Review Changes to Texas Franchise Tax as May 15 Deadline Looms

The May 15 deadline is fast approaching to file the Texas Franchise Tax report and the Public Information Report (PIR) or Ownership Information Report (OIR). Recent changes in the franchise tax “no tax due” revenue threshold have created uncertainty about filing for PIR/OIR extensions.

No Tax Due Reports

Texas has increased the “no tax due” revenue threshold for the Texas Franchise Tax to $2.47 million and eliminated the requirement to file a No Tax Due Report (Form 05-163) for report years 2024 (tax year 2023) and later.

However, taxpayers who are no longer required to file a No Tax Due Report could still be subject to other reporting requirements, depending on their entity type.

Entities at or below the threshold: Taxable entities with annualized total revenue at or below the no tax due revenue threshold do not need to file a No Tax Due Report, but they must still file a PIR or OIR.

Qualifying new veteran-owned businesses: A new veteran-owned business is not required to file a franchise tax report for the initial five-year period that it qualifies for this designation. New veteran-owned businesses also are not required to file a PIR or OIR during this period.

Passive entities: Passive entities must file either the franchise tax long form or the EZ Computation form, but they do not need to file a PIR or an OIR.

Qualifying real estate investment trusts (REITs): REITs must file either a franchise tax long form or EZ Computation form and a PIR or OIR.

Taxable entities with no Texas gross receipts: Taxable entities with no Texas gross receipts must file either a franchise tax long form or EZ Computation form and a PIR or OIR.

PIR/OIR Extensions

Taxpayers can extend a PIR or an OIR beyond the May 15 deadline by filing a Texas Franchise Tax Extension Request (Form 05-164).

Taxpayers filing an extension when a franchise tax return is not required should not imply in any way that they will submit a franchise tax report. For example, a taxpayer should not send a payment or include an extension affiliate list. If the extension suggests that the taxpayer will file a franchise tax report, the Texas Comptroller will expect a franchise tax report and may send the taxpayer notices for failure to file.

Taxpayers that do not extend the PIR/OIR could be deemed noncompliant and assessed a $50 late filing penalty by the Comptroller’s Office. Given this uncertainty, a taxpayer who cannot meet the May 15 filing deadline should weigh the costs and benefits of filing an extension and dealing with potential notices against the potential for a $50 late filing fee.

Taxpayers can either attach the PIR and OIR to any franchise tax reports or submit them to the Comptroller separately. The reports should reflect the taxpayer’s current information as of the filing date.

Electronic Payments and Late Penalties

Taxpayers who owe more than $10,000 in franchise taxes must make the payment electronically or the Comptroller will assess a five percent penalty. There are two different deadlines for electronic payments, depending on the payment amount.

• More than $1 million: 8 PM CST, May 14, 2024, (the business day before the deadline)
• Less than $1 million: 10 AM CST, May 15, 2024, (the day of the deadline).

The Comptroller will assess the following penalties for late payments, depending on when the payment is received:

• Up to 30 days late: Five percent
• 31-60 days late: 10 percent
• More than 60 days late: 10 percent plus interest.

For more information about Texas franchise tax filings, contact us. We are here to help.

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