TLDR
Texas does not have a general charitable solicitation registration statute, which surprises out-of-state founders — but Texas nonprofits still file biennial reports with the Secretary of State, Form 990 with the IRS, sales-tax exemption applications with the Comptroller, and unemployment registrations with the Texas Workforce Commission. Federal grant pass-throughs from agencies like HHSC and TEA carry full Uniform Guidance audit obligations, so any organization spending $1,000,000 or more in federal awards in a fiscal year must complete a Single Audit.
Texas nonprofit compliance is unusual in one important way: the state does not require charitable solicitation registration. That single fact creates a false sense of simplicity. The other obligations — biennial Secretary of State filings, annual franchise tax reports, sales tax exemption applications, property tax exemptions filed with each county, payroll registration with the Texas Workforce Commission, and the federal Single Audit when grant spending crosses $1,000,000 — still apply, and the state has its own quirks (the May 15 franchise deadline, the irrevocable reimbursing-employer election, the local property-tax filings) that catch organizations that assumed Texas was a hands-off state.
This FAQ collects the questions Texas executive directors and development directors actually ask in the first 90 days of operating a grant-funded nonprofit. It is not legal advice. Every answer is grounded in the underlying Texas statute, IRS guidance, or Texas Comptroller publication. Where deadlines or thresholds are stated, the source is cited so you can verify the current rule with the State of Texas.
Where to go next
- The Texas state hub: GrantPipe for Texas nonprofits
- Step-by-step setup: Texas nonprofit startup guide
- Audit thresholds across states: Nonprofit audit requirements by state
- Free download: Texas compliance checklist
Implementation realities and migration notes
Mid-sized nonprofits in this category typically inherit a tangle of restricted-fund histories: federal pass-throughs, state agency contracts, family-foundation grants, and partner funding stretching back many years. Migrating that history cleanly is not optional — auditors and program officers will ask questions that require a year-by-year reconstruction. Implementation timelines run six to ten weeks for organizations that scope the data inventory before signing. Cutting corners on migration to chase a fast launch usually surfaces gaps during the next single-audit cycle, and the cost of fixing those gaps after the fact is meaningfully higher than doing migration right at the start.
Plan accordingly, and require any vendor on the shortlist to demonstrate restricted-fund handling, grant tracking, and donor record migration on a representative sample of your actual historical data before you sign. Vendors that decline to demo on real data are filtering you out for a reason. The demo on your data is where the gaps surface — both the gaps in the vendor’s product and the gaps in your existing records that you will need to clean up regardless of which system you choose. Use that demo to set realistic expectations with the board and the audit committee about timeline and scope before contracts get signed.
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Frequently asked
Frequently Asked Questions
Does Texas require charitable solicitation registration?
No. Texas is one of a small number of states without a general charitable solicitation registration statute administered by the Attorney General or Secretary of State. A 501(c)(3) public charity that solicits Texas donors does not file an annual charitable registration form with the State of Texas. There are narrower regimes — for example, public safety solicitations under Chapter 1803 of the Occupations Code and law enforcement publications under Chapter 1804 — that do require state filings. Most operating charities are not subject to those statutes.
What does Texas require instead of a state charitable registration?
Texas nonprofits incorporated under the Texas Business Organizations Code file a Periodic Report with the Secretary of State once every four years (when requested by the SOS) and pay a filing fee of $5. They also file an annual federal Form 990, 990-EZ, or 990-N with the IRS, and a Texas Franchise Tax No Tax Due Report or Public Information Report (Form 05-102) annually with the Texas Comptroller. Failure to file the franchise report leads to forfeiture of the right to transact business in Texas.
Are Texas nonprofits exempt from franchise tax automatically?
Not automatically. A Texas nonprofit corporation must apply separately for franchise tax exemption with the Texas Comptroller using Form AP-204 (or AP-205 for organizations exempt under IRC 501(c)(3) seeking the corresponding state exemption). Approval grants exemption from Texas franchise tax. Nonprofits still file the annual Public Information Report (Form 05-102) to keep the corporation in good standing, even when no franchise tax is due. Loss of franchise tax good standing prevents the organization from filing lawsuits and signing enforceable contracts.
How does Texas sales-tax exemption work for nonprofits?
Sales-tax exemption is separate from franchise tax exemption and from federal 501(c)(3) status. A nonprofit applies to the Texas Comptroller using Form AP-204 to be designated exempt from sales tax. Once approved, the nonprofit issues an Exemption Certificate (Form 01-339) to vendors when purchasing goods used by the organization. Texas also allows qualifying 501(c)(3) and 501(c)(4) organizations to hold up to two one-day tax-free sales or auctions per calendar year without collecting sales tax on the items sold.
