Texas Franchise Tax Filing, Payment, and Account Status

By Hank FasthoffJuly 5, 2026

Texas franchise tax compliance asks two separate questions. Your business may owe no tax for the year yet lose its right to transact business because it missed an information report.

Chapter 171 of the Texas Tax Code imposes a privilege tax on taxable entities formed or organized in Texas and taxable entities doing business here. Revenue, deductions, apportionment, and the filing method determine the amount due, while the entity type and filing category determine which reports must be filed.

Taxable Entities

Corporations, limited liability companies, limited partnerships, limited liability partnerships, professional associations, business trusts, and many other entities generally qualify as taxable entities. A business formed outside Texas may become subject to the tax when it develops nexus, meaning a sufficient connection with Texas, even if it hasn't registered with the Texas Secretary of State.

Texas classification follows the entity's legal form instead of its federal income tax treatment. A single member LLC treated as a disregarded entity for federal purposes generally has a Texas franchise tax account and filing obligations. An S corporation election changes federal tax treatment without removing the corporation from Chapter 171.

A sole proprietorship owned by an individual generally falls outside the definition because the owner hasn't organized the business as a separate entity with limited liability. A general partnership composed entirely of natural persons also falls outside the general definition, subject to the statute's qualifications and the business's structure. Registration as a limited liability partnership changes the analysis.

The 2026 and 2027 Revenue Threshold

For reports due in 2026 and 2027, an entity with annualized total revenue of $2.65 million or less owes no franchise tax. The Comptroller publishes rates, thresholds, and deduction limits by report year, so you should use the figures for the report being filed.

Annualization adjusts revenue when the accounting period covers more or less than 12 months. Texas divides total revenue by the number of days in the accounting period and multiplies the result by 365. An entity reporting $1.5 million for a six month period therefore has annualized revenue of about $3 million for the threshold analysis. It uses the actual report period amounts to calculate any tax due.

Beginning with reports due in 2024, an entity at or below the threshold generally doesn't file a No Tax Due Report. It must file either a Public Information Report or an Ownership Information Report unless a special filing category provides another rule.

Public and Ownership Information Reports

Corporations, LLCs, limited partnerships, professional associations, and financial institutions file a Public Information Report on Form 05-102. Other legally formed taxable entities generally file an Ownership Information Report on Form 05-167. The Comptroller's PIR and OIR guidance identifies the correct report for each entity type.

An entity at or below the revenue threshold generally files only its information report. The Comptroller doesn't assess the $50 late filing penalty for a late Public Information Report or Ownership Information Report, but an unsigned, incomplete, or missing information report can make the account noncurrent and begin the forfeiture process.

Combined groups require separate attention. Each member organized in Texas or having Texas nexus must file its applicable information report even when the group falls at or below the revenue threshold and files no franchise tax report.

Special Filing Categories

Passive entities, qualifying real estate investment trusts, entities above the revenue threshold with zero Texas gross receipts, and qualifying new veteran owned businesses follow different filing rules. A filing position based only on whether tax is due can produce the wrong forms.

A qualifying passive entity files either the EZ Computation Report or Long Form with the passive entity designation, but it doesn't file a Public Information Report or Ownership Information Report. A qualifying real estate investment trust files an EZ Computation Report or Long Form and its applicable information report.

An entity above the $2.65 million threshold with zero Texas gross receipts must file an EZ Computation Report or Long Form and its information report. By contrast, an entity at or below the threshold generally files only its information report, even when it has zero Texas receipts. The distinction turns on annualized total revenue rather than the absence of Texas receipts.

A qualifying new veteran owned business receives a five year franchise tax exemption and files neither an annual franchise tax report nor an information report during that period. The business must be formed in Texas, begin doing business here on or after January 1, 2022, and be 100% owned by natural persons who served in and received an honorable discharge from a branch of the United States armed forces. Each owner must provide the verification required by Section 171.0005.

A business loses the exemption on the fifth anniversary of the date it began doing business in Texas or when it ceases to qualify, whichever occurs first. House Bill 346, effective September 1, 2025, repealed the sunset provisions that otherwise would have ended the exemption and related Secretary of State fee waivers on January 1, 2026.

Calculating Tax Above the Revenue Threshold

An entity above the revenue threshold generally files either the Long Form or EZ Computation Report. For a Long Form filer, taxable margin is the lowest applicable figure among 70% of total revenue, total revenue minus $1 million, total revenue minus cost of goods sold, or total revenue minus compensation. Texas apportions that margin through a single gross receipts factor based on Texas receipts divided by receipts from the entity's entire business.

For 2026 and 2027 reports, most Long Form filers pay 0.75% of apportioned taxable margin. Qualifying retailers and wholesalers pay 0.375%. The compensation method includes eligible wages, cash compensation, and benefits, subject to a $480,000 limit on wage and cash compensation per person for those report years.

Revenue above $2.65 million doesn't always produce a payment. If the computed tax is less than $1,000, the entity files the applicable franchise tax report and information report but owes no tax. That separate tax due threshold differs from the annualized revenue threshold that determines whether a franchise tax report is required.

An entity with annualized total revenue of $20 million or less may qualify for the EZ Computation Report. The 2026 and 2027 EZ rate is 0.331% of apportioned total revenue. An EZ filer can't deduct cost of goods sold or compensation, claim franchise tax credits, or preserve that year's temporary credit for business loss carryforward, so you should compare the available methods before choosing the shorter form.

