What the Form Is For
Texas Form 05-163, the Franchise Tax No Tax Due Information Report, is a special filing option for businesses that don't actually owe any franchise tax but still need to maintain their good standing with the state. Think of it as your business's way of checking in with Texas to say "we're still here, but we don't owe you any money this year."
The Texas franchise tax is a privilege tax that most businesses formed in Texas or doing business in the state must pay annually. However, not every company ends up owing tax. Form 05-163 exists specifically for businesses that fall below certain revenue thresholds or meet other qualifying criteria, allowing them to fulfill their filing requirement without going through the full franchise tax calculation process. This streamlined form demonstrates to the Texas Comptroller that your business remains active while documenting why you qualify to pay zero tax for the reporting period.
For the 2016 report year, this form was particularly significant because it marked a transition period—starting January 1, 2016, Texas mandated that all No Tax Due Reports must be filed electronically rather than on paper, modernizing the state's tax administration system.
When You’d Use Texas Form 05-163
Qualification Criteria
You would file Form 05-163 for the 2016 report year if your business meets at least one of four specific qualifications:
- Passive entity under Texas Tax Code Section 171.0003
- Total annualized revenue of $1,110,000 or less
- Zero Texas gross receipts
- Qualifying Real Estate Investment Trust (REIT)
Filing Deadlines
The standard annual report is due May 15 each year. If May 15 falls on a Saturday, Sunday, or legal holiday, the next business day becomes the due date.
Late filings are strongly discouraged, as Texas assesses a $50 penalty for each report filed after the due date, regardless of whether any tax is owed.
Late Filing Considerations
If you miss the May 15 deadline:
- File as soon as possible
- Minimize penalties
- Maintain good standing
Extensions are not directly available for this form but may be requested using:
- Form 05-164
- Webfile system
Amended Filings
Amended reports may be necessary if:
- You selected the wrong qualification
- Entity details changed
To amend:
- Submit a corrected electronic report
- Mark it as “Amended”
- Include explanation of changes
Key Rules or Details for 2016
Electronic Filing Requirement
All No Tax Due Reports for 2016 must be filed electronically through Webfile. Paper filings require a waiver and are not standard.
Revenue Threshold Rules
- Threshold: $1,110,000
- Must use annualized revenue if business operated less than a full year
Required Companion Reports
Most entities must also file:
- Form 05-102 (Public Information Report)
- Form 05-167 (Ownership Information Report)
Exception: Passive entities
Privilege Period
- Typically January 1 to December 31 of prior year
- Some entities use different accounting periods
Combined Group Rules
If part of a combined group:
- Threshold applies to the entire group
- Not individual entities
Step-by-Step (High Level)
Step 1: Gather Required Information
- Texas taxpayer number
- Entity details
- Accounting year end
- Financial records
Step 2: Access Webfile System
- Log in or create account
- Navigate to franchise tax filing
- Select No Tax Due Report
Step 3: Enter Entity Information
- Taxpayer number
- Report year
- Due date
- Verify privilege period
Step 4: Select Qualification
Choose at least one:
- Passive entity
- Revenue below threshold
- Zero receipts
- REIT
Step 5: Review and Submit
- Double-check entries
- Submit electronically
- Save confirmation number
Step 6: File Companion Reports
If required:
- Submit Form 05-102 or 05-167
- File alongside or shortly after
Common Mistakes and How to Avoid Them
Not Filing Because No Tax Is Owed
Even if no tax is due, failure to file can result in:
- Penalties
- Loss of legal rights
- Personal liability
Incorrect Revenue Calculations
- Always annualize revenue if not a full year
- Example: $600,000 over 6 months = $1.2M annualized
Missing Companion Reports
Failure to file required reports may lead to forfeiture.
Misclassifying Passive Entity Status
- Must meet strict legal criteria
- Rental income does NOT qualify
Filing Paper Instead of Electronically
2016 requires electronic filing. Paper submissions delay processing.