Do Texas nonprofits get an automatic property-tax exemption?
No. Property-tax exemption is administered locally by the appraisal district where the property sits, under Texas Tax Code Chapter 11. The most common exemptions for charities are Section 11.18 (charitable organizations) and Section 11.20 (religious organizations). The nonprofit files an application with the local appraisal district by April 30 each year for first-time applications. The exemption is not transferred when property is sold or moved between counties; the new owner or location must reapply.
What is the audit threshold for Texas nonprofits?
Texas does not impose a state-level audit threshold for general charitable organizations. The federal Single Audit threshold under Uniform Guidance (2 CFR 200.501) applies whenever a nonprofit expends $1,000,000 or more in federal awards in a fiscal year — including federal funds passed through state agencies like the Texas Health and Human Services Commission. Some Texas state agencies, foundations, and bank loan covenants require audited financial statements at lower thresholds; the typical practical trigger for a CPA audit at midsize Texas nonprofits is $500,000 to $1,000,000 in revenue.
Do Texas nonprofits need to register with the Texas Workforce Commission?
Yes, once they hire their first employee. Nonprofits register with the Texas Workforce Commission (TWC) for unemployment tax. Section 501(c)(3) organizations may elect the reimbursing employer method instead of paying contributions on a quarterly basis — meaning the organization repays TWC dollar-for-dollar for unemployment benefits paid to former employees. Reimbursing-employer status is filed at registration and is generally cheaper for organizations with low turnover. The election is irrevocable for at least two calendar years.
How does payroll registration work for a new Texas nonprofit?
Three layers. Federal: obtain an Employer Identification Number (EIN) from the IRS and register with EFTPS for federal tax deposits. State: register with the Texas Workforce Commission for unemployment tax, electing reimbursing-employer method if eligible. Local: there is no state income tax in Texas, so no state withholding is needed. Workers' compensation insurance is not legally required for most private-sector employers in Texas, but most foundations and federal grants effectively require coverage as a condition of award.
How do I incorporate a nonprofit in Texas?
File a Certificate of Formation for a Nonprofit Corporation (Form 202) with the Texas Secretary of State, $25 filing fee. Texas Business Organizations Code Chapter 22 governs nonprofit corporations. The certificate must list at least three directors, the registered agent and address, the corporation's purpose statement, and whether it has members. After incorporation, draft bylaws, hold an organizational meeting, obtain an EIN from the IRS, file Form 1023 or 1023-EZ for 501(c)(3) determination, and apply separately for state tax exemptions.
What is the minimum board size for Texas nonprofits?
Three directors is the statutory minimum under Texas Business Organizations Code Section 22.204. Directors do not have to be Texas residents and do not have to be members. The Code requires the corporation to have a president, a secretary, and any other officers the bylaws specify. The same person may not serve as both president and secretary unless the bylaws permit it. Board terms, removal procedures, and quorum thresholds are set in the bylaws; the statute defaults to a majority quorum if bylaws are silent.
Are there fiscal-year quirks for Texas nonprofits?
The Texas franchise tax has a hard reporting cycle: returns are due May 15 each year, regardless of the organization's fiscal year. A nonprofit with a June 30 fiscal year still files its franchise/Public Information Report by May 15 covering the most recent prior reporting period. Federal Form 990 follows fiscal year — due the 15th day of the 5th month after fiscal year end. Coordinating both deadlines is the most common operational mistake for new Texas finance staff.
How do federal grants flow through Texas state agencies?
Most federal awards reach Texas nonprofits as pass-throughs from state agencies — Texas Health and Human Services Commission (HHSC) for Medicaid and SNAP-related awards, Texas Education Agency (TEA) for education grants, Texas Department of Housing and Community Affairs (TDHCA) for HUD pass-throughs, and Texas Workforce Commission for Department of Labor awards. The state agency is the pass-through entity under 2 CFR 200.332 and is responsible for monitoring subrecipients. The federal Uniform Guidance audit, allowable cost, and procurement rules apply at the subrecipient level.
What are the top state-funded grant programs Texas nonprofits should know?
The Texas Commission on the Arts grant programs (Arts Respond, Arts Education); the Texas Health and Human Services Commission (HHSC) contracts for behavioral health, child welfare, and aging services; the Texas Department of Agriculture's State of Texas Agricultural Relief (STAR) Fund and the Texans Feeding Texans home-delivered meals program; the Office of the Governor's Criminal Justice Division grants, and the Texas Department of Housing and Community Affairs Emergency Solutions Grant. Most are administered through the eGrants or AGate portals.
