Lawsuit May Clarify Texas Franchise Tax Deductions for Geophysical Services

Martens, Todd & Leonard recently filed a lawsuit in Travis County District Court challenging the Texas Comptroller’s position that a company may not include the costs of producing the oil and gas well data recordings it sells in its cost of goods sold. This lawsuit may clarify the scope of the cost of goods sold deduction for geophysical services.The taxpayer creates audio and visual Read More...

U.S. Supreme Court Defines the Limits of IRS Power in Home Concrete

In U.S. v. Home Concrete & Supply, LLC (“Home Concrete”), the U.S. Supreme Court handed down a huge victory for taxpayers. A copy of the opinion is available here. Martens, Todd & Leonard appeared as amici counsel in Home Concrete. In Home Concrete, the Supreme Court held that an overstatement of basis in property sold is not an omission from gross income that triggers the extended six-year Read More...

Lawsuits to Resolve Texas Franchise Tax Deductions for Real Estate Contractors

Under the Texas franchise tax, real estate contractors may claim a revenue exclusion and/or cost of goods sold deduction for the substantial costs they incur. However, the Comptroller’s policies dramatically limit the businesses and amounts that qualify for these items. As a result, many real estate contractors face large tax bills and great uncertainty about their tax obligations. We and many Read More...

Texas Tax Litigation Update

Martens, Todd & Leonard recently filed lawsuits in state court challenging the Comptroller’s positions on several issues:Texas Franchise Tax – Cost of Goods Sold Deduction for Per Diem Payments to Construction WorkersOne case concerns whether a construction company may include per diem payments to its employees in its cost of goods sold deduction for Texas franchise tax purposes. The company Read More...

Texas Supreme Court Throws Out Nestle’s Texas Franchise Tax Challenge

The Texas Supreme Court recently rejected Nestle’s challenge to the Texas franchise tax, In re Nestle USA, Inc. et al. (“Nestle”). Nestle’s suit complained that the tax is unfair because it gives taxpayers in some industries more deductions and a lower tax rate than others. The Nestle suit said that this unfair treatment is unconstitutional because Texas doesn’t have a good reason for treating Read More...

Current Litigation to Clarify Texas Franchise Tax Election Issues

This post is the first in a series exploring common Texas franchise tax issues under litigation. The Texas franchise tax statutes and the Comptroller’s polices appear to conflict on whether businesses may switch among the available tax calculation methods after they have filed their franchise tax reports. This has created problems for businesses who initially calculate their deductions Read More...

Texas Supreme Court Finds Texas Franchise Tax Constitutional, Opens the Door to a Net Income Tax on Businesses

The Texas Supreme Court ruled today in In re Allcat Claims Service L.P. and John Weakly (“Allcat”), No. 11-0589. It held that the Texas franchise tax did not violate Texas’s constitutional prohibition on imposing a state income tax on natural persons without voter approval. The Court grounded its holding entirely in the entity theory of partnership taxation. It found that a tax directly imposed Read More...

Following Allcat Oral Argument, Texas Supreme Court Announces Briefing Schedule for Second Texas Franchise Tax Challenge

The Texas Supreme Court recently announced the briefing and oral argument schedule for the second challenge to the Texas franchise tax filed in the Court, Nestle USA, Inc., Switchplace, LLC, and NSBMA, LP v. Combs, No. 11-0855 ("Nestle").  The Nestle briefing schedule is available here.The Court's announcement comes shortly after it heard oral argument in In re: Allcat Claims Service, L.P. and Read More...

Texas Supreme Court Hears Oral Argument in Allcat's Texas Franchise Tax Constitutional Challenge

The Texas Supreme Court heard oral argument on October 24th in In re: Allcat Claims Service, L.P. and John Weakly, No. 11-0589 ("Allcat").  Allcat was represented by Jimmy Martens and Amanda Traphagan of Martens, Todd & Leonard.  Jimmy Martens argued on Allcat's behalf.  Allcat's suit alleges that the revised Texas franchise tax violates Texas's constitutional prohibition on enacting a state Read More...

Settling Worker Reclassification Issues

Businesses that pay workers as independent contractors could be financially devastated by a reclassification of the workers as employees by the IRS during an employment tax audit. The odds of being selected for an employment tax audit have dramatically increased because the current administration has directed the IRS and the Department of Labor ("DOL") to work together and to share information Read More...