Texas Franchise Tax Filing, Payment, and Account Status

By Hank FasthoffJuly 5, 2026

Texas franchise tax obligations involve two separate questions. Your business may owe no franchise tax for the year and 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. The amount due depends on revenue, deductions, apportionment, and the filing method, while annual reporting obligations depend on the entity and its filing category.

Taxable Entities

Corporations, limited liability companies, limited partnerships, limited liability partnerships, professional associations, business trusts, and many other entities with limited liability generally fall within the definition of a taxable entity. An entity formed outside Texas may become subject to the tax when its activities establish Texas nexus, even if it hasn't registered with the Texas Secretary of State.

Texas applies its own taxable entity rules. A single member LLC treated as a disregarded entity for federal income tax purposes generally has a Texas franchise tax account and Texas 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 business hasn't been organized as a separate limited liability entity. A general partnership composed entirely of natural persons also falls outside the general definition, subject to the statute's qualifications and the entity's actual structure. Registering as a limited liability partnership changes that analysis.

The 2026 and 2027 Revenue Threshold

For reports due in 2026 and 2027, an entity with annualized total revenue at or below $2.65 million owes no franchise tax. Current franchise tax rates and thresholds apply by report year, so you should use the figures for the report being filed instead of the year in which the revenue was received.

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 that result by 365. If an entity reports $1.5 million for a six month accounting period, its annualized total revenue is about $3 million for purposes of the threshold. Annualized revenue determines whether the entity qualifies for the no tax due threshold, but the entity uses its 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 a different 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. These reports identify the people who manage or own the entity and provide the addresses and other information requested on the applicable form.

An entity at or below the threshold generally files only its information report. A late Public Information Report or Ownership Information Report doesn't incur the $50 late filing penalty, but an unfiled information report can make the franchise tax account noncurrent and begin the forfeiture process.

Special Filing Categories

Passive entities, qualifying real estate investment trusts, entities with zero Texas receipts, and qualifying new veteran owned businesses follow different filing rules. Treating every no tax entity as an information report only filer will produce the wrong filing for some of them.

A qualifying passive entity files either the EZ Computation Report or Long Form with the passive entity designation and required identifying information, 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 with the applicable designation and also files its information report. An entity with zero Texas receipts files an EZ Computation Report or Long Form and its information report, even when the calculation produces no tax.

A qualifying new veteran owned business receives a five year franchise tax exemption and doesn't file an annual franchise tax report or information report during that period. The business must be formed in Texas, must first begin doing business here on or after January 1, 2022, and must 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. The exemption ends on the fifth anniversary of the date the business began doing business in Texas or when it ceases to qualify, whichever occurs first. House Bill 346 repealed the provisions scheduled to end the exemption and certain Secretary of State filing fee waivers on January 1, 2026.

Calculating Tax Above the Threshold

An entity above the no tax due threshold generally files either the Long Form or the EZ Computation Report. For a Long Form filer, taxable margin is based on the lowest applicable result among 70% of total revenue, total revenue minus $1 million, total revenue minus cost of goods sold, or total revenue minus compensation. Texas then apportions that margin through a 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 permits eligible wages, cash compensation, and benefits, subject to a $480,000 limit on wage and cash compensation per person for those report years.

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 and can't claim credits, so you should compare the available filing methods before choosing the shorter form.

Affiliated entities engaged in a unitary business may have to file as a combined group. Combined reporting changes the revenue, apportionment, and information report analysis, and every member of the group must use the same method to calculate margin.

The May 15 Deadline

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

An extension postpones the filing deadline but requires the applicable tax payment with the extension request. A timely extension generally requires payment of at least 90% of the tax that will be due for the current report year or 100% of the tax reported as due for the prior year.

Entities that aren't required to pay electronically may receive 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 to extend filing through November 15. Electronic payment is generally required when the entity paid $10,000 or more in franchise tax during the preceding state fiscal year, and payments of $500,000 or more must use TEXNET.

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 that information report deadline to November 15.

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. That penalty applies to a late EZ Computation Report or Long Form, while a late Public Information Report or Ownership Information Report doesn't incur the $50 charge under the current reporting rules.

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 interest rate annually at the prime rate plus 1%, which produces a 7.75% rate for 2026.

An extension protects the filing date only when the entity submits a timely request and satisfies the payment requirement. An underpayment can invalidate the extension and cause penalties to run from the original due date.

Forfeiture of the Right to Transact Business

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

If the entity doesn't cure within 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 result in forfeiture of a domestic entity's certificate or a foreign entity's Texas registration through the Secretary of State.

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 the entity's privileges were revived. 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 shows that the entity incurred the debt over that person's objection. It also provides a defense when the person lacked knowledge of the debt and reasonable diligence wouldn't have revealed the intention to incur it. Revival leaves liability under that section in place for qualifying debts from the forfeiture period.

Account Status and Reinstatement

The Comptroller's online record is called the Franchise Tax Account Status, a term that replaced 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, along with all tax, penalties, and interest due. If only the right to transact business was forfeited, satisfying the Comptroller's requirements allows the agency to revive that right.

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

What You Should Review Each Year

You should confirm the entity's accounting period, annualized total revenue, filing category, and required forms before May 15. If the entity exceeds the threshold, you should compare the Long Form calculations against the EZ Computation instead of choosing a form because it takes less time to complete.

You should keep the names and addresses in the Public Information Report or Ownership Information Report consistent with the company's current records. A filing that omits a signature, uses the wrong information report, or leaves required ownership information incomplete 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 end the tax account until the entity files any required final report and resolves its Texas nexus.

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 in which Section 171.255 may apply.