Texas Franchise Tax: No Tax Due Threshold Jumps to $2.65M

Texas just made it easier for more small businesses to owe nothing on their franchise tax. For report years 2026 and 2027, the Texas Comptroller raised the “No Tax Due” threshold from $2,470,000 to $2,650,000 in total annualized revenue — meaning a business can bring in significantly more before it owes a single dollar of franchise tax. Colorado has no franchise tax at all, but that is not the same thing as no tax: every C corporation doing business in the state still owes Colorado’s flat corporate income tax starting from its first dollar of apportioned income, with no size-based exemption anywhere close to what Texas just expanded. For business owners in Houston, The Woodlands, and Denver, these two systems are pulling further apart this year, and the planning implications are different in each state.

What Changed in Texas’s Franchise Tax Thresholds for 2026

For report years 2026 and 2027, the No Tax Due threshold is $2,650,000 of total revenue, up from $2,470,000 in the prior two-year cycle. Entities below that line owe $0 in franchise tax and don’t have to work through the Long Form or EZ Computation — but they still have to file a Public Information Report or Ownership Information Report every year to keep the entity in good standing. Entities above the threshold pay 0.375% on total revenue if they’re primarily retail or wholesale, or 0.75% otherwise, unless they qualify for the EZ Computation (available up to $20 million in total revenue, at a 0.331% rate). The compensation deduction limit used in the standard calculation also rose, to $480,000 per person. Annual reports are due May 15, and the Comptroller has been actively sending forfeiture notices — Form 05-211 and Form 05-213 — to entities that missed a filing, even ones that owed nothing.

Why Houston and The Woodlands Business Owners Get a Bigger Break

More Small Businesses Fall Below the Line Entirely

The jump to $2,650,000 pulls a meaningful number of additional Houston-area and Woodlands businesses below the No Tax Due line for the first time — professional practices, contractors, and retail operations that were close to the old $2,470,000 threshold now have breathing room before franchise tax applies at all. The catch is that falling below the threshold doesn’t mean doing nothing: the entity still has to file its Public Information Report or Ownership Information Report by May 15 each year. The Comptroller’s own forfeiture notices exist precisely because business owners assume “no tax due” means “no filing,” skip the report, and end up with a notice threatening forfeiture of their right to transact business in Texas over a filing that would have taken minutes.

Why Denver Business Owners Don’t Get an Equivalent Exemption

Colorado’s Corporate Income Tax Has No Small-Business Floor

Colorado doesn’t have a franchise or privilege tax, so there’s no threshold for the state to raise. Instead, any C corporation organized or commercially domiciled in Colorado — or with property, payroll, or sales in the state above modest nexus thresholds — owes Colorado’s flat corporate income tax on its apportioned net income starting from the first dollar. There is no comparable “no tax due” carve-out for small C corporations, and a corporation with a loss or a minimal liability still has to file an annual Colorado income tax return. Pass-through entities such as S corporations, partnerships, and most LLCs aren’t taxed at the entity level by default; that income flows to the owners’ personal returns, where Colorado’s flat individual rate applies (and owners who’ve elected the SALT Parity Act’s pass-through entity tax have their own separate set of rules to track). The upshot for a Denver C corporation is straightforward: size alone never gets you out of filing or paying, the way it increasingly does in Texas.

What To Do Before Year-End

If you’re in Houston or The Woodlands, recompute your 2026 annualized total revenue against the new $2,650,000 threshold — if you’re newly below it, mark your calendar to still file the Public Information Report or Ownership Information Report by May 15, 2026.
If your Texas entity received a Form 05-211 or Form 05-213 notice in the past year, resolve it now rather than waiting; forfeiture of your right to transact business is a real consequence, not a formality.
If you’re above the Texas threshold, confirm which rate applies to your business (0.375% retail/wholesale vs. 0.75% other) and check whether the EZ Computation makes sense if your total revenue is under $20 million.
If you’re in Denver and operate as a C corporation, don’t assume a slow year gets you out of filing — confirm your Colorado nexus status and file your annual corporate return even if you expect zero liability.
If you operate entities in both states, coordinate your Texas threshold planning with your Colorado apportionment position so neither state’s deadline catches you by surprise.

At Petry Tax & Advisory, we help business owners across Houston, The Woodlands, and Denver sort out exactly which filings and thresholds apply to their entities in each state — contact us for a consultation before your next franchise or corporate income tax deadline.

This post is for general informational purposes only and does not constitute legal or tax advice. Consult with a qualified professional about your specific situation.

Source: Texas Comptroller — Franchise Tax | Colorado Department of Revenue — Corporate Income Tax Guide