North Dakota — Corporate Income / Franchise Tax

Every corporation that does business in North Dakota, has sources of income in North Dakota, or has federal unrelated business taxable income (UBTI) must file Form 40—Corporation Income Tax Return.

Source: Corporate Income Tax, N.D. Office of State Tax Commissioner

North Dakota's corporate income tax applies to C corporations doing business in or deriving income from sources within the state. The state uses federal taxable income as the starting point for computing North Dakota taxable income, subject to state-specific adjustments prescribed in N.D.C.C. § 57-38-01.3.

Source: N.D.C.C. § 57-38-01.3

## Tax-exempt corporations with unrelated business income

A corporation that is exempt from federal income tax but has federal unrelated business taxable income (UBTI) must file Form 40 and is subject to North Dakota corporate income tax on that income. Returns of tax-exempt organizations reporting UBTI are due on the 15th day of the 5th month following the close of the tax year.

Source: Corporate Income Tax, N.D. Office of State Tax Commissioner

A corporation that is exempt from federal income tax purposes and has no federal UBTI is exempt from North Dakota corporate income tax and does not need to file a North Dakota return for that year.

Source: Corporate Income Tax, N.D. Office of State Tax Commissioner

## S corporations and pass-through entities

North Dakota recognizes the federal S corporation election under N.D.C.C. § 57-38-01.4. S corporations, partnerships, and LLCs taxed as partnerships or S corporations are generally treated as pass-through entities for North Dakota income tax purposes and do not pay corporate income tax at the entity level. These entities file separate informational returns (Form 60 for S corporations, Form 58 for partnerships).

Source: S Corp and Partnership Tax, N.D. Office of State Tax Commissioner

## Insurance companies

Insurance companies paying North Dakota insurance premiums tax under N.D.C.C. § 26.1-03-17 are exempt from the corporate income tax under N.D.C.C. § 57-38-09(3). However, to the extent an insurance company has earnings from business activities not subject to insurance premiums taxes, those earnings are subject to corporate income tax.

Source: Corporate Income Tax Study, N.D. Legislative Council

North Dakota imposes a graduated corporate income tax on North Dakota taxable income at three rates: 1.41% on the first $25,000 of taxable income; 3.55% on taxable income exceeding $25,000 but not exceeding $50,000; and 4.31% on all taxable income exceeding $50,000.

Source: N.D.C.C. § 57-38-30

Multistate corporations apportion business income to North Dakota using an equally weighted three-factor formula: property, payroll, and sales. The apportionment percentage equals (property factor + payroll factor + sales factor) ÷ 3. Alternatively, a corporation may elect to use a single-sales-factor formula (100% sales, 0% property and payroll) beginning with tax year 2019. The election is binding for five consecutive tax years and must be made on the originally filed return.

Source: N.D.C.C. § 57-38.1-09, Corporate Income Tax, N.D. Office of State Tax Commissioner

North Dakota establishes corporate income tax nexus under a traditional physical presence (“doing business”) standard—not an economic nexus standard—and has not adopted any post–Wayfair economic thresholds (such as gross receipts or number of transactions) for corporate income tax purposes.

• The North Dakota Tax Commissioner’s official guidance defines nexus in this context as a corporation being "present in the state and subject to a North Dakota tax return filing requirement," emphasizing physical or business presence rather than economic activity alone.

• North Dakota's published guidance confirms conformity to the Multistate Tax Commission’s (MTC) comprehensive nexus statement for income/franchise tax, which relies on physical presence and business activity—no bright-line economic thresholds for corporate income tax are currently recognized.

• North Dakota Century Code and current administrative guidance do not set economic nexus thresholds (such as a specific sales amount or transaction count) for corporate income tax registration or filing, unlike the state's approach to sales and use tax after South Dakota v. Wayfair.

Conclusion: North Dakota corporate income tax nexus currently remains grounded in physical presence and "doing business" standards; the state has not enacted or published any economic nexus thresholds or rules for corporate income tax as of June 2026.

Source: Corporate Income Tax, N.D. Office of State Tax Commissioner

## Annual return due date

Form 40—Corporation Income Tax Return is due on April 15 for calendar-year corporations. For fiscal-year filers, the return is due on or before the 15th day of the 4th month following the end of the tax year. The due date may vary if it falls on a weekend or state holiday.

Tax-exempt organizations with UBTI: Returns of tax-exempt organizations reporting federal unrelated business taxable income are due on the 15th day of the 5th month following the close of the tax year (May 15 for calendar-year filers). A signed Form 40 is required along with federal Form 990-T.

Cooperatives: For cooperatives that file federal Form 1120-C, returns are due on the 15th day of the 9th month following the close of the tax year (September 15 for calendar-year filers). The due date may vary if it falls on a weekend or state holiday.

