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Universal Frozen Foods Company v. Rylander

The disparate impact of the additional tax on fiscal year taxpayers results from a voluntary election made by the taxpayer; therefore, the additional tax complies with the principles of equal protection and equal and uniform taxation.

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This appeal involves a challenge to the additional tax component of the Texas franchise tax. See Tex. Tax Code Ann. � 171.0011 (West 2002). Universal Frozen Foods Company (“Universal”), its successors-in-interest, ConAgra, Inc. and Lamb Weston, Inc., and Universal Foods Corporation, challenged the validity of the additional tax and asserted, in the alternative, that the amount on which Universal was taxed was improper. After the parties filed competing motions for summary judgment, the trial court denied Universal’s motion and granted summary judgment in favor of Carole Keeton Rylander, successor-in- interest to John Sharp, Comptroller of Public Accounts of the State of Texas and John Cornyn, successor-in-interest to Dan Morales, Attorney General of the State of Texas (collectively the “Comptroller”). We will affirm the district court’s judgment.

BACKGROUND

In 1991, the Legislature amended the franchise tax statute primarily to add the earned surplus component to the franchise tax calculation. As part of the same amendment, the Legislature constructed the additional tax which forms the basis of this dispute. The franchise tax is an excise tax levied for the privilege of doing business in Texas during the year for which the tax is paid. See General Dynamics Corp. v. Sharp, 919 S.W.2d 861, 866 (Tex. App.-Austin 1996, writ denied). After the 1991 amendment, the Comptroller may assess a corporation’s franchise tax liability based either on that corporation’s capitalization or its earned surplus generated in the previous accounting year. See Tex. Tax Code Ann. �� 171.110, .1532 (West 2002).

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