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Ezel / Tax Rulings / TX
TX 9806546L Franchise Tax (PRIOR TO 01/01/2008) 1998-06-02

Could a Texas state agency grant a license to a corporation that was not in good standing for franchise-tax purposes?

Short answer: No. The Comptroller confirmed that a state agency could not grant a license to a corporation that was not in good standing with respect to franchise tax. The letter attributed that requirement to Article 2.45 of the Texas Business Corporation Act and referred agencies to Notice FM97-33.

Apply this to your situation

This page answers the general question as of 1998. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1998
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. The cited corporate-law provision and 1996 agency notice are historical; confirm current good-standing and licensing requirements. 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 Texas state agency could not grant a license to a corporation that was not in good standing for franchise-tax purposes.

The Comptroller said the restriction was imposed by Article 2.45 of the Texas Business Corporation Act. The letter also directed the recipient to the November 25, 1996 Notice to State Agencies FM97-33, titled Doing Business With Corporations Delinquent in Franchise Tax.

What this means for you

Corporations seeking state licenses

Under the rule described in this 1998 letter, franchise-tax good standing affected whether a state agency could issue a license.

State agencies and licensing staff

The letter treated the licensing restriction as mandatory and pointed agencies to Notice FM97-33 for additional information.

Common questions

Q: Could the state agency issue the license despite the franchise-tax status?
A: No, according to the letter.

Q: What authority did the Comptroller identify?
A: Article 2.45 of the Texas Business Corporation Act.

Q: Did the letter identify further agency guidance?
A: Yes. It cited Notice FM97-33 dated November 25, 1996.

Citations and references

  • Article 2.45, Texas Business Corporation Act
  • Notice to State Agencies FM97-33, Doing Business With Corporations Delinquent in Franchise Tax (November 25, 1996)

Source

Original ruling text

June 2, 1998

Dear Mr. **:

Thank you for your recent tax help inquiry about franchise tax.

Your understanding that a state agency may not grant a license to a corporation
which is not is good standing with respect to the franchise tax is correct.
This requirement is imposed pursuant to Article 2.45, Texas Business
Corporation Act.

For additional information, please refer to the November 25, 1996, Notice to
State Agencies FM97-33, Doing Business With Corporations Delinquent in
Franchise Tax. You may access this notice through the "Texas Government"
window on the Comptroller's home page, Window on State Government, internet
address http://www.window.state.tx.us. You should then select "Statewide
Financial Management," and "Notices to State Agencies."

If you have further franchise tax questions, please write me or call me
toll-free at 1-800-531-5441, extension 3-3958. My direct line is 512/463-3958.

Sincerely,

Teresa Comer
[email protected]
Tax Policy Division

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