S Corp and Partnership Tax

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Subchapter S Corporation

A corporation that elects to be taxed as a subchapter S corporation for federal income tax purposes is taxed in the same manner for North Dakota income tax purposes. A subchapter S corporation that carries on business or derives gross income from sources in North Dakota must file a Form 60 - S Corporation Income Tax Return by April 15.

An S corporation reports income or loss to every nonresident individual, estate, or trust shareholder on a Form 60 – S Corporation Income Tax Return. This form is also used to report income or loss to every qualified subchapter S trust (QSST) and electing small business trust (ESBT) shareholder with a nonresident individual or estate beneficiary.

Apportionment - All income derived from the S corporation’s activity is business income and is subject to apportionment. For the definitions of business and nonbusiness income, see North Dakota Administrative Code § 81-03-09. North Dakota does not allow for separate accounting.


Partnership

A partnership that carries on business or derives gross income from sources in North Dakota must file a Form 58 – Partnership Income Tax Return by April 15 each year.

If a partnership is an investment partnership and elects out of the partnership rules under I.R.C. § 761(a)(1) and does not file a federal partnership return, the partnership must file a Form 58 – Partnership Income Tax Return if it carries on investment activity, or derives any gross income from sources during its tax year. An IRS Form 1065 must be completed on a pro forma basis and attached to Form 58 – Partnership Income Tax Return.

Apportionment - All income derived from the partnership’s activity is business income and is subject to apportionment. For the definitions of business and nonbusiness income, see North Dakota Administrative Code § 81-03-09. North Dakota does not allow for separate accounting.


Limited Liability Company (LLC) 

An LLC that is taxed like a partnership or S corporation for federal income tax purposes is treated in the same manner for North Dakota income tax purposes.

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Passthrough Withholding Requirement – S Corporation

An S corporation, or a limited liability company filing as an S corporation, is required to withhold North Dakota income tax for every nonresident partner whose distributive share of North Dakota income is greater than $1,000. It must withhold at the highest individual income tax rate from the year-end distributive share.

Since the 2014 tax year, a nonresident partner for passthrough entity withholding return purposes was expanded to include:

  • Nonresident trusts
  • Nonresident grantor trusts
  • Passthrough entities with a commercial domicile outside of North Dakota

An S corporation does not have to withhold North Dakota income tax from a nonresident partner's distributive share of North Dakota income if:

  • The distributive share for the taxable year is less than $1,000; or
  • In lieu of filing the North Dakota income tax return by the nonresident shareholder, the nonresident shareholder elects to be included in a composite filing by the S corporation.
  • The nonresident shareholder is a passthrough entity and elects to exempt its distributive share of North Dakota income from withholding. This election is made on Form PWE – Passthrough Withholding Entity Member Withholding Exemption & Certification and remains in effect until it is revoked by the nonresident passthrough entity.
  • The nonresident shareholder is an individual who meets the qualifying conditions and completes the Form PWA. For the qualifying conditions, see Form PWA – Passthrough Withholding Adjustment – Nonresident Member. 

The applicable rate for each year is set in Form 60 – S Corporation Income Tax Forms and Instructions. The total withholding must be paid in full with the S corporation return when it is filed. An S corporation cannot withhold on behalf of a C corporation or an exempt organization.

Passthrough Withholding Requirement - Partnership

A partnership, or a limited liability company filing as a partnership, is required to withhold North Dakota income tax for every nonresident partner whose distributive share of North Dakota income is greater than $1,000. It must withhold at the highest individual income tax rate from the year-end distributive share.

Since the 2014 tax year, a nonresident partner for passthrough entity withholding return purposes was expanded to include:

  • Nonresident trusts
  • Nonresident grantor trusts
  • Passthrough entities with a commercial domicile outside of North Dakota

The applicable rate for each year is set out in Form 58 – Partnership Income Tax Form and its instructions. The total withholding must be paid in full with the partnership return when it is filed. A partnership cannot withhold on behalf of a C Corporation or an Exempt Organization.

A partnership does not have to withhold North Dakota income tax from a nonresident partner's distributive share of North Dakota income if:

  • The distributive share for the taxable year is less than $1,000; or
  • In lieu of filing the North Dakota income tax return by the nonresident partner, the nonresident partner elects to be included in a composite filing by the passthrough entity.
  • The nonresident partner is a passthrough entity and elects to exempt its distributive share of North Dakota income from withholding. This election is made on Form PWE – Passthrough Withholding Entity Member Withholding Exemption & Certification and remains in effect until it is revoked by the nonresident passthrough entity.
  • The nonresident partner is an individual who meets the qualifying conditions and completes the Form PWA. For the qualifying conditions, see Form PWA – Passthrough Withholding Adjustment – Nonresident Member. 

A publicly traded partnership as defined by section 7704(b) of the Internal Revenue Code that is treated as a partnership for federal income tax purposes is not subject to this withholding requirement if it reports each unitholder with a North Dakota distributive share of income over $500 on Form 58, Schedule KP.

1099-MISC or Schedule K-1

S corporations and partnerships that received a Form 1099-MISC or a North Dakota Schedule K-1, showing North Dakota withholding, must:

  • E-File – Properly enter the withholding source when e-filing.
  • Paper File – Include copies of the forms showing the withholding with your returns.
    • S Corporation – Enter amount on line 5, page 1, Form 60 - S Corporation Income Tax Return.
    • Partnership – Enter amount on line 4, page 1, Form 58 – Partnership Income Tax Return.

Withholding can only be claimed by the entity whose identification number appears on the Form 1099-MISC or North Dakota Schedule K-1. If the withholding was issued to a disregarded entity, see Disregarded Entity with North Dakota Withholding.

E-File

The Office of State Tax Commissioner offers a variety of E-Filing options for corporations. See more information:

E-Filing for Businesses

Estimated Payments

North Dakota has no requirement for S corporations and partnerships to make estimated income tax payments. If the S corporation or partnership expects a tax due on its return, an estimated payment can be made online through ND TAP. 

Make a Payment


S Corporation

If you are paper filing, use Form 60-ES – S Corp Estimated Tax Payment. If an extension is granted and the S corporation expects a tax due, an extension payment may be made using Form 60-EXT – S Corp Extension Payment. If an extension is granted and the S corporation expects a tax due, an extension payment may be made.


Partnership

If you are paper filing, use Form 58-ES – Partnership Estimated Tax Payment. If an extension is granted and the partnership expects a tax due, an extension payment may be made using Form 58-EXT – Partnership Extension Payment. If an extension is granted and the partnership expects a tax due, an extension payment may be made.

NAICS Codes – Business Classification

The North American Industry Classification System (NAICS) provides a way to classify business establishments using a six-digit code. The Office of State Tax Commissioner uses NAICS codes to:

  • Evaluate whether a business needs certain sales tax schedules,
  • Identify who should receive information about important legislative changes that affect specific industries.