When the Texas Comptroller assesses franchise tax you believe you don’t owe, you have the right to challenge that assessment. Understanding the process helps you protect your interests and potentially eliminate or reduce the liability.
Assessments typically follow audits or result from Comptroller-prepared returns when you’ve failed to file. Either way, you’ll receive a notice identifying the assessed amount, including tax, penalties, and interest. Review this notice carefully to understand what’s being claimed and why.
Identify the basis for your dispute. Assessments can be wrong for various reasons. The Comptroller may have miscalculated your total revenue, applied the wrong margin deduction method, made errors in apportionment, or included income that shouldn’t be taxed. Identifying specifically what’s wrong focuses your challenge on the issues that matter.
Gather documentation supporting your position. If the Comptroller’s revenue calculation is incorrect, assemble records showing your actual revenue. If apportionment is wrong, document where your receipts were actually sourced. The burden of proof shifts depending on the situation, but documentation is essential regardless.
File a motion for redetermination within 60 days of the assessment notice. This deadline is strictly enforced. Your motion should identify the specific items you’re disputing, the legal and factual basis for your position, and the relief you’re seeking.
Present your case at the redetermination hearing. A hearing officer independent from the audit staff will review your dispute. This is your opportunity to present additional evidence, explain your position, and respond to questions. The hearing is typically informal but should be taken seriously.
Escalate to SOAH if necessary. If the redetermination doesn’t resolve your dispute favorably, you can appeal to the State Office of Administrative Hearings or pursue other remedies. SOAH provides a more formal proceeding before an administrative law judge.
Don’t assume assessments are correct just because they come from the government. Comptroller calculations can be wrong, and challenging incorrect assessments protects your business from paying more than it actually owes.
If you’ve received a franchise tax assessment you believe is incorrect, contact us to evaluate your challenge options.
