What Form 05-163 Is For
The Texas Franchise Tax No Tax Due Information Report (Form 05-163) was a simplified filing option that allowed certain qualifying businesses to satisfy their annual franchise tax reporting requirements without calculating or paying franchise tax. The form served as an official declaration to the Texas Comptroller of Public Accounts that your business met one of five specific criteria exempting it from owing franchise tax for that reporting period. Think of it as a way to stay in good standing with the state while confirming you don't owe any tax.
For the 2020 report year, businesses could file Form 05-163 if they fell into one of these categories: entities with total annualized revenue at or below $1,180,000 (the no tax due threshold for 2020), passive entities as defined by Texas law, Real Estate Investment Trusts (REITs) meeting specific qualifications, entities with zero Texas gross receipts, or pre-qualified new veteran-owned businesses. Even though these entities owed no tax, filing the form remained mandatory to maintain their right to conduct business in Texas and avoid potential forfeiture consequences.
The form was intentionally streamlined compared to the standard franchise tax returns. It required basic identifying information about your business, your accounting period, and verification of which exemption category applied to you. By filing Form 05-163, businesses confirmed their compliance with state franchise tax laws while avoiding the complexity of calculating taxable margin, determining appropriate tax rates, or completing lengthy schedules.
When You’d Use Form 05-163
Annual Filing Deadlines
Annual reports using Form 05-163 were due on May 15 each year. If May 15 fell on a weekend or legal holiday, the due date automatically moved to the next business day. The form covered your entity's accounting year, which could be any 12-month period your business used for federal tax purposes. For 2020 reports specifically, the accounting year end would typically fall sometime in 2019, with the report filed by May 15, 2020.
Final Filings
You also filed a final Form 05-163 when your business permanently closed, was acquired, merged, converted to a different entity type, or otherwise ceased to have nexus (sufficient business connection) with Texas. Final reports were due within 60 days after the event that ended your Texas franchise tax obligation. For example, if you dissolved your company on March 1, your final report would be due by April 30. The final version of Form 05-163 looked nearly identical to the annual version but was marked as "final" at the top.
Late Filings
If you missed the May 15 deadline, you could still file a late Form 05-163. The Comptroller assessed a $50 late filing penalty on reports filed after the due date, regardless of whether any tax was owed. This penalty applied even to No Tax Due Reports. Additionally, late filing could trigger more serious consequences including forfeiture of your entity's right to transact business in Texas, denial of access to Texas courts for lawsuits, and potential personal liability for officers and directors for certain business debts.
Amended Filings
Amended filings were less common but sometimes necessary. If you discovered after filing that you provided incorrect information or selected the wrong qualification category, you could file an amended Form 05-163 with a cover letter explaining the error. Time-sensitive amendments could be faxed to the Comptroller's office with "urgent" marked on the cover sheet. However, most routine changes, such as updated officer information, could simply be included on your next annual Public Information Report rather than requiring an immediate amendment.
Key Rules or Details for 2020
Electronic Filing Requirement
The most fundamental rule was the electronic filing requirement. Beginning January 1, 2016, all No Tax Due Reports were required to be filed electronically through the Comptroller's Webfile system or through approved electronic filing software providers. Paper forms were only accepted if you specifically requested and received a waiver from the electronic filing requirement for that report year. Filing by paper when you were required to file electronically resulted in an additional five percent penalty.
Revenue Threshold Rules
Understanding the $1,180,000 no tax due threshold for 2020 was critical. This figure represented your entity's annualized total revenue, not just your Texas revenue or net income. To determine if you qualified, you calculated your total revenue from all sources everywhere during your accounting period, then annualized it to a 12-month equivalent if your accounting period was shorter than a year. If this annualized total revenue was $1,180,000 or less, you qualified to file Form 05-163 rather than a full franchise tax return with tax payment.
