What the Form Is For
The Texas Franchise Tax No Tax Due Information Report (Form 05-163) is an annual filing submitted to the Texas Comptroller of Public Accounts when your business entity owes no franchise tax but still needs to maintain its good standing with the state. This streamlined report serves as your official declaration that your entity qualifies for no tax due status while keeping your business registered and compliant with Texas law.
For the 2022 report year, businesses could file this form if they fell into specific categories: entities with annualized total revenue at or below $1,230,000, passive entities (certain partnerships or trusts earning primarily passive income), Real Estate Investment Trusts (REITs) meeting specific Texas Tax Code qualifications, entities with zero Texas gross receipts, or qualifying new veteran-owned businesses. Filing this report keeps your business in good standing without requiring you to calculate or pay franchise tax, though most entities must still submit a Public Information Report or Ownership Information Report alongside it.
Think of Form 05-163 as your business's way of checking in with Texas to confirm "we're still here, we're operating legitimately, but our revenue situation means we don't owe franchise tax this year." It's considerably simpler than the standard franchise tax returns because you don't need to wade through complex tax calculations—you're essentially affirming your eligibility and providing basic identifying information.
When You’d Use It
You'll file Form 05-163 annually by May 15 (or the next business day if May 15 falls on a weekend or holiday) if your entity qualifies for no tax due status. This deadline coincides with the regular franchise tax filing deadline, so mark your calendar accordingly. You're reporting on your accounting period from the previous calendar year—for example, a 2022 report filed in May 2022 typically covers your 2021 accounting period.
Sometimes you'll need to file a late or amended No Tax Due Report. If you missed the May 15 deadline entirely, you'll face a $50 late filing penalty regardless of whether you owe tax. You might also file an amended report if you discovered errors in your original submission, need to support a refund claim, or initially filed the wrong report type. Perhaps you filed the Long Form or EZ Computation when you actually qualified for No Tax Due status, or you miscalculated your annualized revenue and now realize you fall below the threshold.
When your business is closing its doors or converting to a different entity type, you'll file a final No Tax Due Report within 60 days of ceasing operations in Texas. This final report uses a different version of Form 05-163 marked "Final" rather than "Annual." It's your last official communication with the Comptroller regarding franchise tax, closing out your account properly so you don't receive notices about unfiled reports after you've ceased doing business.
Key Rules or Details for 2022
Revenue Threshold
For 2022 reports, the no tax due threshold stands at $1,230,000 in annualized total revenue. This means if your entire business generates $1,230,000 or less in revenue annually, you qualify to file the No Tax Due Report instead of calculating franchise tax. Revenue annualization is critical: if you operated for only part of the year, you must annualize your revenue to determine eligibility. For instance, if you earned $400,000 during four months of operation, that annualizes to $1,200,000 for the full year, keeping you below the threshold.
Electronic Filing Requirement
Electronic filing is mandatory for all No Tax Due Reports originally due after January 1, 2016. You must file through the Comptroller's Webfile system unless you have an approved waiver for electronic filing hardship. Paper returns are only accepted when you've specifically requested and received permission to file in paper format. This electronic requirement streamlines processing and reduces errors, though it means you'll need internet access and basic familiarity with the online filing system.
Passive Entity Rules
Passive entities have special status under Texas Tax Code Section 171.0003. To qualify, you must be a partnership or trust (but not a business trust) that earns at least 90 percent of your gross income from passive sources like dividends, interest, capital gains, and royalties. You must maintain this passive status throughout your entire accounting period. Importantly, rental income doesn't count as passive for this test. If you qualify as passive, you can file the No Tax Due Report regardless of your revenue level, and you're exempt from filing the Public Information Report or Ownership Information Report.
Required Companion Reports
Most entities filing the No Tax Due Report must also file either a Public Information Report (Form 05-102) or Ownership Information Report (Form 05-167) by the same May 15 deadline. Corporations, LLCs, limited partnerships, professional associations, and financial institutions file the PIR, listing officers and directors. Other entity types file the OIR, providing ownership information. Only passive entities and new veteran-owned businesses are exempt from this additional information reporting requirement. Failing to file these information reports can result in forfeiture of your right to conduct business in Texas, even if you properly filed your No Tax Due Report.
