F. General Business Corporations (G.S. 105-122)

  1. Basis For the Tax
    The basis of the tax is total or allocated capital stock, surplus and undivided profits. The basis is the same for both domestic and foreign corporations. Corporations doing business both within and without North Carolina are required to allocate a part of their capital stock, surplus and undivided profits to their business in North Carolina in accordance with a specified statutory allocation formula. Regardless of the actual amount of capital stock, surplus and undivided profits, the amount determined for purpose of this tax cannot be less than fifty-five percent of appraised ad valorem tax value of all tangible property plus value of intangible property in North Carolina nor less than the actual investment in tangible property in North Carolina.

  2. Franchise Tax Bases
    The taxable franchise tax base is the largest of these tax bases:

    1. Capital stock, surplus and undivided profits
    2. Fifty-five percent of appraised ad valorem tax value of all tangible property plus value of intangible property in N. C.
    3. Actual investment in tangible property in North Carolina

  3. Corporations Required to File
    Unless specifically exempt under G.S. 105-125, all active and inactive domestic corporations, and all foreign corporations with a Certificate of Authority to do business, or which are in fact doing business in this State, are subject to the annual franchise tax levied under G.S. 105-122.

  4. Forms to be Used for Filing
    The general business franchise tax is filed on form CD-405 for both domestic and multistate corporations and CD-401S for S corporations. These forms, other required corporate forms, and instructions are available from the Department of Revenue in Raleigh or from any of the branch offices located throughout the State. The forms and other related schedules are also available from the Department's web site at www.dor.state.nc.us.

  5. Substitute Returns
    Any facsimile or substitute form must be approved by the Department of Revenue prior to its use. The guidelines for producing substitute forms are available in the publication, "Requirements for the Approval of Substitute Tax Forms". The publication is available on the Department's web site, or it can be obtained by contacting the Department's forms coordinator. If you use computer generated returns, the software company is responsible for requesting and receiving an assigned barcode. The Department publishes a list of software developers who have received approval on our web site. Photocopies of the return are not acceptable. Returns that cannot be processed by our imaging and scanning equipment may be returned to the taxpayer with instructions to refile on an acceptable form.

  6. Report and Payment Due
    General business corporations must file returns annually on or before the fifteenth day of the third month following the end of the income year. The return is filed as a part of a combined franchise and income tax return. Payment of the entire amount of franchise tax is required by the statutory due date of the return. The tax paid represents an advance payment for the ensuing income year. Example: A corporation files a franchise and income tax return on December 15, 2001 for the fiscal year ended September 30, 2001. The franchise tax due on the return would apply to the year October 1, 2001 through September 30, 2002.

  7. Tax Rate
    The franchise tax rate is $1.50 per $1,000 and is applied to the greatest base determined as set forth in the law. The minimum franchise tax is thirty-five dollars ($35).

  8. Franchise Tax Payable in Advance (G.S. 105-114)
    Franchise tax is payable in advance for the privilege of doing business in North Carolina or for the privilege of existing as a corporation in North Carolina.

    Example: A corporation incorporates, domesticates or commences business in North Carolina on October 15, 2001. The corporation has selected the calendar year as its income yearend. The first tax return due on March 15, 2002 will be a short period return covering the income tax period from October 15, 2001 to December 31, 2001. Franchise tax due on this return covers the ensuing calendar year through December 31, 2002 for the privilege of doing business in North Carolina or for the privilege of existing as a corporation in North Carolina.