The confusion is understandable. Ownership, unitary business, and Texas nexus overlap, but they are different tests. Entities with no Texas presence can still land on the schedule.
This guide covers the current Texas Comptroller requirements for Form 05-166: who files, what to gather, how to complete it, how it connects to combined reporting, and how to review it before filing.
Key Takeaways
- Form 05-166 reports affiliate information. It does not calculate tax.
- Affiliate status, common ownership, unitary business, and Texas nexus are separate tests.
- A federally disregarded affiliate still gets its own line on the schedule.
- Reconcile the schedule with the franchise tax report, the PIR or OIR, ownership records, and prior filings.
- Always check the instructions for the specific report year.
What Is the Texas Franchise Tax Affiliate Schedule?
What Form 05-166 reports
Form 05-166 is the Texas Franchise Tax Affiliate Schedule. For report years 2026 and later, the Comptroller publishes annual and final-report versions.
The reporting entity of a combined group uses it to list each member's identifying and financial details, as described in the 2026 franchise tax instructions.
The schedule is about the relationship between the reporting entity and its affiliates. It does not depend on the amount of tax due or on how an entity is classified for federal income tax.
Each affiliate line asks for:
| Fields | Information requested |
|---|---|
| 1-3 | Legal name, Texas taxpayer number (or FEI number if none), NAICS code |
| 4-5 | Disregarded for Texas franchise tax; no Texas nexus |
| 6-7 | Affiliate reporting period start and end dates |
| 8 | Texas Subchapter T qualified research expenses |
| 9-10 | Gross receipts everywhere and in Texas, before eliminations |
| 11 | Cost of goods sold or compensation, before eliminations |
How an affiliate differs from a combined-group member
Texas uses specific definitions, and a general corporate "affiliate" idea is not a substitute.
- Affiliated group: entities in which a common owner or owners hold a controlling interest, directly or indirectly. Controlling interest generally means more than 50%.
- Unitary business: a single economic enterprise whose parts are interdependent and integrated, with value shared or exchanged among them.
- Combined group: taxable entities in an affiliated group that are engaged in a unitary business. The group is treated as one taxable entity.
Take a Delaware parent that owns 100% of an Ohio manufacturing subsidiary and a Texas sales subsidiary. If the three operate as one enterprise, they report together.
The Ohio subsidiary belongs in the group even without its own Texas nexus. A vendor or customer of the parent does not, however large the relationship.
Why accuracy matters
Each entity identified on the schedule is jointly and severally liable for the group's franchise tax. A missing affiliate can distort group revenue and apportionment, and it can leave the Comptroller's records out of step with your ownership disclosures.
Late reports and payments carry general penalties: $50 per late report, then 5% or 10% of tax paid late. Interest begins 61 days after the due date. No separate penalty applies to the 05-166 itself.
Who Must File the Affiliate Schedule and When?
Start with the entity and the Texas system
Review each entity's legal form, formation state, activities, and Texas connections. Corporations, LLCs, partnerships, professional associations, and holding companies can all be taxable entities under Chapter 171.
Federal tax classification does not settle the question. A federally disregarded entity generally remains a separate Texas filer unless it is a combined-group member. Even then, it must be listed separately on the schedule.
Test ownership and business relationships
Work through the facts in order:
- Map direct and indirect ownership, using voting power, stock value, capital, profits, or membership interests as the entity type requires.
- Identify whether any common owner holds more than 50% of each entity.
- Look for unitary signals: the same line of business, steps in a vertical process, centralized management, and shared services.
- Note that Texas rules presume affiliated entities are unitary, though the presumption can be rebutted.
- Separate true affiliates from customers, vendors, and passive investors.
Check report year and filing conditions
The no-tax-due threshold applies to annualized total revenue of the whole combined group, not each member:
| Report year | No-tax-due threshold |
|---|---|
| 2025 | $2,470,000 |
| 2026 | $2,650,000 |
For 2026, a combined group at or below the threshold generally does not file Form 05-166 or Form 05-177. If it elects to file a franchise tax report anyway, Form 05-166 is required.
A few situations deserve a second look:
- Foreign affiliates: an entity that meets the ownership and unitary tests joins the group even with no Texas nexus. Per the Comptroller's combined-group FAQ, it counts in total revenue but contributes no Texas receipts.
- Zero Texas receipts: this gives a separate filer a zero apportionment factor. It does not replace the group-level computation.
- Information reports: a taxable entity organized in Texas or with Texas nexus must still file its PIR or OIR, even at or below the threshold.
The 2026 annual report was due May 15, 2026. Extensions to November 16, 2026 were available (August 17 for mandatory EFT payors, with a second extension possible). A combined group requesting one files Form 05-164 plus Form 05-165.
Records to gather first
- Organizational charts and ownership ledgers
- Formation documents and exact legal names
- Texas taxpayer numbers or FEI numbers
- Entity classifications and NAICS codes
- Prior franchise tax filings
- Intercompany agreements
- Accounting-period dates for every member
Write down why each related entity is in or out. If the Comptroller asks, that note is your support.
How to Complete the Affiliate Schedule
Confirm the reporting entity and period
Match the reporting entity's legal name, taxpayer number, report year, and accounting period to its Comptroller account and the main report. The reporting entity itself must appear on the schedule.
