Franchise Tax Preparation

What is Franchise Tax?

Franchise tax is a tax levied by the state of Texas on all Texas corporations, LPs and
LLPs that were formed in the state. The amount of the tax is based on the total amount of income that the entity earned in a calendar year. 

While most business owners are familiar with federal income taxes, many are not familiar with state taxes like the franchise tax. This is particularly true for LLCs, which are taxed differently than other types of businesses. These reports must be submitted to the Texas Comptroller of Public Accounts each year.

What are the due dates? 

Usually on May 15 for the filing and payment deadline and November 15 for the extension
deadline. However, remember the extension is an extension to file, not an extension to pay. You still have to pay by the original deadline.

New legislature

In July 2023, the legislature passed Senate Bill 3, which increased the no tax due threshold and eliminated reporting requirements for certain entities. In response, the Comptroller’s office has changed the way some entities have to report for franchise tax purposes.

No Tax Due Threshold Increased to $2.47 Million

For reports originally due on or after January 1, 2024, the no tax due threshold is increased to $2.47 million.

Taxpayers Under the No Tax Due Threshold

For reports originally due on or after Jan. 1, 2024, a taxable entity whose annualized total revenue is less than or equal to $2.47 million is no longer required to file a No Tax Due Report.