North Carolina Department of Revenue Form Instructions
CD-401S — S Corporation Tax Return Instructions
preamble
Corporations Required to File Every S corporation doing business in North Carolina and every inactive S corporation chartered or domesticated here must file an annual franchise and income tax return using the name reflected on the corporate charter if incorporated in this State, or on the certificate of authority if incorporated outside this State. A franchise tax is imposed on corporations for the privilege of doing business in this State even though the activities are exempt from income tax under P.L. 86-272. For a corporation that is subject to both income tax and franchise tax, its apportionment factor is the same for both taxes. For a corporation that is subject to franchise tax but not income tax, its apportionment factor for computing the amount of franchise tax due is the same factor that would be used if its activities that are protected by P.L. 86-272 were subject to income tax in this State. New S Corporations A new S corporation (newly incorporated, newly domesticated out-ofstate corporation, or other corporation commencing business in the State) is required to file a franchise and income tax return with the Department by the 15th day of the fourth month following the close of its first income year of twelve (12) months or less. The taxable year for a new corporation in this State is presumed to end the calendar month preceding the month of incorporation unless otherwise established by the filing of the required return indicating the taxable year adopted. In no case may the first taxable year exceed 12 months unless it is clearly shown that the corporation has adopted a method of accounting using the 52-53 week reporting period. A tax return is due annually as long as the corporation remains incorporated, domesticated, or continues to do business in this State.
GENERAL INFORMATION
The information contained in these instructions is to be used as a guide in the preparation of the North Carolina S-Corporation tax return and is not intended to cover all provisions of the law. For further information on North Carolina tax law, refer to administrative rules, bulletins, directives, and other publications issued by the Department of Revenue, ("Department"), as well as opinions issued by the Attorney General's office. The Department has published the "2025 Tax Law Changes" resource document. This document gives a brief summary of the tax law changes made by the 2025 General Assembly regardless of when the changes take effect, as well as changes made by prior General Assemblies that take effect for tax year 2025. For detailed information concerning these changes click on "Taxes and Forms," "Corporate Income and Franchise Tax," "Tax Law Changes," and select "2025." Election to be S Corporation There is no separate S election for North Carolina income tax purposes. There is no provision to elect a different filing method for State income tax purposes. Termination of S Election The S corporation election will terminate for North Carolina purposes at the same time and for the same taxable period the termination is effective for federal tax purposes. Estimated Income Tax Estimated income tax payments are not required on behalf of nonresident shareholders filing a composite tax return. However, a Taxed S Corporation is generally required to make estimated income tax payments if the Taxed S Corporation expects to have a N.C. income tax liability of $500 or more. An S corporation that did not make the election to be a Taxed S Corporation is not required to pay estimated income tax. If the S corporation makes any prepayments of income tax for nonresidents or the Taxed S Corporation makes estimated tax payments, the S corporation must claim these prepayments or estimated payments on Schedule B, Line 20b. Tax Rates The franchise tax rate is $200 for the first one million dollars ($1,000,000) of the corporation's tax base and $1.50 per $1,000 (.0015) of its tax base that exceeds one million dollars ($1,000,000). The franchise tax can be no less than $200 with no maximum except for a qualified holding company. The corporate income tax rate for composite filers and Taxed S Corporations is based on the current individual income tax rate. When and Where to File The S corporation tax return is due on the 15th day of the fourth month following the close of the income year. An income year ending on any day other than the last day of the month is deemed to end on the last day of the calendar month ending nearest to the last day of the actual income year. Mail returns to: P.O. Box 25000 Raleigh, NC 27640-0500 Extensions An extension of time to file the franchise and income tax return may be granted for seven (7) months if the extension application is received timely. Without a valid extension, a return filed after the statutory due date will be delinquent and subject to interest and all applicable penalties provided by law. To receive an extension, taxpayers must file the application by the original due date of the return. You can apply for an extension and pay your tax online. Go to "File and Pay," "eServices," and select "Corporate Extension CD-419." A taxpayer that receives an automatic extension to file a federal corporate income tax return will be granted an automatic state extension to file the N.C. S-Corporation tax return, Form CD-401S. In order to receive the automatic state extension, you MUST fill in the "Federal Extension" circle on page 1 of Form CD-401S. S-Corporation Tax Return CD-401S Instructions Web 1-26 Where to Get Forms In an effort to save the cost of printing and mailing tax booklets, the Department does not print or mail franchise and corporate income tax forms. Franchise and corporate income tax forms are available on the Department's website. Go to "Taxes and Forms," "Corporate Income and Franchise Tax," and click on "Forms and Instructions. " The website offers forms that can be downloaded or filled in online and printed. Tax returns that can not be processed by the Department's imaging and scanning equipment will be returned to the taxpayer with instructions to file on an acceptable form.
