| (a) Provisions. The provisions of this section apply to franchise tax reports originally due after January 1, 1992. (b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Accounting methods--The method of allocating the cost, benefit, or expense of an asset or liability to accounting periods. For purposes of the credit under §171.111, the accounting method used to calculate the timing difference under the Tax Code, §171.111, must be in accordance with GAAP. A change in accounting method includes the method used to allocate assets and liabilities to accounting periods or changes in estimates used in calculating the amount of the timing difference under the Tax Code, §171.111(b)(1). The disposition of an asset or liability through a sale, trade, abandonment, or other similar situation is not considered a change
in an accounting method. (2) Correction of an error--For purposes of computing timing differences under this section, the correction of an error resulting from mathematical mistakes, mistakes in the application of accounting principles, or an oversight or unintentional misuse of facts that existed on the computation date. (3) Generally accepted accounting principles (GAAP)--For the purposes of this title, unless the context clearly requires otherwise, GAAP means those broad rules of accounting formally accepted by the American Institute of Certified Public Accounts (AICPA) or its designees through publication of a statement, opinion, interpretation, research bulletin, and the like. (4) Timing differences--Temporary differences as defined in Statement of Financial Accounting Standards Number 96 (SFAS 96) as amended effective January 1, 1992, which will reverse at some future date. (A) Events and transactions
which do not result in differences between the basis of an asset or liability for financial and income tax purposes do not qualify as timing differences even if a provision for income tax is required under generally accepted accounting principles. (B) A timing difference is considered to reverse at some future date if such difference results in income, deductions, expenses, or credits for financial accounting or federal income tax purposes which offset the difference in basis in future accounting years. Differences whose reversal are under the control of the taxpayer do not qualify as timing differences. (C) For the purposes of this section, deferred investment tax credits, allowance for funds used during construction, and basis differences for which tax provisions are not required under SFAS 96, as amended effective January 1, 1992, do not qualify as timing differences. (c) Notice of intent. (1) The notice of
intent to preserve the right to claim the temporary credit under the Tax Code, §171.111, must be submitted to the comptroller on forms specified by the comptroller. The form must be filed on or before March 2, 1992 (because March 1, 1992, falls on a Sunday). The postmark date (or meter-mark date, if there is no postmark) on the envelope in which the form is received determines the date of filing. (2) The corporation must submit with the notice of intent the amount of timing differences determined under the Tax Code, §171.111(b)(1). The amount of such differences may be estimated if no final determination of such amount is available at the date of filing of the notice of intent. Although corrections of errors (as defined in this section) in calculating such timing differences may be made on reports within the period of limitations, changes in accounting methods will not be considered a correction of an error in calculating such differences. The corporation
will be liable for any applicable penalty and interest if the amount of timing differences determined results in an underpayment of tax. (3) The preservation of the right to claim the credit may not be conveyed, assigned, or transferred to another entity. (d) Electing the credit. (1) The election to claim the credit is a one-time election. If the election is revoked, the credit may not be claimed on any reports originally due on or after the date the election is revoked. (2) A corporation elects the credit by: (A) properly taking the credit in computing the tax on earned surplus and paying the additional tax due under the Tax Code, §171.111(h), on a report filed on or before the original due date; or (B) electing the credit on a timely filed extension request and complying with the requirements of subparagraph (A) of this paragraph on the report filed on or before
the extended due date of the report. (3) If a corporation elects the credit on a report on which the corporation was ineligible for the credit based on the provisions of this section or the Tax Code, Chapter 171, the corporation is treated as though the election was not made. The corporation will be liable for any applicable penalty and interest for underpayment of tax. (4) The allowable credit on reports due within the limitation period as specified in the Tax Code, Chapter 111, Subchapter D, is subject to adjustment even if the initial election to take the credit is outside the period of limitations under the Tax Code, Chapter 111, Subchapter D. (e) Computation of the credit. (1) If the credit under the Tax Code, §171.111, is claimed, the corporation is required to use the GAAP method in computing taxable capital. In other words, the corporation may not use the federal income tax method in whole or in
part in computing taxable capital. (2) The amount subject to the credit determined under the Tax Code, §171.111(b)(1), is the excess of the basis of qualifying assets minus liabilities in accordance with generally accepted accounting principles over the basis of qualifying assets minus liabilities for federal income tax purposes as of the accounting year end in 1991. Amounts not allowed as timing differences under this section or Tax Code, §171.111, shall be excluded from the computation of the amount subject to credit. The corporation must include all assets and liabilities in computing the credit under the Tax Code, §171.111 (i.e., the corporation cannot compute the differences for only certain assets and/or liabilities). (f) Revocation of the election. Unless otherwise provided in subsection (g) of this section, the election to claim the credit under the Tax Code, §171.111, is revoked at the earliest of the following
occurrences: (1) after making a valid election: (A) the corporation notifies the comptroller in writing that the election is revoked; (B) the corporation fails to claim the credit on a subsequent report or fails to report the additional tax due under the Tax Code, §171.111(h), on a subsequent report; or (C) the corporation uses the federal income tax method in reporting taxable capital; or (2) when calculating taxable capital, the corporation changes the accounting method for any asset or liability used in determining the timing differences under the Tax Code, §171.111(b)(1); or (3) the corporation is the nonsurvivor of a merger or consolidation or the corporation terminates its existence for any other reason. (g) Correction of error. The election will not be revoked under subsection (f)(1)(B) or (C) of this section if the corporation files,
within 60 days from the date of notice of the revocation, an amended report correcting the error which caused the revocation. (h) Changes in accounting methods. A corporation, otherwise precluded from changing accounting methods under the Tax Code, §171.109, may change accounting methods on its first report due on or after January 1, 1992, to the methods used to account for qualifying assets and liabilities on its financial statements for the accounting year ended in 1991, if the timing differences computed under the Tax Code, §171.111(b)(1), are based on the methods used on such 1991 financial statements. A corporation that changes methods under this section is considered to have made a change in accounting methods for purposes of the Tax Code, §171.109. For the purposes of this section, other changes in accounting methods for qualifying assets and liabilities are allowed only with the written consent of the comptroller.
(i) Temporary credit. The temporary credit is not available when computing the additional tax under the Tax Code, §171.0011.
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