment sold, leased, or rented after August 31, 2001
and before July 1, 2003, but no surcharge is due on equipment sold, leased,
or rented during this time period if the equipment is subject to use tax or
is used in non-construction activities.
(c)
[
(d)
[
[
[
[
(e)
[
(1)
A seller
or purchaser with a surcharge account, including
direct payment holder,
must report and pay the surcharge in the same
manner as sales
or use
tax, but separate reports and payments for
the surcharge are required.
(A)
A seller's
or purchaser's
reporting
period (i.e., monthly, quarterly, or yearly) and due date for the surcharge
are
[
(B)
A purchaser who does not hold
a surcharge account must report and pay the surcharge by the 20th day of the
month following the month in which the purchaser acquired heavy-duty, diesel
powered equipment on which the seller did not collect the surcharge.
(2)
A seller
or purchaser
must report and pay the
surcharge to the comptroller on forms prescribed by the comptroller for the
surcharge. A seller
or purchaser
is not relieved of the responsibility
for filing a surcharge report and paying the surcharge by the due date because
the seller
or purchaser
fails to receive the correct form from
the comptroller.
(3)
The penalties and interest imposed for failure to timely
file and pay the surcharge are the same as those imposed for failure to timely
file and pay sales
or use
tax. Likewise, the 0.5% discount for
timely filing and payment is applicable to surcharge reports and payments.
No prepayment discount will be paid a seller
or purchaser
for prepayment
of the surcharges.
[
[
[
[
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on June 30, 2003.
TRD-200304012
Martin Cherry
Chief Deputy, General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: August 11, 2003
For further information, please call: (512) 475-0387
34 TAC §3.541
The Comptroller of Public Accounts proposes an amendment
to §3.541, concerning exemptions. The proposed amendment to subsection
(a)(2) is to correct a reference to another subsection. The proposed amendment
in subsection (c)(1) reflects legislative clarification provided by Senate
Bill 1689, 77th Legislature, 2001. Subsection (k) is added to incorporate
legislative change, Senate Bill 1125, 77th Legislature, 2001, that entities
organized under 12 U.S.C. §2071 and certain agricultural credit associations
are exempt from franchise tax. The proposed amendment to subsection (i)(3)(B)
deletes "certificate of authority" as a basis of the tax based on the court
decision of
Rylander v. Bandag Licensing Corporation
. The proposed amendment to subsection (j)(3) reflects a legislative
change made by House Bill 2424, 78th Legislative Session, 2003. Subsections
(a), (a)(1), (b)(1), (b)(2), (c)(3), (c)(4), (c)(5), (d)(1), (d)(2), (j)(2)(A),
and (j)(2)(B) are being amended in accordance with agency policy.
James LeBas, Chief Revenue Estimator, has determined that for the first
five-year period the rule will be in effect, there will be no significant
revenue impact on the state or units of local government.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect, the public benefit anticipated as a result of enforcing
the rule will be in providing new information regarding tax responsibilities.
This rule is adopted under Tax Code, Title 2, and does not require a statement
of fiscal implications for small businesses. There is no significant anticipated
economic cost to individuals who are required to comply with the proposed
rule.
Comments on the proposal may be submitted to Bryant K. Lomax, Manager,
Tax Policy Division, P.O. Box 13528, Austin, Texas 78711.
This amendment is proposed under Tax Code, §111.002, which
provides the comptroller with the authority to prescribe, adopt, and enforce
rules relating to the administration and enforcement of the provisions of
Tax Code, Title 2.
The amendment implements Tax Code §§171.051-171.087
§3.541.Exemptions.
(a)
Application for exemption.
A corporation must apply
for an exemption from franchise tax.
For provisional exemptions for
certain corporations, see subsection (i) of this section; for trade show exemptions,
see subsection (j) of this section.
