What the Form Is For
Texas Form 05-163, the Franchise Tax No Tax Due Information Report, was a specialized document that allowed certain qualifying businesses to report to the Texas Comptroller of Public Accounts without owing any franchise tax. The franchise tax itself is a privilege tax imposed on entities formed or organized in Texas, or doing business in Texas. Form 05-163 served as an official declaration that your business fell into one of several categories where no tax payment was required, while still maintaining your good standing with the state.
For the 2010 report year, this form was available to four main categories of entities:
Eligible Entity Categories
- Businesses with annualized total revenue of $1 million or less (the "no tax due threshold")
- Passive entities as defined in Texas Tax Code Section 171.0003
- Entities with zero Texas gross receipts
- Real Estate Investment Trusts (REITs) meeting specific qualifications under Texas Tax Code Section 171.0002(c)(4)
Think of it as your business's way of saying "we exist, we're following the rules, but we don't owe you any money this year."
Filing Requirements
Importantly, filing Form 05-163 didn't exempt you from all franchise tax obligations. You still needed to file either:
- Public Information Report (Form 05-102), or
- Ownership Information Report (Form 05-167)
depending on your business structure.
Important Update
Note: The Texas Legislature made significant changes to franchise tax reporting requirements in 2023. Form 05-163 was discontinued beginning with the 2024 report year. However, it remained in use through 2023 for historical filings.
When You’d Use It (Late or Amended Filing)
The annual Form 05-163 was due on May 15 each year.
Filing Deadlines
- Standard due date: May 15
- Weekend/holiday: Moves to next business day
Late Filing Consequences
If you missed the deadline:
- $50 late filing penalty applied
- Applies even if no tax is owed
Amended Filing
You could file an amended Form 05-163 to:
- Correct math errors
- Update information
- Fix data entry mistakes
Final Report Filing
When Required
- Business closes
- Operations end
- Entity withdraws from Texas
Form Used
- Form 05-163-F (Final Report)
Electronic Filing Requirement
Beginning January 1, 2016:
- Electronic filing became mandatory
- Methods included:
- Webfile system
- Approved software providers
Paper filing required special exemption approval.
Key Rules to Remember
Revenue Threshold Calculation
- Based on annualized total revenue
- Not limited to Texas income
Annualization Formula
- Divide revenue by number of days
- Multiply by 365
Passive Entity Qualification
Passive entities qualify regardless of revenue if:
- 90% of income is passive (e.g., interest, dividends, rents)
Required Companion Reports
All filers must also submit:
- Form 05-102 (Public Information Report), or
- Form 05-167 (Ownership Information Report)
Failure to file leads to:
- Delinquency notices
- Possible forfeiture of business rights
Combined Group Rules
- Eligibility based on group revenue, not individual entity
- Reporting entity files on behalf of group
Enforcement
Failure to comply results in:
- Penalties
- Escalating notices
- Forfeiture of right to transact business
Step-by-Step Filing Process (High Level)
Step 1: Determine Your Eligibility
- Calculate annualized revenue
- Confirm qualification category:
- Below threshold
- Passive entity
- Zero Texas receipts
- REIT
Step 2: Gather Required Information
- Taxpayer number
- Business name and details
- Reporting period dates
- Revenue figures
- Officer/authorized signer info
Step 3: Complete Form 05-163
- Select qualification category
- Enter required details
- Sign under penalty of perjury
Step 4: Prepare the Required Information Report
- Form 05-102 (PIR), or
- Form 05-167 (OIR)
Step 5: Submit Your Filing
- Mail (for 2010 year), or
- File electronically
Step 6: Retain Documentation
- Keep records for at least 4 years
- Maintain:
- Filed forms
- Calculations
- Correspondence
Common Mistakes and How to Avoid Them
Filing the Wrong Information Report
- Incorrect pairing of forms
- Leads to deficiency notice
Failing to Annualize Revenue
- Causes incorrect eligibility
- Example:
- $700,000 over 8 months = ~$1.09M annualized
Missing Signatures
- Unsigned reports = incomplete filing
Overlooking Combined Group Rules
- Filing individually when group filing required
Filing Late Without Handling Penalties
- $50 penalty still applies
- Ignoring leads to further issues
Confusing "No Tax Due" With "Tax-Exempt"
- Not the same thing
- Filing still required annually
What Happens After You File
Processing Timeline
- Takes several weeks
- Reviewed for completeness and accuracy
If Filing Is Accepted
- Business remains in good standing
- No additional action required
If Issues Are Found
- Deficiency notice issued
- Must correct within deadline
Enforcement Process
Step 1: Notice of Intent (Form 05-211)
- 45-day response window
Step 2: Forfeiture Notice (Form 05-212)
- Loss of right to transact business
Reinstatement Process
To reinstate:
- File missing reports
- Pay penalties
- Request Tax Clearance (Form 05-391)
- Submit to Secretary of State
Public Record Status
- Filed reports become public
- OIR data remains confidential
FAQs
If my business had $950,000 in revenue, why file Form 05-163?
While both methods may result in zero tax, Form 05-163 simplifies compliance and formally declares eligibility under the no-tax-due category.
Does filing Form 05-163 make my business permanently exempt?
No. Qualification is determined annually based on revenue and status.
What happens if I forget the Public Information Report?
You’ll receive a deficiency notice and must submit the missing form to avoid penalties or forfeiture.
Can I file electronically?
Yes. Electronic filing became mandatory for reports due after January 1, 2016.
What if I’m part of a combined group?
You don’t file individually. The reporting entity files on behalf of the group.
Does a deficiency notice mean I owe tax?
Not necessarily. Most notices relate to missing or incorrect documentation.
Does the $1 million threshold include all revenue?
Yes. It includes total revenue from all sources, not just Texas-based income.
