Frequently Asked Questions about NC Franchise, Corporate Income and Insurance Tax

No. For corporate income and franchise tax purposes, taxpayers are identified by their Federal Identification Number and the number assigned by the Secretary of State.

The Department's current position concerning nexus is to administer the rule as amended November 2, 1992. Except for an amendment effective January 1, 1994, which removed ambiguous language in the first paragraph, North Carolina's Doing Business Rule, 17 NCAC 5C .0102, has not changed since November 2, 1992. In 1992, the Department clarified the language of the original rule pertaining to income producing property in this state. The original rule dated back to February 1, 1976. Originally, subdivision .0102(5) stated simply that "the owning, renting, or operating of business or income-producing property (real or personal) in North Carolina" would be considered to be doing business in this state. The 1992 revision includes more specific examples of the types of income producing property that create nexus. Those examples include: (i) realty; (ii) tangible personal property; (iii) trademarks, tradenames, franchise rights, computer programs, copyrights, patented processes, and licenses. Additionally, subsections addressing corporations with partnership and joint venture interests in this state and motor carrier operations were incorporated into the rule. The Tax Review Board upheld the Department's position on May 7, 2002. (See A&F Trademark, Inc. Decision number 381.)

No. For corporations permitted to apportion income, only those sales made within North Carolina are required to be included in the numerator of the sales factor. However, sales of a corporation which is not required to file an income tax return in another state are considered to be this state.

Yes.

No. The Department of Revenue will issue a tax-exempt letter with proof of your federal exemption. (Read more about non-profits).

Refer to Corporate Income and Franchise Tax Rates for current tax rate information.

North Carolina General Statute 105-230 requires the Department of Revenue to notify the Secretary of State when a "corporation or a limited liability company fails to file any report or return or to pay any tax or fee required by the tax laws for 90 days after it is due." It further requires the Secretary of State to "suspend the articles of incorporation, articles of organization, or certificate of authority, as appropriate, of the corporation or limited liability company." All the powers and privileges of the corporation will cease upon the suspension.

You must file all returns for all tax schedules and pay all tax, penalty, and interest due and pay a $25 reinstatement fee. Upon receipt, the corporation will be reinstated and the Department will notify the Secretary of State’s office.

• If a return was filed, send a copy of the return, canceled check with which payment was made, and a copy of the delinquent letter to the Corporate Work Group - Central Examination, Post Office Box 871, Raleigh, NC 27602.
• If a return was not filed, send the return and payment for the tax, penalties, and interest to North Carolina Department of Revenue, Post Office Box 25000, and Raleigh, NC 27640-0710.

A corporation that is inactive or has no assets is subject annually to a minimum franchise tax of $200.00. A return must be filed for each year in which there was no activity and a $200.00 payment must be made. Returns are required through the date of formal dissolution or withdrawal through the Office of the Secretary of State.

If a corporation is dissolved or formally withdraws via the Office of the Secretary of State, 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. A final return is required by the 15th day of the fourth month after the close of business.

Corporations in bankruptcy are not required to pay pre-petition tax, penalty, and interest; however, returns must still be filed. Corporations in bankruptcy are required to file post-petition returns and pay the tax, penalty, and interest due.