How to make the North Carolina PTET election.

Can your business elect?

S corporations required to file a North Carolina return, and partnerships (including LLCs taxed as partnerships) required to file one. Publicly traded partnerships cannot elect, and a partnership cannot elect if at any time during the year it has a partner other than an individual, estate, certain trusts, a Section 1361(c)(6) organization, or an entity taxed as a partnership or corporation.

The election is binding on all owners. A Taxed Partnership leaves out the shares of partners classified as partnerships or corporations; those partners do not get the deduction, and the nonresident partner tax rules of G.S. 105-154(d) still apply to them. A partner that is a disregarded single-member LLC owned by an individual is allowed and its share is included.

Rate: 3.99%, the individual income tax rate for 2026. S.L. 2026-41 left the 2026 rate at 3.99%.

Each owner's share of income attributable to North Carolina (apportioned and allocated), for residents and nonresidents alike, with North Carolina adjustments. A resident owner's income not attributable to North Carolina is not included.

Available for 2026. The Taxed Pass-Through Entity election is in G.S. 105-131.1A (S corporations) and G.S. 105-154.1 (partnerships), and no sunset was found in official guidance. New to PTET? See how the election works.

Deadlines

These dates are for a calendar-year business. Pay at least two business days early, since state payment sites slow down on deadline days.

Electing, step by step

Deadline: Made on a timely filed 2026 North Carolina return, by the due date including extensions: April 15, 2027, or the extended due date (October 15, 2027 for a partnership; the 2025 bulletin describes a seven-month extension for S corporations). An election on a late-filed return is invalid.

Start with 2025 Form D-403, Partnership Income Tax Return (web fill-in version), from the North Carolina Department of Revenue.

1. Prepare the 2026 Form D-403 (partnerships) or Form CD-401S (S corporations), e-filed through approved software or filed on paper.
2. On page 1 of Form D-403, fill in Yes for the Taxed Partnership question ('Is the partnership making the election to be a Taxed Partnership'). On page 1 of Form CD-401S, fill in Yes for the Taxed S Corporation question.
3. Every partnership and S corporation must answer the question. A No or blank answer means the entity is not taxed at the entity level for the year.
4. Compute the tax: on Form D-403, Part 1, Lines 11 through 13 (from Part 4); on Form CD-401S, Lines 17 through 19.
5. File by the due date, including extensions. An election on a late return is invalid, and the election cannot be made or revoked after the return is filed.

1

Paying the tax, step by step

Required if expected liability is at least $500, paid like a C corporation in four equal installments due April 15, June 15, September 15, and December 15, 2026, using Form CD-429 PTE (S corporations) or Form NC-40 PTE (partnerships). No underpayment interest applies if the entity was not a Taxed PTE in 2025.

What you need

• Nothing to set up. NCDOR eServices (File & Pay) takes payments without an account.
• The entity's FEIN.
• Bank routing and account numbers for a bank draft, or a credit or debit card.
• The 2026 Form NC-40 PTE or CD-429 PTE for each mailed estimated payment.

Start at NCDOR eServices (File & Pay), North Carolina's official site.

1. Pay the balance due at ncdor.gov: select File & Pay, then Partnership Tax under Tax Category. S corporations use the CD-V Franchise Tax and Corporate Income Tax payment.
2. Choose bank draft (no fee) or credit or debit card (convenience fee).
3. Or pay through the approved eFile software when it files the return, if the software offers payment.
4. Pay by April 15, 2027. An extension extends only the time to file.
5. Mail each 2026 estimated payment with Form NC-40 PTE (partnerships) or Form CD-429 PTE (S corporations) and a check. The NC-40 PTE goes to N.C. Department of Revenue, P.O. Box 25000, Raleigh, N.C. 27640-0650.

Filing the return: Form D-403 (partnerships) or Form CD-401S (S corporations), due April 15, 2027. An extension extends filing only; the tax must be paid by April 15, 2027 to avoid interest and the failure-to-pay penalty.

Claiming the credit

Owners deduct their share of income included in the Taxed PTE's North Carolina taxable income on Form D-400 Schedule S, and add back any share of loss. The entity reports the included amount and the election on Form NC K-1.

Good to know

• If the entity does not pay its tax within 60 days of a collection notice, owners lose the deduction and are assessed directly.
• Only the Taxed PTE, not its owners, can request a refund of an overpayment.
• North Carolina income tax credits the entity earns cannot pass through to owners in an election year; the entity applies them against each owner's share of tax, and carryforwards stay with the entity.
• Residents may deduct income not attributable to North Carolina that was subject to another state's entity-level tax, whether or not the entity elects in North Carolina.
• Individual estimated payments cannot be transferred to the Taxed PTE.
• Paying your personal North Carolina estimates? See how to pay North Carolina estimated taxes.
• Business in more than one state? Each state has a guide of its own.

Official sources

Checked October 2026 against the North Carolina Department of Revenue's own publications and G.S. 105-131.1A; G.S. 105-154.1; owner deduction in G.S. 105-153.5(c3).

• NCDOR 2025 Personal Taxes Bulletin, Section XXII Taxed Pass-Through Entities
• NCDOR Important Notice on the Pass-Through Entity Tax
• NCDOR individual income tax rate schedules
• NC General Assembly summary of S.L. 2026-41 (S257), 2026 rate remains 3.99%
• 2025 Form D-403 partnership instructions
• 2025 Form D-403, Partnership Income Tax Return
• 2025 Form CD-401S instructions
• 2026 Form NC-40 PTE, Taxed Partnership Estimated Income Tax
• NCDOR eServices
• NCDOR notice, updated Forms CD-429 PTE and NC-40 PTE (June 2, 2023)

This guide is for general education and reflects rules as of October 2026. Tax law and agency websites change, and your situation may have details that change the answer. Please talk with your tax professional before acting on it.