(1)
A
[
(2)
Except as
otherwise provided
[
(A)
a request for exemption in writing, indicating the particular
provision of the Tax Code, Chapter 171, Subchapter B, under which exemption
is claimed;
(B)
a detailed statement of the corporation's past activities,
if any, and its future plan of activities, both in relation to the manner
in which the corporation proposes to implement the purposes clause in its
articles of incorporation or certificate of authority;
(C)
a copy of the articles of incorporation and, for a foreign
corporation, a copy of the application for a certificate of authority;
(D)
for a homeowners' association only, a copy of all relevant
documents, such as, the bylaws or the declaration, specifying the requirements
for membership in the association, the classes of membership and the attendant
voting rights for each membership class, the conditions or events, if any,
resulting in the termination of a membership class or resulting in the reinstatement
of a membership class, and a listing of each lot or unit within the association
and the name and address of the owner of that lot or unit; and
(E)
any additional information the comptroller may require
to make a determination whether the corporation is eligible for a franchise
tax exemption.
(b)
Actions by comptroller. Upon receipt of an application
for exemption, the comptroller's representative will review the application
and send the
applicant
[
(1)
If the exemption is granted, the exemption will be effective
from the first date the corporation was eligible for exemption.
If the
corporation paid any franchise taxes prior to the comptroller's notification
granting the exemption for a privilege period after the effective date of
the exemption, the corporation may request a refund, subject to the applicable
statute of limitations.
[
(2)
If the exemption is denied or revoked, the corporation
may contest the denial or revocation by filing all reports due as
required
by the comptroller
[
(A)
paying all amounts of tax, penalty, and interest due and
requesting a refund hearing pursuant to the
provisions of Chapter 111
of
Tax Code[
(B)
paying all amounts of tax, penalty, and interest due, accompanying
the payment with a written protest, and filing suit for the recovery of amounts
paid pursuant to the
provisions of Chapter 112 of
Tax Code[
(C)
requesting
a redetermination hearing pursuant to Tax
Code, §111.009 if the comptroller issues
[
(c)
Qualification for exemption.
(1)
Corporations subject to insurance premium taxes.
All
insurance, surety, guaranty, or fidelity companies that are subject to the
annual gross premiums tax levied by
Chapter 4 of
the Insurance
Code,[
(2)
Those corporations organized for the exclusive purpose
of promoting the public interest of any county, city, town, or other area
within the state, must show that promotion of the public interest is the exclusive
purpose of the corporation and not merely an incidental result. A corporation
will not be considered to be promoting the public interest if it engages in
activities to promote or protect the private, business, or professional interests
of its members or patronage.
(3)
A nonprofit corporation seeking franchise tax exemption
as a religious organization must be an organized group of people regularly
meeting for the primary purpose of holding, conducting, and sponsoring religious
worship services according to the rites of their sect. The corporation must
be able to provide evidence of an established congregation showing that there
is an organized group of people regularly attending these services. A corporation
that supports and encourages religion as an incidental part of its overall
purpose, or one whose general purpose is furthering religious work or instilling
its membership with a religious understanding, will not qualify for exemption
under this provision. No part of the net earnings of the organization may
inure to the benefit of any private party or individual other than as reasonable
compensation for services rendered to the organization. Some examples of corporations
that do not meet the requirements for exemption under this definition are
conventions or associations of churches, evangelistic associations, churches
with membership consisting of family members only, missionary organizations,
and groups
that
[
(4)
A nonprofit corporation seeking a franchise tax exemption
as organized for purely public charity must
devote
[
(5)
A nonprofit corporation seeking a franchise tax exemption
as an educational organization must show that its activities are devoted solely
to systematic instruction, particularly in the commonly accepted arts, sciences,
and vocations, and has a regularly scheduled curriculum, using the commonly
accepted methods of teaching, a faculty of qualified instructors, and an enrolled
student body or students in attendance at a place where the educational activities
are regularly conducted. A corporation that has activities consisting solely
of presenting public discussion groups, forums, panels, lectures, or other
similar programs, may qualify for exemption under this provision, if the presentations
provide instruction in the commonly accepted arts, sciences, and vocations.
The corporation will not be considered for exemption under this provision
if the systematic instruction or educational classes are incidental to some
other facet of the corporation's activities. No part of the net earnings of
the organization may inure to the benefit of any private party or individual
other than as reasonable compensation for services rendered to the organization.
