Changes to Texas Franchise Tax Rules

It is extremely important to file your Texas Franchise Tax Report and Public Information Report with the Texas Comptroller timely by May 15 every year.  Still, it is common for business owners to miss, which can lead to personal liability. Additionally, it can lead to penalties being assessed by the Comptroller. 

 

Changes to Texas Franchise Tax Rules allow for new, larger penalties for late filings.

In the past, the procedure to reinstate a forfeited company was the same regardless of how long the company had been forfeited.  Now, the Texas Comptroller can charge more penalties for later filings.

  • For franchise taxes and reports less than 4 years overdue:
    • $50 late penalty for each late report;
    • Estimated tax assessment, plus interest.
  • For franchise taxes and reports overdue 4 years or more:
    • Estimated tax assessment for each year the entity is in forfeiture over 4 years;
    • Additional fee of 18 cents per day.

 For example, if a company has been forfeited since 2015, the following is an estimate of the cost to reinstate it through the Texas Comptroller in 2019:

  •   2015: $1,480 estimated assessed taxes + $65.70 (.18 x 365 days) = $1,545.70 
  • 2016-2019: $50 late penalty per year = $200 
  • Total Due: $1,745.70

It is not an option to terminate a company instead of filing the late documents and paying the fees because before you can terminate a company, it must be in good standing. 

A Forfeited Texas Company Does Not Legally Exist.

A forfeited Texas company does not legally exist until it is fully reinstated by the Secretary of State.  As a result, corporate protections are lost and there is a risk for personal liability for any debt of the company, including but not limited to the delinquent taxes discussed above.

We can help you reinstate a forfeited company and communicate with the Texas Comptroller regarding assessed penalties or fee.  If your company has been forfeited or if you are unsure of the status of your company, please call us so we can assist you

The legal information in this blog entry is not intended to be a substitute for seeking personalized legal advice from an attorney licensed to practice in your jurisdiction.  Further, nothing contained in this article is intended to create an attorney-client relationship with any reader.  This article and website are made available by Waldron & Schneider for educational purposes only and to give basic information and a general understanding of the law, not to provide specific legal advice. By using this website you understand that there is no attorney-client relationship between you and Waldron & Schneider. The article and website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. For more information or questions you can contact us and one of our attorneys will be in touch soon.