Introduction
Founders often confuse non-profit status with the “no-tax-due” threshold in Texas Franchise Tax.
In 2025, assuming your startup pays no tax simply because you’re small—or registered as a non-profit—can lead to costly compliance mistakes. Let’s separate fact from fiction.
Key Texas Legal References
- Texas Tax Code §171.0002(d) – No-tax-due threshold rules
- Texas Tax Code §171.063 – Exemption for certain non-profits
- Texas Administrative Code §3.586 – Filing requirements for exempt and no-tax-due entities
What is “No-Tax-Due” Status?
For 2025, if your business has annualized total revenue under $2.47 million, you don’t owe franchise tax—but you must still file a No-Tax-Due Report.
This applies to:
- For-profit LLCs
- Startups under revenue threshold
- Single-member entities with low receipts
Myth: No-tax-due = no filing required
Fact: You must file a Franchise Tax Report and Public Information Report.
What Counts as a Non-Profit?
To qualify as a tax-exempt nonprofit in Texas, you must:
- Be formed for religious, educational, or charitable purposes
- Obtain IRS 501(c)(3) status
- Submit Texas Form AP-204 to the Comptroller
Exemption applies to:
- Public charities
- Religious organizations
- Accredited educational entities
Myth: Just forming a “non-profit LLC” is enough
Fact: Without IRS and state exemption, you must file and pay like any other entity.
Example: Nonprofit vs. No-Tax-Due
Example: TX STEM Impact, a small educational nonprofit:
- Forms an LLC, applies for 501(c)(3), and gets IRS approval
- Files Form AP-204 and gets exempt status from TX Comptroller
Result: No franchise tax and no public information report required
Example 2: DevLite, a startup with $150K revenue:
- Operates as for-profit SMLLC
- Below the $2.47M threshold
Result: Owes no tax but must file annual No-Tax-Due Report
Step-by-Step: Stay Compliant in 2025
- Determine Your Entity Type
LLC, Corp, or 501(c)(3)? Tax treatment differs. - Review Your Gross Revenue
If under $2.47M, prepare No-Tax-Due Report. - If Nonprofit, File AP-204
Get exemption status before skipping reports. - File PIR When Required
Most entities—even if exempt—must still file a Public Information Report unless waived. - Keep IRS Status Current
Revoked status = franchise tax liability returns.
Conclusion
Don’t confuse low revenue with nonprofit status. And don’t assume nonprofit formation alone gets you exempted in Texas.
Proper documentation and filings are still required.
Call to Action
Confused about whether your Texas entity owes franchise tax?
Book a call with Anshul Goyal, CPA, EA, FCA to:
- Clarify exemption vs. No-Tax-Due status
- Help file AP-204 and IRS 501(c)(3) docs
- Avoid costly late filing penalties
Don’t let false assumptions trigger state audits.
https://calendly.com/anshulcpa/
About Our CPA
Anshul Goyal, CPA, EA, FCA
Anshul brings 15+ years of U.S. and international tax experience. He specializes in helping online sellers, foreign founders, and U.S. residents with IRS and multi-state compliance. Known for his deep knowledge in Shopify and Amazon seller tax strategy, Anshul has helped hundreds of entrepreneurs minimize taxes and scale legally.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified tax professional regarding your individual tax situation.
Top 5 FAQs for 2025
1. Does a no-tax-due LLC still need to file?
Yes, a Franchise Tax Report and PIR are required.
2. How do I qualify for nonprofit exemption?
Get 501(c)(3) status and file Texas Form AP-204.
3. Do nonprofits ever owe franchise tax?
Yes, if exemption is not filed or IRS status is revoked.
4. What if I miss filing the PIR?
You could lose good standing with the Texas SOS.
5. Can I skip all filings under $1M revenue?
No, filing is still required unless you’re fully exempt.