Page 2, CD-401S Instr., Web, 1-26 Demographic and Other Taxpayer Information Name, Address, and Identification Numbers. Print or type the corporation's true legal name (as set forth in the corporate charter), address, federal identification number, and North Carolina Secretary of State number on the appropriate lines. Include in this section the corporation's primary NAICS code as reported to the Division of Employment Security within the Department of Commerce. (For further information regarding the NAICS code, see the North American Industry Classification System as published by the Federal Office of Management and Budget.) If a change in address occurs after the return is filed, use Form NC-AC, Business Address Correction, to request the change. Gross Receipts/Sales and Total Assets. Enter the corporation's gross receipts or sales from all business operations for the tax year. Also, enter the corporation's total assets (as determined by the accounting method regularly used in keeping the corporation's books and records) at the end of the tax year. Initial Return. If this is the corporation's first return in North Carolina, fill in the appropriate circle. Final Return. If the corporation ceases to exist or leaves North Carolina during the tax year, fill in the appropriate circle. Since franchise taxes are paid in advance or at the beginning of the income year, corporations are not subject to franchise tax after the end of the income year in which articles of dissolution or withdrawal are filed with the Secretary of State unless the corporation engages in business activities not reasonably incidental to winding up its affairs. This provision applies, however, only to those corporations that voluntarily file articles of dissolution or withdrawal with the Secretary of State of North Carolina. Although the final income tax return must be filed on a franchise and income tax return form, the schedules relating to franchise tax should be disregarded. Specific Instructions for Filing Form CD-401S Period Covered File the 2025 return for calendar year 2025 and fiscal years that begin in 2025. You must use the same taxable period on your North Carolina return as on your federal return. Note: The 2025 Form CD-401S may also be used if: The corporation has a tax year of less than 12 months that begins in 2025. If the corporation's tax year is less than 12 months, fill in the beginning and ending dates for the tax year. The 2026 Form CD-401S is not available at the time the corporation is required to file its return. Important. Returns submitted to the Department that do not meet the specified criteria will be returned to the taxpayer with instructions to refile the return on an acceptable form. Short Year Return. If this is not the taxpayer's initial return nor the taxpayer's final return and the corporation has a tax year of less than 12 months, fill in the appropriate circle. NC-Rehab. Article 3L, which became effective January 1, 2016, established two new credits for rehabilitation of historic structures in North Carolina. The Article provides for a tax credit for rehabilitating income-producing historic structures and a tax credit for rehabilitating nonincome-producing structures. Corporations taking a credit under Article 3L must complete Form NC-Rehab, "2025 Historic Rehabilitation Tax Credits," and place it on the front of the completed Form CD-401S. If the corporation has attached Form NC-Rehab, fill in the appropriate circle. NC-478. Corporations taking a credit limited by statute to 50% of tax must complete Form NC-478, Summary of Tax Credits Limited to 50% of Tax, and place it on the front of the completed Form CD- 401S. If the corporation has attached Form NC-478 to Form CD-401S, fill in the appropriate circle. Amended Return. If filing an amended return, fill in the appropriate circle. A complete explanation as to the reason(s) for filing an amended return, including specific schedule and line number references, must be included on Schedule J of the return. If any change is made to corporate net income by the Internal Revenue Service, taxpayers are required to file an amended North Carolina return within six (6) months after being notified of the correction or final determination. A penalty is imposed for failure to comply with this filing requirement. Corporations filing amended returns with additional tax due should use Form CD-V Amended. (For more information on Form CD-V Amended, see page 5.) Has Nonresident Shareholders. If the corporation has nonresident shareholders during the tax year, fill in the appropriate circle. Escheatable (Abandoned or Unclaimed) Property. Every corporation holding property of North Carolina residents that is unclaimed and abandoned under General Statutes Chapter 116B must certify the holding of the escheatable property on its income tax return by filling in the appropriate circle. For questions concerning escheatable property, call (866) 622-2741 or write to:
NC Department of State Treasurer, Unclaimed Property Division, P.O. Box 20431, Raleigh, North Carolina 27619-0431 NC-PE is Attached. A pass-through entity is required to attach Form NC-PE to the applicable N.C. tax return if the entity is required to add certain items to federal income, or if the entity is allowed to deduct certain items from federal income. If the corporation has attached Form NC-PE to Form CD-401S, fill in the appropriate circle. Qualified Subchapter S Subsidiary (QSSS). For corporate income tax purposes, North Carolina follows the federal classification of entities under the federal check-the-box regulations. Determine whether or not the corporation meets the qualifications of a QSSS, or is the parent of a QSSS and fill in the appropriate circle. In addition, if the corporation is a QSSS, enter the parent's name and FEIN on Schedule F, Line 7. Qualified Subchapter S Subsidiaries must file separate franchise tax returns. N.C. Education Endowment Fund. A corporation may elect to contribute to the N.C. Education Endowment Fund. To make a contribution, complete Form NC-EDU and enclose the form and applicable payment with the tax return. Form NC-EDU is available on the Department's website. Go to "Taxes and Forms," "Corporate Income and Franchise Tax," "Forms and Instructions," and select "NC-EDU." (For more information on the Education Endowment Fund, see page 6.) Alternative Method of Filing - eFile There are many advantages to filing electronically including: • File the corporation's state and federal returns at the same time. • Pay by bank draft with no convenience fee. • File current, amended and prior year returns. • Make payments up to the due date of the tax, schedule estimates up to 12 months out and extensions up to 6 months out. You can eFile the corporation's income tax return for a fee using an NCDOR approved software provider or a tax professional. Visit ncdor.gov/file-pay for more information.
Page 3, CD-401S Instr., Web, 1-26 Rounding Off to Whole Dollars Corporations must round the amounts on the return and accompanying schedules to the nearest whole dollar. Taxpayers should drop any amount less than 50 cents and increase any amount of 50 cents or more to the next whole dollar. Taxed S Corporation. All S corporations must fill in one circle answering either "Yes" or "No" to the Taxed S Corporation question on page 1 of Form CD-401S. The Taxed S Corporation question must be answered by all S corporations, not just S corporations that are eligible to make the Taxed S Corporation election for the tax year. Note. If the S corporation does not answer "Yes" to the Taxed S Corporation question, the S corporation is NOT a Taxed S Corporation for the tax year. Important. The Taxed S Corporation election is an annual election. Federal Extension. All S corporations must fill in one circle answering either "Yes" or "No" to the Federal extension question on page 1 of Form CD-401S. This question must be answered by all S corporations, not just S corporations that are granted an automatic extension to file federal Form 1120S. Important. You must certify that you were granted an automatic federal extension. Otherwise, your state return will be subject to applicable penalties. Computation of Franchise Tax - Schedule A Lines 1 and 2 - Franchise Tax North Carolina imposes a franchise tax upon corporations for the opportunity and privilege of transacting business in the State. Franchise tax is measured by a corporation's net worth (Schedule C). Franchise tax is computed by applying $200 to the first one million dollars ($1,000,000) of the corporation's tax base. If the tax base exceeds one million dollars ($1,000,000), multiply the amount over $1,000,000 by .0015 and add $200. Franchise tax can be no less than $200. Inactive Corporations. A corporation that is inactive and without assets is subject annually to a minimum franchise tax of $200. A return containing a statement of the status of the corporation is required to be filed. Failure to file this return and pay the minimum tax will result in suspension of the articles of incorporation or certificate of authority. Net Worth. Enter the amount of the corporation's net worth from the book balance sheet as of the end of the tax year. Before making this entry, corporations must complete Schedule C of Form CD-401S. (See instructions on page 6.) Holding Company. Franchise tax payable by a holding company on its net worth tax base is limited to an amount not to exceed $150,000. Important. If the corporation qualifies as a holding company, fill in the "Holding Company Exception" circle.
Line 3 - Payment with Franchise Tax Extension
If the corporation filed an application for franchise tax extension, Form CD-419, enter the amount of franchise tax paid with the extension on Line 3. (From Form CD-419, Line 9.) When filing an amended return, include the franchise tax extension payment claimed on the original return on Schedule B, Line 20b.
