What the Form Is For
Form 05-163, the Texas Franchise Tax No Tax Due Information Report, allowed certain qualifying businesses to report to the Texas Comptroller of Public Accounts that they owed no franchise tax for the 2021 report year. The Texas franchise tax is a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in the state. Rather than file a more complex franchise tax return with detailed calculations, eligible entities could use this simpler form to satisfy their annual reporting obligation when they met specific revenue thresholds or other qualifying criteria.
For the 2021 report year, the form was available in two versions: an annual report for entities continuing business operations and a final report for entities ending their Texas nexus. This simplified reporting option was designed to reduce the compliance burden on smaller businesses and certain other qualifying entities while still maintaining their good standing with the state. Note that Form 05-163 was discontinued beginning with the 2024 report year, but understanding its requirements remains important for businesses dealing with prior-year amendments or tax compliance issues from that period.
When You’d Use Form 05-163
Annual Filing
You would file the annual version of Form 05-163 for the 2021 report year (originally due May 15, 2021, though extended to June 15, 2021) if your entity had annualized total revenue of $1,180,000 or less. This threshold applied to reports due in 2020 and 2021 specifically. Other qualifying scenarios included being a passive entity (earning at least 90 percent of gross income from passive sources), a qualifying Real Estate Investment Trust (REIT), or a new veteran-owned business during its initial five-year period.
Final Report
You would file the final version when your Texas-formed entity was terminating, converting, or merging, or when your out-of-state entity was ending its Texas nexus, provided you still met the revenue threshold or other qualifying criteria. The final report had to be filed in the year of termination, conversion, or merger, and no later than 60 days after ceasing to do business in Texas for out-of-state entities.
Late Filing
If you missed the original deadline, you could still file Form 05-163 late, but a $50 late-filing penalty would be assessed regardless of whether any tax was actually due. This penalty applied even to No Tax Due Reports. The law required all No Tax Due Reports originally due on or after January 1, 2016, to be filed electronically through the Comptroller's Webfile system, approved third-party software, or approved form providers.
Amended Filings
To correct errors on a previously filed Form 05-163, you would need to submit an amended paper report with "AMENDED" written across the top of each page and include a cover letter explaining the reason for the amendment. Amended reports could address mathematical errors, support a refund claim, or correct information that might affect your account status with the Secretary of State.
Key Rules or Details for 2021
Revenue Threshold
The $1,180,000 revenue threshold for 2021 reports was critical—this amount represented your entity's annualized total revenue, not just Texas revenue. To calculate annualized total revenue, you would take your actual revenue for your accounting period and adjust it to a 12-month equivalent. For example, if your accounting period was only six months and you earned $600,000, your annualized total revenue would be $1,200,000, placing you above the threshold.
Electronic Filing Requirement
All No Tax Due Reports for 2021 had to be filed electronically unless you requested and received a waiver. The electronic filing requirement applied to reports originally due on or after January 1, 2016. Filing electronically through Webfile was free and helped ensure faster processing with built-in error checking.
Required Companion Forms
You still had to file Form 05-102 (Public Information Report) or Form 05-167 (Ownership Information Report) along with your Form 05-163. The Public Information Report was required for most entity types and disclosed information about your business's officers, directors, and owners. This companion report was mandatory even though you owed no tax.
Combined Group Rules
Combined groups had special rules—all members had to be included in the combined report even if individual members had revenue below the threshold. If the combined group's total annualized revenue was at or below $1,180,000, the entire group could file a No Tax Due Report.
Accounting Period Rules
Your accounting period matters significantly. The accounting year end date you reported generally had to be the federal accounting year end date that ended in the calendar year before your report was due. For a 2021 franchise tax report, this typically meant using the 2020 calendar or fiscal year-end figures. First-time filers had different rules based on when they established Texas nexus.
