Taxation of Series LLCs in Texas: Bigger Isn’t Always Better in the Lone Star State

Date

2014

Authors

Outenreath, Alyson

Journal Title

Journal ISSN

Volume Title

Publisher

Abstract

Texas’s Comptroller of Public Accounts announced a policy concerning the taxation of series LLCs in which all series of a series LLC should be aggregated and treated as a single taxable entity for Texas franchise tax purposes. The comptroller’s policy of aggregating a series LLC into a single taxable entity for Texas franchise tax purposes illustrates that bigger is not always better.

This article addresses whether the comptroller’s policy concerning the taxation of series LLCs is correct or sound tax policy. The author believes the policy is not sound because the comptroller’s policy does not have statutory support and creates constitutional and procedural issues. The comptroller’s policy also treats similarly situation taxpayers differently, and it likely will not significantly lessen administrative burdens for either the comptroller or taxpayers. Furthermore, the comptroller’s policy is at odds with the position adopted by other states and the policy adopted for federal income tax purposes.

Description

Keywords

Texas, tax law, series LLC, Texas franchise tax, business entities, LLC, comptroller

Citation

Alyson Outenreath, Taxation of Series LLCs in Texas: Bigger Isn’t Always Better in the Lone Star State, 45 St. Mary’s L. J. 183 (2013–14).