North Dakota Corporation Income Tax Instruction Booklet

Corporation Income Tax Instruction Booklet
Corporate Income Tax Booklet (2023)
NORTH DAKOTA

CORPORATE INCOME TAX
FORM 40
INSTRUCTIONS
Email Questions to: [email protected]

Updated October 2023

New for 2023
Changes to corporate income tax and credits -

A summary of the 2023 legislative changes affecting corporate income tax credits is below. See the
2023 Corporate Income Tax Credit instruction booklet on our website for additional details.

Automation tax credit

The income tax credit for the purchases of equipment used to automate a manufacturing process
was reauthorized by House Bill 1168. - The credit was made permanent and is similar to the
prior version except for the following:
	 •	 Is now 15% of the cost of equipment used to automate a manufacturing process.
	 •	 Expanded to include animal ag machinery and equipment.
	 •	 Raised the annual cap to $3 million of tax credits and reserved a portion of the cap for first
time applicants.

Credit for employment of individuals with developmental disabilities or severe
mental illness

House Bill 1244 reinstated the income tax credit that existed for 2019 through 2022. The tax
credit is now permanent and equal to 25% of the first $6,000 of wages paid annually to an eligible
employee. The bill also removed the credit limitation on the number of employees allowable.

Maternity home, child placing agency, or pregnancy help center contribution
tax credit

House Bill 1176 created a new income tax credit for contributions to a maternity home, child
placing agency, or pregnancy help center. The credit is equal to 100% of a taxpayer’s contributions
and may not exceed 50% of the taxpayer’s tax liability or $2,500, whichever is less.

Apprentice tax credit

House Bill 1383 created a new income tax credit for compensation paid by a taxpayer to an
apprentice. The credit equals 10% of the stipend or salary paid to an apprentice with a maximum
credit of $3,000 earned by a taxpayer for all years combined. The credit also limits the earning of
the credit to only five apprentices at the same time.

Farming and Ranching Corporations

House Bill 1371 created a new type of farming and ranching corporation designated as an Authorized
Livestock Farm Corporation (ALFC) or an Authorized Livestock Farm LLC (ALFLLC).

Business Incentive Agreement Reporting

House Bill 1215 repealed the reporting requirements related to Business Incentive Agreements which
were applicable to certain tax incentives.

Special Reminders
Sales factor weighting - apportioning corporations

Existing provisions allow a corporation the option to make an election (for a term of five tax years)
to use a 100% weighted sales factor for its apportionment factor. See the instructions on page 9 for
more information.

Federal Due Dates and Extensions

Corporation due dates for the Form 40 are found on page 1 of the instructions. The extension of time
to file a federal return is automatically accepted by North Dakota as an extension of time to file the
state return for the same period plus one additional month, which for a corporation with a calendar
year-end would be November 15th. To extend the due date of the North Dakota return, mark the
circle on the return and attach a copy of the federal extension. The extension form should not be
submitted separately from the return.

Filing Attachments

All required schedules and a complete copy of the federal income tax return must be included with
the North Dakota return regardless of whether it is filed electronically or on paper. The Modernized
efile (MeF) program continues to be available for electronically filing your North Dakota original
return. If a required attachment or schedule is not included with the software, it must be attached as
a PDF to the return submission. PDF examples might include a Property Tax Clearance Record, North
Dakota credit computation schedules, or the Federal Extension Form 7004.

Reporting Changes to Federal Taxable Income

The starting point for computing North Dakota taxable income is federal taxable income. As a result,
if a corporation’s federal taxable income is changed by either a federal amended return or federal
audit and results in a change to North Dakota taxable income, the change must be reported with a
corresponding North Dakota amended return. A copy of the federal amended return or federal audit
must also be included. For more detailed information, see the amended return Form 40X instructions
on our website.

Mergers or Reorganizations

Page 2 of the North Dakota return includes Question #13 regarding providing information related
to mergers, reorganizations, or short tax periods. In addition to providing details or an explanation
with the return, you may contact us by phone or email to alert our office to an upcoming change to
your filing. The information is also helpful in ensuring estimated income tax payments are correctly
credited to the appropriate tax account and periods.

North Dakota Net Operating Loss Merger or Dissolution Considerations

A North Dakota net operating loss (NOL) can only be used by the corporation that incurred it,
regardless of its North Dakota business activities or filing method. The North Dakota NOL of the
non-surviving corporation in a merger or a dissolved corporation is forfeited and may not be used as
a deduction by the surviving corporation. A corporation that has elected to become a Disregarded
Entity (DRE) is not considered a taxpayer and is not allowed to transfer its NOL to another
corporation.

