A Texas tax clearance letter (Form 05-377) is the document the Comptroller issues once your entity has filed every missing franchise tax report and paid every outstanding tax, penalty, and interest balance. You need it to reinstate a business whose privileges or charter were forfeited for franchise tax noncompliance. The letter itself is free; getting to the point where the Comptroller will issue one is the work. Once you have it, you attach it to Form 801 and a $75 filing fee at the Secretary of State to set the forfeiture aside.
Why the Clearance Letter Matters
When the Comptroller forfeits a Texas entity’s corporate privileges for failing to file franchise tax reports or pay the tax, the entity loses the right to sue or defend itself in Texas courts, and every director and officer becomes personally liable for business debts created after the forfeiture date, as if they were general partners. That personal exposure continues until privileges are revived. The same forfeiture procedure and consequences apply to LLCs, partnerships, and other taxable entities, not just corporations.1State of Texas. Texas Tax Code Chapter 171 – Franchise Tax – Section: 171.2515 Forfeiture of Privileges of Taxable Entities Other Than Corporations
If the entity does not revive its privileges within 120 days, the Secretary of State can go further and forfeit the entity’s charter, certificate, or registration outright.2State of Texas. Texas Tax Code 171.309 – Forfeiture by Secretary of State Reinstatement is still available after that happens. For tax forfeitures specifically, there is no deadline to reinstate, so long as the entity would otherwise still exist.3Texas Secretary of State. Terminations and Reinstatements FAQs But waiting is not free. Interest keeps accruing on unpaid balances, and every day the business operates while forfeited is another day of personal liability for new debts.
Step 1: Find Out Exactly What You Owe
Start with the Comptroller’s Franchise Tax Account Status Search. You can look up the entity by name, by its 11-digit Texas Taxpayer Number, or by its 9-digit federal EIN.4Texas Comptroller of Public Accounts. Franchise Tax Account Status Search The results will show whether the entity is “not in good standing” and identify which annual reports are missing and what tax, penalty, and interest amounts remain due.
The Comptroller forfeits privileges when a taxable entity fails to file required reports or pay the tax within 45 days after a notice of forfeiture is mailed.5State of Texas. Texas Tax Code Chapter 171 – Franchise Tax – Section: 171.251 Forfeiture of Corporate Privileges If the forfeiture caught you off guard, check whether the Comptroller had a current mailing address for your entity. Updating it now prevents the same thing from happening after reinstatement.
Step 2: File Every Missing Report and Pay the Balance
Before the Comptroller will issue a clearance letter, you have to file every delinquent franchise tax report and pay all outstanding tax, penalties, and interest.6Texas Comptroller of Public Accounts. Reinstating or Terminating a Business There is no partial clearance. The account has to be fully current. If you have several years of unfiled reports or complex calculations, this is where the real time and money go.
Step 3: Request the Clearance Letter
With the account clear, you request the Tax Clearance Letter by submitting Form 05-391, the request form. If the Comptroller confirms your account has no outstanding obligations, it issues Form 05-377, the clearance letter itself. The letter is what the Secretary of State needs; Form 05-391 is simply the mechanism to trigger it.7Texas Comptroller of Public Accounts. Tax Clearance Letter Request for Reinstatement
You have two submission options:
- Webfile. If you have a franchise tax Webfile (XT) number and the entity is registered with the Secretary of State, log into the Comptroller’s eSystems portal and request the letter electronically. If the account is fully clear, the system returns a PDF of the clearance letter immediately.
- Mail. Complete Form 05-391 on paper and mail it to the Comptroller. Slower, but required for certain entities.
Several categories cannot use Webfile and have to file the paper request: entities that are part of a combined group, entities active for franchise tax less than a year, limited liability partnerships, entities not registered with the Secretary of State, entities with an active audit, entities forfeited before January 1, 2000, and entities with past-due franchise tax obligations predating January 1, 1992.8Texas Comptroller of Public Accounts. Requesting Tax Certificates and Tax Clearance Letters
The request asks for the entity’s full legal name exactly as it appears on the Secretary of State’s records and the 11-digit Texas Taxpayer Number. Mismatches cause delays, so verify both against your original formation documents or the Comptroller’s online search before submitting.
Step 4: File Form 801 with the Secretary of State
The clearance letter alone does not reinstate the entity. You take Form 05-377 to the Secretary of State and file it with Form 801, the Application for Reinstatement and Request to Set Aside Tax Forfeiture.9Texas Secretary of State. Form 801 – Application for Reinstatement and Request to Set Aside Tax Forfeiture The two agencies operate independently; neither will route paperwork to the other for you.
Form 801 requires the entity’s Secretary of State file number, the exact legal name on file, and the signature of an officer, director, manager, or other authorized person. The Form 05-377 clearance letter must be attached; the Secretary of State will reject the application without it.10Texas Secretary of State. Instructions for Form 801 – Application for Reinstatement and Request to Set Aside Tax Forfeiture
The filing fee is $75. Nonprofit corporations are exempt.10Texas Secretary of State. Instructions for Form 801 – Application for Reinstatement and Request to Set Aside Tax Forfeiture You can submit through SOSDirect or SOSUpload, which accept credit card payment and process faster, or mail the form, the clearance letter, and a check or money order to the Secretary of State in Austin.6Texas Comptroller of Public Accounts. Reinstating or Terminating a Business
One trap worth checking before you file: a forfeited entity’s name is not reserved. If another business registered an identical or deceptively similar name while you were inactive, you cannot reinstate under the original name and will need a name amendment. Check availability on the Secretary of State’s online records before submitting.11State of Texas. Texas Business Organizations Code Chapter 9 – Procedures for Reinstatement
Once the Secretary of State approves the application, you get a Certificate of Reinstatement. Keep it in your permanent company records as proof that the forfeiture has been set aside.
What Reinstatement Does and Does Not Fix
A reinstated entity is generally treated as having continued in existence through the forfeiture period, which protects contracts signed, suits filed, and business conducted while the entity was forfeited.3Texas Secretary of State. Terminations and Reinstatements FAQs
What reinstatement does not erase is the personal liability directors and officers accumulated during the forfeiture window. Under Texas Tax Code Section 171.255, that liability attaches to debts created or incurred in Texas between the date the report or tax was due and the date privileges are revived. Reviving privileges stops the clock going forward, but debts from the forfeiture window remain a potential exposure for the individuals involved.12State of Texas. Texas Tax Code Chapter 171 – Franchise Tax – Section: 171.255 Liability of Directors and Officers
When to Bring in a Professional
A straightforward case — a missed report or two, a modest balance, no litigation — is usually manageable by the business owner or a bookkeeper working through Webfile and the Secretary of State’s online portal. Total cost is the back taxes, penalties, interest, and the $75 fee.
A CPA is worth hiring if the entity has multiple years of unfiled reports, is part of a combined group, or has tax calculations complex enough that errors are likely. A CPA can also check whether credits or reduced rates apply.
A tax attorney is the better call when the stakes are higher: active litigation that needs privileges restored urgently, personal liability claims against officers or directors for forfeiture-period debts, a dispute with the Comptroller over the amount owed, or an open audit. Communications with a tax attorney carry attorney-client privilege; conversations with a CPA do not.