What the Form Is For
The Texas Form 05-163, officially titled the "Texas Franchise Tax No Tax Due Information Report," was a simplified filing option available through the 2023 report year for businesses that met specific revenue thresholds or qualified as passive entities. This form allowed eligible Texas businesses to satisfy their annual franchise tax reporting obligations without calculating or paying any tax. The Texas franchise tax itself is a privilege tax imposed on businesses formed in Texas or doing business within the state, and while many businesses owe tax, Form 05-163 provided a streamlined pathway for those below certain revenue limits.
For the 2023 report year, any taxable entity with annualized total revenue at or below $1,230,000 could file this No Tax Due Report instead of completing the more complex Long Form or EZ Computation reports. Additionally, passive entities—specifically defined under Texas Tax Code Section 171.0003 as partnerships or trusts (other than business trusts) that receive at least 90 percent of their gross income from passive sources like dividends, interest, royalties, and capital gains—could also use this form regardless of their revenue level. The form served dual purposes: it confirmed the entity's tax-exempt status for that year while maintaining compliance with state filing requirements.
It's important to note that beginning with the 2024 report year, the Texas Comptroller discontinued Form 05-163 following legislative changes that significantly raised the no tax due threshold from $1,230,000 to $2,470,000 and eliminated the separate No Tax Due Report filing requirement altogether. However, understanding Form 05-163 remains relevant for businesses filing late or amended 2023 reports, resolving past-year compliance issues, or seeking historical context about Texas franchise tax evolution.
When You’d Use It (Late and Amended Filings)
While Form 05-163 was the standard filing for eligible businesses during the 2023 report year (with a May 15, 2023 deadline), there are still several situations where you might need to file this form today. If your business failed to file a 2023 franchise tax report by the original deadline, you're still required to file Form 05-163 if you qualified for no tax due status that year, even though the deadline has passed. Late filing will result in a $50 penalty assessed regardless of whether tax was owed, so addressing this sooner rather than later is advisable.
Amended filings represent another scenario where Form 05-163 remains relevant. If you originally filed a Long Form or EZ Computation report for 2023 but later realized your annualized revenue actually fell below the $1,230,000 threshold—perhaps due to accounting corrections or errors in your initial calculation—you can file an amended Form 05-163 to correct the record. This type of amendment could potentially result in a refund if you originally paid tax. However, amended reports that result in reduced tax liability function as refund requests and must meet specific refund requirements established by the Texas Comptroller.
You might also file Form 05-163 as a final report if your business ceased operations or ended its nexus in Texas during 2023 while meeting the revenue threshold. In this case, you'd use the "Final" version of Form 05-163 rather than the "Annual" version. The form exists in both annual and final variants, and selecting the correct version is essential. Texas entities terminating their existence must file their final reports in the year they plan to terminate and pay any amounts due before receiving a Certificate of Account Status from the Comptroller, which is required to formally terminate with the Texas Secretary of State.
Additionally, if your business was part of a tiered partnership structure or combined reporting group in 2023 and should have filed Form 05-163 but didn't, you may need to file this form now to bring your account current with the Comptroller's office.
Key Rules or Details for 2023
Understanding the specific eligibility criteria for Form 05-163 is crucial to filing correctly. For the 2023 report year, the no tax due threshold was precisely $1,230,000 in annualized total revenue. This means that if your business's annualized total revenue was at or below this amount, you qualified to file Form 05-163. Annualized total revenue is calculated by taking your total revenue for the accounting period, dividing by the number of days in that period, then multiplying by 365. This annualization becomes particularly important for businesses with accounting periods shorter or longer than 12 months.
The passive entity qualification provided an alternative pathway to filing Form 05-163. Under Texas Tax Code Section 171.0003, a passive entity must be either a partnership or trust (excluding business trusts) for the entire accounting period. Furthermore, at least 90 percent of the entity's gross income must come from passive sources including dividends, interest, foreign royalties and dividends, capital gains from the sale of investment assets, royalties from mineral properties, and royalties from other real and tangible personal property. Importantly, rental income does not count as passive income under this definition, and various recapture provisions can convert otherwise passive income into ordinary income that doesn't count toward the 90 percent threshold.