Some examples of organizations that do not meet the requirements for exemption
under this definition are professional associations, business leagues, information
resource groups, research organizations, support groups, home schools, and
organizations that merely disseminate information by distributing printed
publications. Although these organizations do not qualify for exemption under
this category of exemption as educational organizations, they may qualify
for the exemption under [
(6)
A nonprofit corporation requesting franchise tax exemption
as a homeowners' association must prove that it meets all requirements to
qualify for the exemption. The corporation must show that it is organized
and operated to obtain, manage, construct, and maintain the property in or
of a residential condominium or residential real estate development. The corporation
also must prove that the condominium project, or, for a real estate development,
the related property, is legally restricted for use as residences. Furthermore,
the corporation must establish that the collective resident owners of individual
lots, residences or units control at least 51% of the votes of the corporation
and that voting control, however acquired, is not held by: a single individual
or family; one or more developers, declarants, banks, investors, or other
similar parties. For example, an association is formed for a residential condominium
consisting of 12 units with each unit being entitled to one vote. Each of
five individuals separately owns and occupies one unit, a total of five units.
A sixth individual owns two units, living in one unit and leasing the other.
A seventh individual owns and leases the remaining five units. None of the
owners are related. In determining whether the collective resident owners
control at least 51% of the votes of the corporation, the sixth owner is a
resident owner regarding the one unit in which the owner lives and an investor
regarding the other. The collective resident owners, therefore, have a total
of six votes. Consequently, since the collective resident owners only have
50% of the votes of the corporation, the association does not meet the requirement
that the resident owners must control at least 51% of the votes of the corporation.
Accordingly, the corporation does not qualify for the franchise tax exemption
as a homeowners' association.
(d)
Revocation, withdrawal, or loss of exemptions.
(1)
A corporation that no longer qualifies for the franchise
tax exemption is required to notify the comptroller in writing of its change
in status.
Except as provided in paragraph (2) of this subsection, if
at any time the comptroller has reason to believe that an exempt corporation
no longer qualifies for exemption, the comptroller's representative will notify
the
corporation
[
(2)
For nonprofit corporations granted an exemption under [
(3)
An electric cooperative corporation previously exempted
from franchise tax under [
(e)
Federal exemption. A corporation meeting the requirements
of any paragraph of this subsection establishes its exempt status by furnishing
to the comptroller a copy of a current exemption letter from the IRS.
(1)
a nonprofit corporation that has been exempted from the
federal income tax under the provisions of [
(2)
for reports due on or after January 1, 1988, any corporation
that has been exempted under the provisions of [
(3)
for each annual period that begins on or after June 2,
1989, and for each initial period that on that date has six months or more
before expiration and for any second period if the change applies to the initial
period, a corporation that is exempted from federal income tax under [
(4)
for reports due on or after January 1, 1996, a nonprofit
corporation that has been exempted from the federal income tax under the provisions
of Internal Revenue Code, §501(c)(8), (10), or (19).
(f)
Solar energy device. For purposes of [
(1)
devices used in the conversion of solar thermal energy
into electrical or mechanical power;
(2)
devices used in the photovoltaic (solar cell) generation
of electricity;
(3)
systems used in the heating of water and the heating and
cooling of structures by use of solar collectors to gather the sun's energy;
and
(4)
heat pumps used as an integral part of a system designed
to make the best combined use of solar energy and conventional heating.
(g)
Exemption for recycling operation. A corporation engaged
solely in the business of recycling sludge as defined by Health and Safety
Code, Chapter 361, Solid Waste Disposal Act, §361.003, is exempt from
franchise tax beginning with reports due on or after September 1, 1991.
(h)
Exemption for Texas National Research Laboratory Commission
Corporation. A corporation formed by the Texas National Research Laboratory
Commission under [
(i)
Provisional exemptions.
