What the Form Is For
Texas Form 05-163 was the state's way of letting smaller businesses tell the Texas Comptroller, ""We're still here, but we didn't make enough money to owe franchise tax this year."" Think of franchise tax as a privilege tax—a fee companies pay for the right to do business in Texas. Not all businesses owe this tax every year, and Form 05-163 existed specifically for those that qualified to owe nothing.
For the 2018 report year, if your business had total revenue of $1,130,000 or less (when calculated on an annual basis), you could file this simplified form instead of the more complex franchise tax returns. The form essentially told the state that while your business existed and operated during that period, your revenue stayed below the threshold that triggers an actual tax payment.
Beyond just low-revenue businesses, Form 05-163 served several other types of entities:
Eligible Entity Types
- Brand-new veteran-owned businesses during their first five years of operation
- Qualifying passive entities (those that primarily hold property or investments rather than actively conducting business)
- Certain qualifying real estate investment trusts
The form allowed these entities to meet their reporting obligations without calculating complicated tax margins or owing any payment. Texas Comptroller of Public Accounts
Important Status Update
An important note: Form 05-163 was discontinued for report years 2024 and later due to legislative changes. Businesses that previously used this form now follow different reporting procedures, though the information here remains relevant for understanding historical filings and the 2018 tax year specifically.
When You’d Use Form 05-163
Late Filing Rules
For the 2018 report year, your Form 05-163 was originally due on May 15, 2018. If that date fell on a weekend or holiday, the deadline moved to the next business day.
If you filed late—even just one day—Texas assessed a $50 late filing penalty automatically. This penalty applied regardless of whether you owed any actual tax.
The law required all No Tax Due Reports originally due on or after January 1, 2016, to be filed electronically through:
- The state's Webfile system
- Approved software providers
Paper forms were not accepted unless you received special approval with a written explanation. Texas Comptroller of Public Accounts
Amended Reports
Amended reports could be filed if you discovered errors after submitting your original Form 05-163.
Common Reasons for Amendments
- Mathematical mistakes
- Incorrect entity information
- Filing the wrong type of report
If your amended filing results in tax owed, you must switch to:
- Form 05-158, or
- Form 05-169
The state allows amendments for corrections or refund claims. Texas Comptroller of Public Accounts
Reinstatement After Forfeiture
If your business lost its right to operate (“forfeiture”), you must:
Reinstatement Requirements
- File all missing reports
- Pay penalties and interest
- Submit Form 05-391 (Tax Clearance Letter Request)
Key Rules or Details for 2018
Revenue Threshold Rule
The most critical rule: your annualized total revenue must be $1,130,000 or less.
Annualization Formula
- Divide actual revenue by number of days in the period
- Multiply by 365
Texas Comptroller of Public Accounts
Required Companion Reports
Filing Form 05-163 alone is not enough.
Required Forms
- Form 05-102 (Public Information Report)
- Form 05-167 (Ownership Information Report)
Who Files What
- Corporations, LLCs, LPs → Public Information Report (public record)
- Trusts, associations → Ownership Information Report (confidential)
Texas Comptroller of Public Accounts
Accounting Period Alignment
Your reporting period must match your federal tax accounting period.
Combined Groups
If part of a combined group:
- All members must be included in one report
- Even if some individually fall below the threshold
Electronic Filing Requirement
Mandatory for reports due on or after January 1, 2016.
Penalty for Paper Filing
- 5% penalty if filed without approval
Step-by-Step (High Level)
Step 1: Gather Required Information
- Texas taxpayer number
- Accounting period dates
- Total revenue
- Entity structure details
- Information report details
Step 2: Access Filing System
- Log into Webfile or approved software
- Verify entity details
Step 3: Complete Basic Information
- Entity name
- Taxpayer number
- Report year (2018)
- Privilege period
Step 4: Confirm Eligibility
- Revenue ≤ $1,130,000
- OR qualifies under special categories
Step 5: File Information Report
Public Information Report Includes
- Officers and directors
- Registered agent
- Ownership ≥10%
Ownership Information Report Includes
- Trustees, partners, or equivalent
Step 6: Sign and Submit
- Authorized signature required
- System validates and submits
Common Mistakes and How to Avoid Them
Miscalculating Annualized Revenue
Many businesses fail to properly annualize revenue.
Example Mistake
- $950,000 over 10 months ≠ qualified
- Annualized = $1,137,377 → disqualified
Forgetting Required Information Reports
Missing Form 05-102 or 05-167 can result in:
- Loss of legal standing
- Inability to sue/defend
- Personal liability risk
Filing the Wrong Form
If revenue exceeds threshold:
- Must file regular franchise tax return
- Even if tax owed = $0
Filing on Paper Without Approval
Triggers automatic:
- 5% penalty
Combined Group Errors
Common issues:
- Filing separately when required to combine
- Excluding group members
What Happens After You File
Confirmation of Filing
Immediately receive:
- Confirmation number
- Filing date
- Taxpayer details
Processing by State
- Information sent to Secretary of State
- Public records updated (for PIR)
- Confidential handling (for OIR)
Account Status Update
Your account shows:
- Current status
- No balance due
Useful for:
- Loans
- Licensing
- Contracts
If Errors Are Found
You’ll receive a notice with:
- Issue details
- Correction deadline (typically 30 days)
Ongoing Filing Requirement
You must file annually by May 15.
Closing a Business
Required Steps
- File final reports
- Pay all balances
- Submit Form 05-359
Texas Comptroller of Public Accounts
FAQs
If my business is brand new and didn’t make much money, do I have to file right away?
Not necessarily. New entities file their first report the following year. If your business started in March 2017, your first filing would be due May 15, 2018. If your revenue stays below the threshold when annualized, you would use Form 05-163.
Can I file if revenue exceeds the threshold but profit is low?
No. Eligibility is based strictly on total revenue, not profit. If revenue exceeds $1,130,000, you must file a regular franchise tax return—even if your final tax due is zero.
What’s the difference between the Public Information Report and Ownership Information Report?
The difference depends on your entity type:
- Corporations and LLCs → Public Information Report (public)
- Trusts and partnerships → Ownership Information Report (confidential)
Texas Comptroller of Public Accounts
What should I do if I discover an error after filing?
File an amended report immediately. If tax becomes due, switch to the correct franchise tax form and pay any applicable interest and penalties.
Do related companies file separately?
Not always. If required to file as a combined group, all members must be included in a single report. Each member still files its own information report.
What replaced Form 05-163 after 2024?
For 2024 onward:
- No filing required if under threshold ($2,470,000)
- Still must file information reports
- Some entities may file EZ or Long Form instead
Texas Comptroller of Public Accounts
Why is my business not in good standing now?
Most likely cause: missing filings in later years. You must:
- File all missing reports
- Pay penalties
- Submit Form 05-391 for reinstatement
Texas Comptroller of Public Accounts
This information is based on Texas franchise tax law as it applied to the 2018 report year and subsequent years. Tax laws change over time, and the No Tax Due Report (Form 05-163) was discontinued for report years beginning with 2024. Always verify current requirements with the Texas Comptroller of Public Accounts or consult with a qualified tax professional for your specific situation.
