Financial Institutions

Banks, trust companies, building and loan associations, and other financial institutions, including bank holding companies, production credit associations, and leasing companies are subject to a tax under N.D.C.C. ch. 57-35.3. The tax is imposed for the privilege of transacting, or the actual transacting of, business in North Dakota, and is based upon and measured by the financial institution's taxable income.

If a financial institution is granted Subchapter S corporation status for federal income tax purposes, the Subchapter S status is not recognized for North Dakota financial institution tax purposes, and the corporation must file a financial institution tax return and pay the tax. In this case, a shareholder-limited to an individual, estate or trust-is allowed an adjustment to income in computing the shareholder's North Dakota income tax liability. The adjustment, which is equal to the portion of the income passed through to the shareholder and subject to North Dakota income tax, prevents the financial institution's income from being taxed at both the financial institution level and the individual, estate or trust level.

Tax rates: The current tax rate for a financial institution, which applies to tax years beginning on or after January 1, 2011, is 6.5%.

Note: For tax years 1997 through 2010, the tax rate was 7%.