Texas Franchise Tax for an Apartment Syndication LLC: Who Files, What It Costs
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An LLC that owns an apartment building in Texas is subject to the Texas franchise tax, but it owes tax only when its total revenue is above the no tax due threshold: $2,650,000 for the 2026 and 2027 report years, according to the Texas Comptroller. Below that, it owes nothing but must still file a Public Information Report (or, for some entities, an Ownership Information Report) by May 15 each year. Above it, the tax is 0.75% of taxable margin, or, if revenue is $20 million or less, the LLC can use the EZ computation at 0.331% of revenue. Most single-building syndications are under the threshold; larger properties are not.
This guide explains who files, how the tax is figured for an apartment LLC, and what happens if the reports are missed. It applies to a deal company formed in Texas or registered to do business there. For the federal side, see the K-1 in a real estate syndication.
Does a syndication LLC owe Texas franchise tax?
The franchise tax applies to taxable entities formed in Texas or doing business there, and limited liability companies are taxable entities. That is true whether the LLC is formed in Texas or in another state and registered in Texas to own the property. The federal tax status (a partnership filing Form 1065) does not change it.
Some entities are exempt as "passive entities", but the Comptroller's passive entity FAQ says the status is limited to partnerships and certain trusts, and that rental income is not passive income for the 90% income test. An apartment LLC therefore does not qualify.
How much is the tax?
The Comptroller's current figures:
| Item | 2026 and 2027 reports | 2024 and 2025 reports |
|---|---|---|
| No tax due threshold (total revenue) | $2,650,000 | $2,470,000 |
| Tax rate (not retail or wholesale) | 0.75% | 0.75% |
| EZ computation revenue limit | $20 million | $20 million |
| EZ computation rate | 0.331% | 0.331% |
Under the regular method, taxable margin is the lowest of: 70% of total revenue, revenue minus cost of goods sold, revenue minus compensation, or revenue minus $1 million. An apartment LLC usually has no payroll of its own (the property manager employs the staff) and limited cost of goods sold, so 70% of revenue or revenue minus $1 million is often the lowest. Your CPA picks the method each year.
A worked example (made up)
The numbers below are invented to show the math for a 2026 report.
- A 250-unit building's LLC had total revenue of $3,600,000. That is above the $2,650,000 threshold, so tax is due.
- Regular method: 70% of revenue is $2,520,000; revenue minus $1 million is $2,600,000. The lower is $2,520,000. Tax at 0.75%: $18,900.
- EZ computation: $3,600,000 x 0.331% = $11,916.
- The LLC would generally choose EZ and owe $11,916 (before any apportionment if part of its revenue is outside Texas).
A 60-unit building with $900,000 of revenue would owe nothing and file only its information report.
What does the LLC file, and when?
- Annual report due May 15. If May 15 falls on a weekend or holiday, the next business day.
- At or below the threshold: the Public Information Report or Ownership Information Report only. Since the 2024 report year, a separate "no tax due" report is not filed.
- Above the threshold: the franchise tax report with the tax, plus the information report.
- First year: a new LLC files its first annual report for the year after it registers. Put May 15 on the deal's calendar at formation.
What if a report is missed?
The Comptroller assesses a $50 penalty on each report filed late, whether or not tax is due. If tax is due and paid late, a 5% penalty applies for 1 to 30 days late and 10% after that, plus interest starting 61 days after the due date. An entity that keeps failing to file can forfeit its right to transact business in Texas, which can stop it from suing in Texas courts and can expose officers and managers to liability for its debts. Getting reinstated takes the missing reports and payments.
For a syndication, a forfeited deal LLC can also trip loan covenants that require the borrower to stay in good standing. See what lenders check.
Does it affect investors?
The franchise tax is paid by the LLC, so it reduces cash flow like any other expense; investors do not file Texas franchise tax reports for their interests. Texas has no personal income tax, so investors living elsewhere generally have no Texas income tax return to file from the deal. See state tax returns for nonresident investors for other states.
How DoorRaise fits in
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FAQ
Does an LLC with no Texas franchise tax due still have to file?
Yes. It files its Public Information Report or Ownership Information Report by May 15 each year.
Is the threshold based on revenue or profit?
Total revenue. A building can lose money and still owe tax if its revenue is above the threshold, though the margin methods and the EZ computation keep the amount modest.
Is a Delaware LLC that owns Texas property subject to the tax?
Yes, once it does business in Texas, which owning and renting a Texas building generally is. It registers with the Texas Secretary of State and files Texas franchise tax reports.
Does the franchise tax replace Texas property tax?
No. Property tax is a separate local tax on the building's value and is usually a much larger expense. See property tax reassessment.
Next step: see the other notice filings a deal makes in blue sky notice filings.
Sources
- Texas Comptroller: Franchise Tax (rates, thresholds, due dates and penalties)
- Texas Comptroller: Franchise Tax frequently asked questions
- Texas Comptroller: passive entities FAQ
- Texas Tax Code, Chapter 171
This article is general information, not tax or legal advice. Rates and thresholds are as of November 2026. Talk to a CPA about your deal. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.