(1)
If established with the comptroller, the following corporations
may be granted a temporary exemption from franchise tax:
(A)
a nonprofit corporation that has applied for exemption
from federal income tax under [
(B)
or reports due on or after January 1, 1988, a corporation
that has applied for exemption from federal income tax under [
(C)
a corporation that has applied for exemption from federal
income tax under [
(2)
To obtain a temporary franchise tax exemption with the
comptroller, a corporation that has applied for but has not yet received a
letter of exemption from the IRS must timely file with the comptroller:
(A)
a copy of the application for recognition of exemption
that has been filed with the IRS; and
(B)
a copy of:
(i)
a written notice from the IRS stating that the application
for recognition of exemption has been received; or
(ii)
a receipt as proof that the application has been sent
to the IRS by means of the United States Postal Service, other carrier, or
hand delivery to the IRS.
(3)
Paragraphs (2)(A) and
(2)
(B)(ii) of this subsection
apply only if the corporation has filed its application for recognition of
exemption during the 14th or 15th month after its beginning date. Beginning
date means:
(A)
for a corporation chartered in this state, the date on
which the corporation's charter takes effect; and
(B)
for a foreign corporation,[
[(i)
[
(4)
If the information required in paragraphs (2)(A) and
(2)
(B)(i) of this subsection are provided in a timely manner, a 90-day
provisional franchise tax exemption will be granted.
(5)
A corporation qualifying under paragraphs (2)(A) and
(2)
(B)(ii) of this subsection will be granted a 90-day provisional exemption
with the condition that a copy of the notice required in paragraph (2)(B)(i)
of this subsection be provided to the comptroller within 30 days from the
date of the letter notifying the corporation of the provisional exemption.
If the IRS notification is not provided within the 30-day period, the provisional
exemption will be canceled. A corporation whose provisional exemption is canceled
will be subject to all tax, penalty, and interest that has accrued since the
corporation's beginning date.
(6)
The information necessary for obtaining a temporary franchise
tax exemption will be considered to be provided to the comptroller in a timely
manner if:
(A)
the application for recognition of exemption is provided
to the IRS within their timely filing guidelines; and
(B)
the information required in paragraphs (2)(A) and
(2)
(B)(i) or
(2)(B)
(ii) of this subsection is postmarked
within 15 months after the day that is the last day of a calendar month and
that is nearest to the corporation's beginning date.
(7)
Before the expiration of the 90-day provisional exemption,
the corporation must provide the comptroller a copy of the letter from the
IRS showing that the decision on the federal exemption is still pending or
stating that the federal exemption is either granted or denied.
(8)
If the comptroller is notified as required in paragraph
(7) of this subsection that the decision on the federal exemption is still
pending, an extension of the provisional exemption may be considered.
(9)
If the information in paragraph (7) of this subsection
is not provided as required, the provisional exemption may be canceled. If
the provisional exemption is canceled, the corporation will be responsible
for all franchise tax reports and payments that have become due since its
beginning date, and penalty and interest will be based on the original due
date of each report.
(10)
A corporation that provides the comptroller a copy of
the letter from the IRS stating that the federal exemption has been granted[
(11)
If the federal exemption is denied by the IRS, the corporation
is responsible for all franchise tax reports and payments that have become
due since its beginning date and interest will be based on the original due
date of each report. Late filing and payment penalties will be waived for
any reports and payments postmarked within 90 days after the date of the final
denial of the federal exemption. The penalty waiver process will begin when
the corporation submits a written request for penalty waiver and a copy of
the letter denying the federal exemption when filing reports and payment.
(j)
Trade show exemption. See Tax Code, §171.084 for the
requirements for exemption for certain foreign corporations that participate
in trade shows in Texas.