Source: Corporate Income Tax, N.D. Office of State Tax Commissioner

## Extensions

A corporation may request additional time to file its North Dakota corporate income tax return by receiving a federal extension or a North Dakota extension. North Dakota accepts a timely filed federal extension as an extension to file the state return. If the federal return is extended, the corporation does not need to file a separate North Dakota extension or notify the Office of State Tax Commissioner. The extended due date for North Dakota purposes is the same as the federal extended due date.

If a federal extension is not obtained, or if an extension of time beyond the period covered by a federal extension is needed, a North Dakota extension may be obtained by completing and filing Form 101. This is not an automatic extension—there must be good cause to request a North Dakota extension. Form 101 must be postmarked on or before the due date of the North Dakota return.

An extension to file is not an extension to pay. Payment is still due on the original due date.

Source: Corporate Income Tax, N.D. Office of State Tax Commissioner

## Estimated tax requirements

Estimated payments are required if a corporation's income tax liability is expected to exceed $5,000 for the current taxable year and the previous year's state income tax liability exceeded $5,000. When required, quarterly estimated tax installments are due.

Source: Corporate Income Tax, N.D. Office of State Tax Commissioner

The specific due dates for estimated tax installments (15th day of the 4th, 6th, 9th, and 12th months of the taxable year) are confirmed by the Office of State Tax Commissioner's published deadlines calendar.

Source: Corporate Income Tax Deadlines, N.D. Office of State Tax Commissioner

North Dakota’s unitary combined reporting regime under the corporate income tax applies exclusively to corporations; it does not require partnerships, limited liability companies (LLCs) taxed as partnerships, or disregarded entities to be included as members of a unitary group filing a combined report.

Entity-level inclusion: North Dakota law treats partnerships and disregarded entities as pass-throughs for income tax purposes. Under N.D.C.C. § 57-38-08, partnerships are not subject to North Dakota income tax at the entity level. Instead, the responsibility for reporting, allocating, and apportioning partnership income falls to the partners, who apply the same apportionment principles as other taxpayers under N.D.C.C. § 57-38-08.1. Single-member LLCs that are disregarded for federal income tax purposes are also disregarded for North Dakota income tax purposes, and their income is reported directly by the owner.

Combined group membership and factor inclusion: The unitary combined reporting regulations, at N.D. Admin. Code § 81-03-05.3-01, define a "taxpayer" for mandatory combination as a corporation required to file a North Dakota income tax return. Partnerships or disregarded entities are not included as direct members of the group, regardless of whether they are unitary with group corporations. However, if a corporate member of the unitary group owns an interest in a general partnership, that corporate partner must include its proportionate share of the partnership’s property, payroll, and sales in the group’s apportionment factors (N.D. Admin. Code § 81-03-05.3-03(2)(d)). The partnership’s factors are "looked through" and incorporated only to the extent of the corporate owner's share, not by direct inclusion of the entity.

Summary: In summary, partnerships, LLCs taxed as partnerships, and disregarded entities are not included as members in a North Dakota unitary combined report; only corporate group members file. However, where a corporation holds an interest in a partnership, the relevant share of the partnership's apportionment factors is included by the partner for combined reporting purposes. No North Dakota statute or regulation provides for inclusion of partnerships or disregarded entities themselves as filing members of a unitary combined group.

Source: N.D.C.C. §§ 57-38-08, 57-38-08.1 Source: N.D. Admin. Code § 81-03-05.3-01, § 81-03-05.3-03

North Dakota applies a throwback rule for sales of tangible personal property shipped from within North Dakota to purchasers in jurisdictions where the taxpayer is not taxable, by including those sales in the sales factor numerator.

Details Under N.D.C.C. § 57-38.1-16, tangible personal property shipped from North Dakota is assigned to the state—and thus included in the numerator of the sales factor—when the purchaser’s state does not have authority to impose an income tax on the taxpayer (“taxpayer is not taxable in the state of the purchaser”). This aligns with the Uniform Division of Income for Tax Purposes Act’s standard throwback provision.

North Dakota does not impose a throwout rule (which would remove such sales from the denominator instead of assigning them to the numerator).

Effect Sales that cannot be assigned to other states through their taxing authority are “thrown back” into North Dakota’s sales factor numerator, increasing the apportionment percentage where the sales destination lacks jurisdiction.

Source: N.D.C.C. § 57-38.1-16

North Dakota sources sales of services for the corporate income tax sales factor using a cost of performance rule, not a market-based sourcing approach.

Direct answer Gross receipts from the performance of services are assigned to North Dakota—and included in the numerator of the sales factor—only if (1) the services are performed entirely within North Dakota, or (2) if performed both in and outside North Dakota, the greater proportion of the income-producing activity (measured by the cost of performance) occurs in North Dakota than in any other state.

