The policy is effective for all open periods under the statute of limitations, which is four years for Texas franchise (margin) tax purposes. Affected members of a Texas combined reporting group will need to recompute apportionment under the Comptroller's revised policy to determine the potential impact. The revised policy significantly changes how net gains and losses are computed for Texas franchise (margin) tax apportionment purposes. The Comptroller said it will amend Rule 3.591 3 and any other relevant Comptroller guidance to reflect this revised policy. Thus, the capital losses of one member of the combined group cannot be netted against the capital gains of another member of the combined group when determining the combined group's total revenue.The Comptroller reasoned that Texas does not recognize or apply the federal consolidated group regulations, which allow netting of a member's loss against another member's gain. In determining the net gain or loss of a combined group for apportionment purposes, the Comptroller will treat each member of the group separately. The revised guidance includes examples of how to determine the net gain or loss for single-entity taxpayers and combined groups. The guidance further explains that the Comptroller intends to compute any net gain or loss for apportionment purposes on a separate-entity basis. The Comptroller acknowledged that the "net gain" language in Texas Tax Code Section 171.105(b) is expressly limited to the determination of "gross receipts everywhere," but said the analysis in Hallmark applies to the computation of Texas group receipts in the numerator of the apportionment factor because there must be "symmetry" between a taxable entity's Texas gross receipts and its gross receipts everywhere. The term "net gain" was addressed in the Hallmark 2 case, in which the Texas Supreme Court held that a net loss from the sale of an investment or capital asset is not included when calculating gross receipts everywhere. Under this provision, for purposes of apportionment, when a taxable entity sells an investment or capital asset, the entity's "gross receipts everywhere" includes only the net gain from the sale. Texas Tax Code Section 171.105(b) explains how to determine a taxable entity's gross receipts from its entire business (gross receipts everywhere) for use in calculating taxable margin. The Texas Comptroller of Public Accounts (Comptroller), through a policy memo released on its website as STAR 202001008L, revised its policy on the treatment of net losses from the sale of investments and capital assets when calculating gross receipts for apportionment purposes. Texas Comptroller issues additional apportionment guidance on treatment of net losses from sales of investments and capital assets
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