(1)
Notification to comptroller. Corporations need not apply
for an exemption under [
(A)
If a foreign corporation has obtained a certificate of
authority or has already notified the comptroller that it is doing business
in Texas, the corporation must notify the comptroller in writing by the due
date of the first report for which the corporation is exempt that the report
and payment are not due because the corporation is exempt under [
(B)
If a foreign corporation has not obtained a certificate
of authority and if the corporation has not notified the comptroller that
it is doing business in Texas, the corporation must notify the comptroller
in writing only when the corporation no longer qualifies for exemption under
[
(2)
Solicitation periods. If the solicitation of orders is
conducted during more than five periods during the business period upon which
tax is based as set out in [
(A)
A corporation with its fiscal year ending December 31,
2002 that
[
(B)
Assume a foreign corporation participated in its first
trade show in Texas on April 1,
2001
[
(3)
One hundred twenty hours. A solicitation period may not
exceed 120 consecutive hours. If the solicitation of orders is conducted during
a single period of more than 120 consecutive hours, the corporation does not
qualify for exemption. For example, a corporation
that
[
(4)
Effective dates. The exemption provided by [
(k)
A corporation organized under 12 U.S.C. §2071,
or an agricultural credit association regulated by the Farm Credit Administration
is exempt from franchise tax beginning with reports originally due on or after
January 1, 2002.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on June 30, 2003.
TRD-200303983
Martin Cherry
Chief Deputy General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: August 10, 2003
For further information, please call: (512) 475-0387
Chapter 41.
HEALTH CARE AND INSURANCE PROGRAMS
Subchapter C. TEXAS SCHOOL EMPLOYEES GROUP HEALTH (TRS-ACTIVECARE)
Construction ] Equipment.
construction
] equipment--Diesel
-
powered equipment of 50 horsepower or greater, other than motor vehicles
[
, that is used in the construction of improvements to realty such as
roads, buildings, and other permanent structures, or in the repair, restoration,
or remodeling of real property
]. Off-road, heavy-duty diesel [
construction
] equipment includes accessories and attachments sold with
the equipment. Off-road, heavy-duty diesel [
construction
] equipment
includes
, but is not limited to, the following diesel-powered equipment
:
, used by contractors to process the construction materials they
incorporate into realty
]);
(M)
] mixers (cement mixers, mortar
mixers, etc.);
(N)
] off-highway vehicles and other
moveable specialized equipment (equipment, such as a motorized crane, that
does not meet the definition of a motor vehicle because it is designed to
perform a specialized function rather than designed to transport property
or persons other than the driver);
(O)
] paving equipment (asphalt pavers,
concrete pavers, etc.);
(P)
] rammers and tampers;
(Q)
] rollers;
(R)
] saws (concrete saws, industrial
saws, etc.);
(S)
] scrapers;
(T)
] surfacing equipment;
(U)
] tractors;
and
(V)
] trenchers.
1.0%
] fee [
is
] imposed
on the sale, lease, or rental in Texas of new or used off- road, heavy-duty
diesel [
construction
] equipment
and on the storage, use, or
other consumption of such equipment subject to use tax as provided for in §3.346
of this title (relating to Use Tax)
. This surcharge is in addition
to state and local sales
and use
taxes that are due on the equipment
and is for the benefit of the Texas Emissions Reduction Fund, which is administered
by the Texas [
Natural Resources Conservation
] Commission
on Environmental Quality
.
Total price
]--The
total
[
entire
] amount a purchaser pays a seller for the purchase,
lease, or rental of off-road, heavy-duty diesel [
construction
]
equipment
as set out in Tax Code §151.007
. The
sales
[
total
] price includes charges for accessories, transportation,
installation, services, and other expenses that are connected to the sale.
(b)
] Collection of surcharge. A
seller must collect the surcharge from the purchaser on the
sales
[
total
] price of each sale, lease, or rental in Texas of off-road, heavy-duty
diesel [
construction
] equipment that is not exempt from sales tax.
The surcharge is collected at the same time and in the same manner as sales
or use
tax. See §3.286 of this title (relating to Seller's and
Purchaser's Responsibilities) for information on the collection and remittance
of sales
or use
tax. The surcharge is collected in addition to
state and local sales
or use
taxes but is not collected on the
amount of the sales
or use
tax.
(c)
] Exemptions [
and exclusions
].
(1)
]
No surcharge is
collected
[
due
] on the sale, lease, or rental of off-road, heavy- duty diesel [
construction
] equipment that is exempt from sales
and use
tax.
A seller who accepts a valid and properly completed resale or exemption certificate,
direct payment exemption certificate, or other acceptable proof of exemption
from sales
and use
tax is not required to collect the surcharge.
