House Bill 366, passed in Texas’s 88th Legislative Session, raised the franchise tax no-tax-due threshold and eliminated the standalone No Tax Due Report starting with the 2024 report year. For reports originally due on or after January 1, 2026, the no-tax-due threshold is $2,650,000 in annualized total revenue.1Texas Comptroller of Public Accounts. 2026 Franchise Tax Instructions If your business falls at or below that number, you owe zero franchise tax. You are not, however, finished with the Comptroller for the year.
What HB 366 Actually Changed
Two things. First, the bill revised Texas Tax Code sections 171.002 and 171.006 to raise the no-tax-due threshold to $2.47 million for reports originally due on or after January 1, 2024. That increase alone pulled thousands of small businesses out of any franchise tax liability.
Second, and more consequential for day-to-day compliance, the Comptroller discontinued the No Tax Due Report (Form 05-163) entirely beginning with the 2024 report year. Businesses at or below the threshold no longer file that form, and it is not available for any new reporting period.2Texas Comptroller of Public Accounts. No Tax Due Reporting for Report Year 2024 and Later
The 2026 No-Tax-Due Threshold
Under section 171.006, the threshold adjusts every two years based on the Consumer Price Index for All Urban Consumers. The Comptroller multiplies the prior threshold by the CPI percentage increase during the preceding state fiscal biennium and rounds to the nearest $10,000.3State of Texas. Texas Tax Code Chapter 171 – Franchise Tax For reports originally due on or after January 1, 2026, and before January 1, 2028, the threshold is $2,650,000.1Texas Comptroller of Public Accounts. 2026 Franchise Tax Instructions
If your annualized total revenue sits above $2,650,000, HB 366 did not change what you owe. The standard rates still apply: 0.375% for retail and wholesale businesses and 0.75% for all other taxable entities.4Texas Comptroller of Public Accounts. Franchise Tax The EZ Computation option, available to entities with total revenue of $20 million or less, remains at 0.331%.5Texas Comptroller of Public Accounts. Franchise Tax Rates, Thresholds and Deduction Limits
What You Still Have to File
This is where business owners get burned. Losing the No Tax Due Report did not eliminate the annual filing requirement. Even when revenue is well under $2,650,000, every taxable entity must still submit one of two information reports each year:2Texas Comptroller of Public Accounts. No Tax Due Reporting for Report Year 2024 and Later
- Corporations and LLCs file the Public Information Report (Form 05-102).
- Other entities generally file the Ownership Information Report (Form 05-167).
Combined groups have an extra wrinkle. If the combined group’s annualized total revenue falls below the threshold, each member organized in Texas or with Texas nexus must still file its own Public Information Report or Ownership Information Report. The combined group itself skips the No Tax Due Report, Affiliate Schedule, and Common Owner Information Report in that situation.2Texas Comptroller of Public Accounts. No Tax Due Reporting for Report Year 2024 and Later
Annual franchise tax reports are due May 15, 2026.6Texas Comptroller of Public Accounts. Tax Policy News Most filers submit through Webfile on the Comptroller’s eSystems portal.7Texas Comptroller of Public Accounts. File and Pay Downloadable PDF versions of the current forms are posted on the Comptroller’s website for anyone who cannot use Webfile.8Texas Comptroller of Public Accounts. Texas Franchise Tax Report Forms for 2026
What Happens If You Skip the Filing
Missing May 15 costs money even when you owe no tax. The Comptroller assesses a $50 penalty for each late report regardless of whether any tax is due.9Texas Comptroller of Public Accounts. Penalties for Past Due Taxes If tax is owed, additional penalties stack on top:
- 1 to 30 days late: 5% of the tax due.
- More than 30 days late: 10%.
- After the date on a formal Notice of Tax Due: another 10%, for a total of 20%.
Interest starts accruing on the 61st day after the due date at a rate the Comptroller sets each January.9Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
The serious consequence is forfeiture. If a required report or payment is not made within 45 days after the Comptroller mails or electronically sends a forfeiture notice, the entity’s corporate privileges are forfeited.10State of Texas. Texas Code Tax Code 171.251 – Forfeiture of Corporate Privileges A forfeited entity cannot sue or defend itself in Texas courts, and for LLCs and corporations, forfeiture effectively suspends the liability shield that is the point of being organized as a separate entity.
Revival is possible through the Secretary of State using the same procedure that applies to reviving a corporation’s charter.11State of Texas. Texas Code Tax Code 171.3125 – Revival of Taxable Entity To clear the forfeiture, you file every overdue report, pay any tax owed with accumulated penalties and interest, and submit any required Public Information Report or Ownership Information Report for periods when your revenue was at or below the threshold.4Texas Comptroller of Public Accounts. Franchise Tax It is all fixable, and it all costs more than filing on time.