What the Form Is For
The Texas Franchise Tax No Tax Due Information Report (Form 05-163) was a specialized filing option for Texas businesses that met certain criteria allowing them to report to the state without owing franchise tax for the 2023 report year. Think of it as a way to tell the Texas Comptroller, "I'm still in business and meeting my reporting obligations, but I don't owe any tax this year based on my situation."
The Texas franchise tax is a privilege tax—essentially a fee for the right to do business in the state—imposed on entities formed in Texas or conducting business there. While most businesses must calculate and pay tax based on their revenues, certain qualifying entities could file this simpler No Tax Due Report instead of the more complex Long Form or EZ Computation reports.
For the 2023 report year, you could file Form 05-163 if your entity fell into one of these categories:
- Passive entity under Texas Tax Code Section 171.0003
- Total annualized revenue at or below $1,230,000
- Zero Texas gross receipts
- Qualified Real Estate Investment Trust (REIT)
- Verified new veteran-owned business
Important note: Starting with reports due on or after January 1, 2024, the No Tax Due Report (Form 05-163) was discontinued. Entities below the revenue threshold no longer need to file a franchise tax report but must maintain registration status.
When You’d Use Form 05-163
Annual Filing
For the 2023 report year, Form 05-163 was due on May 15, 2023 (or the next business day if it fell on a weekend/holiday). It covered accounting periods ending in 2022.
Late Filing
- File late if you missed the deadline but still qualify
- Mandatory $50 penalty applies
- Must be filed electronically
Final Filing
- Required when terminating business or ending Texas nexus
- Due within 60 days of termination or cessation
Amended Filing
- Used to correct qualification errors
- Must be filed on paper
- Include a cover letter and mark “AMENDED” on each page
Filing Extension
- Extension deadline: November 15, 2023
- Request via Webfile or Form 05-164
- Typically no payment required for no-tax-due filers
Key Rules or Details for 2023
Revenue Threshold
- Threshold: $1,230,000 annualized revenue
- Formula:
(total revenue ÷ days in period) × 365
Passive Entity Rules
Entity Type Requirements
- Must be a general partnership, limited partnership, or trust
Income Requirements
- At least 90% from passive sources:
- Dividends
- Interest
- Capital gains
- Royalties
- Partnership income
Restrictions
- No more than 10% from active business
- Rental income does NOT count as passive
Other Qualification Categories
REIT Qualification
- Must meet Texas Tax Code Section 171.0002(c)(4)
Zero Texas Receipts
- No Texas-sourced income during reporting period
Veteran-Owned Business
- Must be pre-approved by the Comptroller
Filing Requirements
- Electronic filing required (Webfile or approved software)
- Required companion reports:
- Form 05-102 (Public Information Report)
- Form 05-167 (Ownership Information Report)
- Passive entities are exempt from these reports
Step-by-Step (High Level)
Step 1: Confirm Eligibility
- Identify qualification category
- Verify revenue or status requirements
Step 2: Gather Information
- Texas taxpayer number
- Accounting period dates
- Revenue or qualification documentation
Step 3: Access Webfile
- Log in using taxpayer number and XT code
Step 4: Select Report Type
- Choose Form 05-163
- Indicate annual or final filing
Step 5: Enter Entity Information
- Input accounting period
- Select qualification category
- Enter revenue (if applicable)
Step 6: File Required Information Report
- Form 05-102 or 05-167 (unless exempt)
Step 7: Submit and Save Confirmation
- Review entries
- Submit electronically
- Save confirmation number
Common Mistakes and How to Avoid Them
Misunderstanding Revenue Threshold
- Using net income instead of total revenue
- Always calculate based on gross revenue
Incorrect Annualization
- Failing to adjust for short accounting periods
- Use the proper formula
Passive Entity Misclassification
- Confusing federal vs. Texas definitions
- Rental income does not qualify
Missing Information Reports
- Forgetting Form 05-102 or 05-167
- Only passive entities are exempt
Filing on Paper
- Electronic filing is mandatory
- Paper only allowed with special approval
First-Year Filing Errors
- Misreporting accounting period
- First report may be a one-day period
Assuming No Filing Is Required
- Filing was still required for 2023
- Non-filing leads to penalties
What Happens After You File
Confirmation
- Immediate confirmation number issued
- Save for records
Processing
- Comptroller reviews for completeness
- Notices sent if corrections needed
Account Status Update
- Marked compliant for 2023
- Required for Certificate of Account Status
Public Records
- Public Information Report becomes public
- Ownership Information Report remains confidential
Future Reporting
- 2023 filing applies only to that year
- 2024 rules eliminate filing for qualifying entities
Late Filing Penalty
- $50 penalty assessed
- Waiver possible via Form 89-224
Final Filing Follow-Up
- File Form 05-359 if terminating
- Required for business closure approval
FAQs
What’s the difference between the no tax due threshold and the EZ Computation threshold?
The no tax due threshold ($1,230,000 for 2023) determines whether you owe no tax at all and can file Form 05-163. The EZ Computation threshold ($20 million) applies when tax is owed but allows a simplified calculation method. The key difference is whether any tax liability exists.
Do I qualify as a passive entity if I only own rental properties?
Probably not. Rental income does not count toward the 90% passive income requirement under Texas law. Additionally, your entity must meet strict structural and income criteria, which most rental-focused LLCs do not satisfy.
Does a federal extension apply to Texas franchise tax?
No. Federal and Texas filings are separate. You must request a Texas extension independently through Webfile or Form 05-164.
Can I file Form 05-163 on paper?
No, electronic filing is required unless you receive special approval. Mailing a paper form without approval does not count as filing.
Do I need to file again if I filed last year?
For 2023, yes—if you still qualified. Starting in 2024, qualifying entities no longer need to file this report.
What if I’m closing my business?
You must file a final Form 05-163 within 60 days of closing. You may also need Form 05-359 to complete termination with the state.
What if I filed but later realize I didn’t qualify?
You must file an amended report using the correct form, pay any tax due, and include a written explanation. Penalties and interest may apply.