Page 1	

General instructions
Who must file

Every corporation engaged in business
in North Dakota or having income from
North Dakota sources must file a North
Dakota Corporation Income Tax Return,
Form 40.
For example, a North Dakota Form 40
must be filed by:
	 •	 Corporations, including business
trusts, associations, and joint-stock
companies;
	 •	 Cooperative corporations distributing
their net income through patronage
dividends;
	 •	 Insurance companies conducting
business activities not subject to a
gross premiums tax;
	 •	 Tax-exempt organizations having
unrelated business taxable income;
Note - A tax-exempt fiduciary trust
that filed a Form 1041 to report the
trust’s unrelated business taxable
income must file North Dakota
Form 38;
	 •	 Organizations that anticipate
receiving a tax exempt status
notification from the IRS, but
have not actually received such
notification by the end of the taxable
year.
Except as provided under “Exception
for certain S corporations” below,
a corporation that files Federal
Form 1120S must file Form 60, North
Dakota S Corporation Income Tax
Return.
Exception for certain
S corporations. An S corporation must
file Form 40, North Dakota Corporation
Income Tax Return, if all the following
apply:
	 •	 The corporation is a bank or other
financial institution that formerly was
subject to the North Dakota financial
institution tax under North Dakota
Century Code (N.D.C.C.)
		 Ch. 57-35.3 and filed Form 35 for
tax years prior to 2013.
	 •	 The corporation made an election
under N.D.C.C. § 57-38-01.35 to
be taxed as a C corporation for the
2013 tax year and filed a Form 40
for 2013 through 2022.

2023 North Dakota Corporation Income Tax Return Instructions	

	 •	 The corporation’s North Dakota net
tax liability on the 2022 Form 40
(page 1, line 20) is zero and the
corporation is not revoking the
election, which is done by filing
Form 60 for the 2023 year.
If this election is still in effect and
the S corporation files a Form 40 for
the 2023 tax year, it may not file
electronically and must file its return
on paper. The corporation must
provide a statement to each individual
shareholder containing information
on the adjustments that will need to
be made on the shareholder’s North
Dakota individual income tax return to
remove the income and losses already
taxed and deducted on the North
Dakota corporation income tax return.
For more information, see the Income
Tax Guideline: Adjustment For Income
(Loss) From An S Corporation Electing
To Be Taxed Under N.D.C.C.
§ 57-38-01.35.
Privacy Act Notification. In
compliance with the Privacy Act
of 1974, disclosure of a social
security number or Federal Employer
Identification Number (FEIN) on this
form is required under N.D.C.C.
§§ 57-01-15 and 57-38-32, and will be
used for tax reporting, identification,
and administration of North Dakota tax
laws. Disclosure is mandatory. Failure
to provide the social security number
or FEIN may delay or prevent the
processing of this form.
Upon request from Legislative
Management, the Office of State Tax
Commissioner is allowed to share
the amount of any tax deduction or
tax credit claimed or earned by a
taxpayer. Disclosure of the taxpayer’s
name, federal identification number,
or other confidential information is not
permitted.

Due date

A calendar year corporation filing
Form 40 must file on or before April 15
following the close of the calendar year.
A corporation reporting on a fiscal year
basis must file on or before the 15th
day of the fourth month following the
close of the fiscal year. Use the 2023
Form 40 for fiscal years that begin in
2023 and end in 2024.

A cooperative must file on or before the
15th day of the ninth month following
the close of the calendar or fiscal
year. Answer “Yes” to Question #4 on
page two.
Tax-exempt organizations required
to file an income tax return to report
unrelated business taxable income must
file a corporation income tax return
on or before the 15th day of the fifth
month after the tax year ends.

Short period return

A corporation required to file a federal
short period return must file a North
Dakota short period return for the same
period. The North Dakota return must
be filed by April 15th or by the date
prescribed by the IRS, whichever is
later.
See instructions for the North Dakota
Form 40‑ES for due dates of estimated
payments on short period returns.
A corporation terminating as a
Subchapter S Corporation during
the year, or a corporation changing
its annual accounting period, must
annualize its North Dakota taxable
income and prorate its state tax liability
in the same manner as the federal tax
liability is prorated.

Extension of time for filing

An extension of time to file a federal
return is automatically accepted by
North Dakota as an extension of time to
file the state return. The state extension
is for one month after the due date
of the automatic federal extension.
Attach a copy of the federal extension
Form 7004 (or other applicable form)
to the state tax return and mark the
extension circle on page one. The
return will be processed as a
delinquent return if the circle is not
marked and a copy of the federal
extension is not attached.
If a federal extension is not obtained, or
if an extension of time beyond the time
period covered by a federal extension is
needed, a North Dakota extension may
be obtained by completing and filing
North Dakota Form 101 prior to the due
date of the return. This form may be
obtained by contacting our office.