For example, a seller may accept an exemption certificate in lieu of collecting
sales tax and the surcharge from a farmer who purchases a bulldozer to be
used exclusively in the construction or maintenance of roads and water facilities
on a farm that produces agricultural products that are sold in the regular
course of business.
(2)
No surcharge is due on the
sale, lease, or rental of off-road, heavy-duty diesel equipment that is not
used in construction. A seller may accept an exemption certificate in lieu
of collecting the surcharge even if the sale, lease, or rental of the equipment
is not exempt from sales tax. For example, a purchaser who buys equipment
listed in subsection (a)(1) of this section for a purpose other than use in
construction may issue an exemption certificate that states that the equipment
will not be used to construct improvements to realty. The seller may accept
the exemption certificate in lieu of collecting the surcharge, but is required
to collect sales tax if there is no exemption from sales tax. Examples of
non-construction activities include mining at quarries, and oil and gas exploration
and production at oil and gas well sites.]
(3)
No surcharge is due on the
sale, lease, or rental of off-road, heavy-duty diesel construction equipment
that is subject to use tax under Tax Code, Chapter 151, Subchapter D. A purchaser
who brings off-road, heavy-duty diesel construction equipment into Texas for
storage, use, or consumption in this state, or in other situations in which
use tax rather than sales tax is due, is not required to pay or accrue the
surcharge.]
(d)
] Reports and payments.
is
] determined by the amount of surcharge that the seller
collects
or purchaser owes
. See §3.286 of this title (relating
to Seller's and Purchaser's Responsibilities).
(e)
Effective date.]
(1)
The surcharge is due on the total price of
off-road, heavy-duty diesel construction equipment sold in Texas if the purchaser
takes possession of or title to the construction equipment after August 31,
2001 and before October 1, 2008.]
(2)
The surcharge is due on the total price, excluding
separately stated interest charges, of off- road, heavy-duty diesel construction
equipment leased under a financing lease, as defined in §3.294 of this
title (relating to Rental and Lease of Tangible Personal Property), if the
lessee takes possession of the construction equipment after August 31, 2001
and before October 1, 2008.]
(3)
The surcharge is due on the lease payments
for off-road, heavy-duty diesel construction equipment that is leased under
an operating lease, as defined in §3.294, if the lessee takes possession
of the construction equipment after August 31, 2001 and before October 1,
2008.]
Subchapter V. FRANCHISE TAX
It is the responsibility of each
]
corporation that believes it is exempt from payment of franchise tax
must
[
to
] furnish to the comptroller sufficient evidence to
establish its exempt status.
The corporation claiming the exemption bears
the burden to establish its entitlement to
[
It is the duty of the
taxpayer to place itself clearly within the
] exempt status[
desired.
]
and any doubts will result in a denial
[
Doubts regarding
exempt status are interpreted against the granting
] of the
application
for
exemption.
indicated
] in subsections (e),
(i), and
(j)[
, and (k)
]
of this section, each corporation must submit to the comptroller:
taxpayer
] a notification either
granting the exemption,
or
denying the exemption, or requesting
additional information.
However, refunds will not be made if the
statute of limitations for issuing refunds has run. Also,
]
If
[
if
] the
effective
[
first
] date[
the corporation
was eligible for
]
of the
exemption
occurs after the
beginning of a privilege period,
[
was not the beginning of a privilege
period,
] the corporation must pay through the end of such privilege
period.
A corporation that has been subject to the earned surplus component
of the tax and becomes eligible for exemption is liable for Tax Code §171.0011
additional tax. The additional tax is equal to 4.5% of the corporation's net
taxable earned surplus computed on the period beginning on the day after the
last day for which the tax imposed on net taxable earned surplus was computed
under Tax Code §171.1532 and ending on the day before the corporation
was eligible for exemption.
though the corporation is not exempt
];
and
, §111.105
];
, §112.052
]; or
that
] a deficiency
determination[
be issued. If a deficiency determination is issued, a redetermination
hearing may be requested pursuant to the Tax Code, §111.009
].