Where do Texas nonprofits file their annual reports?
Three places. (1) Texas Secretary of State — Periodic Report when requested (every four years), filed online at the SOSDirect portal. (2) Texas Comptroller — annual Public Information Report (Form 05-102) and No Tax Due Report (Form 05-163), filed via Webfile by May 15. (3) IRS — Form 990, 990-EZ, or 990-N, due the 15th day of the 5th month after fiscal year end. None of these is a state charitable solicitation report; Texas does not have one.
What is the most common Texas nonprofit compliance mistake?
Forgetting the annual franchise tax filing. Because most Texas nonprofits owe no franchise tax, founders treat the filing as optional. It is not. Failure to file the Public Information Report or No Tax Due Report by May 15 leads to forfeiture of the right to transact business, voids the corporation's contracts and lawsuits, and triggers a $50 late fee plus a 5% penalty. Reinstatement requires a tax clearance letter, payment of fees, and a Form 801 reinstatement filing with the Secretary of State.
Do Texas nonprofits have to register fundraisers or commercial coventurers?
No state-level registration of professional fundraisers, fundraising counsel, or commercial coventurers exists in Texas as a general matter. Some municipalities — Houston, Dallas, San Antonio — have local solicitation ordinances that may apply to door-to-door or street fundraising. Public-safety solicitations under Texas Occupations Code Chapter 1803 and law-enforcement publications under Chapter 1804 are the narrow exceptions, requiring registration with the Texas Secretary of State. Read the contract with any fundraising counsel carefully — the absence of state oversight makes diligence the charity's responsibility.
What is the Texas raffle law?
The Charitable Raffle Enabling Act (Texas Occupations Code Chapter 2002) allows qualified 501(c) nonprofits that have existed for at least three years to hold up to two raffles per calendar year. Tickets must show the price, the prize, the date of the drawing, the name and address of the conducting organization, and a ticket number. Cash prizes are prohibited; the value of any single non-cash prize is capped (currently $250,000 for purchased prizes; uncapped for donated prizes). Violations are a Class A misdemeanor.
Are Texas nonprofit board meetings subject to the Open Meetings Act?
Generally no. The Texas Open Meetings Act (Government Code Chapter 551) applies to governmental bodies, not to private 501(c)(3) corporations. Two exceptions matter: nonprofits that operate as governmental subdivisions, and nonprofits that contract with a governmental body to perform a governmental function may be subject to the Act. Most operating charities — community service, education, health — are not subject. Nonprofits subject to the Public Information Act (Government Code Chapter 552) likewise need a fact-specific analysis.
What records must Texas nonprofits make available?
Federal law (IRC 6104) requires every 501(c)(3) to make the three most recent Forms 990 and the Form 1023 application available for public inspection. Texas Business Organizations Code Section 22.351 requires a Texas nonprofit corporation to keep correct and complete books and records of account and minutes of director and member meetings, and to make them available to any member upon written demand for any proper purpose. Donor records and member contact information are not required to be public.
How long does Texas 501(c)(3) determination take?
501(c)(3) determination is a federal IRS process, not a state process. Form 1023 (long form) typically takes 6 to 12 months for the IRS to process. Form 1023-EZ (eligible organizations under $250,000 projected gross receipts) typically takes 2 to 4 weeks. Texas state-level work — Secretary of State filing, Comptroller franchise and sales tax exemption — runs in parallel and typically completes within 4 to 8 weeks. The federal determination is the longest pole.
How does GrantPipe help Texas nonprofits stay compliant?
GrantPipe tracks every grant award alongside the program funds it supports, flags reporting deadlines for federal pass-throughs from HHSC, TEA, and TDHCA, and produces the audit-ready schedules required for a federal Single Audit when the $1,000,000 threshold is crossed. It is one system for donors, grants, restricted funds, and compliance documentation — built specifically for the mid-sized nonprofits that previously cobbled together QuickBooks plus spreadsheets plus a CRM.
Where can I read the underlying Texas statutes and forms?
Texas Business Organizations Code Chapter 22 (nonprofit corporations) on the Texas Statutes site at statutes.capitol.texas.gov; Texas Comptroller exempt organization forms at comptroller.texas.gov/taxes/exempt; Texas Secretary of State nonprofit filings at sos.state.tx.us; Texas Workforce Commission nonprofit unemployment information at twc.texas.gov; and federal IRS exempt organization information at irs.gov/charities-non-profits. The Texas Attorney General's Charitable Trusts Section publishes additional guidance at texasattorneygeneral.gov/consumer-protection/charities-and-nonprofits.