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 taxed as corporations.

An accountant typically files it, as franchise taxes are filed as part of the North Carolina corporate income tax filing (Form CD-405 for C corporations or Form CD-401S for S corporations). 

The annual report filing for North Carolina is separate from the tax filing. The annual report is filed with the North Carolina Secretary of State, while franchise and income taxes are administered by the North Carolina Department of Revenue (NCDOR). 

The due dates may align for some filers, but they are distinct legal obligations.

North Carolina has detailed information about franchise taxes on their website. Tax forms can be found here.

When is North Carolina’s franchise tax due?

Due dates vary by entity type:

• C corporations (Form CD-405): 15th day of the 4th month following the close of the taxable year (April 15 for calendar year filers)
• S corporations (Form CD-401S): 15th day of the 3rd month following the close of the taxable year (March 15 for calendar year filers)

Check the current NCDOR instructions for CD-405 and CD-401S for exact dates and extension rules.

How is North Carolina’s franchise tax calculated?

North Carolina has simplified its franchise tax so that it is generally measured on net worth only (older alternative bases, such as capital stock and property-based bases, have been eliminated).

The franchise tax is calculated using a tax base of North Carolina net worth, which is total net worth multiplied by the apportionment factor computed on Schedule O of Form CD-405.

Current calculation structure:

• Minimum franchise tax: $200
• Capped amount on first portion: The law caps the tax due on the first segment of the tax base (for example, a maximum of $500 on the first $1,000,000 of net worth)
• Rate on remaining base: $1.50 per $1,000 of any tax base above the initial capped segment
• Qualified holding companies: Subject to a separate, lower maximum franchise tax cap

There is no overall dollar maximum on franchise tax for ordinary corporations, except for the qualified holding company cap.

North Carolina’s Form CD-405 C-Corp Tax Return (2023 Form here as an example) has a Schedule C for calculating Net Worth, and Schedule O for calculating the Apportionment Factor.

Discern helps you track North Carolina compliance

North Carolina's franchise tax calculation requires detailed financial information and is typically handled by an accountant through NCDOR-approved filing methods. 

While Discern does not file North Carolina franchise taxes directly, Discern can file your North Carolina Secretary of State annual reports, notify you when franchise taxes are due, and provide guidance and tracking to help you stay compliant across all your entities.

Ready to simplify your multi-state compliance? Book a demo of Discern today.