Line 4 - Tax Credits
To take a franchise tax credit on Line 4, corporations must complete Form CD-425, Corporate Tax Credit Summary, and file it with the tax return. Taxpayers taking a credit limited by statute to 50% of tax must also complete Form NC-478, Summary of Tax Credits Limited to 50% of Tax, and place it on the front of the completed tax return. Forms for many of these credits, as well as the CD-425 and NC-478, are available from the Department's website. Failure to substantiate a tax credit may result in the disallowance of that credit. (For specific information regarding tax credits, refer to the Corporate Income and Franchise Tax Bulletin.) Lines 5 and 6 - Franchise Tax Due / Overpaid Subtract Lines 3 and 4 from Line 2. If the total of Line 3 plus 4 is less than Line 2, additional franchise tax is due. Enter the amount of additional tax due on Line 5 and on Page 2, Line 24. If the total of 3 plus 4 is more than Line 2, franchise tax is overpaid. Enter the amount of overpayment on Line 6 and on Page 2, Line 24. Fill in the circle located next to Line 24 to indicate the amount is overpaid. Since franchise tax is prepaid, a special computation is sometimes required to prevent a duplication of tax when two or more corporations with different income years merge or otherwise transfer the entire assets from one corporation to the other. (For specific information and the procedure for making this computation, refer to the Corporate Income and Franchise Tax Bulletin.) (Overpaid franchise tax can offset underpaid income tax in the same tax year and vice versa. See "Tax Due or Overpayment" section, on page 4 for line-by-line instructions.) Line 7 - Shareholders' Shares of Corporation Income (Loss) Enter the total amount of income or loss for the S corporation on Line 7. Before making this entry, corporations must complete Schedules G and H of Form CD-401S. (See instructions on page 7.) If the amount on Line 7 is negative, enter the amount and fill in the circle located next to Line 7 to indicate the amount is negative. Do not use brackets or other symbols to indicate a negative number. Computation of Income Tax - Schedule B
Line 8 - Adjustments to Federal Taxable Income
Taxpayers must make certain adjustments to federal taxable income in arriving at North Carolina taxable income. Before making this entry, corporations must complete Schedule I of Form CD-401S. (See instructions on page 7.) If the amount on Line 8 is negative, enter the amount and fill in the circle located next to Line 8 to indicate the amount is negative.
Line 10 - Nonapportionable Income
When a corporation has income from sources within North Carolina as well as sources outside North Carolina a determination of apportionable and nonapportionable income must be made. If the corporation's business is conducted entirely within North Carolina, enter zero on Line 10. If the business is both within and outside of North Carolina, enter the total amount of nonapportionable income on Line 10. Before making this entry, corporations must complete Schedule N of Form CD-401S. (See instructions on page 7.) If the amount on Line 10 is negative, enter the amount and fill in the circle located next to Line 10 to indicate the amount is negative.
Line 11 - Apportionable Income
All income apportionable under the U.S. constitution is apportioned to North Carolina and to other states based on the apportionment factor. If the amount on Line 11 is negative, enter the amount
Page 4, CD-401S Instr., Web, 1-26 Lines 16 through 19 - Composite Tax Returns and Taxed S Corporations Nonresidents Filing Composite. Lines 16, 18, and 19 are to be completed by an S corporation filing a composite income tax return on behalf of its nonresident shareholders. A composite return is an income tax return that combines and reports the income and tax due of participating nonresident shareholders. A nonresident individual shareholder is not required to file a North Carolina individual income tax return, Form D-400, if the shareholder's only income in North Carolina is reported by the S corporation. If the nonresident shareholder is not an individual, the entity must file a separate North Carolina tax return. Taxed S Corporations. Lines 17 through 19 are to be completed by an S corporation that has made an election to be a Taxed S Corporation for this taxable year. A Taxed S Corporation pays the tax due on behalf of all shareholders. Line 14 - Nonapportionable Income Allocated to N.C. Enter on Line 14 the amount of nonapportionable income allocated directly to this State. Before making this entry, corporations must complete Schedule N of Form CD-401S. (See instructions on page 7.) If the amount on Line 14 is negative, enter the amount and fill in the circle located next to Line 14 to indicate the amount is negative.
Line 18 - Separately Stated Items of Income Attributable to Nonresidents Filing Composite or to All Shareholders
When a Taxed S Corporation Election is Made Special rules apply for gain from the sale, exchange, or disposition of Internal Revenue Section 1231 property on which a Code Section 179 expense deduction was previously claimed. For federal purposes, the gain is no longer included at the entity level but instead is passed through separately to the individual shareholders. As a result, the gain is included in federal taxable income on the shareholder's income tax return but is not included as part of the shareholder's share of the corporation's income. (See North Carolina Schedule K, Line 5.) Important. Losses attributed to the sale of Section 1231 property are not deductible in the calculation of North Carolina income tax for nonresident shareholders filing composite. Taxpayers wishing to deduct their pro rata share of these losses must do so by filing a North Carolina income tax return. Nonresidents Filing Composite. Enter each nonresident shareholder's share of S corporation income attributable to N.C. required to be separately stated for federal income tax purposes if the income is NOT included in the amount reported on Schedule B, Line 7. S corporations must identify each nonresident shareholder's share of separately stated income items and enter the amount on the North Carolina Schedule K, Line 12, and on Form NC K-1, Line 7. (For more information, see the instructions for federal Form 1120S.) All Shareholders when Taxed S Corporation Election is Made. Enter all shareholder's share of S corporation income attributable
Line 19 - North Carolina Income Tax
Nonresidents Filing Composite. To calculate North Carolina net income tax for nonresident shareholder's filing a composite return, add Lines 16 and 18 and multiply the sum by the income tax rate of 4.25%. Taxed S Corporations. To calculate North Carolina net income tax for Taxed S Corporations, add Lines 17 and 18 and multiply the sum by the income tax rate of 4.25%. Line 20a and 20b - Tax Payments and Credits a. Income Tax Extension . Taxpayers filing a Form CD-419 enter the amount of income tax paid on Line 10 of the CD-419 on Line 20a. When filing an amended return, include the income tax extension payment claimed on the original return on Schedule B, Line 20b. b. Oth er Prepayments of Tax. Enter any income tax payments for 2025 (including any payment remitted on behalf of nonresident shareholders applicable to composite tax return filers and estimated tax payments made by Taxed S Corporations) on Line 20b. When filing an amended return, enter the amount of previous tax payments (both franchise and income tax) here. Important. If the corporation received a refund for overpaid taxes on its original return, enter the sum of all previous payments less any refunds received (excluding interest). Line 20c through 20e - Tax Payments and Credits Important. On Lines 20c through 20e, enter only the amount of payments and credits attributable to nonresident shareholders on whose behalf a composite return is filed or to Taxed S Corporations. c. Partnerships . If the corporation is a nonresident partner enter the amount of tax paid to North Carolina on behalf of the corporate partner on Line 20c. Important. If a partnership payment is claimed on Line 20c, a copy of Form D-403 NC K-1 MUST be attached. d. Nonresident W ithholding. Enter the amount of tax withheld on behalf of a nonresident corporation for nonwage compensation during the taxable year on Line 20d. e. Tax Credits . To take an income tax credit, the S corporation must complete Form CD-425, Corporate Tax Credit Summary, and file it with the completed tax return. In order for a composite filer or a Taxed S Corporation to take an income tax credit limited by statute to 50% of tax, the S corporation or Taxed S Corporation must also complete Form NC-478, Summary of Tax Credits Limited to 50% of Tax, and place it on the front of the completed tax return. Forms for many of these credits, as well as the CD-425 and the NC-478, are available from the Department's website. Failure to substantiate a tax credit may result in the disallowance of the credit.
