What Is the No Tax Due Threshold in Texas?
Learn how the Texas franchise tax threshold determines your liability. Even if no tax is due, an annual report is required to remain in good standing.
The Texas Franchise Tax is a levy on an entity’s margin for the privilege of conducting business in the state. It applies to various business structures, including corporations, limited liability companies, and partnerships that have a connection, known as nexus, to Texas. The Texas Comptroller of Public Accounts administers the tax.
The state establishes specific revenue levels that determine whether an entity owes tax. If a business’s annual revenue is below this figure, it may not have a tax liability, but this does not eliminate all annual reporting obligations.
The No Tax Due Threshold Amount
For the 2024 and 2025 reporting years, the no tax due threshold is set at $2.47 million. If a taxable entity’s annualized total revenue is at or below this amount, it does not owe any franchise tax. The Texas Comptroller of Public Accounts periodically reviews and adjusts this threshold, so businesses should verify the correct figure for each reporting year.
The concept of “total revenue” is central to this determination. It represents the gross income of the business before most deductions are taken, and an entity must first accurately calculate this figure to see if it qualifies to owe no tax.
Determining Your Total Revenue
Calculating total revenue for the franchise tax is a specific process that begins with figures from your entity’s federal income tax return. The calculation is defined by Texas Tax Code and starts with the gross receipts or sales reported to the IRS, before most ordinary business deductions. For example, a corporation would typically start with the amount on line 1c and lines 4 through 10 of IRS Form 1120.
From this starting point, certain statutory exclusions are allowed. These are specific types of income that the state permits you to subtract from the federally reported amount. Common exclusions include dividends and interest from federal obligations, certain flow-through funds from passive entities, and specific payments related to healthcare. The final calculated number is the figure you must compare against the $2.47 million no tax due threshold.
Required Filing Below the Threshold
Even if your entity’s total revenue is below the $2.47 million threshold and you owe no tax, you are still required to complete an annual filing. As of 2024, the “No Tax Due Report” has been discontinued. In its place, entities must file either a Public Information Report (PIR) or an Ownership Information Report (OIR).
The type of report you must file depends on your business structure. The Public Information Report (PIR) is required for:
- Corporations
- Limited liability companies (LLCs)
- Limited partnerships
- Professional associations
- Financial institutions
The PIR discloses details such as the names and addresses of all officers, directors, or managers, and this information is public record.
Other taxable entities, such as certain trusts or general partnerships, must file the Ownership Information Report (OIR). The OIR requires identifying information for the business owners, and this information is confidential. Failure to file the appropriate report by the deadline can result in a penalty.
How to Submit Required Information Reports
The Texas Comptroller of Public Accounts provides two primary methods for filing the Public Information Report (PIR) or Ownership Information Report (OIR): online or by mail. The annual deadline for filing is May 15.
The most efficient method is electronic filing through the Comptroller’s WebFile system. To use this system, you will need your 11-digit Texas Taxpayer Number and a WebFile number, which can be found on correspondence from the Comptroller’s office. The online portal guides you through the process and provides a confirmation upon submission.
Alternatively, you can file by mail. You must download the correct, current version of the PIR or OIR from the Comptroller’s website. After completing the form and ensuring it is signed, mail it to the specified address: Texas Comptroller of Public Accounts, P.O. Box 149348, Austin, TX 78714-9348.