Another critical rule involved which entities must file information reports alongside Form 05-163. Corporations, limited liability companies, professional associations, limited partnerships, and financial institutions must file a Public Information Report (Form 05-102) along with their No Tax Due Report. Associations, trusts, and other taxable entities must instead file an Ownership Information Report (Form 05-167). These information reports capture essential business data and ownership details for state records, and filing the franchise tax report without the appropriate information report leaves your filing incomplete.
Certain entities were completely exempt from filing Form 05-163 or any franchise tax report. These include sole proprietorships (except single-member LLCs, which are taxable), general partnerships where all direct owners are natural persons (except limited liability partnerships), entities specifically exempt under Tax Code Chapter 171 Subchapter B, and various specialized entity types like qualified real estate investment trusts meeting specific criteria.
Step-by-Step (High Level)
Filing Form 05-163 for the 2023 report year involves several straightforward but essential steps.
Determine Eligibility
First, you must determine your filing eligibility by calculating your annualized total revenue for the reporting period or confirming your passive entity status. If your accounting period was exactly 12 months, your total revenue is already annualized. If not, you'll need to perform the annualization calculation by dividing total revenue by the days in your period and multiplying by 365.
Choose Report Type
Once eligibility is confirmed, decide whether you're filing an annual or final report. Annual reports are for ongoing businesses, while final reports are for those ending operations.
Complete the Form
Form 05-163 requires:
- 11-digit Texas taxpayer number
- Legal entity name
- Mailing address and contact information
- Accounting year begin and end dates
- Passive entity qualification (if applicable)
Prepare Required Information Report
- Form 05-102 (Public Information Report) for corporations, LLCs, etc.
- Form 05-167 (Ownership Information Report) for associations and trusts
File Electronically
Texas law requires electronic filing through Webfile at comptroller.texas.gov.
Common Mistakes and How to Avoid Them
One of the most frequent errors businesses make is incorrectly calculating annualized total revenue, particularly when their accounting period differs from 12 months. Many filers simply report their total revenue without annualizing it, which can lead to filing the wrong form type.
Another common mistake involves misunderstanding passive entity requirements. Texas has its own definition, and rental income does not count toward passive income for franchise tax purposes.
Failing to file the required information report (PIR or OIR) alongside Form 05-163 represents another significant error. Filing one without the other leaves your compliance incomplete.
Missing the filing deadline results in a mandatory $50 penalty per report, even if no tax is owed.
Business owners sometimes file Form 05-163 when they should instead file a Long Form or EZ Computation report if revenue exceeds $1,230,000.
What Happens After You File
Once submitted, the Texas Comptroller processes your filing and updates your account status. If compliant, your franchise tax obligation is considered satisfied.
If filed late, you will receive a $50 penalty notice. You may request a waiver under certain conditions.
For final filings, you must request a Certificate of Account Status (Form 05-359) to formally terminate your business.
If errors are found, the Comptroller will notify you. Respond promptly—usually within 60 days.
Your filing becomes part of the public record, except Ownership Information Reports, which remain confidential.
FAQs
Does filing Form 05-163 mean my business owes no franchise tax at all?
Yes, if you properly qualified, you owe no franchise tax for that reporting period. However, filing is still required to remain compliant.
Can I still file Form 05-163 for 2023 if I missed the deadline?
Yes. You must still file, though a $50 penalty will apply. Filing late is better than not filing at all.
What if I originally filed a Long Form but qualified for 05-163?
You can file an amended Form 05-163. This may result in a refund if tax was overpaid.
I'm a single-member LLC. Do I need to file?
Yes. Single-member LLCs are taxable entities in Texas and must file if eligible.
My business is a general partnership. Do we need to file?
Only if it’s an LLP or includes non-natural persons as partners. Otherwise, general partnerships are typically exempt.
What’s the difference between PIR and OIR?
PIR (Form 05-102) is public and used by corporations/LLCs. OIR (Form 05-167) is confidential and used by other entities.
What should I file for 2024 and beyond?
If revenue is below $2,470,000, no franchise tax report is required, but you must still file an information report.
