Note: Senate Bill 2325, passed by the 2013 North Dakota Legislature, repealed the financial institution tax law for tax years after 2012. For more information, see "Tax years 2013 and after" below.
Tax years 1997 through 2012
For tax years 1997 through 2012, banks, trust companies, building and loan associations, and other financial institutions, including bank holding companies, production credit associations, and leasing companies were subject to the financial institution tax under N.D.C.C. ch. 57-35.3, and were required to file Form 35. The tax was imposed for the privilege of transacting, or the actual transacting of, business in North Dakota, and was based upon and measured by the financial institution's taxable income.
If a financial institution was a corporation that elected to be a Subchapter S corporation for federal income tax purposes, the Subchapter S status was not recognized for North Dakota financial institution tax purposes, and the corporation was required to file a financial institution tax return and pay the tax. In this case, an individual, estate, or trust shareholder was allowed an adjustment to income in computing the shareholder's North Dakota taxable income. The adjustment, which equaled the portion of the income passed through to the shareholder that was subject to North Dakota income tax, prevented the financial institution's income from being taxed under both the financial institution law and the income tax law.
For tax years 1997 through 2010, the tax rate was 7%. For the 2011 and 2012 tax years, the tax rate was 6.5%.
Tax years 2013 and after
For tax years beginning on or after January 1, 2013, banks and other entities formerly subject to the financial institution tax are subject to the North Dakota income tax under N.D.C.C. ch. 57-38, and must file the applicable income tax return as follows:
- C corporation – file Form 40.
- Partnership – file Form 58.
- S corporation – file Form 60.
- Limited liability company – file Form 40, 58, or 60, whichever applies, based on how the entity files for federal income tax purposes.
Special transitional provisions provide for deferred payment of the 2013 income tax, short period filing for certain fiscal year income tax filers, and the utilization of unused net operating losses and tax credits remaining as of December 31, 2012. They also provide for an election by an S corporation to be treated like a C corporation for the limited purpose of utilizing unused net operating losses and tax credits remaining as of December 31, 2012. The transitional rules are summarized in the July 2013 edition of Income Tax Update, the tax practitioner newsletter. For multistate entities, the apportionment factor provisions that applied under the financial institution tax law were adopted by administrative rule and will apply for income tax purposes.
For assistance, please contact us: