Texas Franchise Tax: Reports, Threshold and Forfeiture

Which Texas and out-of-state businesses are subject to franchise tax?

Texas franchise tax applies to a taxable entity formed in Texas or doing business there, including a corporation, LLC, or many partnerships. A sole proprietor with no liability-limiting legal entity is generally outside the tax, but a single-member LLC is a taxable entity even when federal income tax treats it as disregarded (Texas Comptroller: taxable entities; franchise tax overview).

A general partnership directly owned entirely by natural persons is also outside the tax if its partners have no statutory liability protection. Limited partnerships and limited liability partnerships do not qualify for that exclusion merely because their owners are people (Texas Comptroller: franchise tax instructions).

An entity formed elsewhere can also be subject to Texas franchise tax when it has Texas nexus. Formation elsewhere and federal tax classification do not settle the Texas question. Physical presence or a Texas use tax permit can create nexus; without physical presence, Texas gross receipts of at least $500,000 in a federal accounting period can also create it. The nexus start date may be the first day of that period, so check it before identifying report years. This Texas-receipts test is separate from the no-tax-due test for the whole business (Texas Comptroller: remote sellers). Whether the entity must register in Texas is a separate question; see Registering in another state.

Is my LLC under the no-tax-due threshold, and which revenue counts?

For the 2026 report year, a taxable entity whose annualized total revenue is at or below $2,650,000 generally owes no Texas franchise tax. Calculate Texas-defined total revenue from the applicable federal return lines and Texas exclusions, not taxable profit or Texas sales. A federally disregarded LLC generally computes its own revenue as if it filed a separate federal return; do not use the owner's entire return (Texas Comptroller: threshold table; 2026 franchise tax instructions; total revenue rule).

A Texas annual report normally looks to the federal accounting period ending in the calendar year before the report is due. Thus, a calendar-year entity's 2026 report generally uses its accounting period ending in 2025. A new taxable entity's first annual filing is due in the year after it first became subject to the tax; short accounting periods have special rules (Texas Comptroller: reports and payments).

The tiered partnership election changes the small-tax result: each participating entity's authorized person signs a franchise tax report marking the election and files Form 05-175 by the May 15 annual deadline (or valid extension). Any calculated tax is due (2026 franchise tax instructions; 2026 forms).

For a missing earlier year, use that report year's threshold rather than the current one (Texas Comptroller: thresholds by report year).

If no franchise tax is due, must I still file a PIR or OIR?

Usually yes. An entity at or below the threshold generally skips the franchise tax report, but it still files an annual Public Information Report (PIR) or Ownership Information Report (OIR). Failure to file a complete, signed PIR or OIR can lead to forfeiture even with no tax due (Texas Comptroller: PIR and OIR requirements).

The information report is due on the annual franchise tax due date. The Texas Comptroller identifies exemptions and qualifying new veteran-owned businesses among exceptions; confirm eligibility before skipping a report (Texas Comptroller: PIR and OIR requirements).

Is the No Tax Due Report still used for a missing year?

For report years 2024 and later, Form 05-163, the No Tax Due Report, is discontinued. A taxable entity at or below the threshold generally files only its PIR or OIR. For report year 2023 and earlier, an entity under that year's threshold generally had to file Form 05-163 and its applicable information report. The Comptroller says No Tax Due Reports originally due from 2016 through 2023 must be filed electronically (Texas Comptroller: reporting requirements; reports and payments FAQ).

Do not substitute today's form for an older missing report. Check each year separately for the correct threshold, form, and accounting period. Qualifying passive entities and some other special cases follow different reporting rules (Texas Comptroller: no-tax-due changes).

When are the annual report and payment due, and can I extend filing?

The annual Texas franchise tax report, any payment, and the PIR or OIR are ordinarily due May 15. A weekend or legal holiday moves the deadline to the next working day. A federal extension does not extend the Texas filing; request a Texas extension by the original due date. A valid Texas extension generally requires timely payment based on current or prior-year tax (Texas Comptroller: franchise tax; extensions; extension FAQ).

A business under the threshold can request a no-payment extension for its PIR or OIR by the original due date. An entity that paid $10,000 or more in franchise tax in the prior state fiscal year (September 1–August 31) must pay electronically. Its first extension runs to August 15; a second request and any required payment by then extends filing to November 15. Without a valid first extension, May 15 remains the deadline. Other entities can extend to November 15. Weekend and holiday adjustments apply. A first annual report cannot use the prior-year payment option (Texas Comptroller: extensions FAQ; extension rules).

Does a passive entity file a different report, and can an LLC qualify?

No. An LLC cannot be a Texas passive entity, whatever its income or federal classification. Only a qualifying partnership or trust other than a business trust can. A registered passive entity files a signed Long Form or EZ Computation Report annually, marking the passive-entity circle and accounting dates, but no PIR or OIR (Texas Comptroller: passive entities FAQ; 2026 forms).

The partnership or trust must qualify for the entire accounting period. At least 90% of its federal gross income must come from listed sources, and no more than 10% may come from an active trade or business. Ordinary rent is not a listed source. An LLC converting to a limited partnership cannot qualify for that period, but may qualify in later periods (Texas Comptroller: passive entities FAQ; Texas Tax Code section 171.0003).

What happens if I miss a report or payment, and can a penalty be waived?

A missing required franchise tax report, PIR or OIR, or unpaid tax can lead to forfeiture. The Comptroller first sends a Notice of Intent to Forfeit (Form 05-211). If a required report or amount remains missing 45 days after the notice is mailed or sent electronically, it may forfeit the right to transact business. If that right is not revived within 120 days after forfeiture, the Secretary of State may also forfeit registration (Texas Tax Code Chapter 171; 2026 instructions; notice guide).

After forfeiture, the entity is generally denied the right to sue or defend in a Texas court. Officers and directors—and, depending on the entity, partners, members or owners—are personally liable for covered debts created or incurred in Texas after the missed report, tax or penalty was due and before rights are revived, including later franchise tax. Revival does not erase that liability. Section 171.255 gives a director or officer a defense for debt incurred over their objection or without knowledge despite reasonable diligence (Texas Tax Code section 171.255; Comptroller: account current).

A late franchise tax report carries a $50 penalty per report, including a late No Tax Due Report for 2023 or earlier, even with no tax due. Tax paid 1–30 days late carries a 5% penalty; tax paid more than 30 days late carries a 10% penalty, and interest starts after 60 days. A late PIR or OIR alone does not trigger the late-report penalty (Texas Comptroller: penalties and interest; tax notices; 2026 instructions).

You may request a waiver of assessed penalties or interest, but the Comptroller will not grant one until all reports are filed and all tax due is paid. An ordinary penalty waiver is generally limited to one annual report period; a waiver in the past two years generally bars another absent extenuating circumstances. The Comptroller excludes periods outside the statute of limitations, generally four years from when tax was due, and Texas businesses with inactive Secretary of State registration. For a forfeited registration, pay the balance, obtain clearance, reinstate, then request a waiver; paid penalties are refunded if waived. Several overdue years may qualify for voluntary disclosure; relief is discretionary (Texas Comptroller: penalty waivers; reinstatement).

How do I check status and find the missing reports?

Start with the Comptroller's Franchise Tax Account Status search to see whether the entity's right to transact business is active or forfeited. The public status is a summary at the time of the search, not a list of every missing item (Texas Comptroller: account status).

Then compare each notice's report year and listed issue with the reports in the entity's Comptroller filing account. Notices distinguish a missing franchise tax report, a missing or unsigned PIR/OIR, and an unpaid balance. Paying an estimated-tax notice does not cure missing reports (Texas Comptroller: FAQ). The Comptroller's notice guide gives the fix for each issue. If the account and notices do not identify all missing years, contact the Comptroller with the taxpayer number and the notices; do not guess from the public status alone.

File a missing PIR or OIR through Webfile or by mail using the PIR/OIR instructions. To set up Webfile, use the taxpayer number and XT Webfile number on a Comptroller notice; contact its Webfile support if the XT number is missing. Gather the formation and Texas nexus dates, federal year-end, revenue and filing records by year, payment records, notices, and any combined-group details (Texas Comptroller: making an account current).

If the state shows forfeiture, what must be current before reinstatement?

First identify whether only the Comptroller's right to transact business is forfeited or the Secretary of State has also forfeited registration. Before the second step, filing missing reports and paying what is due revives the right; only Secretary of State reinstatement needs a tax clearance letter and state filing. For each missing year, compare revenue with that year's threshold. A standard entity at or below it generally files a PIR or OIR for 2024 onward; for 2023 or earlier, it generally files that year's No Tax Due Report too and pays its late-report penalty. Above the threshold, check whether a Long Form or EZ Computation Report and information report were due. Passive entities and other exceptions differ. File every required report and pay tax, penalties and interest due (Texas Comptroller: no-tax-due changes; making an account current; reinstating a business).

When Secretary of State reinstatement is needed, the Comptroller says to request a tax clearance letter after filings and balances are current. The separate state reinstatement filing follows; see Reinstating your company for that process (Texas Comptroller: reinstating a business).

Example

Illustrative only; all amounts are US dollars. A Texas single-member LLC has $180,000 of total revenue for a full accounting year ending in 2025, with no related entities. Its 2026 report-year revenue is below the applicable threshold. It generally does not file a 2026 franchise tax report or pay franchise tax, but it still files a 2026 PIR. Suppose it missed only that PIR and the Comptroller forfeited its right to transact business. Filing the PIR makes its tax account current; it owes no tax or late-report penalty. If the Secretary of State later forfeits registration, it also needs a tax clearance letter and state reinstatement filing. Federal disregarded-entity treatment changes none of these Texas filing steps.

Different for you?

• The entity is forfeited or terminated at the Secretary of State: follow Reinstating your company after bringing Texas tax filings current.
• You cannot establish a start date, combined-group revenue, or correct missing-year filings: gather notices and accounting records and seek corporate tax help.
• The entity was formed elsewhere and you need to know whether to register in Texas: see Registering in another state.
• The business also has activity in other states: see Business income tax in other states.
• The business stopped operating: a Texas-formed entity still owes annual reports until it terminates; an out-of-state entity ending Texas nexus owes a final report and payment within 60 days. See Closing a company (Texas Comptroller: final reports).
• A Canadian seller holds inventory in Texas: see Canadian sellers with US inventory.
• You are comparing state franchise taxes: see the separate guides to California minimum tax and Delaware franchise tax.