What Form 05-163 Is For
The Texas Franchise Tax No Tax Due Report (Form 05-163) was a simplified annual or final report filed by certain Texas businesses that qualified to pay zero franchise tax. The Texas franchise tax itself is a privilege tax imposed on entities formed in Texas or doing business in the state. Rather than filing the more complex Long Form or EZ Computation reports, eligible businesses could use Form 05-163 to confirm they met specific criteria that exempted them from owing any tax for that reporting period.
For the 2011 report year referenced in your request, businesses could file this form if they fell into one of four categories:
- Entities with annualized total revenue at or below $1 million (the "no tax due threshold" for that year)
- Passive entities as defined by Texas Tax Code Section 171.0003
- Entities with zero Texas gross receipts
- Real Estate Investment Trusts (REITs) meeting qualifications specified in Texas Tax Code Section 171.0002(c)(4)
The form essentially served as a declaration that the business qualified for no-tax-due status while still maintaining compliance with state reporting requirements.
Required Companion Forms
Most entities filing this form also had to submit:
- Form 05-102 (Public Information Report)
- Form 05-167 (Ownership Information Report)
Which Form Applies
- Corporations, LLCs, professional associations, limited partnerships, and financial institutions → Form 05-102
- Associations, trusts, and similar entities → Form 05-167
When You’d Use Form 05-163
Late Filings
The standard due date for Texas Franchise Tax reports was May 15 each year.
- If May 15 fell on a weekend/holiday → moved to next business day
- Late filing penalty → $50 minimum, even if no tax is owed
Amended Filings
You may need to amend if:
- Mathematical errors were made
- Qualification category changes
- Incorrect form originally filed
Final Reports
Used when:
- Closing a business
- Converting entity type
- Merging or terminating
Additional Requirement for Final Filing
- Form 05-359 (Request for Certificate of Account Status)
Key Rules or Details for 2011
Revenue Threshold Rule
- 2011 threshold → $1 million
- Must calculate annualized total revenue
Annualization Formula
- Adjust revenue to a 12-month equivalent
Example:
- Short period = 6 months with $500,000 → annualized = $1 million
Other Qualification Paths
Passive Entity Status
- Must earn 90% passive income
- Rental income does not qualify
Zero Texas Gross Receipts
- Applies to out-of-state or inactive businesses
REIT Qualification
- Must meet IRS + Texas Tax Code requirements
Registration Rules
- Registered entities → must file
- Non-registered passive entities → may not need to file
Step-by-Step (High Level)
Step 1: Determine Eligibility
- Identify qualification category
- Calculate annualized revenue
Step 2: Gather Required Information
- Taxpayer number
- Entity name and address
- SOS file number
- Accounting period
- Responsible party info
Step 3: Complete the Form
- Fill identifying details
- Check applicable qualification box
Step 4: Sign the Form
- Authorized representative required
Step 5: Prepare Companion Forms
- Form 05-102 or 05-167 (if applicable)
Step 6: Submit the Report
Electronic Filing (Required after 2016)
- Use Webfile system
Paper Filing (Pre-2016)
- Mail to Texas Comptroller
Common Mistakes and How to Avoid Them
Miscalculating Revenue
- Not annualizing revenue correctly
Using the Wrong Qualification Rule
- Assuming low tax = eligibility
Missing Required Forms
- Not filing 05-102 or 05-167
Misunderstanding Passive Income
- Treating rental income as passive
Registration Confusion
- Filing when not required or skipping when required
Filing Method Errors
- Using paper instead of electronic (post-2016)
Missing Deadlines
- Late filing → automatic $50 penalty
What Happens After You File
Processing
- Electronic → instant confirmation
- Paper → several weeks
Review by Comptroller
- Checks accuracy and completeness
Possible Outcomes
Approved
- Account marked in good standing
Issues Found
- Notice sent requesting corrections
Maintaining Compliance
- Needed for business operations like:
- Loans
- Contracts
- Certificates of Account Status
Final Filings
- Requires Form 05-359
- Needed to terminate entity officially
FAQs
Does filing Form 05-163 mean my business pays no franchise tax forever?
No. Each year must be evaluated independently. If revenue increases beyond the threshold, a different form is required and tax may apply.
If I'm a passive entity, do I need to file anything else?
It depends on registration status. Registered passive entities file Form 05-163 only. Non-registered passive entities may not need to file at all.
Can I file Form 05-163 if my calculated tax is under $1,000?
No. Eligibility depends on revenue threshold or qualification criteria—not the tax amount.
What happens if I filed incorrectly?
You must file an amended report using the correct form and pay any tax, penalties, and interest if applicable.
How do I calculate annualized total revenue?
Use this formula:
- Actual revenue ÷ days in period × 365
Short periods can result in higher annualized figures than expected.
Do combined groups file Form 05-163?
Yes, if total group revenue meets the threshold. The group files one report, but members may still file information reports.
I'm closing my business mid-year—what do I file?
You file a final Form 05-163 (if eligible) and Form 05-359. In some cases, both annual and final reports may be required.
Additional Notes
This guide applies to filings through 2023. Starting in 2024:
- Form 05-163 was discontinued
- Businesses below the threshold no longer file franchise tax reports