Line 12 - Apportionment Factor
Enter the apportionment factor percentage as calculated from Schedule O of Form CD-401S. The apportionment factor must be calculated four places to the right of the decimal. (See instructions on page 8.) and fill in the circle located next to Line 11 to indicate the amount is negative. to N.C. required to be separately stated for federal income tax purposes if the income is NOT included in the amount reported on Schedule B, Line 7. (For more information, see the instructions for federal Form 1120S.) Lines 22 and 23 - Income Tax Due / Overpaid Subtract Line 21 from Line 19. If Line 21 is less than Line 19 additional income tax is due. Enter the amount of additional tax
Page 5, CD-401S Instr., Web, 1-26 Lines 28a through 28c - Interest and Penalties Interest. Interest at the rate established by G. S. 105-241.1 is charged on taxes paid late even if an extension of time to file is granted. The interest rate on underpayments is the same as the interest rate on overpayments. The rate is established semiannually by the Secretary of Revenue and is listed on the Department's website. Failure to File Penalty. Returns filed after the due date are subject to a penalty of 5% of the tax for each month, or part of a month, the return is late (maximum 25% of the additional tax). Failure to Pay Penalty. Returns filed after the original due date are subject to a late payment penalty. The applicable rate is 5 percent (5%) regardless of how late the tax is paid. Other Penalties. There are other penalties for negligence, filing a frivolous return and fraud. Criminal penalties also apply for fraud with intent to evade or defeat the tax and for willful failure to file a return, supply information, or pay the tax. Collection Assistance Fee. Any tax, penalty, and interest not paid within 60 days after a Notice of Collection is mailed will be assessed a 20 percent (20%) collection assistance fee. The fee does not apply if the tax debt is paid in full or an installment payment agreement is established with the Department before the fee is assessed.
Line 27 - Underpayment of Estimated Income Tax
A Taxed S Corporation that can reasonably expect to have a N.C. income tax liability of at least $500 is required to pay estimated tax payments in the same manner as a C corporation. Important: An S corporation that did not make the election to be a Taxed S Corporation is not subject to interest on the underpayment of estimated income tax. A Taxed S Corporation that does not timely pay the required amount of estimated income tax may be subject to interest on the underpayment. To determine if interest is due, complete Form NC-429B PTE, "Underpayment of Estimated Tax by Taxed Pass- Through Entities." Important: A Taxed S Corporation may be able to reduce or eliminate underpayment interest if the Taxed S Corporation qualifies for one of the exceptions provided by N.C. law. (For more information on these exceptions, see "Exceptions to Underpayment of Estimated Tax," below.) If the Taxed S Corporation owes interest on the underpayment of estimated tax, enter the amount of interest on Line 27. Note: Underpayment interest will increase the tax liability of the Taxed S Corporation or reduce its overpayment. Do not attach Form NC-429B PTE to the completed tax return. Maintain the form for future reference. Exceptions to Underpayment of Estimated Tax. In certain cases, a Taxed S Corporation may reduce or eliminate underpayment interest. If any of the following exceptions apply, enter the code "E" in the "exceptions box" located next to Line 27. Also, enter the amount of underpayment interest due, if any, on Line 27. Note: Line 27 cannot be blank, and zero must be entered, if the code "E" is entered in the "exceptions box" and there is no underpayment interest due. Not a Taxed S Corporation in Prior Year. If the Taxed S Corporation did not make the election to be a Taxed S Corporation in N.C. during the preceding tax year, the Taxed S Corporation is not subject to estimated tax interest. Note: Under N.C. law, an S corporation was not permitted to make the election to be a Taxed S Corporation prior to January 1, 2022. If this exception applies, enter an "E" in the "exceptions box" located next to Line 27, and enter the amount of underpayment interest due, if any, on Line 27. Short T axable Year. If the Taxed S Corporation's tax year is less than four months, or if the requirements to make an estimated tax payment were not met before the first day of the last month in the short tax year, the Taxed S Corporation is not subject to estimated tax interest.
Line 29 - Total Due
Add Lines 26, 27 and 28c and enter the total on Line 29, but not less than zero. This is the amount of tax, penalties, and interest due. Make your check or money order payable to the North Carolina Department of Revenue. The Department will not accept a check or money order unless it is drawn on a U.S. (domestic) bank and the funds are payable in U.S. dollars. Mail the return, any balance due, and a personalized payment voucher, Form CD-V, to: NC Department of Revenue, P.O. Box 25000, Raleigh, NC 27640-0500 Form CD-V (Corporate Payment Voucher). Form CD-V is a personalized payment voucher that a corporation should send with any balance due. This voucher allows the Department to process payments more accurately and efficiently with fewer errors. To generate a personalized payment voucher, go to "Taxes and Forms," "Corporate Income and Franchise Tax," "Forms and Instructions," and select "CD-V." The Department strongly encourages the use of the personalized payment voucher. Form CD-V Amended (Amended Corporate Payment Voucher). When filing an amended return, corporations that owe additional tax must use Form CD-V Amended. Form CD-V Amended allows the Department to process amended payments more accurately and efficiently with fewer errors. To generate an amended personalized payment voucher, go to "Taxes and Forms," "Corporate Income and Franchise Tax," "Forms and Instructions," and select "CD- V Amended." Lines 24 through 26 - Tax Due or Overpayment A corporation that overpays its franchise or income tax may elect to have its refund applied to an underpaid franchise or income tax liability in the same tax year. The netting of an overpaid tax to an underpaid liability is calculated by adding or subtracting Lines 24 and 25. on Line 22 and on Line 25. If Line 21 is more than Line 19, income tax is overpaid. Enter the amount of overpayment on Line 23 and on Line 25. Fill in the circle located next to Line 25 to indicate the amount is overpaid. (Overpaid franchise tax can offset underpaid income tax in the same tax year and vice versa. See "Tax Due or Overpayment" below for instructions.) If this exception applies, enter an "E" in the "exceptions box" located next to Line 27, and enter the amount of underpayment interest due, if any, on Line 27. Annualized Income. If the Taxed S Corporation annualized its taxable income for the tax year, the Taxed S Corporation may be able to reduce or eliminate underpayment interest. If this exception applies, enter an "E" in the "exceptions box" located next to Line 27, and enter the amount of underpayment interest due, if any, on Line 27.