Step-by-Step (High Level)
Step One: Determine Your Eligibility
Calculate your annualized total revenue for your accounting period that ended in 2020. If it's $1,180,000 or less, you likely qualify. Alternatively, verify you meet the passive entity criteria (90 percent or more passive income), REIT requirements, or new veteran-owned business status. Combined groups must calculate the entire group's revenue together.
Step Two: Gather Your Information
You'll need your 11-digit Texas taxpayer number (assigned by the Comptroller when you first registered), your legal entity name exactly as registered with the Secretary of State, your accounting period begin and end dates, and your calculated annualized total revenue figure. Also collect information needed for the companion Public Information Report or Ownership Information Report.
Step Three: Access the Filing System
Log into the Texas Comptroller's Webfile system using your taxpayer number and Webfile number (an XT number specifically for franchise tax reports). If you don't have Webfile access, you can register online or use approved third-party software. Paper filing required a waiver request.
Step Four: Complete Form 05-163
Enter your entity information, accounting period dates, and annualized total revenue. Indicate whether you're filing an annual or final report. For passive entities, REITs, and veteran-owned businesses, mark the appropriate designation. Double-check all figures before proceeding, as errors could trigger notices or processing delays.
Step Five: File the Public Information Report
Complete either Form 05-102 (Public Information Report) or Form 05-167 (Ownership Information Report) depending on your entity type. Most entities filed Form 05-102. This report must be signed by an officer, director, or other authorized person and submitted along with Form 05-163.
Step Six: Submit and Retain Confirmation
Submit both forms electronically through Webfile. The system will generate a confirmation number—save this for your records. The Comptroller processes reports and typically updates your account status within a few weeks. You can check your account status online anytime through the Comptroller's website.
Common Mistakes and How to Avoid Them
Mistake One: Miscalculating Annualized Revenue
Many filers incorrectly use only their Texas-sourced revenue or forget to annualize a short accounting period. The threshold applies to total revenue from all sources, annualized to 12 months. If you operated for only eight months and earned $800,000, your annualized revenue is $1,200,000 ($800,000 ÷ 8 × 12), which exceeds the threshold. Always annualize before comparing to the $1,180,000 limit.
Mistake Two: Filing Without the Required Information Report
Form 05-163 alone doesn't satisfy your franchise tax obligations. You must also file Form 05-102 or Form 05-167. Failing to submit both forms will result in your account showing delinquent status, potentially preventing you from obtaining a Certificate of Account Status needed for business transactions with the Secretary of State. Always file both reports together.
Mistake Three: Using Wrong Accounting Period Dates
For annual reports, your accounting year end date should be your federal accounting year end that occurred in 2020 for a 2021 report. Using the wrong dates can cause processing errors or miscalculations. First-time filers have special rules—your accounting year begin date is when you established Texas nexus, not necessarily your federal accounting period start. Review the Comptroller's guidance on accounting periods carefully.
Mistake Four: Missing the Electronic Filing Requirement
Some taxpayers print and mail paper forms without realizing electronic filing is mandatory for No Tax Due Reports since 2016. Paper reports filed without a waiver request may be rejected or assessed additional penalties. Unless you've specifically requested and received approval for paper filing, use Webfile or approved software.
Mistake Five: Forgetting About Combined Group Reporting
If your entity is part of a combined group, individual member entities don't file separate No Tax Due Reports—the reporting entity files one combined report including all members. Filing individually when you're part of a combined group creates account discrepancies and triggers delinquency notices. Verify your reporting structure before filing.
What Happens After You File
Once you submit Form 05-163 and the accompanying information report electronically, the Comptroller's office processes your filing and updates your account. Processing typically takes several weeks, though it may take longer during peak filing season around the May deadline. You can monitor your account status online through the Comptroller's website using your taxpayer number.
If your report is accepted without issues, your account will show "No Tax Due" status and your filing obligation for that report year is satisfied. You won't receive a bill or additional correspondence unless there's a problem. Your entity remains in good standing with the Comptroller, which is essential for maintaining active status with the Secretary of State.
