What the Form Is For
The Texas Form 05-163 is a specialized information report used by businesses that don't owe franchise tax to Texas. Think of it as a "check-in" form that tells the state your business exists and is operating, but your revenue is too low or your structure qualifies you for zero tax liability. The franchise tax itself is essentially a privilege tax that most businesses pay for the right to operate in Texas. However, not every business owes this tax every year.
For the 2017 report year, you could file Form 05-163 if your business fell into one of several categories. The most common situation was having annualized total revenue at or below $1,110,000—the "no tax due threshold" for that year. Other qualifying situations included being a passive entity under Texas Tax Code Section 171.0003, having zero Texas gross receipts, qualifying as a Real Estate Investment Trust under specific provisions, or being a pre-qualified new veteran-owned business as defined in Section 171.0005. Even though you didn't owe tax, Texas still required this filing to maintain your business's good standing with the state and keep your account current.
The form itself is relatively straightforward compared to the full franchise tax return. You provide basic identifying information about your business, specify which category qualifies you for the no tax due status, and report your revenue figures. It's accompanied by either a Public Information Report (Form 05-102) or an Ownership Information Report (Form 05-167), depending on your business structure. Together, these documents keep the state informed about your business operations while confirming you don't owe franchise tax for that reporting period.
When You'd Use It
Initial Annual Filing
The vast majority of businesses used Form 05-163 for their standard annual franchise tax obligation. If your 2017 annual report was due on May 15, 2017, and your business qualified under one of the no tax due categories, this was your primary filing. The annual report covered an accounting period based on your previous report's end date—you'd start the day after your last report ended. For most businesses following a calendar year, this meant reporting on activities from January through December of the previous year.
Late Filing Situations
If you missed the May 15, 2017 deadline and your business still qualified for no tax due status, you would still file Form 05-163, but it would be considered late. Beginning with reports originally due on or after January 1, 2016, Texas law mandated electronic filing for all No Tax Due Reports. There's no separate "late version" of the form—you simply file the same form after the deadline. However, you'd face a $50 penalty for filing late, even though you didn't owe any franchise tax. This penalty applied to the late filing itself, not to unpaid taxes.
Final Reports
You'd also use a final version of Form 05-163 if your business was terminating, converting its structure, or merging with another entity during 2017. Texas required a final franchise tax report within 60 days of the event causing your business to no longer have sufficient nexus (legal connection) to be subject to Texas franchise tax. If your business qualified for no tax due status at the time of termination, you'd file the Final No Tax Due Report rather than a final report with payment.
Amended Situations
If you discovered errors after filing your original 05-163, you would need to file an amended report. Unlike regular franchise tax reports that could sometimes be amended electronically, amended No Tax Due Reports had to be submitted in paper format. You'd need to include a cover letter explaining specifically what you were correcting and why, along with the corrected form and any supporting documentation.
Key Rules or Details for 2017
Electronic Filing Requirement
The most important rule for 2017 No Tax Due Reports was the mandatory electronic filing requirement. Beginning January 1, 2016, Texas law required all No Tax Due Reports originally due on or after that date to be filed electronically through the Comptroller's Webfile system. You couldn't simply mail in a paper copy. If you attempted to file a paper report when electronic filing was required, you were essentially requesting an exemption from the electronic filing requirement—something the Comptroller rarely granted. This marked a significant change from previous years when paper filing was acceptable.
Qualifying Conditions
To file Form 05-163 for 2017, you had to meet specific qualifying conditions. The $1,110,000 annualized total revenue threshold was the most commonly used qualifier, but it applied to your entire business revenue, not just what you earned in Texas. "Annualized" meant if you operated for less than a full year, your revenue was mathematically projected to a 12-month equivalent. For example, if you had $600,000 in revenue but only operated for six months, your annualized revenue would be $1,200,000—exceeding the threshold. Understanding this calculation was crucial because using the wrong threshold or miscalculating your annualized revenue meant filing the wrong form.
Public Information Reporting
Filing Form 05-163 didn't exempt you from the companion information reporting requirement. Every business filing a No Tax Due Report also had to file either Form 05-102 (Public Information Report) or Form 05-167 (Ownership Information Report). These forms disclosed ownership information, officer names, and principal business activities. The PIR applied to most corporations and LLCs, while the OIR was used by entities with more complex ownership structures. Both forms had to be completed, signed by an authorized person, and submitted together with your 05-163.
Maintaining Good Standing
Filing Form 05-163 properly and on time was essential to maintaining your franchise tax account status with Texas. Even though you didn't owe money, failure to file meant your account wasn't current. This could lead to serious consequences: the Comptroller would mail a "Notice of Intent to Forfeit Right to Transact Business," and if you didn't respond appropriately, your right to legally conduct business in Texas could be forfeited. The state took information reporting seriously regardless of whether tax was actually due.
Step-by-Step (High Level)
Determine Eligibility
Your first step was confirming you actually qualified to file the No Tax Due Report...
Gather Required Information
Once you confirmed eligibility, you'd collect all the information needed...
Access Webfile System
You'd log into the Texas Comptroller's Webfile system...
Complete Companion Reports
Within the same Webfile session, you'd complete Form 05-102 or 05-167...
Review and Submit
Before final submission, you'd review all entered information carefully...
Common Mistakes and How to Avoid Them
Misunderstanding the Revenue Threshold
One of the most frequent errors was misunderstanding which revenue counted...
Filing Paper When Electronic Required
Some businesses, especially those that had filed paper forms for years...
Forgetting the Public Information Report
Many businesses correctly filed Form 05-163 electronically...
Missing the Deadline Without Extension
The May 15 annual report deadline arrived quickly...
Using the Wrong Qualifying Category
Form 05-163 had several checkboxes for different reasons...
What Happens After You File
Confirmation and Record Keeping
Immediately after successfully filing through Webfile...
Account Status Update
Within days to weeks after filing, your franchise tax account status...
No Further Action Required
Since you didn't owe any franchise tax...
Potential Review or Questions
While most No Tax Due filings were simply processed...
State Database Updates
The information from your Public Information Report...
FAQs
Can I file a No Tax Due Report if my revenue is slightly over the threshold?
No—the $1,110,000 threshold for 2017 was a firm cut-off...
What if I already filed the Long Form but realize I qualified for No Tax Due?
If you filed a Long Form or EZ Computation Report showing zero tax due...
Do I still need to file if my business was inactive all year?
Yes, generally you still needed to file...
What's the difference between having "no tax due" and owing zero franchise tax?
This distinction confused many businesses...
Can I file an extension for a No Tax Due Report?
Yes, you could file Form 05-164 (Extension Request)...
What happens if I miss the deadline for filing Form 05-163?
Missing the May 15, 2017, deadline triggered a $50 late filing penalty...
Do I need to file anything in years after 2017 if my situation hasn't changed?
Franchise tax reporting was an annual obligation...
Sources:
This summary is based exclusively on information from the Texas Comptroller of Public Accounts.
