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Permian Basin Royalty Trust Message Board

  • rpg47 rpg47 Jun 3, 2013 2:24 PM Flag

    Texas Tax Treatment of Distributions

    How are distributions taxed/claimed for non-TX residents?

    Sentiment: Hold

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    • Umm, texas has no state income tax.

      • 1 Reply to lizahuang54321
      • Umm, tax information as stated....."each Unit holder that is considered a taxable entity under the Texas franchise tax will generally be required to include its portion of Trust revenues in its own Texas franchise tax computation."

        II.
        STATE TAX RETURNS
        All revenues from the Trust are from sources within Texas, which has no individual income tax. Texas imposes a franchise tax at a rate of 1% on gross revenues less certain deductions, as specifically set forth in the Texas franchise tax statutes. Entities subject to tax generally include trusts and most other types of entities having limited liability protection, unless otherwise exempt. Trusts that receive at least 90% of their federal gross income from designated passive sources, including royalties from mineral properties and other non-operated mineral interest income, and do not receive more than 10% of their income from operating an active trade or business, generally are exempt from the Texas franchise tax as ‘‘passive entities.’’ The Trust has been and expects to continue to be exempt from Texas franchise tax as a passive entity. Because the Trust should be exempt from Texas franchise tax at the Trust level as a passive entity, each Unit holder that is considered a taxable entity under the Texas franchise tax will generally be required to include its portion of Trust revenues in its own Texas franchise tax computation.

        This revenue is sourced to Texas under provisions of the Texas Administrative Code providing that such income is sourced according to the principal place of business of the Trust, which is Texas.
        Unit holders should consult their own tax advisor......

        so how do you handle as a non-Texas resident?

        Sentiment: Hold

 
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