If the Comptroller identifies errors or missing information, you'll receive a notice explaining the problem and what you need to do to resolve it. Common issues include incomplete information reports, mismatched accounting periods, or mathematical errors in annualized revenue calculations. Respond promptly to these notices to avoid penalties and maintain good standing.
For entities filing final reports, processing the final No Tax Due Report is a necessary step before the Secretary of State will allow you to officially terminate, merge, convert, or withdraw your registration. After filing your final report, you'll need to request a Certificate of Account Status showing all tax obligations are satisfied. This certificate must be submitted to the Secretary of State along with your termination documents.
Your reporting obligation continues annually until you file a final report or otherwise end your franchise tax responsibility. Simply filing a No Tax Due Report for one year doesn't eliminate future filing requirements. You must file for each subsequent report year until you officially close or terminate your entity through the proper channels.
If you later discover errors in your filed report, you can file an amended Form 05-163 with supporting documentation explaining the corrections. Depending on the nature of the error, amendments might affect your tax liability or account status, potentially triggering refund claims or additional tax due.
FAQs
Do I need to file Form 05-163 if my revenue is below the threshold?
For report years through 2023, having annualized total revenue at or below the no tax due threshold ($1,180,000 for 2021 reports) meant you could file Form 05-163, but you still had to file either Form 05-102 or Form 05-167. Starting with 2024 reports, the rules changed—entities below the threshold no longer file Form 05-163 but must still file the information reports. For 2021 specifically, filing Form 05-163 was your way of formally reporting your no tax due status.
Can I file Form 05-163 if I calculated tax due but it's less than $1,000?
No. The form is specifically for entities that owe no tax based on meeting the revenue threshold or other qualifying criteria (passive entity, REIT, veteran-owned business). If you calculated any tax due, even amounts under $1,000, you must file either the EZ Computation form or the Long Form instead, not Form 05-163. The $1,180,000 revenue threshold determines eligibility, not the calculated tax amount.
What happens if I file a No Tax Due Report late?
A $50 late-filing penalty is assessed on any franchise tax report filed after the due date, including No Tax Due Reports. This penalty applies even though you owe no actual tax. The penalty is charged in addition to any other penalties or interest that might apply. You can request a penalty waiver by completing Form 89-224 after filing your report and paying any amounts due, explaining the circumstances that caused the late filing.
If I filed a federal extension with the IRS, am I automatically extended for Texas franchise tax?
No. Federal extensions don't automatically extend your Texas franchise tax deadline. You must separately request a franchise tax extension from the Texas Comptroller by the original due date (May 15 for most entities, extended to June 15 for 2021 reports). Extension requests must include payment of either 100 percent of last year's tax or 90 percent of the current year's estimated tax. For No Tax Due Reports, this typically means zero payment, but you still need to formally request the extension.
Do passive entities and REITs file the same Form 05-163 as entities below the revenue threshold?
Yes, the same Form 05-163 was used, but these entities had different qualification criteria. Passive entities earned 90 percent or more of their gross income from specified passive sources. REITs met specific federal tax requirements. Both entity types could file Form 05-163 regardless of their revenue levels. On the form, you would indicate your entity type so the Comptroller could verify your qualification under the appropriate rules.
Can combined groups file No Tax Due Reports?
Yes, if the combined group's total annualized revenue is at or below the no tax due threshold ($1,180,000 for 2021), the group can file Form 05-163 as a combined report. Individual members don't file separate reports—the reporting entity files for the entire group. However, each Texas-organized member or member with Texas nexus must still file an individual Public Information Report or Ownership Information Report.
What if I'm terminating my business but owe tax from prior years?
You cannot file a final No Tax Due Report if you have outstanding tax liabilities from previous report years. You must first resolve all prior-year obligations by filing delinquent reports, paying amounts due, and bringing your account current. Only then can you file a final report for the termination period. The Comptroller won't issue a Certificate of Account Status needed for Secretary of State termination until all franchise tax obligations are satisfied.
