2024 Texas Franchise Tax Reporting Changes

Jan 3, 2024

2024 Texas Franchise Tax Reporting Changes

Starting from reports due after or on January 1, 2024, the no-tax-due threshold in Texas has been raised to $2.47 million.

Texas Comptroller

Enhancements and Adjustments: No Tax Due Reporting for 2024

When it comes to taxation, changes are inevitable. Therefore, you must be aware of these changes to ensure compliance and avoid any potential penalties. “No Tax Due” reporting requirements for 2024 are one of the significant changes to keep an eye on.

In this blog post, we will talk about the key adjustments made in no-tax-due reporting for 2024.

So, here we go:

Understanding No Tax Due Reporting

No Tax Due” reporting refers to the process by which businesses or individuals declare that they have no tax liability for a specific reporting period. It is typically applicable when there is no taxable activity to report or when all taxable activity has been properly accounted for, and taxes have been paid. It serves as a way for taxpayers to fulfill their reporting obligations even when no taxes are owed.

Changes for 2024 No Tax Due Reports

2024’s “No Tax Due” reporting brings about several notable adjustments that taxpayers should be aware of. The government passed Senate Bill 3 in July 2023. This bill is bringing about adjustments to how certain entities report for franchise tax purposes. Let’s have a look at the key changes below to understand what has changed in No Tax Due Reports for 2024.

Increase in No Tax Due Threshold

Starting from reports due after or on January 1, 2024, the no-tax-due threshold in Texas has been raised to $2.47 million. This is a 100% increase, from the previous $1,230,000 for reports due in 2022-2023.

Taxpayers Below the No Tax Due Threshold

For reports due on or after January 1, 2024, if the annualized total revenue of a taxable entity is $2.47 million or less, then they don’t have any obligations to submit a No Tax Due Report any longer.

However, they still need to file either Form 05-102 PIR in PDF or Form 05-167 OIR.

No tax due report for combined groups

For combined groups, even if individual members fall below the threshold, the entire group must report. If the group’s total revenue is below the threshold, they are exempt from filing a No Tax Due Report, Affiliate Schedule, or Common Owner Information Report. However, each member must still file a Public Information Report or Ownership Information Report if they are based in Texas or have connections in Texas.

Here, we have simplified the combined group’s no tax due reporting to make things easier to understand. So, let’s have a look at the information below.

When dealing with combined groups, it is important to note that:

  1. Inclusion of All Members:

A combined group should encompass all taxable entities within the group report. It includes members with annualized total income below or at the provided no-tax-due revenue threshold when considered individually.

  • Revenue Threshold Exemption:

If the combined group’s total annualized revenue falls at or below the no-tax-due revenue threshold:

  • No requirement to submit a franchise tax report.
    • No need for an Affiliate Schedule (Form 05-166) or a Common Owner Information Report (Form 05-177) for that specific report year.
  • Individual Member Obligations:

However, each member within the combined group, organized in Texas or having nexus in Texas, must still file either a PIR (Public Information Report). Or each member needs to file an Ownership Information Report (OIR).

Regardless of which report every combined group member is filing, these reports must be provided in PDF format.

Changes for Veteran-Owned New Businesses

For reports due on or after January 1, 2024, qualifying veteran-owned new businesses are excused from filing a No Tax Due Report in their starting period of five years.

Qualifying Veteran-Owned New Businesses

For the first five years as a new veteran-owned business:

  • No requirement to file a No Tax Due Report.
  • No need to file a PIR or OIR during this initial period in the form of PDF.

Discontinuation of Form 05-163 (No Tax Due Information Report)

Due to the fact that taxable entities with an annualized total revenue below or at the provided threshold and qualifying veteran-owned new businesses don’t require mandated anymore to submit a No Tax Due Report. In fact, the authorities are discontinuing 2024’s No Tax Due Report for the whole year and onward. You can’t access the form for any reporting periods in future.  

Previously, five different entities were eligible for filing this report. However, in the coming year, all of these entities need to follow the instructions we have enlisted below to file for their tax report. So, you must understand these instructions properly.

Let’s have a look at the following information:

Taxable Entities Below the Threshold

If a taxable entity’s annualized total revenue is at or below the no-tax-due threshold:

  • No taxes are owed.
  • No need to file for the No Tax Due Report.
  • However, a PIR or OIR is still necessary to file in PDF format.
For Passive Entities who are Qualified

Every passive entity that is qualifying must know the following rules. It:

  • Must file either the Long Form or EZ Computation Report.
  • Fill in the adequate circle in the section required taxpayer information.
  • Sign the report.
  • No need to provide additional information.
  • No obligation to file a PIR or OIR in PDF.
Qualifying REITs

When it comes to qualifying REITs, then it:

  • Must file either the EZ Computation Report or the Long Form.
  • Blacken the appropriate circle in the taxpayer information section.
  • Sign the report.
  • No need to provide extra information.
  • Must continue filing a PIR or OIR in pdf format.
Entities that are Taxable with Texas Gross Receipts (Zero)

For taxable entities having zero tax gross receipts:

  • File any of the Long Form or either the EZ Computation Report.
  • Fill out specific line items to compute total income.
  • On gross receipts line of Texas, you need to report zero.
  • Continue filing a PIR or OIR in pdf format.

Final Thoughts

Overall, the revamped “No Tax Due” reporting requirements for 2024 start a new era of tax compliance. It is demanding a more comprehensive and meticulous approach to reporting. Individuals and businesses can navigate the changes with resilience and ensure continued compliance with tax requirements. They can do so by understanding the nuances of the updated regulations and taking proactive steps to adapt.

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