What the Form Is For
The Texas Franchise Tax No Tax Due Information Report (Form 05-163) is a simplified annual filing used by certain Texas businesses to satisfy their franchise tax obligations when they owe no tax for the reporting period. This form allows eligible entities to declare their no-tax-due status while maintaining compliance with Texas franchise tax requirements. For the 2022 report year, businesses could file this form if they met specific qualification criteria, such as having total annualized revenue at or below $1,230,000 or qualifying as a passive entity under Texas law.
Unlike standard franchise tax reports that require detailed revenue calculations and tax computations, Form 05-163 serves as an information return affirming that the entity qualifies for no-tax-due status. The form requires basic identification information, industry classification codes, accounting period dates, and responses to qualification questions that determine eligibility. This streamlined approach reduces the administrative burden on smaller businesses and entities that clearly owe no franchise tax while keeping the Texas Comptroller's office informed of their continued existence and business status.
The form applies to various entity types including corporations, limited liability companies, partnerships, professional associations, and other taxable entities formed in Texas or conducting business in the state. Filing Form 05-163 demonstrates compliance with franchise tax law and helps entities maintain their right to transact business in Texas, avoid forfeiture penalties, and protect officers and directors from personal liability for certain business debts.
When You’d Use It
Annual Filings
For the 2022 report year, the annual No Tax Due Report was originally due on May 15, 2022 (or the next business day if May 15 fell on a weekend or holiday). Entities use this form annually when their circumstances place them below taxing thresholds or within specific exemption categories. The form comes in two versions: the annual report (Form 05-163-A) for regular yearly filings and the final report (Form 05-163-F) for entities ceasing business operations in Texas.
Late Filings
Late filings occur when businesses miss the May 15 deadline. Texas law requires electronic filing for all No Tax Due Reports originally due after January 1, 2016, through the Comptroller's Webfile system or through approved electronic submission providers. Late filing triggers a fifty-dollar penalty regardless of whether any tax is actually due.
Additionally:
- Entities filing between one and thirty days late incur a five percent penalty on any tax due
- Entities filing more than thirty days late face a ten percent penalty
However, since Form 05-163 filers owe no tax, the primary concern is the fifty-dollar late filing penalty and potential forfeiture of the right to transact business if filing obligations remain unsatisfied.
Amended Filings
Amended reports may be filed to:
- Correct mathematical errors
- Support refund claims
- Report additional tax owed
When amending:
- Mark the form as "Amended"
- Include a cover letter explaining the reason
Time-sensitive amendments can be faxed to 512-475-0433 with "urgent" notation. Extensions are available through Form 05-164 or by making an online extension payment before the original due date.
Key Rules or Details for 2022
Qualification Criteria
An entity qualified to file Form 05-163 if it met at least one of the following:
- Total annualized revenue of $1,230,000 or less
- Passive entity status under Texas Tax Code Section 171.0003
- Zero Texas gross receipts
- Real Estate Investment Trust qualification
- New veteran-owned business status
Electronic Filing Requirement
Electronic filing was mandatory for all No Tax Due Reports originally due after January 1, 2016. Entities must use:
- Comptroller Webfile system
- Approved software providers
- Approved form providers
Paper filing required a waiver.
Companion Reports
Most entities must also file:
- Public Information Report (Form 05-102)
- Ownership Information Report (Form 05-167)
Exceptions include:
- Passive entities
- REITs
- Qualified veteran-owned businesses
- Entities without Texas nexus
Failure to file these can result in forfeiture of business rights.
Step-by-Step (High Level)
Step 1: Access the Filing System
Use the Texas Comptroller Webfile system. Have your taxpayer ID ready.
Step 2: Enter Basic Information
Include:
- Taxpayer number
- Report year and due date
- Legal entity name and address
- Filing type (annual or final)
Step 3: Provide Industry Classification
Enter:
- SIC code
- NAICS code
Step 4: Complete Accounting Period
- Begin date: day after previous report period
- End date: based on federal tax year or business closure
Step 5: Answer Qualification Questions
Confirm eligibility based on:
- Revenue threshold
- Passive status
- Zero receipts
- REIT status
- Veteran-owned status
Step 6: Report Revenue
Enter total annualized revenue based on Form 05-158-A instructions.
Step 7: Sign and Submit
An authorized individual must sign electronically. Save the confirmation number after submission.
Common Mistakes and How to Avoid Them
Miscalculating Annualized Revenue
Annualize correctly, especially for short periods. Incorrect calculations can lead to invalid filings.
Missing Companion Reports
Failing to file required information reports can result in forfeiture, even if the tax report is correct.
Misunderstanding Passive Entity Status
Texas definitions differ from federal rules. Rental income does not qualify as passive income.
Ignoring Electronic Filing Rules
Paper filing without a waiver can delay processing and cause compliance issues.
Filing the Wrong Form
Entities exceeding the threshold must file:
- Form 05-169 (EZ)
- Form 05-158 (Long Form)
Form 05-163 is only for qualified entities.
What Happens After You File
Processing and Status Update
The Comptroller updates your status, which appears in the Taxable Entity Search system.
Review and Verification
The Comptroller may:
- Verify eligibility
- Request additional information
Respond promptly to notices.
Public Record Updates
If applicable, Public Information Reports are shared with the Secretary of State.
Non-Compliance Consequences
Failure to file can lead to:
- Notices of deficiency
- Forfeiture of business rights
- Personal liability for business debts
Recordkeeping
Maintain:
- Confirmation number
- Copies of filings
- Supporting documentation
FAQs
What is the no tax due threshold for 2022 reports?
For reports due in 2022 and 2023, the threshold is $1,230,000 in annualized total revenue. This amount may change periodically, so always verify current thresholds before filing.
Can I file Form 05-163 electronically even though I prefer paper filing?
Yes, but electronic filing is mandatory. Paper filing is only allowed with an approved waiver for that specific report year.
If my business owes no franchise tax, do I still need to file anything?
Yes. Most entities must file Form 05-163 and may also need to submit a Public Information or Ownership Information Report.
What if my accounting period is shorter or longer than twelve months?
You must annualize revenue by converting it to a 12-month equivalent using IRS and Comptroller formulas.
Does qualifying as a passive entity for federal tax purposes mean I qualify for Texas?
No. Texas uses its own definition under Tax Code Section 171.0003, which differs from federal rules.
Can I amend my No Tax Due Report after filing?
Yes. Mark the report as "Amended," include a cover letter, and submit through the appropriate method.
What happens if I miss the May 15 deadline?
You will face a $50 penalty, and continued non-compliance can result in forfeiture of your right to transact business in Texas.