What Happens After You File
Confirmation and Processing
- Immediate confirmation number issued
- Keep for records
Review by Comptroller
- May take a few weeks
- Notices issued if issues found
Maintaining Good Standing
Benefits include:
- Legal rights preserved
- Protection from personal liability
- Ability to obtain certificates
Public Information Updates
- PIR data forwarded to Secretary of State
- Becomes publicly searchable
Ongoing Compliance
- Filing required annually
- Due every May 15
Consequences of Non-Compliance
- Delinquency notices
- Potential forfeiture
- Possible penalty waivers (case-by-case)
FAQs
If I don't owe any franchise tax, why do I still need to file Form 05-163?
Texas law requires all taxable entities to file annual franchise tax reports, even when no tax is due. Filing Form 05-163 fulfills this legal obligation and keeps your business in good standing. Without filing, your entity risks forfeiture of the right to sue in Texas courts, potential personal liability for officers and directors, and inability to obtain necessary certificates from the state. Think of it as maintaining your business's license to operate legally in Texas, separate from the question of whether you owe tax.
My business had revenue of $900,000 for the year, so I definitely qualify for the no tax due threshold, right?
Possibly, but you need to verify whether that revenue requires annualization. If your business operated for the full 12-month privilege period and that $900,000 represents your complete annual revenue, then yes, you're below the $1,110,000 threshold for 2016. However, if your business started mid-year or only operated for part of the period, you must annualize that figure to determine your qualification. The Comptroller's instructions provide formulas for calculating annualized total revenue based on your specific circumstances.
Can I still file Form 05-163 on paper instead of electronically?
For reports due in 2016 and later years (up to 2023), electronic filing became mandatory. The law specifically requires No Tax Due Reports originally due on or after January 1, 2016, to be filed electronically through Webfile. While the paper forms technically exist and filing one requests a waiver from the electronic requirement, you should plan to file electronically using the Comptroller's Webfile system. It's faster, provides immediate confirmation, and aligns with state requirements.
I filed Form 05-163, but do I need to file anything else?
Most likely, yes. Unless your entity qualifies as a passive entity, you must also file either Form 05-102 (Public Information Report) if you're a corporation, LLC, limited partnership, professional association, or financial institution, or Form 05-167 (Ownership Information Report) if you're another type of taxable entity. These companion reports provide the state with information about your officers, directors, or owners. Failure to file these required reports can result in forfeiture proceedings even if you properly submitted Form 05-163. Passive entities are exempt from filing the PIR or OIR.
What if I filed Form 05-163 but later realized my revenue actually exceeded the $1,110,000 threshold?
You need to file an amended franchise tax report as soon as you discover the error. Instead of Form 05-163, you would need to file the appropriate franchise tax return—either the EZ Computation Report (if your annualized revenue is $20 million or less) or the Long Form, along with any tax payment due. Contact the Comptroller's office to explain the situation and file the corrected report promptly. You may face penalties for the original incorrect filing and any late payment of tax, but addressing the error quickly demonstrates good faith and may help if you request penalty relief.
My business closed in March. Do I still need to file Form 05-163?
If your business ceased operations or no longer has nexus with Texas, you need to file a final franchise tax report, not an annual report. If you qualify for no tax due status, you can file a final version of Form 05-163, clearly marked as "Final" rather than "Annual." The final report is due within 60 days after your business ceased doing business in Texas. Before officially closing your business with the Secretary of State, you'll need a Certificate of Account Status showing your franchise tax obligations are satisfied, which requires filing this final report and any other required forms.
I keep hearing about changes to no tax due reporting for 2024. Does this affect my 2016 report?
No, changes implemented for 2024 and later report years don't affect reports for 2016. For the 2016 report year specifically, Form 05-163 was the correct form to use if you met the qualification criteria, and the rules described in this guide apply to that period. However, if you're reading this guide for historical purposes but need to file for more recent years, be aware that the No Tax Due Report was discontinued starting with 2024 report years. Entities that previously qualified to file Form 05-163 now have different filing requirements, so consult the current year's instructions on the Comptroller's website.
