North Carolina franchise tax information
North Carolina imposes a franchise tax on most corporations and entities taxed as corporations doing business in the state, including C corporations, S corporations, and LLCs that elect corporate tax treatment. LLCs taxed as partnerships or disregarded entities are not subject to the tax. The North Carolina Department of Revenue (NCDOR) treats an LLC as a corporation for franchise tax purposes only where the LLC elects to be taxed as a corporation under the Code, a position set out in its corporate tax bulletin.
Franchise tax is reported as part of the North Carolina corporate income tax filing (Form CD-405 for C corporations or Form CD-401S for S corporations), typically prepared by an accountant. Both taxes are administered by the NC Department of Revenue, which publishes franchise tax filing requirements and current-year corporate tax forms on its website.
The North Carolina annual report filing is separate from the tax filing. The annual report goes to the North Carolina Secretary of State, while NCDOR administers the franchise tax. The due dates may align for some filers, but they are distinct legal obligations.
When is North Carolina's franchise tax due?
Both corporate return types are due on the 15th day of the fourth month following the close of the income year, generally April 15 for calendar year filers. That is later than the federal S corporation deadline, which falls in the third month, so do not assume the state and federal dates line up. Because the North Carolina date is keyed to your income year and is subject to change, confirm it against the current NCDOR instructions each year.
C corporations (Form CD-405): franchise and income tax reported on one combined return
S corporations (Form CD-401S): same deadline, franchise tax reported on the S corporation return
For tax years beginning on or after January 1, 2025, filing Form CD-419 extends the filing deadline by seven months, up from the six-month extension that applied to tax years beginning before that date, according to the NCDOR extensions page. An extension of time to file does not extend the time to pay or delay when a failure-to-pay penalty attaches, so tax due is still payable by the original due date. Current extension and payment rules appear in the CD-405 and CD-401S instructions for the tax year you are filing.
How is North Carolina's franchise tax calculated?
For tax years beginning on or after January 1, 2023, the franchise tax is measured on net worth only; S.L. 2021-180 eliminated the 55%-of-appraised-property-value and investment-in-tangible-property bases, per NCDOR law changes. The tax base is net worth as adjusted on Schedule C of Form CD-405, multiplied by the apportionment factor computed on Schedule O, which is the same fraction used to apportion corporate income under § 105-130.4.
C corporations pay $1.50 per $1,000 of net worth base, with the tax on the first $1,000,000 capped at $500; S corporations pay a flat $200 on that first $1,000,000. Every filer owes at least $200.
Filer | Rate on the net worth base | Minimum tax | Maximum tax |
|---|---|---|---|
C corporations | $1.50 per $1,000 of tax base, with the tax on the first $1,000,000 capped at $500, plus $1.50 per $1,000 of base above $1,000,000 | $200 | No overall ceiling |
S corporations | $200 on the first $1,000,000 of tax base, plus $1.50 per $1,000 of base above $1,000,000 | $200 | No overall ceiling |
Holding companies | $1.50 per $1,000 of tax base, with the tax on the first $1,000,000 capped at $500, plus $1.50 per $1,000 of base above $1,000,000 | $200 | $150,000 |
The $500 first-tier cap applies to tax years beginning on or after January 1, 2025; a different version of the rate statute governs earlier tax years. These figures are set by legislation and have been amended more than once since 2019, so confirm the rate, minimum, and cap that apply to your filing year against current NCDOR guidance.
The rate authority is G.S. § 105-122(d2), which exists in two versions, one for tax years beginning before January 1, 2025 and one for tax years beginning on or after that date. The $500 first-tier cap for C corporations came from S.L. 2023-134; it is effective for tax years beginning on or after January 1, 2025 and applies to the franchise tax reported on 2024 and later returns. The S corporation structure has been in place for tax years beginning on or after January 1, 2019, per the NCDOR rates page.
Holding companies, defined in § 105-120.2(c), get the same first-tier treatment as C corporations, but § 105-120.2(b) caps the franchise tax itself, not the base, at $150,000. No comparable ceiling exists for general business corporations anywhere in § 105-122.
Net worth reported on Schedule C of the 2025 CD-405 form is computed under generally accepted accounting principles as of the end of the taxable year. Where a corporation does not keep its books under GAAP, net worth follows the accounting method it uses for federal tax purposes.
Simplify your North Carolina compliance with Discern
North Carolina's franchise tax calculation requires detailed financial information from your books, and the filing sits alongside a separate Secretary of State obligation with its own deadline. Discern's entity compliance platform does not file North Carolina franchise taxes, but it files your North Carolina Secretary of State annual reports, handles North Carolina foreign registration filings, notifies you when franchise taxes are due, and tracks compliance status across your entities.
For teams managing entities across multiple states, Discern covers registered agent services, annual report filings, formations, and foreign registrations in all 51 jurisdictions, plus Delaware franchise tax calculation and filing, with visibility into good standing everywhere they operate.
Frequently asked questions about North Carolina franchise tax
Here are answers to common questions about the North Carolina franchise tax.
Do LLCs pay North Carolina franchise tax?
Not by default. An LLC taxed as a partnership or disregarded entity owes no franchise tax. An LLC that elects C corporation or S corporation treatment with the IRS becomes subject to the tax like any other corporation.
Is the franchise tax the same as the annual report?
No. The annual report is a Secretary of State filing; the franchise tax is a Department of Revenue obligation filed with the corporate income tax return. Business corporations file annual reports by the 15th day of the fourth month after fiscal year end, while LLCs file by April 15 each year regardless of fiscal year, per the Secretary of State's annual report due dates. Completing one does not satisfy the other, even when both fall on the same date.
Can the filing deadline be extended?
Yes. Form CD-419 grants a seven-month extension for tax years beginning on or after January 1, 2025, but payment is still due by the original deadline. Confirm the extension period that applies to your filing year with NCDOR.
How much is the minimum North Carolina franchise tax?
$200. G.S. § 105-122(d2) sets the same floor for C corporations, S corporations, and holding companies, and provides that the tax may in no event fall below $200.
How is net worth determined for the franchise tax?
It starts from the corporation's book net worth on Schedule C of Form CD-405, measured at the close of the taxable year. GAAP governs that figure where the corporation keeps its books on that basis; otherwise it follows whatever accounting method the corporation uses for federal tax. The result is then apportioned using the Schedule O factor.
Is there a maximum North Carolina franchise tax?
Not for general business corporations. § 105-122 sets no overall ceiling for them, so $1.50 per $1,000 keeps accruing on base above the first $1,000,000. Holding companies are the exception, capped at $150,000 under § 105-120.2(b). The $500 figure that applies to C corporations caps only the tax on the first $1,000,000 of base, not the total.
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