The Business Centre of the South Plains
Lubbock is the trading, banking and medical centre for a large farming region. The Texas High Plains grows roughly 30 percent of the country's cotton, according to Plains Cotton Growers, and Lubbock is home to cotton merchants, gins, warehouses, equipment dealers, seed and chemical suppliers and the lenders that finance them. Texas Tech University and two large health systems add thousands of professional jobs. BOMCAS prepares returns for Lubbock businesses and farms remotely.
Our Texas business tax page explains franchise tax methods. This one covers farms, gins and Lubbock businesses.
What Is Filed
Texas has no corporate or personal income tax. Businesses file federal returns and the Texas franchise tax report by May 15. Farms operated by individuals report on Schedule F, while farms organised as partnerships, LLCs or corporations file entity returns. Many family farms are not subject to the franchise tax because sole proprietorships and general partnerships owned by individuals are not taxable entities, but LLCs and corporations are.
Cotton Farms
Farm returns depend on how crops are sold and when income is recognised. Cash-method farmers can choose when to sell or defer payment under a deferred payment contract, and crop insurance proceeds can be deferred to the next year if the farmer normally sells the crop in the following year. Commodity Credit Corporation marketing loans can be treated as income when received or as loans. Farm income averaging on Schedule J spreads a large year across the previous three years' tax brackets.
Gins and Cooperatives
Many South Plains gins are cooperatives owned by their grower members. Cooperatives file Form 1120-C and pay patronage dividends that members report from Form 1099-PATR. Cooperatives can pass part of a special deduction for agricultural production to their members. Privately owned gins file regular returns and need careful accounting for seed, bale storage and ginning fees.
Groundwater Depletion
Farmers in the Southern High Plains who irrigate from the Ogallala Aquifer may be able to claim a cost depletion deduction for groundwater as the water table declines, a position the IRS accepted after a 1960s court case brought by a High Plains farmer. The deduction requires measurements of the water level and records of the land's cost allocated to the water. It does not suit every farm, but for large irrigated operations it can be significant.
Equipment Dealers and Ag Lenders
Dealers in tractors, harvesters, irrigation systems and parts carry large inventory, floor plan financing and trade-ins. Ag lenders and farm credit associations deal with loan loss reserves and patronage. Dealers selling to farmers need valid agricultural exemption numbers on file for sales tax.
Medical and Professional Practices
Lubbock is the medical centre for West Texas and eastern New Mexico, with Covenant Health, UMC Health System and the Texas Tech University Health Sciences Center. Physician groups, clinics and specialists from the region file partnership or S corporation returns with owner compensation, equipment depreciation and practice buy-ins.
Wind and Oil Income
Landowners around Lubbock receive lease payments from wind farms, and those in Hockley, Terry and other counties to the west may receive oil royalties. Wind lease income is generally ordinary income, while oil royalties qualify for percentage depletion of 15 percent for most small producers and royalty owners.
What We Review
- Crop sale timing and insurance deferral.
- CCC loans and income averaging.
- Patronage dividends and cooperative returns.
- Groundwater depletion records.
- Dealer inventory and financing.
- Franchise tax status.
Lubbock Business Tax Preparation Questions
Can crop insurance be deferred to next year?
Yes, if you normally sell the crop in the following year and make the election.
Do family farms pay franchise tax?
Sole proprietorships and general partnerships of individuals do not. LLCs and corporations do.
Is groundwater depletion still deductible?
It can be for High Plains farms that irrigate from the Ogallala and keep the required records.
How are cooperative patronage dividends taxed?
Members report them from Form 1099-PATR.
Talk to BOMCAS About Business Tax Preparation in Lubbock
Farm and business returns come from crop-year bookkeeping, farm and seasonal payroll and sales tax with ag exemptions. Family members report their shares on personal returns, big decisions start with planning, missed years go to catch-up filing, and foreign owners see cross-border tax. From the Panhandle to the coast, our Texas pages on personal returns, sales tax, bookkeeping, payroll, planning, late filing and cross-border tax set out the statewide rules, gathered in the Texas overview.
Whether it is a section of irrigated cotton, a shop on 34th Street or a household near campus, a short description is enough for BOMCAS to suggest a starting point and list the records a quote would need. Reach us on the contact page or the form below, call 780-667-5250 or email info@bomcas.ca. Each Lubbock service is linked from the Lubbock overview. Nothing here is advice for a particular farm, business or family.