A. General Information (G.S. 105-114)

  1. Scope and Nature
    North Carolina levies a series of franchise taxes upon corporations, both domestic and foreign, and upon certain persons, LLCs, and partnerships. The taxes levied in this subchapter are for the privilege of engaging in business or doing the act named. Specific sections of the law under which the various corporations and businesses are taxed are as follows:

    G.S. 105-116 Electric light, power, water, sewerage and other similar businesses not other wise taxed
    G.S. 105-120 Telephone companies (Repealed effective January 1, 2002)
    G.S. 105-120.2 Holding companies
    G.S. 105-121.1 Mutual burial associations
    G.S. 105-122 General business corporations
    G.S. 105-125 Exempt corporations

    The taxes levied upon corporations organized under the laws of North Carolina (domestic corporations) are for the corporate rights and privileges granted by their charters, and the enjoyment of corporate powers, rights, privileges and immunities under the laws of North Carolina.

    The taxes levied upon corporations not organized under the laws of North Carolina (foreign corporations) are for the privilege of doing business in this State and for the benefit and protection they receive from the government and laws of this State.

  2. Corporation Defined
    For franchise tax purposes, the term "corporation" includes not only corporations in the usual meaning of the term, but also associations, joint stock companies, trusts and other organizations formed or operating for pecuniary gain which have capital stock represented by shares and privileges not possessed by individuals or partnerships. The term does not include a limited liability company.

  3. S Corporations Liable for Franchise Tax
    S corporations are liable for franchise tax levied under Article 3 of the Revenue Laws. The enactment of the S corporation law for income tax purposes does not affect the franchise tax liability of corporations doing business in this State or that are incorporated or domesticated in this State.

  4. Period Covered
    Taxes levied under this Subchapter are for the fiscal year of the State in which they become due, except for the general business franchise tax which is for the income year of the corporation in which such taxes become due.

  5. Inactive Corporations (Section .0104)
    A corporation that is inactive and without assets is subject annually to a minimum franchise tax of thirty-five dollars ($35). Failure to file this return and pay the minimum tax will result in suspension of the Articles of Incorporation or Certificate of Authority. Any corporation which intends to dissolve or withdraw through suspension for nonpayment of franchise tax should indicate its intention in writing to the Department.

  6. Dissolution or Withdrawal of Corporate Rights (Section .0105)
    Corporations are not subject to franchise tax after the end of the income year in which articles of dissolution or withdrawal are filed with the Secretary of State unless they engage in business activities not reasonably incidental to winding up their affairs. Therefore, no franchise tax is required with the income return filed for the year in which the application is filed or with any subsequent income returns that may be required in connection with winding up the affairs of the corporation.

    Examples:
    A calendar year corporation files articles of dissolution or withdrawal during the calendar year 2000. Although its final income tax return will be filed on a combined franchise and income form, the franchise tax portion of the return need not be completed since no franchise tax is due after that applicable to the calendar year 2000. Tax applicable to that year was due on March 15, 2000 with the combined 1999 return.
     
    A corporation using an income year ending April 30 files articles of dissolution or withdrawal on May 19, 2000. Although its final income tax return will be filed on a combined franchise and income form, the franchise tax portion of the return need not be completed since no franchise tax is due after that applicable to the year ending April 30, 2000. Tax applicable to that year will be due on July 15, 2000 with the combined return for the year ended April 30, 2000.


  7. Payment of Franchise Taxes
    General business corporation franchise and income taxes are due on the statutory filing date of the return, without regard to any extensions.

    The utility franchise tax, dependent on various law requirements, may be due semimonthly, monthly or quarterly as stated under the paragraph of "Due Date of the Report and Tax" of each utility tax type. All utility companies, except electric power companies, with an average franchise utility tax of $20,000 or more per month are required to remit the utility tax by Electronic Funds Transfer. An electric power company is required to pay franchise utility tax by EFT if the company is required to pay sales and use tax by EFT.

    Effective January 1, 2002, the payment schedule for specific types of utility franchise tax liability changed. See the section that pertains to the specific type of utility for information regarding the changes.

    For additional information on EFT, refer to the subject of; "Payments of Tax by EFT", under General Administration.

  8. Extension of Filing Date (Section .0107)
    Prior to the regular due date, a corporation may apply for an extension of time for filing its return.

    For additional detailed information concerning the requirements for obtaining an extension of time for filing a corporate franchise and income tax return, see Subject, "Extension of Time for Filing Return."