The franchise tax report can be filed through Webfile, Comptroller-approved software, or on paper. Confirm the channel for your report year before you start.
Enter each affiliate consistently
Use the legal name and number from state records and formation documents. Do not use trade names, group nicknames, or accounting abbreviations.
Key entry rules from Comptroller's Form 05-166:
- Keep each affiliate's reporting dates within the combined group's accounting period.
- Check the no-nexus box only if the affiliate is not organised in Texas and has no Texas nexus.
- Check the disregarded box where it applies.
- Report receipts and COGS or compensation before eliminations. The combined report applies permitted eliminations.
Decide which entities belong
Parents, subsidiaries, sister companies, holding companies, disregarded entities, and out-of-state members all need evaluation. Include members of the combined group for the accounting period in which they belong to it. An entity outside the group for a period files separately for that period.
Document every exclusion. Then verify against the current instructions that you are listing the right category of entities.
Reconcile before filing
Do not prepare the schedule in isolation. Cross-check it against:
- Group revenue calculations and intercompany eliminations
- Texas receipts and apportionment workpapers
- The PIR or OIR and ownership records
Mismatches can prompt follow-up questions or produce an inaccurate group filing.
Submit, save, and correct
Sign or authorize as required. An agent needs Form 01-137 or other written authorisation. Save the confirmation or accepted filing record.
To amend a franchise tax report, file all pages, mark it "AMENDED," and attach a cover letter explaining the reason with support. A PIR correction follows a separate amended-PIR procedure, and later changes go on the next PIR.
How the Affiliate Schedule Relates to Combined Reporting and Other Forms
Combined reporting
Common ownership plus a unitary business means the entities report as one group. The group totals member revenue, applies the statutory adjustments, and apportions combined margin. Non-nexus affiliates add nothing to Texas receipts.
The group selects a reporting entity under the instructions and Rule 3.590. Form 05-166 supplies the member-level data. The group tax computation sits in the main report.
The related Texas filings
| Filing | Who files | What it reports |
|---|---|---|
| Franchise tax report | Reporting entity | Group revenue, margin, and tax |
| 05-166 Affiliate Schedule | Reporting entity, when required | Affiliate identity, status, dates, receipts, COGS or compensation |
| 05-165 Extension Affiliate List | Reporting entity, with 05-164 | Affiliates for extension purposes only |
| 05-102 PIR | Corporations, LLCs, LPs, professional associations, and financial institutions with Texas ties | Officers and directors |
| 05-167 OIR | Other taxable entity types with Texas ties | General partners or trustees and 10%+ owners |
| 05-177 Common Owner Information Report | Reporting entity of a group preserving a business-loss carryforward credit | Common owner identity and ownership start date |
Filing one does not replace another. Each answers a different question.
Thresholds and special situations
Verify the current threshold, passive-entity treatment under Tax Code Sec. 171.0003, and the foreign-operations exclusion in Sec. 171.1014 before filing. Do not decide on an affiliate based only on its standalone revenue. Group-level rules control.
Common Mistakes and a Final Review Checklist
Frequent errors
- Omitting a related entity, or listing an unrelated vendor
- Using an outdated legal name or the wrong taxpayer number
- Confusing an affiliate with a common owner
- Reporting after-elimination amounts where before-elimination amounts are required
- Failing to update after a merger or ownership change
- Assuming "no tax due" means no affiliate information is needed
That last assumption needs care. Information reports remain due even when no tax is owed, and electing to file at or below the threshold still triggers Form 05-166.
Pre-submission checklist
- Entity names and taxpayer numbers match state records
- Ownership and control analysis is documented
- Unitary-business conclusion is written down
- Nexus and disregarded boxes are correct
- Group membership matches the accounting period
- Report year and form version are current
- Signature or authorization is in place
- Schedule agrees with the main franchise tax report
Retain these records with the filing:
- Organizational chart
- Ownership support
- Intercompany reconciliation
- Completed schedule
- Filing confirmation
- Any written technical conclusion
Texas requires tax records to stay available for at least four years.
Compliance support
VJM Global supports US-based businesses and multinational groups with accounting records, tax compliance workflows, and related-entity reporting reviews. VJM Global is not affiliated with the Texas Comptroller, and this article does not replace professional advice based on your facts.
Frequently Asked Questions
Does Texas have a state franchise tax?
Yes. Texas taxes qualifying taxable entities. Whether you file reports or schedules depends on entity status, nexus, group structure, revenue, and current Comptroller rules.
What are the instructions for filing Texas Form 05-102?
Form 05-102 is the Public Information Report, which lists officers and directors. It is separate from the Affiliate Schedule. Follow the current Comptroller instructions for your entity type.
Can I file my Texas annual report online?
Generally yes. The Comptroller offers Webfile and a list of approved software providers. Paper filing is also described in the instructions. Confirm the channel for your report year.
What is the Texas Franchise Tax Affiliate Schedule?
It is Form 05-166, a disclosure of affiliate details filed with a combined franchise tax report. Confirm the exact scope under the current instructions.
When does a Texas business need to file Form 05-166?
It depends on combined-reporting status, group revenue against the threshold, and report type. Review your ownership chart and the current instructions before deciding.
