Could a corporation extend the deadline to amend its former Texas franchise-tax report after an IRS audit?

Plain-English summary

Texas did not allow an extension of the amended-report deadline triggered by a final IRS audit.

Rule 3.544(d)(2) required a corporation to file an amended Texas franchise-tax report within 120 days after an IRS Revenue Agent's Report became final if the RAR changed amounts used for Texas reporting.

An RAR was final when the corporation exhausted or gave up all IRS administrative appeals. Although annual and initial report due dates could be extended, the letter said no provision extended the amended-report deadline.

What this means for you

Corporations under federal audit

A partial agreement with the IRS did not itself start the clock if unresolved issues and administrative appeals remained, but once the RAR became final the historical 120-day period applied.

Tax professionals

Document the federal finality date and identify every RAR change that affects Texas amounts.

Common questions

Q: When was the RAR final?
A: When IRS administrative appeals were exhausted or forgone.

Q: How long did the corporation have to amend?
A: 120 days under the historical rule.

Q: Could that amended-report deadline be extended?
A: No.

Citations and references

• 34 Tex. Admin. Code Sec. 3.544(d)(2)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=FIT
• Opinion: https://star.comptroller.texas.gov/view/9611850L

Original ruling text

November 26, 1996

Dear **:

In your letter of November 18, you requested permission to defer the filing of
an amended franchise tax return for your client.

You state that the Internal Revenue Service (IRS) is currently conducting an
income tax audit of your client (Taxpayer). The IRS and Taxpayer have reached
an agreement with respect to some, but not all, of the federal income tax
issues under examination. Thus, the IRS has not made a final determination in
connection with all the issues currently under audit.

Subsection (d)(2) of Rule 3.544(enclosed) states that "A corporation which has
been audited by the Internal Revenue Service must file an amended franchise tax
report within 120 days after the Revenue Agent's Report (RAR) is finalized, if
the RAR results in changes to amounts reported for franchise tax purposes. An
RAR is considered to be finalized when all administrative appeals with the
Internal Revenue Service have been exhausted or forgone." Although the due
date for filing annual and initial reports may be extended, there is no
provision which allows an extension of time to file an amended report.
Therefore, Taxpayer must file an amended report as required under Rule
3.544(d)(2).

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 any questions, contact Tax Policy Division. You may call toll free
1-800-531-5441, or our regular number is 512/463-4600. My extension is 3-4662.
You may write me at Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Bob Jeffcoat
Tax Policy Division