Page 6, CD-401S Instr., Web, 1-26 Net Worth - Schedule C A corporation's net worth is measured by the corporation's total assets without regard to the deduction for accumulated depreciation, depletion, or amortization less its total liabilities, computed in accordance with generally accepted accounting principles, ("GAAP"), as of the end of the corporation's taxable year. If the corporation does not maintain its books and records in accordance with GAAP, then the corporation's net worth is computed in accordance with the accounting method used by the corporation for federal income tax purposes. The corporation's net worth is subject to the following adjustments: A deduction for accumulated depreciation, depletion, and
amortization as determined in accordance with the method used for federal tax purposes. Assets for which a deduction is allowed for accumulated depreciation, depletion, and amortization are valued in accordance with the method used in computing each for federal tax purposes. An addition for the amount of indebtedness the corporation owes t hat creates net interest expense, as defined in G.S. 105-130.7B(b) (3), but does not create qualified interest expense, as defined in G. S. 105-130.7B(b)(4)(a) through G. S. 105-130.7B(b)(4)(d). If the creditor corporation is subject to North Carolina franchise tax, the creditor corporation may deduct the amount of indebtedness owed to it by a parent, subsidiary, or affiliated corporation to the extent that such indebtedness has been added by the debtor corporation. The term "indebtedness" includes all loans, credits, goods, supplies, or other capital of whatsoever nature furnished by a parent, a subsidiary, an affiliate, or a noncorporate entity in which the corporation or an affiliated group of corporations owns directly or indirectly more than fifty percent (50%) of the capital interests of the noncorporate entity, other than indebtedness endorsed, guaranteed, or otherwise supported by one of these corporations. The terms "parent," "subsidiary," "affiliate," and "noncorporate entity" have the meanings specified in G. S. 105-122(b1). Signature and Verification An authorized officer must sign and date the completed tax form and enter his or her corporate title. A phone number for the corporation, including area code, is also requested. If a paid preparer is used, the preparer must also sign and date the return, enter the firm's federal employer ID number, social security number, or PTIN as assigned by the Internal Revenue Service, and fill in the applicable circle to denote the type of number used.
Line 33 - Education Endowment Fund
The North Carolina Education Endowment Fund was created to provide additional support and funding for K-12 public schools. Corporations may elect to contribute part or all of their overpayment to the North Carolina Education Endowment Fund. If the corporation wishes to contribute to the Fund, enter the amount of the contribution on Line 33. The election to contribute to the Fund cannot be changed after the return is filed. If the corporation is not due a refund, it may still contribute to this Fund by: (1) making a contribution with the tax return; or (2) mailing a donation directly to the North Carolina Department of Public Instruction. To make a donation directly to the North Carolina Department of Public Instruction, mail your donation to: North Carolina Department of Public Instruction, Cash Collections, 6336 Mail Service Center, Raleigh, North Carolina 27699-6336. Checks should be made payable to the North Carolina Department of Public Instruction and should indicate it is a contribution for the North Carolina Education Endowment Fund.
Line 34 - Amount to be Refunded
Enter the amount of overpayment to be refunded on Line 34. The amount to be refunded cannot exceed Line 30 minus the total of Lines 31, 32, and 33.
Line 32 - Nongame and Endangered Wildlife Fund
Corporations may elect to contribute part or all of their overpayment to the North Carolina Nongame and Endangered Wildlife Fund. Your tax deductible contributions are essential to match private and federal grants to pay for conservation projects from sea turtles to songbirds, and native fish to bats. Conserving these species and their habitat is made possible by your contributions. Your donations provide most of the funds for conservation of our endangered species and native backyard wildlife. If the corporation wishes to contribute to the Fund, enter the amount of the contribution on Line 32. The election to contribute to the Fund can not be changed after the return is filed. If the corporation is not due a refund, it may still contribute to this Fund by mailing your donation directly to the North Carolina Wildlife Resources Commission, 1702 Mail Service Center, Raleigh, North Carolina 27699-1702. Checks should be made payable to the NC Wildlife Diversity Endowment Fund. For more information about the Fund or to donate online, visit ncwildlife.org/donate and select NC Wildlife Diversity Endowment Fund.
Line 31 - Estimated Income Tax
A corporation may elect to apply part or all of the overpayment shown on Line 30 to its estimated income tax for the following year by entering the amount to be applied on Line 31. The election to apply any overpayment to 2026 can not be changed after the return is filed. Important. To apply an overpayment from 2025 to 2026 estimated tax, the return must be filed by the last allowable date for making 2026 estimated tax payments.
Line 30 - Overpayment
If the sum of Lines 26 through 28c is less than zero, the corporation has overpaid its tax. Enter the amount of overpayment on Line 30. Important. You can pay your franchise and corporate income tax online. Go to "File and Pay," click on "eServices," and select the tax you are paying. Corporate Member of a Limited Liability Company (LLC) A limited liability company's income, assets, liabilities, or equity is generally not attributed to a corporation that is a member of the LLC. However, if the corporation or an affiliated group of corporations owns more than 50% of the capital interests in a LLC, the corporation must include a percentage of the LLC's net assets in the calculation of the corporation's franchise tax. For example: A partnership owns 100% of the capital interests of an LLC. Corporation A is a 51% owner of the partnership. Corporation A constructively owns
Computation of Income (Loss) - Schedule H Line 1 Enter the ordinary business income (loss) as taken from federal Form 1120S, Line 22 or from Schedule G, Line 22. Lines 2-10 Add income or deduct losses on Lines 2 through 10 that are directly passed to the shareholders as shown on federal Schedule K, Lines 2 through 10.