§4.10 or §4.11,
] or
all insurance organizations,
title insurance companies, and title insurance agents that are subject to
annual gross premium tax levied by Chapter 9 of the Insurance Code
[
the additional taxes on gross premiums levied under the Insurance Code, and
that have not been exempted from the gross premiums taxes,
] are exempt
from payment of the franchise tax regardless of whether any gross premiums
taxes are actually paid in any given year.
A non-admitted insurance
organization that is required to pay a gross premium receipts tax during a
tax year is exempted from the franchise tax for the same tax year. The exemption
in this paragraph covers the periods upon which the earned surplus component
is based, provided the gross premium receipts tax is required to be paid on
premiums received or written, as applicable, during the same period. For example,
an insurance organization's gross premium receipts tax is due and payable
on March 1, 2003, for premiums received during calendar year 2002. The entity
would be exempt from franchise tax for the 2003 annual report covering the
January 1, 2003 through December 31, 2003 privilege period, if the tax was
based on net taxable earned surplus earned in calendar year 2002.
[
No other franchise tax exemption is allowed for any insurance company or surety,
guaranty, or fidelity company.
]
who
] meet for the purpose of holding
prayer meetings,
Bible
[
bible
] study or revivals. Although
these organizations do not qualify for exemption under this category of exemption
as religious organizations, they may qualify for the exemption under [
the
]Tax Code, §171.063, if they obtain an exemption from the Internal
Revenue Service (IRS) under Internal Revenue Code, §501(c).
be devoting
] all or substantially all of its activities to the alleviation of poverty,
disease, pain, and suffering by providing food, clothing, drugs, treatment,
shelter, or psychological counseling directly to indigent or similarly deserving
members of society with its funds derived primarily from sources other than
fees or charges for its services. If a corporation engages in any substantial
activity other than the activities that are described in this section, it
will not be considered as having been organized for purely public charity,
and therefore, will not qualify for exemption under this provision. No part
of the net earnings of the organization may inure to the benefit of any private
party or individual other than as reasonable compensation for services rendered
to the organization. Some examples of organizations that do not meet the requirements
for exemption under this definition are fraternal organizations, lodges, fraternities,
sororities, service clubs, veterans groups, mutual benefit or social groups,
professional groups, trade or business groups, trade associations, medical
associations, chambers of commerce, and similar organizations. Even though
not organized for profit and performing services that are often charitable
in nature, these types of organizations do not meet the requirements for exemption
under this provision. Although these organizations do not qualify for exemption
under this category of exemption as charitable organizations, they may qualify
for the exemption under [
the
]Tax Code, §171.063, if they obtain
an exemption from the IRS under Internal Revenue Code, §501(c).
the
]Tax Code, §171.063, if they obtain
an exemption from the IRS under Internal Revenue Code, §501(c).
taxpayer
] that its exempt status is
under review. The comptroller's representative may request additional information
necessary to ascertain the continued validity of the corporation's exempt
status. If the comptroller determines that a corporation is no longer entitled
to its exemption, notification to that effect will be sent to the corporation.
The effective date of revocation is the date the corporation no longer qualified
for the exemption.
The day immediately following the date of withdrawal,
loss, or revocation shall be the beginning date for determining the corporation's
privilege period and for all other purposes related to franchise tax.
the
]Tax Code, §171.063, the revocation, withdrawal, or loss of
the federal income tax exemption[
will
] automatically
terminates
[
terminate
] the franchise tax exemption
. A nonprofit
corporation that no longer qualifies for the federal income tax exemption
which was the basis for obtaining the franchise tax exemption must notify
the comptroller in writing within 30 days of its change in status and must
provide a copy of the notice of such revocation, withdrawal, or loss. The
[
as of the
] effective date of[
the revocation,
]
withdrawal[
,
] or loss
is the date of withdrawal or loss
of
the federal tax exemption. The effective date of
a
[
the
]
revocation[
, withdrawal, or loss of exemption by the IRS
] is
the date the IRS serves written notice of the revocation to the non-profit
corporation or the date the IRS serves written notice of revocation to the
comptroller, whichever is earlier. The day immediately following the date
of withdrawal, loss, or revocation shall be
[
considered
] the
corporation's beginning date for [
purposes of
]determining its privilege
periods and for all other purposes of the franchise tax. [
The corporation
must notify the comptroller in writing of the revocation, withdrawal or loss
of exemption within 30 days of receiving notice from the IRS of such revocation,
withdrawal, or loss.
