Key figures
North Carolina accounting
2026, with sources
A low income tax on a single sales factor
North Carolina taxes C-corporations at 2.00% for tax years beginning in 2026, one of the lowest rates of any state that has a corporate income tax, and the rate is on a statutory path down from there. The income tax and the franchise tax are filed together on Form CD-405, due on the 15th day of the fourth month after year end, with a seven-month extension for tax years beginning on or after January 1, 2025.
Income is apportioned using only the sales factor, and since 2020 receipts from services and intangibles are sourced to the market under Session Law 2019-246. A SaaS company with its whole team in Raleigh but customers across the country apportions only the share of receipts sourced to North Carolina customers, so a growing payroll here does not on its own raise the income tax.
The 2026 conformity update and its two add-backs
North Carolina conforms to the Internal Revenue Code as of a fixed date, and until July 2026 that date was January 1, 2023. Session Law 2026-31 moved it to July 5, 2025, with one notable exception for startups: a corporation that expensed domestic research costs under Section 174A must add back 80% of that deduction and then deduct the add-back in 25% installments over the following four years.
Bonus depreciation has its own long-standing add-back: 85% of the federal Section 168(k) deduction is added back, and 20% of that is deducted in each of the next five years. Both are temporary differences in the state deferred tax calculation, and both are easy to miss if the state return is generated straight from the federal one.
An example
A Delaware C-corporation with a Charlotte office spends $400,000 on domestic engineering salaries in 2026 and expenses all of it federally under Section 174A. For North Carolina it adds back $320,000 (80%) and deducts $80,000 in each of 2027 through 2030. If the company is still in losses, the add-back simply shrinks its North Carolina net loss, which then carries forward 15 years.
Deadlines
- 15th day of the 4th month after year end (April 15)C-corporation franchise and income tax return (calendar year)Form CD-405
- The original due dateExtension of time to file; seven months for tax years beginning on or after January 1, 2025Form CD-419
- Quarterly through the tax yearEstimated income tax, when expected liability is $500 or moreForm CD-429
The federal baseline
This page covers what North Carolina adds. The federal rules underneath it apply here too.
Common questions
What North Carolina rate goes in our 2026 tax provision?
2.00% for tax years beginning in 2026, down from 2.25% in 2025 and 2.5% for 2019 through 2024. Under G.S. 105-130.3 it stays 2% for 2027, drops to 1% for 2028 and 2029, and to 0% for tax years beginning after 2029. Bills to repeal the phase-out were filed in 2026 but none has been enacted, so deferred taxes should be measured at the rate for the year each difference reverses — which, for anything reversing after 2029, is zero.
Does North Carolina follow the federal R&D expensing rules?
Partly. In July 2026 North Carolina moved its Code reference to July 5, 2025, which picks up the One Big Beautiful Bill Act generally, but it decoupled from Section 174A: a corporation adds back 80% of the domestic research costs it expensed federally and deducts that add-back in 25% slices over the next four years. The Department says the change is retroactive, so a 2025 return filed before the notice may need amending.
Do our early losses carry forward in North Carolina?
Yes. North Carolina has its own 15-year carryforward of losses apportioned to the state in the year they arise, with no 80% limit in the statute. A startup that filed North Carolina returns in its loss years builds a state loss it can use later; one that never filed has nothing on record to carry forward.
Accounting next door
- GAGeorgia accountingGeorgia taxes C-corporations at a flat 4.99% for 2026, apportions on gross receipts alone, adds a net worth tax capped at $5,000, and decouples from bonus depreciation and Section 174A.
- SCSouth Carolina accountingSouth Carolina taxes corporations at 5% on a single receipts factor, sources services by income-producing activity, decouples from bonus depreciation and conforms to the federal Code only through 2024.
- TNTennessee accountingTennessee taxes corporations through a 6.5% excise tax on earnings and a 0.25% franchise tax on net worth, apportioned on a single sales factor from 2025, with the property measure repealed in 2024.
- VAVirginia accountingVirginia taxes corporations at a flat 6% with a double-weighted sales factor and cost-of-performance sourcing. It conforms to the IRC as of December 31, 2025 but decoupled from the 2025 R&D expensing and from bonus depreciation.
Founder guides on this
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- US GAAPUS GAAP for early-stage startups, in plain EnglishAccrual accounting, revenue recognition (ASC 606), leases (ASC 842), stock compensation and capitalized software: what each means for a small company.
- The closeWhy startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.
More of the North Carolina guide
- ReceivablesReceivables and sales tax in North CarolinaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in North CarolinaPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in North CarolinaWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in North CarolinaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in North CarolinaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- N.C. Gen. Stat. § 105-130.3 — corporate income tax rate schedule
- NCDOR — Corporate Filing Requirements
- NCDOR — Market-Based Sourcing
- NCDOR — Important Notice: Impact of Recently Enacted Laws (S.L. 2026-31, 2026-41)
- N.C. Gen. Stat. § 105-130.5B — bonus depreciation add-back
- N.C. Gen. Stat. § 105-130.8A — net loss carryforward
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.