North Carolina has progressed in leaps and bounds beyond the days when our business tax climate was routinely ranked among the least welcoming in the country. These days, North Carolina boasts a top-10 business tax climate anchored by the lowest corporate income tax rate in the nation, down from what was once the highest in the Southeast. And this ranking isn’t just an abstract accolade. The nonpartisan Tax Foundation research group recently modeled the actual tax burdens impacting different business types across states. Their published report on these findings, Location Matters, showed that most business types modeled in North Carolina enjoyed some of the lowest effective tax rates nationally relative to their analogues in other states.

However, the Location Matters report also found that newly invested capital-intensive manufacturers do not experience quite the same beneficial rates here compared to their counterparts elsewhere. This finding points to the burdensome impacts of our uncapped franchise tax, an annual tax imposed on certain companies’ net worth which essentially penalizes job creators for making sizeable investments in North Carolina. Put another way, since the franchise tax specifically targets assets and capital, it functions as a duplicative form of business taxation that can deter high-valued companies from bringing to our state the kind of high-impact investments that often fuel secondary growth and generate new opportunities throughout our communities.

Click here to learn more about the importance of repealing North Carolina’s franchise tax, the regressive “right-to-compete” fee harming job creators across our state and deterring major investors from growing high-quality opportunities for hardworking North Carolinians.

Conferees from the N.C. House and N.C. Senate remain engaged in negotiations to reach a compromise budget for the state, and our advocacy team is continuing to help lead a business-driven effort to ensure leaders in both chambers fully understand the harm caused by the franchise tax. As we push our leaders to repeal this burdensome obstacle to our growth, we are encouraged by the inclusion of measures in each chambers’ initial budget proposals that would simplify the complicated three-factor formula for assessing each company’s franchise tax burden. Indeed, these measures would streamline the tax assessment process and reduce costs for many North Carolina businesses – a welcome change that would offer a sensible waypoint on the path to full repeal.

In the coming weeks, we will continue to provide updates on any new developments related to franchise tax reform as budget negotiations proceed.