What Texas Form 05-359 Is For
Texas Form 05-359 is used to request a Certificate of Account Status from the Texas Comptroller of Public Accounts when a taxable entity plans to end its legal existence in the State of Texas or terminate its registration. This certificate confirms that the entity has satisfied all franchise tax and other applicable tax obligations under the Texas Tax Code.
The Certificate of Account Status is required before the Texas Secretary of State will accept a certificate of termination, administrative dissolution filing, or withdrawal filing. Without tax clearance, the entity remains active in state records and continues to incur franchise tax liability. This requirement applies to corporations, Texas LLC entities, limited liability companies taxed as corporations, limited liability partnerships, and other taxable entities.
When You’d Use Texas Form 05-359
When a business owner is officially shutting down and getting ready to send termination papers to the Secretary of State, they use Form 05-359. Common scenarios encompass voluntary dissolution, merger, conversion, or the withdrawal of a foreign entity from the State of Texas.
The form is also required when a business needs a tax clearance certificate after losing something or when it requests tax clearance letters for specific legal actions, such as appearing in court or resuming operations. Regardless of the business's financial performance, it must file the form once it ceases operations and has submitted all its tax returns for the year.
Form 05-359 itself does not have a late or changed version. But there are often delays when a Franchise Tax Report or other tax reports need to be fixed before tax clearance can be given.
Key Rules or Details for 2020
An entity must file all required Franchise Tax Reports before requesting a Certificate of Account Status. This includes filing annual reports, final franchise tax returns, and any amended tax returns necessary to correct errors in tax liability or reporting. You must pay all of your tax debts in full, including any interest and penalties.
The last Franchise Tax Report must cover the time between the end of the previous report and the end of business operations. This end date has to be within 60 days of the actual shutdown date. Failure to meet this timing requirement may result in delayed tax clearance.
Entities must also submit the appropriate information report, including ownership or public information filings, before the Texas Comptroller of Public Accounts will issue the certificate. Certain entities are exempt from using the franchise tax Webfile and must submit Form 05-359 by mail, including combined group members and entities with active audits.
Step-by-Step (High Level)
Before requesting tax clearance, the entity must confirm that all tax filings are complete and accurate.
- File all outstanding franchise tax reports and sales and use tax returns.
- Pay all franchise tax, sales tax, use tax, penalties, and interest owed.
- Prepare and file the final franchise tax return covering the proper accounting period.
- Submit the required information report based on the entity type.
Once the account is in good standing, the entity may request the Certificate of Account Status.
- Submit Form 05-359 through the franchise tax Webfile if eligible.
- Mail the paper form if electronic filing is not allowed.
- Wait for the Texas Comptroller to review tax accounts and confirm tax clearance.
After receiving the certificate, the entity must file termination documents with the Secretary of State.
- Complete Form 651 or other required certificate of termination.
- Attach the Certificate of Account Status to the filing.
- Pay the required filing fee to the Texas Secretary of State.
Common Mistakes and How to Avoid Them
- Requesting tax clearance before filing the final Franchise Tax Report: File all required franchise tax reports first so the Comptroller can issue the certificate without delays.
- Missing the December 31 expiration date: Time the request so termination paperwork is filed promptly and the certificate does not expire before the Secretary of State processes it.
- Assuming stopping operations ends tax obligations: Complete the formal winding up and obtain tax clearance even when the business is inactive or the operating agreement has been terminated.
- Submitting electronically when paper filing is required for combined groups: Use paper submission when combined group rules apply, and confirm eligibility for the filing method before sending the request.
- Skipping an eligibility and account-status review before requesting clearance: Verify reports, payments, and required information filings are complete so the request is not rejected or stalled.
What Happens After You File
The Texas Comptroller of Public Accounts reviews the entity's franchise tax account status after submitting Form 05-359. The Certificate of Account Status is granted if all conditions are satisfied, certifying that the entity has no unpaid tax obligations under the Texas Tax Code.
The Comptroller notifies the filer of any unresolved issues, such as unpaid tax payment balances, missing tax reports, or mistakes in the Franchise Tax Report, if there are deficiencies. Until all the pending problems are fixed, the certificate won't be issued.
Once the certificate is filed with the Texas Secretary of State and accepted, the entity’s legal status changes to terminated or withdrawn. Franchise tax obligations end after the final report period, although the state may still conduct audits of prior years. Records should be retained for several years following termination.
FAQs
Who must file Texas Form 05-359?
Any taxable entity seeking a certificate of termination, withdrawal, or administrative dissolution in the State of Texas must file Form 05-359 to request a Certificate of Account Status.
How long is the Certificate of Account Status valid?
The certificate is valid only through December 31 of the year it is issued, regardless of when it was granted during the year.
What is the difference between Form 05-359 and Form 05-391?
Form 05-359 is used for termination tax clearance, while Form 05-391 is generally associated with the Tax Clearance Letter Request for Reinstatement and Application for Reinstatement filings.
Does tax clearance end all future obligations?
Tax clearance ends future franchise tax obligations after termination, but prior tax years remain subject to audit, assessment, or review by field offices if issues are later identified.
Is Texas Form 05-359 related to other states?
Texas Form 05-359 applies only within the State of Texas. It is unrelated to the processes used by other agencies, including the California Secretary of State or federal security services, matters involving online attacks, or external system errors.