Why This is a classic “cost of performance” regime as codified in North Dakota Admin. Code § 81-03-09-31 and N.D.C.C. § 57-38.1-17. The law does not use a market-based sourcing standard for services. The regulation defines cost of performance as the cost of all activities directly performed in the state to earn the income, not the location of the customer. This method applies to all receipts from services unless specifically excepted (such as for tangible personal property or rented property covered by separate rules).

Source support The controlling authority is North Dakota Admin. Code § 81-03-09-31, which implements N.D.C.C. § 57-38.1-17 for apportionment. It states, in part: “If the income-producing activity is performed entirely within this state, the gross receipts from sales are attributed to this state. If the income-producing activity is performed both within and without this state, the gross receipts are attributed to this state if a greater proportion of the income-producing activity is performed in this state than in any other state, based on cost of performance.” No provision adopts a market-based rule for service finding as of the current code and regulations.

Source: N.D. Admin. Code § 81-03-09-31

Caution / review status Not yet human confirmed. All sourcing and classification language taken verbatim and summarized from North Dakota's current regulation and statute; practitioners should verify status with current law in the event of administrative reform.

Corporations whose only business activity in North Dakota is the solicitation of orders for sales of tangible personal property—where those orders are sent outside the state for approval or fulfillment—are protected from North Dakota corporate income tax under Public Law 86-272 (15 U.S.C. §§ 381-385).

Direct answer North Dakota expressly incorporates the restrictions of Public Law 86‑272 (PL 86‑272) into its corporate income tax regime. If a corporation’s in-state activity consists only of soliciting sales of tangible personal property—where approval and shipment occur outside the state—North Dakota does not assert jurisdiction to impose its income tax on that corporation.

Why This approach is spelled out in N.D. Admin. Code § 81-03-09-13, which provides: "Jurisdiction to impose the net income tax will not exist if prohibited by Public Law 86-272 (15 U.S.C. 381-385)." The regulation aligns North Dakota’s approach with the federal statute, meaning companies qualifying for protection under PL 86‑272 are not subject to North Dakota corporate income tax solely as a result of their protected activities within the state.

Source support The controlling authority is N.D. Admin. Code § 81-03-09-13, which expressly refers to the prohibition of income tax jurisdiction where protected by PL 86‑272. The regulation makes clear that North Dakota respects the federal limitations, and this is the operative agency rule as of the current version of the North Dakota Administrative Code.

Source: N.D. Admin. Code § 81-03-09-13

Caution / review status Not yet human confirmed. All statements are directly supported by current regulation; practitioners should confirm application to detailed fact patterns in complex situations.

## Penalties and Interest for Late Filing, Late Payment, and Abatement

Late Filing Penalty

Under N.D.C.C. § 57-38-45(2), if a corporation fails to file its North Dakota corporate income tax return by the due date (including any approved extension), a penalty of 5% of the unpaid tax is imposed for each month or fraction thereof the return is late, not to exceed 25% in total. If the return is over 60 days late, the minimum penalty becomes the lesser of $100 or 100% of the tax due.

Late Payment Penalty

Per N.D.C.C. § 57-38-45(3), a separate late payment penalty applies when the required tax is not paid by the original due date—even if an extension to file is granted. This penalty is 5% of the unpaid tax.

Interest on Underpayments

Interest accrues on unpaid tax from the original due date until paid, at a rate annually set by the Tax Commissioner. The rate is prescribed in N.D.C.C. § 57-38-45(4) and published in the North Dakota Administrative Code. Interest applies only to the tax and not categorically to penalties (unless specified by statute or regulation).

Underpayment of Estimated Tax

Interest may be imposed for the underpayment or late payment of required estimated corporate income tax. The mechanics of this interest calculation, including exceptions and the interest rate, are detailed in N.D. Admin. Code § 81-03-04-01 and referenced in the annual Form 40 instructions.

Abatement or Waiver of Penalty

According to N.D.C.C. § 57-38-45(5), the Tax Commissioner may abate penalties (but not interest) if the taxpayer shows that failure to file or pay on time was due to reasonable cause and not willful neglect. "Reasonable cause" is not specifically defined in the statute, but the request must be in writing and detail the facts and circumstances. The Commissioner’s published guidance emphasizes that relief is fact-specific and not automatically granted.

Practitioner Note on Interest Rates

The current annual interest rate is updated and published by the Tax Commissioner as provided in statute and administrative rule. Practitioners must check the annually announced rate for the applicable tax year in the Administrative Code or the official DOR website.

Source: N.D.C.C. § 57-38-45 Source: 2023 North Dakota Corporation Income Tax Return Instructions, pp. 14–15 Source: N.D. Admin. Code § 81-03-04-01

Not yet human confirmed. All statements are directly anchored to the cited statute, administrative code, and official DOR guidance. Practitioners should verify the published interest rate for the specific year of noncompliance.

