Texas Streamlines Franchise Tax Reporting for 2024

Texas Streamlines Franchise Tax Reporting for 2024

According to an article by Winstead, Texas businesses may find relief from filing Franchise Tax Reports due to legislative changes aimed at easing administrative burdens. The Texas legislature has significantly raised the “No Tax Due” threshold from $1,230,000 to $2,470,000 in annualized total revenue. 

Businesses below this threshold no longer need to file the “No Tax Due Report” (Form 05-163), according to Tex. Tax Code. This change primarily benefits small to medium-sized businesses by reducing their reporting obligations.

For combined groups, the total revenue of the group, not individual entities, determines the threshold eligibility. This prevents larger entities from circumventing tax liabilities by splitting operations across smaller entities.

Despite the removal of the “No Tax Due Report” requirement, businesses below the threshold must still submit a Public Information Report (Form 05-102) or an Ownership Information Report (Form 05-167) to maintain compliance.

Additionally, the Corporate Transparency Act (CTA) introduces federal compliance requirements, mandating Beneficial Ownership Information Reports (BOIR) to combat financial crimes. Entities formed before January 1, 2024, must file initial reports by January 1, 2025, while those formed after January 1, 2024, have 30-90 days to comply. These reports require detailed disclosures about beneficial owners, adding a significant compliance layer.

While Texas businesses benefit from reduced state-level tax reporting, they must remain vigilant about federal requirements. Effective compliance strategies are crucial to navigate these changes and ensure adherence to both state and federal regulations.