18 Feb 2025
Franchise Taxes: A Tax for the Privilege of Existing within a State
Virtually every state has some type of franchise tax or fee that is imposed on domestic and/or foreign corporations as part of the cost of doing business in the state. The measure of franchise taxes varies from state to state. While some franchise taxes are measured by nominal or actual value using authorized capital stock or issued capital stock as the tax base, others are measured by earnings, with net income as the tax base. Reference our state survey of franchise tax rates and see how they are determined.
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See how virtually every state, apart from Nevada, South Dakota, and Wyoming, imposes some type of tax on the income that domestic and foreign corporations obtain from doing business in that state. Some of the states impose the generic corporate income tax at a flat rate; others impose their tax at a graduated rate up to a maximum percentage.
- Apportionment Formula State Law Survey
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- Business Entities. Trump Administration freezes issuance of proposed and final regulations pending review. The White House, Regulatory Freeze Pending Review.
- Business Entities. IRS provides transitional relief from penalties for certain brokers who fail to report sales of digital assets, as defined in Reg. §1.6045-1(a)(19), other than digital assets not required to be reported as digital assets pursuant Treas. Reg. §1.6045-1(c)(8)(ii),(iii), or (iv), on information returns (Form 1099-DA, Digital Asset Proceeds From Broker Transactions), or fail to furnish payee statements I.R.C. Section 6045. I.R.S. Notice 2025-3.
- Employment. IRS provides guidance regarding the federal income and employment tax treatment of contributions and benefits paid in certain situations under a state’s paid family and medical leave statute, and the related reporting requirements. Rev. Rul. 2025-4.
- International Taxation. Executive Order by President Trump provides that the OECD Global Tax Deal no longer applies in the United States, with a stated goal of safeguarding sovereignty and competitiveness while combating extraterritorial, discriminatory taxes impacting U.S. businesses. The Organization for Economic Co-operation and Development (OECD) Global Tax Deal (Global Tax Deal).
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