Line 11
Total of Lines 1 through 10; enter on Schedule B, Line 10. Adjustments to Income (Loss) - Schedule I Taxpayers must make certain adjustments to federal taxable income in arriving at North Carolina taxable income. Specifically, a shareholder's income (loss) is subject only to the adjustments under individual law regardless of the shareholder's residency status or whether the income is attributable to North Carolina. Important: Form NC-PE lists ALL North Carolina adjustments permitted to an individual who is required to file a North Carolina individual income tax return. Only adjustments allowed by North Carolina law can be claimed by the S corporation. Some of the adjustments listed on Form NC-PE do not apply to an S corporation. To determine if a North Carolina adjustment applies to an S corporation, review applicable federal and North Carolina tax law. Example: Line 38, "Taxed Pass-Through Entity Income," does not apply to an S corporation. (See G.S.105-153.5(c3)) Ordinary Income (Loss) From Trade or Business - Schedule G The computation of net income from trade or business activities follows the determination of ordinary income as defined by the Internal Revenue Code, effective January 1, 2023. This means that any change made to the Internal Revenue Code after January 1, 2023, including changes made to the code as part of the federal reconciliation act ("OBBBA") DO NOT apply when calculating North Carolina taxable income for tax year 2025 unless North Carolina conforms to federal income tax law. Because there are areas of nonconformity with federal income tax law, taxpayers may need to make modifications to federal taxable income, (Collectively, "Adjustments to federal taxable income"). Note: Taxpayers are encouraged to check the Department's website for any updates to federal conformity and NC adjustments. S corporations must transfer the information from federal Form 1120S, U.S. Income Tax Return for an S Corporation (Lines 1 through 22), to Schedule G, or attach a copy of the federal form along with all supporting schedules.
MUST BE COMPLETED BY ALL TAXPAYERS
Other Information - Schedule F 51% of the capital interest in the LLC. If all members of the affiliated group are doing business in NC, then each member includes the percentage of the LLC's assets equal to the member's percentage ownership in the LLC. If some of the members of the group are not doing business in NC, then the percentage of the LLC's assets owned by the group are allocated among the members that are doing business in NC. The percentage attributed to each member doing business in NC is determined by multiplying the percentage of the LLC owned by the entire group by a fraction. The numerator of the fraction is the member's percentage ownership of the LLC and the denominator is the total percentage of the LLC owned by all members doing business in NC. For example: An affiliated group of corporations owns 100% of the capital interests in an LLC. The group consists of three corporations. Corporation A is doing business in NC and owns 51% of the LLC. Corporation B is doing business in NC and owns 10% of the LLC. Corporation C is not doing business in NC and owns 39% of the LLC. The percentage of the LLC's assets required to be included in Corporation A's and Corporation B's franchise tax is determined as follows: • Corporation A 100% X 51% ÷ (51% + 10%) = 83.61% • Corporation B 100% X 10% ÷ (51% + 10%) = 16.39% Important. If a corporation is required to include a percentage of the
LLC's assets in the calculation of its franchise tax, the corporation may exclude its investment in the LLC from the computation of the corporation's net worth. Also, if the total book value of the LLC's assets never exceed $150,000 during the taxable year, no attribution is required. Page 7, CD-401S Instr., Web, 1-26 Shareholders' Pro Rata Share Items - Schedule K This schedule is provided primarily as a worksheet to all S corporations to summarize all the shareholders' shares of income, North Carolina adjustments, and North Carolina tax credits, and to show the amount of these items that are apportioned or allocated to nonresident shareholders. The name, address, and percentage of ownership of each shareholder must be listed on Schedule K. A North Carolina resident is required to report its full share of corporate income or loss. A nonresident shareholder, however, is only required to report to North Carolina its share of apportioned and allocated income or loss. The S corporation must give each shareholder a copy of Form NC K-1. The NC K-1 is the form used to report each shareholder's share of these items. The cumulative total of a given line on all of the shareholders' NC K-1s must equal the amount that the corporation reports in the Shareholders' Total column of Schedule K. A nonresident shareholder filing a composite income tax return must be provided with its share of net tax paid on its behalf by the S corporation. (For additional instructions on Form NC K-1, see page 9.) Tax Credits: If the S corporation did not elect to be a Taxed S Corporation for tax year 2025 AND the S corporation qualified to claim a tax credit in 2025, the S corporation must pass through to each shareholder the shareholder's distributive share of the tax credit. The S corporation MAY NOT pass through to the shareholder a tax credit that is required to be taken in installments if the first installment of the tax credit was taken in a taxable period for which the election to be a Taxed S Corporation was in effect. Important: If the S corporation made an election to be a Taxed S Corporation for tax year 2025 and the first installment of the tax credit was taken in a taxable period for which the election to be a Taxed S Corporation was not in effect, the S corporation must pass through to the shareholder the shareholder's distributive share of the tax credit installment the S corporation is qualified to claim in 2025. (For more information on tax credits and Taxed S Corporation, see G.S. 105 -131.1A(c)). In addition, an S corporation doing business in this State must file Form NC-NA for each of its nonresident shareholders. The form is due by the 15th day of the fourth month following the first taxable period in which the nonresident shareholder became a shareholder of the corporation. For additional instructions on Form NC-NA, go to "Taxes and Forms," "Corporate Income and Franchise Tax," "Forms and Instructions," and select "NC-NA."
