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Ezel / Tax Rulings / TX
TX 200509692L Franchise Tax (PRIOR TO 01/01/2008) 2005-09-01

Through what report years could an enterprise project claim the Texas franchise-tax jobs creation credit and capital investment credit?

Short answer: The credits had firm cutoff dates. The Comptroller explained that the franchise-tax jobs creation credit (Tax Code Sections 171.751-171.761) and capital investment credit (Sections 171.801-171.811) were available to enterprise projects designated on or after September 1, 2001, but the eligibility subsections expired January 1, 2005. A jobs creation credit could be claimed on franchise-tax reports originally due on or after September 1, 2003 but before January 1, 2005, and not on reports due on or after January 1, 2005. A capital investment credit could be claimed on reports due on or after September 1, 2003 but before January 1, 2006, and not on reports due on or after January 1, 2006; under Section 171.8015, qualified capital investment included tangible personal property first placed in service in an enterprise zone and in use by September 30, 2005.

Apply this to your situation

This page answers the general question as of 2005. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 2005
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. It describes the pre-2008 franchise-tax jobs creation and capital investment credits, whose eligibility had already expired by the dates stated and which are not part of the current margin tax created by the 2007 legislation (House Bill 3 and House Bill 3928). Treat the holding as historical. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A taxpayer asked about the (pre-2008) franchise-tax credits for enterprise projects. The Comptroller explained the statutory windows:

  • Two credits. Tax Code Sections 171.751-171.761 provide a jobs creation credit, and Sections 171.801-171.811 provide a capital investment credit. Enterprise projects designated on or after September 1, 2001 could qualify — but the eligibility subsections expired January 1, 2005.
  • Jobs creation credit window. Claimable on franchise-tax reports originally due on or after September 1, 2003 but before January 1, 2005; not on reports due on or after January 1, 2005. A project's first report that would include its operations, if due after January 1, 2005, could not claim the credit.
  • Capital investment credit window. Claimable on reports due on or after September 1, 2003 but before January 1, 2006; not on reports due on or after January 1, 2006. Under Section 171.8015, qualified capital investment included tangible personal property first placed in service in an enterprise zone — purchased for an incomplete improvement under active construction, documented by purchase order/invoice/contract, and physically present and in use by September 30, 2005.

Important currency note: These credits belong to the pre-2008 franchise tax, and their eligibility had already expired by the dates above. The 2007 legislation (House Bills 3 and 3928) replaced the tax with the current margin tax; do not rely on these credits for current reports. Confirm current incentives.

What this means for you

Businesses that operated designated enterprise projects

The value here is the hard report-year cutoffs: jobs credit gone for reports due on/after January 1, 2005; capital investment credit gone for reports due on/after January 1, 2006, with property needing to be in use by September 30, 2005. If you have open pre-2008 years, these windows governed eligibility.

Accountants and tax professionals

Map each credit to the correct report-due-date window and the project's designation date and accounting year-end. These credits do not exist under the margin tax, so this is historical/audit-year guidance only.

Common questions

Q: Until when could an enterprise project claim the jobs creation credit?
A: On franchise-tax reports originally due before January 1, 2005 (and on or after September 1, 2003); not on reports due on or after January 1, 2005.

Q: Until when could it claim the capital investment credit?
A: On reports due before January 1, 2006 (and on or after September 1, 2003), with qualifying property in use by September 30, 2005.

Citations and references

Statutes and rules:

  • Tex. Tax Code Secs. 171.751-171.761 (franchise-tax jobs creation credit)
  • Tex. Tax Code Secs. 171.801-171.811 (franchise-tax capital investment credit)
  • Tex. Tax Code Sec. 171.8015 (qualified capital investment for an enterprise project)

Source

Original ruling text

September 1, 2005

To: **

Dear **:

Thank you for your inquiry concerning franchise tax credits for enterprise
projects.

The statutes I mention below, as well as other related information, are
available online at http://www.window.state.tx.us/taxinfo/franchise/index.html.

Texas Tax Code Sections 171.751 through 171.761 and 171.801 through 171.811
provide for a jobs creation credit and capital investment credit. Enterprise
projects designated on or after September 1, 2001 could qualify to establish
the credits. However, the tax code subsections that provided for an enterprise
project’s eligibility for the credits expired January 1, 2005.

Enterprise projects qualifying for the jobs creation credit could claim the
credit on franchise tax reports originally due on or after September 1, 2003
but before January 1, 2005. Enterprise projects may not claim a jobs creation
credit on franchise tax reports originally due on or after January 1, 2005.
Generally, an enterprise project filing an annual 2004 franchise tax report was
eligible to establish a jobs creation credit based on qualifying jobs created
from its designation date through its accounting period ending date in 2003 for
reporting earned surplus. If based upon an enterprise project’s designation
date and accounting year-end, the first franchise tax report to include the
operations from the enterprise project would be due after January 1, 2005, the
enterprise project would not be eligible to claim the jobs creation credit.

Enterprise projects qualifying for the capital investment credit could claim
the credit on franchise tax reports originally due on or after September 1,
2003 but before January 1, 2006. Enterprise projects may not claim a capital
investment credit on franchise tax reports originally due on or after January
1, 2006. Under Tax Code Section 171.8015, qualified capital investment for an
enterprise project includes tangible personal property first placed in service
in an enterprise zone if purchased by a qualified business for placement in an
incomplete improvement that is under active construction or other physical
preparation; identified by a purchase order, invoice, billing, sales slip, or
contract; and physically present at the enterprise zone and in use not later
than September 30, 2005. An enterprise project filing 2004 and 2005 annual
franchise tax reports could establish a capital investment credit beginning
with its designation date through its accounting period ending date for
reporting earned surplus, provided the property is present and in use by
September 30, 2005. If based upon an enterprise project’s designation date and
accounting year-end, the first franchise tax report to include the operations
from the enterprise project would be due after January 1, 2006, the enterprise
project would not be eligible to claim the capital investment credit.

This response is based on the facts presented and current law. If there are
different or additional facts, the response may change.

If you have questions about this, my internet address is
[email protected], or you may call toll-free at 1-800-531-5441,
extension 59952.

Sincerely,

Teresa Bostick
Tax Policy Division

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