34 Tex. Admin. Code § 3.574 - Margin: New Veteran-Owned Businesses
(a)
Effective date. This section is effective January 1, 2016.
(b) Definitions. The following words and
terms, when used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1)
Beginning date--
(A) For a taxable entity
that qualifies as a new veteran-owned business, the earlier of:
(i) the fifth anniversary of the date on
which the taxable entity was chartered, organized, or otherwise formed in
Texas; or
(ii) the date the
taxable entity ceases to qualify as a new veteran-owned business.
(B) For example, if a qualifying
entity files its certificate of formation with the secretary of state on June
1, 2016, and remains wholly-owned by honorably discharged veterans throughout
its first five years of business, the entity becomes subject to franchise tax
June 1, 2021. If one of the owners of this same new veteran-owned business
sells his or her ownership percentage to anyone other than a qualifying veteran
on December 31, 2017, the entity no longer qualifies as a new veteran-owned
business and becomes subject to franchise tax January 1, 2018.
(2) Letter of Verification of
Veteran's Honorable Discharge--A letter issued by the Texas Veterans
Commission, upon request by a veteran, verifying the honorable discharge of the
veteran.
(3) New business--A
taxable entity that is chartered, organized, or otherwise formed in Texas on or
after January 1, 2016, and before January 1, 2020.
(4) New veteran-owned business--A taxable
entity that is a new business in which each owner is a natural person who:
(A) served in and was honorably discharged
from a branch of the United States armed forces; and
(B) provides verification to the comptroller
of the person's service and discharge, as required by subsection (d) of this
section.
(c)
Tax not imposed. The franchise tax is not imposed on a taxable entity that
qualifies as a new veteran-owned business until the earlier of:
(1) the fifth anniversary of the date on
which the taxable entity was chartered, organized, or otherwise formed in
Texas; or
(2) the date the taxable
entity ceases to qualify as a new veteran-owned business.
(d) Verification. A taxable entity that
qualifies as a new veteran-owned business must verify that it is owned entirely
by qualifying veterans.
(1) Required
documents. A taxable entity must submit the following documents as required in
paragraph (2) of this subsection:
(A) a
"Letter of Verification of Veteran's Honorable Discharge" from the Texas
Veterans Commission for each owner of the business; and
(B) comptroller Form 05-904, Certification of
New Veteran-Owned Business, or any successor to the form promulgated by the
comptroller.
(2)
Submission. A taxable entity must submit the required documents identified in
paragraph (1) of this subsection to the:
(A)
secretary of state, if the taxable entity is formed with the secretary of state
on or after January 1, 2016; or
(B) comptroller, along with the appropriate
comptroller franchise tax questionnaire, if necessary, if the taxable entity is
not required to file a certificate of formation with the secretary of state.
(e)
Reporting requirement for a new veteran-owned business. A taxable entity that
meets all of the qualifications of a new veteran-owned business is required to
file a No Tax Due Report for each reporting period that the franchise tax is
not imposed on the taxable entity.
(1) A
qualifying new veteran-owned business that fails to file a No Tax Due Report as
required shall pay a penalty of $50 under Tax Code, §
171.362(f).
(2) A qualifying new veteran-owned
business may not file with a combined group for each reporting period that the
franchise tax is not imposed.
(3)
A qualifying new veteran-owned business is not required to file a Public
Information Report or an Ownership Information Report for each reporting period
that the franchise tax is not imposed.
(f) Beginning date upon withdrawal of federal
tax exemption. A qualifying new veteran-owned business that is exempt from
franchise tax under Tax Code, §
171.063 (Exemption for a
Non-profit Corporation Exempt from Federal Income Tax) and subsequently has its
federal tax exemption withdrawn by the Internal Revenue Service for failure to
qualify or maintain its qualification for the exemption has a beginning date:
(1) as provided in subsection (b)(1) of this
section if:
(A) in the absence of the federal
tax exemption, the franchise tax would not have been imposed on the taxable
entity under subsection (c) of this section; and
(B) the effective date of the withdrawal is
before the beginning date determined under subsection (b)(1) of this section;
or
(2) that is the
effective date of the withdrawal, if either paragraph (1)(A) or (B) of this
subsection does not apply.
(g) Expiration. The provisions of this
section expire January 1, 2020; however, a business that first qualifies as a
new veteran-owned business before January 1, 2020, continues to qualify as a
new veteran-owned business as provided by this section.
Notes
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