Nonapportionable Income - Schedule N "Nonapportionable income" means all income other than apportionable income. "Apportionable income" means all income that is apportionable under the U.S. Constitution. Nonapportionable income is not subject to apportionment, but is allocated. In general, all transactions and activities of a taxpayer that are dependent upon, or contribute to the operations of the taxpayer's economic enterprise as a whole, constitute the taxpayer's trade or business. Income from these type of transactions and activities are operational income and therefore apportionable. Nonapportionable income includes rents and royalties from real or tangible personal property, capital gains, interest, dividends, and patent and copyright royalties, to the extent they are not dependent upon, or contribute to, the operations of the taxpayer's economic enterprise as a whole. Nonapportionable income must be reduced by the related expenses incurred to generate the nonapportionable income. Attribution of Expenses to Other Income Not Taxed. Under general principles of income taxation, expenses are deductible if they are incurred to produce taxable income and are not deductible if they are incurred to produce income that is exempt from tax. The disallowance of a deduction for expenses related to income not taxed is commonly called "attribution of expenses." Attribution of expenses is required for all nonapportionable income not allocated to North Carolina as well as other income exempt from State taxation. Direct Expenses. All expenses directly connected with the production of income not taxed in North Carolina must be used to compute the net amount of income not taxed. Page 8, CD-401S Instr., Web, 1-26 Note. As an alternative for expenses attributed to income not taxed, other than interest expense, corporations may use the procedure set forth in the Code for determining expenses related to foreign source income generally referred to as "stewardship." Domestic Corporations - Part 1 Domestic corporations and other corporations not apportioning franchise or income outside of North Carolina must enter 100% on Schedule B, Line 12 and on Schedule C, Line 8. Domestic corporations are those corporations or associations created or organized under North Carolina law. Foreign corporations doing business in North Carolina but not taxable in another state must also enter 100% for its apportionment factor. Computation of Apportionment Factor - Schedule O All corporations, domestic or foreign, doing business in North Carolina must complete Schedule O to compute the corporation's net worth and North Carolina taxable income. Multistate Corporations - Part 2 A corporation having income from business activities that is taxable both within and without North Carolina is required to apportion its State net income or net loss. For purposes of allocation and apportionment, a corporation is taxable in another state if (i) the corporation's business activity in that state subjects it to a net income tax or a tax measured by net income, or (ii) that state has jurisdiction based on the corporation's business activity in that state to subject the corporation to a tax measured by net income regardless of whether that state exercises its jurisdiction. For purposes of this section, "business activity" includes any activity by a corporation that would Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More - Schedule M-3
Attach a copy of federal Schedule M-3 to the back of this form if the corporation's total assets as reported on federal Schedule L equal or exceed $10 million.
1. Value of Assets that Produce Income Not Taxed ........................................... 2. Total Assets at Cost ....................................... 3. Line 1 divided by Line 2 ................................. 4. Total Income Not Taxed in North Carolina ................................................ 5. Total Income (From Schedule G, Line 11) ....... 6. Line 4 divided by Line 5 ................................. 7. Average Ratio (Line 3 plus Line 6 divided by 2) ...................................................... 8. Expenses, Such as Interest Expense, Not Related to any Particular Type of Income .... 9. Expenses Attributable to Income Not Taxed (Multiply Line 8 by Line 7) ............... Attribution of Expenses to Income Not Taxed Balance Sheet - Schedule L and Schedule M-1 Complete these schedules only if you do not attach a copy of federal Schedule L and Schedule M-1, along with all supporting schedules. Analysis of N.C. Accumulated Adjustments Account, N.C. AAA - Schedule M-2 All corporations must maintain an "accumulated adjustments account" (AAA) for federal and State purposes. The N.C. accumulated adjustments account, N.C. AAA, may be different than the federal AAA for S corporations that were in existence prior to 1989. The computation of the N.C. AAA and N.C. Other Adjustments Account is made using the same procedures as the federal computation applying the North Carolina amounts. (See instructions for federal Form 1120S and IRC §1368.) N.C. Other Adjustments Account. The N.C. Other Adjustments Account, N.C. OAA, is only adjusted by any items of North Carolina income less related expenses that are not included in the N.C. AAA account. Indirect Expenses. When a corporation earns income that is not taxed by this State and incurs expenses, such as interest expense, that are not specifically related to any particular income or property, the corporation must attribute a portion of these expenses to income not taxed in determining North Carolina taxable income. To compute the amount of expenses attributable to income not taxed, complete the worksheet below.
establish a taxable nexus pursuant to 15 United States Code § 381. All income of corporations other than those subject to special apportionment must be apportioned to this State by using the sales factor. Calculate the apportionment factor to four places to the right of the decimal. Sales Factor The sales factor is a fraction, the numerator of which is the total sales of the corporation in this State during the income year, and the denominator of which is the total sales of the corporation everywhere during the income year. The following receipts are excluded from both the numerator and denominator of the sales factor: (1) Receipts from any casual sale of property. (2) Receipts from nonapportionable income. (3) Receipts exempt from taxation. (4) The portion of receipts realized from the sale or maturity of securities or other obligations that represents a return of principal. (5) The portion of receipts from financial swaps and other similar financial derivatives that represents the notional principal amount that generates the cash flow traded in the swap agreement. (6) Receipts in the nature of dividends deducted or excluded from federal taxable income. If a corporation is not taxable in another state on its apportionable
income but is taxable in another state only because of nonapportionable income, all sales are treated as having been made in this State. Sales of tangible personal property are in this State if the property is received in this State by the purchaser. In the case of delivery of goods by common carrier or by other means of transportation, including transportation by the purchaser, the place at which the goods are ultimately received after all transportation has been completed is considered the place at which the goods are received by the purchaser. Direct delivery into this State by the taxpayer to a person or firm designated by a purchaser from within or without the State constitutes delivery to the purchaser in this State. Other sales are in this State if any of the following applies: (1) The receipts are from real or tangible personal property located in this State. (2) The receipts are from intangible property and the property is used in this State. (3) The receipts are from services and the service is delivered to a location in this State. (For more information, including definitions and examples, see the Corporate Income and Franchise Tax Bulletin on the Department's website.) Special Apportionment Formulas - Part 3 G.S. 105-130.4 and the instructions for completing Form CD- 405, C-Corporation Tax Return, should be consulted for detailed information regarding apportionment of income. Important: Special apportionment formulas apply to certain types of businesses. The Department refers to the North American Industry Classification System (NAICS) as a means of determining whether a taxpayer's business operations require the use of a special apportionment formula. See G.S. 105-130.4 for definitions and other statutory requirements. Banks. All income of a bank must be apportioned by multiplying the income by a fraction, the numerator of which is the total receipts within this State and the denominator which is the total receipts Page 9, CD-401S Instr., Web, 1-26 Computation of Apportionment Factor for Motor Carriers - Vehicle Miles Factor 3. Percentage of Mileage in N.C. Factor (Divide Line 1 by Line 2; enter amount here and on Schedule O, Part 3) ............... %. 