Required Companion Reports
Even when you filed Form 05-163 and owed no tax, you were still required to file a companion report in most cases. Corporations, limited liability companies, limited partnerships, professional associations and financial institutions organized in Texas or having nexus in Texas had to file Form 05-102, the Public Information Report, which disclosed officer and director information. Other entity types filed Form 05-167, the Ownership Information Report. Only passive entities and new veteran-owned businesses were exempt from these information reporting requirements.
Accounting Period Rules
The privilege period and accounting period rules sometimes confused business owners. Your franchise tax report was based on your federal income tax accounting period. For calendar year businesses, the 2020 report covered January 1, 2019 through December 31, 2019. However, the tax you calculated (if you owed any) was for the privilege of doing business in Texas during the following year.
Step-by-Step (High Level)
Step 1: Gather Business Information
Filing Form 05-163 began with gathering your basic business information. You needed your 11-digit Texas taxpayer identification number, your accounting period dates, your legal entity name, business address, and contact details.
Step 2: Determine Qualification Category
Next, you determined which qualification category applied to your business. For most small businesses, this meant calculating annualized total revenue to confirm it fell at or below the $1,180,000 threshold.
Step 3: Access Webfile System
Once you confirmed your qualification category, you accessed the Comptroller's Webfile system and selected Form 05-163 for the appropriate report year.
Step 4: Complete and Sign the Form
The system guided you through entering your details and required you to electronically sign the form, certifying accuracy under penalty of perjury.
Step 5: Submit and Save Confirmation
After submission, you received an electronic confirmation receipt with a submission number. Save this for your records.
Step 6: File Companion Reports
Finally, you needed to file Form 05-102 or Form 05-167 if required. These reports were due on the same date and necessary to fully satisfy filing obligations.
Common Mistakes and How to Avoid Them
Filing the Wrong Form
One of the most frequent errors was filing Form 05-163 when the entity actually owed tax. Qualification was based on total revenue, not profit.
Miscalculating Annualized Revenue
Many businesses incorrectly calculated annualized revenue, especially for short accounting periods, leading to incorrect eligibility.
Forgetting Companion Reports
Failing to file Form 05-102 or 05-167 could result in forfeiture, even if Form 05-163 was correctly filed.
Missing the Deadline
Missing the May 15 deadline triggered penalties and potential forfeiture. Calendar reminders help avoid this.
Filing Paper Without Waiver
Submitting a paper form without an approved waiver resulted in an additional five percent penalty.
What Happens After You File
Confirmation and Processing
Once filed, you received an electronic confirmation. The Comptroller processed your return within a few business days.
Account Status and Certificates
You received a certificate confirming your account was in good standing, often required for business operations.
Secretary of State Updates
Filed Public Information Reports were forwarded to the Texas Secretary of State and updated in public records.
Ongoing Filing Obligations
You needed to file annually as long as your business operated in Texas and met nexus requirements.
Final Filing Outcomes
If filing a final report, the Comptroller closed your account and confirmed completion of franchise tax obligations.
FAQs
I formed my LLC in December 2019 and started business in January 2020. When is my first Form 05-163 due?
Your first franchise tax report is due May 15 of the year after you began business. Since you started business in early 2020, your first report would be due May 15, 2021.
Can I file Form 05-163 if I'm registered in Texas but my business is based in another state and I have no customers or revenue in Texas?
Potentially yes, depending on your total annualized revenue or if you have zero Texas gross receipts.
I filed Form 05-163 in May, but later realized my revenue exceeded the threshold. What should I do?
You need to file an amended return and contact the Comptroller to correct the filing.
My business is a passive entity. Do I still need to file Form 05-102?
No, passive entities are exempt from filing the Public Information or Ownership Information Report.
We're closing our business. Do we file an annual or final Form 05-163?
You file a final Form 05-163 within 60 days after ceasing Texas business activity.
I missed the May 15 deadline. Can I still file and what penalties apply?
Yes, you can still file online. A $50 late filing penalty applies.
My revenue was below the threshold but came from multiple states. Can I still use Form 05-163?
Yes, as long as total revenue from all sources is within the threshold.