Step-by-Step (High Level)
Step 1: Gather Required Information
Start by gathering your essential information: your Texas taxpayer number, your accounting period dates, your entity's legal name and address, and your revenue figures. You'll need to know your accounting year begin date (typically the day after your previous report's end date) and accounting year end date (generally your last federal accounting period end date in the year before the report is due). If you're claiming passive entity status or qualifying as a REIT, make sure you have documentation supporting that classification.
Step 2: Calculate and Confirm Eligibility
Calculate your annualized total revenue using the same methodology required for the Long Form franchise tax report. Take your total revenue for the accounting period and annualize it if you didn't operate for a full 12 months. Compare this figure against the $1,230,000 threshold for 2022. Double-check your qualification under one of the five categories: below-threshold revenue, passive entity, REIT status, zero Texas gross receipts, or qualifying new veteran-owned business. You must honestly meet at least one of these criteria to file the No Tax Due Report.
Step 3: Access Webfile System
Access the Comptroller's Webfile system through the Texas Comptroller website. Log into your Webfile account using your credentials, or create an account if this is your first time filing electronically. Select the franchise tax filing option and choose the No Tax Due Report for the 2022 report year. The system will walk you through a series of questions about your entity type, accounting periods, and qualification reasons.
Step 4: Complete and Submit the Form
Answer the qualification questions carefully, indicating which criterion makes you eligible for no tax due status. Enter your revenue amount (passive entities and certain others may enter zero). Review all information for accuracy before submitting—the electronic system will flag obvious errors, but you're responsible for the correctness of all data. Submit your report electronically by the May 15 deadline. The system will provide confirmation of your filing, which you should save for your records.
Step 5: File Companion Report
Don't forget the companion filing: unless you're a passive entity or new veteran-owned business, you must also file either Form 05-102 (Public Information Report) or Form 05-167 (Ownership Information Report) through Webfile. This separate submission lists your officers, directors, managers, or owners depending on your entity type. Both reports must be filed to fully satisfy your annual filing requirements.
Common Mistakes and How to Avoid Them
Miscalculating Revenue
The most frequent error is miscalculating annualized revenue, which determines your eligibility entirely. Business owners often forget to annualize when they operated for only part of the year, or they incorrectly include or exclude certain revenue types. Avoid this by carefully following the revenue instructions from the Long Form (Form 05-158-A) and performing annualization correctly.
Filing When Not Qualified
Another common pitfall is filing the No Tax Due Report when you don't actually qualify. Some entities mistakenly believe that owing less than $1,000 in tax means they can file the No Tax Due Report, but these are different concepts.
Forgetting Required Reports
Many filers forget the required Public Information Report or Ownership Information Report, assuming the No Tax Due Report is sufficient. This oversight can trigger forfeiture proceedings against your entity.
Missing the Deadline
Missing the May 15 deadline triggers an automatic $50 late filing penalty, even when you owe no tax. Mark your calendar early and prepare ahead.
Filing the Wrong Report Type
Some entities file the No Tax Due Report when they actually owe tax. This can result in penalties, interest, and compliance issues.
What Happens After You File
Once you submit your No Tax Due Report through Webfile, the system provides immediate confirmation of your filing. Save this confirmation—it's your proof that you filed timely. The Texas Comptroller's office processes your report, typically within a few weeks.
If your report is accepted without issues, your entity remains in good standing with the state. You won't receive a tax bill or refund since no tax is due.
If issues arise, you'll receive a notice explaining the problem. Respond promptly to avoid penalties or enforcement actions.
Your business must continue filing annually. If your revenue changes, you may need to switch to a different report type in future years.
FAQs
Can I file Form 05-163 if I owe less than $1,000 in franchise tax?
No, the no tax due threshold relates to your total revenue, not your tax liability. If your annualized total revenue exceeds $1,230,000 for 2022 reports, you must file the EZ Computation or Long Form.
What qualifies as a passive entity?
Texas defines passive entities under Tax Code Section 171.0003. You must be a partnership or trust earning at least 90 percent of income from passive sources like dividends, interest, and capital gains.
What should I do if I miss the deadline?
File immediately through Webfile. You’ll incur a $50 penalty, but late filing is better than not filing at all.
Do I still need to file a PIR or OIR?
Yes, most entities must file a Public Information Report or Ownership Information Report alongside Form 05-163 unless exempt.
Can I file a paper form?
Generally no. Electronic filing is required unless you receive special approval for a waiver.
Can I correct a wrong filing?
Yes, you can submit an amended report through Webfile with the correct information.
What if my business is closing?
You must file a final version of Form 05-163 within 60 days of closing, marked as “Final.”