Direct answer For North Dakota corporate income tax, receipts from digital goods, digital services (including software as a service [SaaS], cloud computing, and electronically delivered media), and other intangible property are generally sourced using the "cost of performance" rule for apportionment. This means these receipts are assigned to North Dakota if the greatest proportion of the income-producing activity (measured by the cost of performance) occurs in North Dakota. If the activity is performed entirely in North Dakota, the receipts are sourced to North Dakota. If performed both within and without North Dakota, income is sourced to the state where the greater share of the cost of performance occurs.

Why North Dakota does not specifically classify digital goods, digital services, or SaaS as tangible personal property for corporate income tax apportionment. Instead, by statute and regulation, receipts from "other than tangible personal property" (which includes intangibles such as software, digital media, and online services) are sourced under the same cost-of-performance principles that apply to services and other intangibles. N.D.C.C. § 57-38.1-17 and N.D. Admin. Code § 81-03-09-31 provide the principal rule. Further, N.D. Admin. Code § 81-03-09-34 addresses apportionment of income "from intangible property," specifying that if the income-producing activity can be identified (such as licensing software), receipts are included in the numerator and denominator according to where that activity occurs—again, under the cost-of-performance metric. These rules have not been superseded by a shift to market-based sourcing or by explicit digital services guidance as of June 2026.

Source support

• N.D.C.C. § 57-38.1-17 directs that gross receipts from “other than sales of tangible personal property” are attributed to North Dakota if the income-producing activity is performed entirely in the state, or, if both within and without, based on the greater proportion of cost of performance.
• N.D. Admin. Code § 81-03-09-31 codifies this for services; N.D. Admin. Code § 81-03-09-34 extends similar sourcing to receipts from intangible property, including digital goods/services, when the specific income-producing activity can be identified.
• The 2024 ND Corporate Income Tax Booklet reinforces that for digital property/services, receipts are sourced based on cost of performance, not market-based sourcing.

Source: N.D.C.C. § 57-38.1-17 Source: N.D. Admin. Code § 81-03-09-31 Source: N.D. Admin. Code § 81-03-09-34 Source: 2024 Corporate Income Tax Booklet, p. 20

Caution / review status Not yet human confirmed. North Dakota's law and regulations do not provide tailored digital products/services apportionment rules as of June 2026; practitioners should confirm continued applicability with the current law and any further DOR or legislative updates.

North Dakota law does not provide a separate or explicit carve-out for corporations or affiliates located in so-called "tax haven" jurisdictions in its combined (worldwide or water’s edge) reporting regime. Inclusion or exclusion of foreign affiliates is governed by statutory and regulatory criteria unrelated to the nominal tax status of the jurisdiction in which the affiliate is incorporated or does business.

Worldwide Combined Reporting North Dakota requires worldwide combined reporting for unitary groups by default. Under this method, all corporations—domestic and foreign—that are part of the unitary business are included in the combined report. There is no statutory exclusion for affiliates that operate in tax haven jurisdictions. See ND Admin. Code § 81-03-05.3-03: "Every corporation that is part of a unitary business is included in the combination regardless of the country in which incorporated, organized, managed, or controlled." Thus, being organized in a tax haven has no bearing on inclusion in North Dakota’s worldwide combined report.

Water’s Edge Election A corporation may elect to use the water’s edge method to limit the combined group to U.S. domestic corporations and certain foreign entities meeting specific tests. Under ND Admin. Code § 81-03-05.2-04 and N.D.C.C. § 57‑38.4‑02, foreign affiliates are included only if they:

• Have effectively connected U.S.-source income
• Dispose of U.S. real property interests under I.R.C. § 897
• Have at least 20% of their average payroll and property assigned to U.S. locations

Foreign affiliates purely present in tax haven jurisdictions are not automatically included under the water’s edge election unless they meet one of these thresholds. North Dakota does not employ a tax haven “blacklist” or separately identify tax haven entities for inclusion.

Administrative Discretion The Tax Commissioner retains authority under N.D.C.C. § 57‑38‑14 to require combination "whenever necessary to properly reflect the business carried on" in North Dakota, but this is not articulated with reference to tax haven status and instead focuses on unitary business principles and proper income reflection.

Summary Table:

• Worldwide combined reporting: all affiliates are included regardless of location/tax status
• Water’s edge: foreign affiliates are included only under specific statutory criteria, not due to tax haven classification

Source: ND Admin. Code § 81-03-05.3-03 Source: ND Admin. Code § 81-03-05.2-04 Source: N.D.C.C. § 57-38.4-02 Source: N.D.C.C. § 57-38-14

Not yet human confirmed. All statements are directly anchored to North Dakota current law and regulation as cited. Practitioners should confirm continued applicability with new law or material administrative updates after June 2026.