How did 1999 Texas legislation affect dentist professional associations and corporations with less than $150,000 in gross receipts?

Plain-English summary

Dentists could organize as professional associations beginning September 1, 1999, and the letter said professional associations were not subject to the former franchise tax.

Senate Bill 1085 expanded professional-association eligibility to dentists. The response says only doctors and podiatrists had previously been able to use that form.

The letter also summarized Senate Bill 441 small-business relief. For reports due on or after January 1, 2000, a corporation owed no franchise tax if its gross receipts from everywhere were each below $150,000 for taxable capital and earned surplus. An eligible corporation still filed an abbreviated franchise-tax information report stating its receipts and a public information report.

Currency note: This response applies 1999 entity-form legislation and the former two-component franchise tax. Texas replaced that tax with the margin tax effective January 1, 2008.

What this means for you

Dental practices reviewing historical entity choices

The letter identifies September 1, 1999 as the effective date for dentists to organize as professional associations under Senate Bill 1085.

Small corporations

The separate Senate Bill 441 relief eliminated tax but not information-report obligations, and both receipts tests had to be below the threshold.

Common questions

Q: When could dentists form professional associations?
A: Effective September 1, 1999 under Senate Bill 1085.

Q: Did professional associations owe the former franchise tax?
A: The letter says they were not subject to it.

Q: Did the $150,000 rule eliminate all filings?
A: No. An abbreviated information report and public information report remained due.

Citations and references

• Senate Bill 1085, 76th Legislature
• Senate Bill 441, 76th Legislature

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=FIT
• Opinion: https://star.comptroller.texas.gov/view/9907283L

Original ruling text

July 30, 1999

To: **

Dear **:

Thank you for your e-mail concerning ** and recent legislative
changes regarding the franchise tax.

During the 76th session of the Texas Legislature, six bills were passed that
impact the franchise tax. The bills are: HB 2067, HB 3211, HB 3658, SB 365, SB
1368, and SB 441.

SB 441 included an exclusion for corporations with less than $150,000 in gross
receipts from its entire business. These corporations, who had less than
$150,000 in gross receipts, everywhere, for a particular accounting period for
both taxable capital and earned surplus purposes will owe no franchise tax for
the corresponding report period. The corporation will be responsible for filing
an abbreviated franchise tax information report, stating the amount of its
gross receipts, along with a public information report. This change in law is
effective for reports due on or after January 1, 2000.

In addition, the 76th Legislature passed SB 1085. This bill allows dentists to
organize as professional associations effective September 1, 1999. Previously,
only doctors and podiatrists could be professional associations. Professional
Associations are not subject to franchise tax.

All of the bills mentioned above may be viewed via the web site of the Texas
Legislature, "Texas Legislature ONLINE," at . You
will see on the left side of the home page a link to search for bills by bill
number. Click on this link, then enter the specific bill number that you would
like to review. At the top of the bill summary page, you'll see a link to the
"text" of the bill. Click on "text" and finally, on the "enrolled" version of
the bill text.

This response is based on the facts presented and presumption stated herein.
If there are different or additional facts, the response may change.

If you have questions about this, my internet address is
, or you may call toll-free at 1-800-531-5441,
extension 3-4612.

Sincerely,

Janet Spies
Tax Policy Division
Texas State Comptroller