2. Total number of vehicle miles traveled everywhere .................................. 1. Number of vehicle miles traveled in N.C. .. everywhere. (For more information about what constitutes a receipt for a bank, including definitions and examples, see G.S.105-130.4B and the Corporate Income and Franchise Tax Bulletin on the Department's website.) Wholesale Content Distributors. All receipts of a wholesale content distributor must be apportioned by multiplying the receipts by a fraction, the numerator of which is the gross receipts within this State and the denominator which is the gross receipts everywhere. Note: In no event may the amount of receipts sourced to this State be less than the amount determined by multiplying two percent (2%) by the total domestic gross receipts of the wholesale content distributor from advertising and licensing activities. (For more information, including definitions and examples, see G.S.105- 130.4A and the Corporate Income and Franchise Tax Bulletin on the Department's website.) Electric Power Companies. All income of an electric power company must be apportioned by multiplying the income by a fraction, the numerator of which is the average value of property within this State and the denominator which is the average value of property everywhere. (For more information, including definitions and examples, see G.S.105-130.4(s3) and the Corporate Income and Franchise Tax Bulletin on the Department's website.) Pipeline Companies. All income of a pipeline company must be apportioned by multiplying the income by a fraction, the numerator of which is the number of traffic units in this State and the denominator of which is the number of traffic units of the company everywhere. (See G.S. 105-130.4(s2) for more information.) Air and Water Transportation. All income of an air or water transportation company must be apportioned by the ratio of revenueton miles in North Carolina to total revenue-ton miles. A revenue-ton mile is one ton of passenger, freight, mail, or other cargo carried one mile; each passenger is deemed to weigh 200 pounds. (See G.S. 105-130.4(s) for more information, including a definition of an air transportation corporation.) Railroads. All income of a railroad company must be apportioned by multiplying the income by a fraction, the numerator of which is the "railway operating revenue" from business done in this State and the denominator of which is the total railway operating revenue of the company everywhere. (See G.S. 105-130.4(m) for a detailed definition of railway operating revenue.) Motor Carriers. All income of a motor carrier of property or passengers must be apportioned by multiplying the income by a fraction, the numerator of which is the number of vehicle miles in this State and the denominator of which is the total number of vehicle miles of the company everywhere. The words "vehicle miles" mean miles traveled by vehicles owned or operated by the company hauling property for a charge, carrying passengers for a fare, or traveling on a scheduled route. (Complete the worksheet below.)
Shareholder's Share of North Carolina Income, Adjustments, and Credits - Form NC K-1 Form NC K-1 is the form used by all S corporations to report to each shareholder its share of the S corporation's income, adjustments, tax credits, etc. Prepare and give a Form NC K-1 to each entity that was a shareholder in the S corporation at any time during the tax year. Form NC K-1 must be provided to each shareholder on or before the due date of the return. (Form NC K-1 is available from the Department's website.) Shareholders that are residents of North Carolina must be provided with the total amount of their proportionate share of the following items:
1. Nort h Carolina adjustments to federal adjusted gross income, NC K-1, Lines 2 and 3. 2. Shareholder' s distributive share of tax credits, NC K-1, Line 4. When reporting the distributive share of tax credits, a list of the amount and type of each tax credit must be provided to the shareholder. 3. Any tax withheld from nonwage compensation for personal services in North Carolina by the S
corporation, NC K-1, Line 5. Shareholders that are nonresidents of North Carolina must be provided with their share of the same items listed above for North Carolina residents, along with the following items:
1. North Carolina income appor tioned and allocated for business activities occurring outside of North Carolina, NC K-1, Line 6. 2. Shareholder' s share of separately stated items of income, NC K-1, Line 7. 3. Any North C arolina income tax paid by the S corporation on behalf of the nonresident shareholder, NC K-1, Line 8. Shareholders of S corporations that elect to be a Taxed S Corporation must be provided with their share of the same items listed above from NC K-1, Lines 1 through 7, along with Lines 1 and 2 below: 1. Shareholder' s share of North Carolina taxable income if the amount is less than zero, NC K-1, Line 9. 2. Shareholder' s share of North Carolina taxable income if the amount is greater than zero, NC K-1, Line 10. Shareholder's Share of N.C. Additions and Deductions - Form NC K-1 Supplemental Schedule NC K-1 Supplemental Schedule is used by all S corporations to report to each shareholder, the shareholder's share of North Carolina adjustment addition and deduction items from Form NC-PE. In Column A report the shareholder's share of North Carolina adjustment addition and deduction items from all sources. In addition, if applicable, in Column B report the amount of each item that is attributable to North Carolina. The S corporation may have to complete Column B for non-individual shareholders and for individual shareholders who were nonresidents of North Carolina at the end of the year. The S corporation may also have to complete Column B for individual shareholders who move into North Carolina during the S corporation's tax year because these part-year residents will need the information in Column B to correctly complete their tax return. Form CD-425 and, if applicable, Form NC-478 and Form NC-Rehab, must be filed by every S corporation eligible to take a tax credit or an installment of a tax credit against its tax due. In addition, the S corporation must attach a schedule showing the computation of each tax credit claimed and each shareholder's distributive share of that tax credit. Instructions for an S corporation that did not make the election to be a Taxed S Corporation in 2025. An S corporation that did not elect to be a Taxed S Corporation may apply each nonresident shareholder's distributive share of the S corporation's tax credit against the income tax due on behalf of the nonresident shareholder included in a composite return. The S corporation MAY NOT apply a tax credit against the income tax due on behalf of the nonresident shareholder included in a composite return if the tax credit is required to be taken in installments and the first installment of the tax credit was taken in a taxable period for which the election to be a Taxed S Corporation was in effect. Instructions for Taxed S Corporations. A Taxed S Corporation that qualifies to claim a tax credit may apply each shareholder's distributive share of the Taxed S Corporation's tax credit against the shareholder's distributive share of the Taxed S Corporation's income tax due. A Taxed S Corporation MAY NOT claim a tax credit against the shareholder's distributive share of the Taxed S Corporation's income tax due, if the tax credit is required to be taken in installments and the first installment of the tax credit was taken in a taxable period for which the election to be a Taxed S Corporation was not in effect. (For more information on tax credits and Taxed S Corporations, see G.S. 105-131.1A(c)). If the S corporation claims a tax credit on Form CD-401S, the S corporation MUST attach Form CD-425 to Form CD- 401S. If the S corporation does not, the Department may be unable to process the S corporation's return. Failure to substantiate a tax credit may result in the disallowance of the tax credit. 2025 Corporate Tax Credit Summary - Form CD-425 Page 10, CD-401S Instr., Web, 1-26 Page 9, CD-401S Instr., Web, 2-23 Forms and Instructions for the NC-478 Series Forms and Instructions for the NC-478 series are available from the Department's website.
Source: official text