Texas Court OKs Flow-Through Exclusion To Franchise Tax

Law360, New York (March 14, 2014, 4:18 PM EDT) -- A Texas company that passes earnings on to third-party contractors can exclude that money while calculating its franchise tax debt, a state appeals court ruled Friday.

Reversing the trial court's ruling, the Third Court of Appeals of Texas removed a grey area in the state’s 2006 franchise tax statute that has seen numerous revisions since its enactment. The franchise tax scheme present in January 2008 governed the court’s interpretation for this case, the appeals court wrote.

Texas tax collectors had argued that that money could only...
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