]
the
]Tax Code, §171.079, that participates
in a joint powers agency on or after September 1, 1995, thereby loses its
franchise tax exemption. The commencing date of participation in the joint
powers agency shall be considered the corporation's beginning date for purposes
of determining the corporation's privilege periods and for all other purposes
of the franchise tax. The electric cooperative corporation must notify the
comptroller in writing that it is a participant in a joint powers agency within
30 days after the commencing date of its participation.
the
]Internal Revenue
Code, §501(c)(3), (4), (5), (6), or (7); or
the
]Internal Revenue
Code, §501(c)(2) or (25), if the entity or entities for which it holds
title to property are either exempt from or not subject to the franchise tax;
or
the
]Internal Revenue Code, §501(c)(16); and
the
]Tax
Code, §171.056, the term "solar energy device" includes, but is not limited
to:
the
]Government Code, §465.008(g), is exempt
from franchise tax beginning with reports originally due on or after September
1, 1991.
the
]Internal Revenue Code, §501(c)(3),
(4), (5), (6), or (7), (8), (10), or (19);
the
]Internal
Revenue Code, §501(c)(2) or (25), if the entity or entities for which
it holds title to property is either exempt from or not subject to the franchise
tax; and
the
]Internal Revenue Code, §501(c)(16).
the earlier of
] the
date on which
the corporation's certificate of
authority takes effect, or
]
(ii)
]
the corporation begins doing business in
this state.
,
] will be considered for franchise tax exemption under subsection (e)
of this section.
the
]Tax Code, §171.084.
the
]Tax Code, §171.084. After such notification, the corporation must
notify the comptroller in writing only when the corporation no longer qualifies
for exemption.
the
]Tax Code, §171.084. There is no need to apply for exemption
as long as the corporation qualifies for the exemption.
the
]Tax Code, §171.153 and §171.1532,
the corporation does not qualify for exemption. A corporation may be exempt
from one component of the franchise tax, but not exempt from the other component,
because the business upon which the tax is based may be different for the
two components. For example, assume the following corporations meet the requirements
of [
the
]Tax Code, §171.084, except possibly the number of
periods during which they solicit orders.
1992, which
] filed a
2002
[
1992
] annual report, will not have to file and pay a
2003
[
1993
] annual report if it did not solicit orders for more than five
periods during
2002
[
1992
].
1992, and had not previously
obtained a certificate of authority
]. It also participated in trade
shows in
2002
[
1993
] on January 1, March 1, May 1, June
1, August 1, and October 1. The corporation's fiscal year ends are December
31,
2001
[
1992
] and
2002
[
1993
].
The corporation would be exempt for its initial report and payment (covering
the
privilege
[
tax
] periods from April 1,
2001
[
1992
]-December 31,
2002
[
1993
]) because it only
solicited for one period from April 1,
2001
[
1992
]-December
31,
2001
[
1992
] (i.e., the business upon which the initial
report
[
period
] is based). The corporation would be required
to file a
2003
[
1994
] annual report and pay tax, however,
because it solicited for six periods from January 1,
2002
[
1993
]- December 31,
2002
[
1993
] (i.e., the period
upon which the
2003
[
1994
] annual report is based).
which
] meets the other requirements of [
the
]Tax Code, §171.084,
will meet the 120 hours requirement if the solicitation occurs Monday- Friday,
but will not meet the 120 hours requirement if the solicitation occurs Monday-
Saturday.
If none of the solicitation limits prescribed in this subsection
are exceeded, a corporation may qualify for the exemption even if it leases
space at a wholesale center for the entire period upon which the tax is based.
the
]Tax
Code, §171.084, is effective for 1988 annual reports and initial reports
originally due on or after January 1, 1988.
Part 3.
TEACHER RETIREMENT SYSTEM OF TEXAS