For reports due on or after January 1, 2026, amounts taken from federal return lines generally follow the Internal Revenue Code in effect for that federal tax year. A Texas statute or rule that refers to a specific federal-law date continues to use that stated date. This 2026 change can affect total revenue and deduction calculations after a federal amendment.

Affiliated entities engaged in a unitary business may have to file as a combined group. Group reporting changes revenue, apportionment, and information report analysis, and the members use the same method to calculate margin. Entities without Texas nexus may enter the group calculation even though their receipts receive different treatment in the Texas apportionment factor.

The May 15 Deadline

Annual franchise tax and information reports are due May 15. When that date falls on a Saturday, Sunday, or legal holiday, the deadline becomes the next business day.

An extension postpones filing but requires the applicable payment with a timely request. A valid request generally includes at least 90% of the tax due for the current report year or 100% of the tax due for the prior report year. The prior year option has limits, including for a first annual report and for an entity that left a combined group.

Entities that aren't required to pay electronically may obtain an extension through November 15. An entity required to pay electronically receives an initial extension through August 15 and must request a second extension by that date for additional time through November 15. Because both dates fall on weekends in 2026, the 2026 deadlines are August 17 and November 16.

Electronic payment generally becomes mandatory after an entity pays at least $10,000 in franchise tax during the preceding state fiscal year. A taxpayer that paid at least $500,000 in a tax category during that period must use TEXNET for payments in that category.

An entity at or below the no tax due threshold may request a no payment extension for its Public Information Report or Ownership Information Report. A timely request extends the information report deadline to November 15, adjusted to the next business day when applicable.

Penalties and Interest

A franchise tax report filed after its due date incurs a $50 late filing penalty, even when the report shows no tax due. The penalty applies to a late EZ Computation Report or Long Form, while the Comptroller's current guidance imposes no $50 charge for a late Public Information Report or Ownership Information Report.

Tax paid from one through 30 days after the due date incurs a 5% penalty. The penalty increases to 10% when payment occurs more than 30 days late, and interest begins on the 61st day after the due date. Texas sets the annual interest rate for most past due taxes at the prime rate plus 1%, which produces a 7.75% rate for 2026.

The Comptroller treats an extension as valid only when the entity submits a timely request and satisfies the payment requirement. If the payment falls short, penalty and interest may run from the original due date on part of the unpaid amount.

Forfeiture of the Right to Transact Business

Unpaid tax, a missing franchise tax report, or a missing information report can make an account noncurrent. The Comptroller may mail a Notice of Intent to Forfeit the entity's right to transact business, and Section 171.251 allows at least 45 days after mailing for the entity to cure the delinquency.

If the entity misses that period, the Comptroller may forfeit its right to transact business in Texas. Section 171.252 generally denies a forfeited entity the right to sue or defend in a Texas court. Continued delinquency can also lead the Secretary of State to forfeit a domestic entity's certificate of formation or a foreign entity's registration.

Personal liability during forfeiture has a defined statutory scope. Sections 171.2515 and 171.255 apply the forfeiture provisions to taxable entities and can make an officer, director, partner, member, or owner liable for qualifying debts created or incurred in Texas after the report, tax, or penalty became due and before revival. Exposure depends on the person's role, the date and place the debt arose, and the statutory defenses.

Section 171.255 provides a defense when the person proves that the entity incurred the debt over that person's objection. Another defense applies when the person lacked knowledge of the debt and reasonable diligence wouldn't have revealed the intention to incur it. Revival leaves qualifying personal liability from the forfeiture period in place.

Account Status and Reinstatement

The Comptroller calls its online record the Franchise Tax Account Status, replacing the older reference to good standing. You should check the entity's account status before a financing, real estate closing, merger, conversion, sale, or lawsuit requires proof that the entity can transact business.

Bringing a noncurrent account up to date requires every outstanding franchise tax report and information report, plus all tax, penalties, and interest due. When only the right to transact business was forfeited, satisfying the Comptroller's requirements permits the agency to revive that right.

An entity whose certificate or registration was forfeited through the Secretary of State has another filing. After resolving the account, it must obtain a tax clearance letter and submit the applicable reinstatement filing and fee. Section 11.254 of the Texas Business Organizations Code treats a reinstated entity as having continued without interruption, while Section 171.255 preserves qualifying personal liability from the forfeiture period.

Annual Review Before May 15

You should confirm the entity's accounting period, annualized total revenue, filing category, and required forms before May 15. If revenue exceeds the threshold, compare the Long Form calculations against the EZ Computation and the separate $1,000 tax due threshold.

Names and addresses in the Public Information Report or Ownership Information Report should match the company's current records. A filing that lacks a signature, uses the wrong information report, or omits required ownership information may fail to satisfy the annual requirement.

Foreign entities should evaluate Texas nexus separately from Secretary of State registration. An entity may owe Texas franchise tax before it registers, and withdrawing a foreign registration doesn't close the tax account. An unregistered entity that ends Texas nexus generally must file its final report and payment within 60 days and provide the Comptroller with the information needed to end its reporting responsibility.

If the entity receives a notice, you should identify the missing report or payment and respond within the stated period. Filing the report, paying the balance, and confirming the updated account status protects the entity's ability to transact business and limits the period during which Section 171.255 may apply.