2023 North Dakota Corporation Income Tax Return Instructions 	

An extension of time to file a North
Dakota return does not extend the time
for payment of the tax, and extension
interest at the rate of 12% per annum
will apply to any payment made after
the regular due date of the state tax
return. Penalty does not apply to tax
paid within the extension period.
Extension payments must be
accompanied by Form 40‑EXT
identifying the name, address, and
FEIN of the taxpayer. The form can be
found on our website. Alternatively, a
letter containing the above information
along with a copy of the approved
state extension of time to file may be
submitted with the prepayment of tax
due.

Payment of tax

If tax due is less than $5.00, payment
need not be made. If tax is due, the
total payment due must be paid at
the time of, or before, the return is
filed. Payment made by check should
be made payable to the North Dakota
Office of State Tax Commissioner
and be mailed with payment voucher
Form 40PV.
Payment may be made electronically
using an ACH debit, ACH credit, credit
card, debit card, or electronic check. To
pay online, go to www.tax.nd.gov and
select “Make a Payment”.
Payment in the form of a check drawn
on an international bank, except
Canada, cannot be accepted. A check
must be drawn on a U.S. or Canadian
bank, be in U.S. dollars, and use a
standard nine digit routing number.

Preparer authorization

If the corporation wants to allow
the North Dakota Office of State Tax
Commissioner to discuss its 2023 tax
return with the preparer who signed it,
mark the circle in the signature area of
the return. This authorization applies
only to the individual whose signature
appears in the “Signature of Preparer”
section of the corporation’s return. It
does not apply to the firm, if any, shown
in that section.
If the circle is marked, the corporation
is authorizing the North Dakota Office
of State Tax Commissioner to contact
the preparer to answer any questions
that are related to the processing of its
return.

The corporation is also authorizing the
preparer to:
	 •	 Give the North Dakota Office of State
Tax Commissioner any information
that is missing from the return;
	 •	 Call the North Dakota Office of
State Tax Commissioner about the
processing of the return or the
status of any related refund or
payment(s); and
	 •	 Respond to certain North Dakota
Office of State Tax Commissioner
notices that the corporation has
shared with the preparer about
math errors and return preparation.
The notices will not be sent to the
preparer.
The authorization will automatically end
one year after the extended due date
for filing the corporation’s 2023 tax
return.
The corporation is not authorizing
the preparer to receive any refund
check, bind the corporation to
anything (including any additional tax
liability), or otherwise represent the
corporation before the North Dakota
Office of State Tax Commissioner. If
the corporation wants to expand the
preparer’s authorization, North Dakota
Form 500, Authorization to Disclose
Tax Information and Designation of
Representative, will need to be signed
and filed with our office. North Dakota
Form 500 can be found on our website
at www.tax.nd.gov. Search for
Form 500.

Overpayments

Overpayments of income tax may be
applied to the 2024 estimated tax
(minimum $5) or issued as a refund
(minimum $5). If an overpayment
is applied to the following year, the
amount of overpayment is considered
an estimated payment and cannot be
refunded or applied against other tax
liability until the close of the following
year.

Interest and penalty

The Office of State Tax Commissioner
will notify the taxpayer of any interest
and penalty owed on tax due. If
desired, interest and penalty may be
computed by the taxpayer on tax due
and entered on the return.

Page 2

Interest
If the full amount of the tax is not paid
by the original due date, the following
provisions for interest apply:
	 •	 If an extension was obtained,
interest on the tax due during the
extension period is computed at
12% per annum, through the later of
the extended due date or date paid.
Beginning with the month thereafter,
interest is computed at 1% per
month or fraction of a month.
	 •	 If an extension was not obtained,
interest on the tax due is computed
at 1% per month or fraction of a
month, except the month in which
the tax became due.
Penalty
	 •	 If the full amount of tax is not paid
by the due date (or extended due
date), penalty is equal to 5% of the
unpaid tax due or $5.00, whichever
is greater.
	 •	 If the return is not filed by the due
date (or extended due date), a
penalty of 5% of the net tax liability
or $5.00, whichever is greater,
applies for the month in which the
return is due, with an additional
5% for each additional month (or a
fraction of a month) during which
the delinquency continues, not to
exceed 25% of the net tax liability.
If there is an overpayment on Form 40,
page 1, interest at the rate of 1% per
month accrues on the overpayment
beginning forty-five days after the later
of:
	 •	 the due date of the return (without
extension); or
	 •	 the date return is filed and deemed
complete.

Attachments and incomplete
returns
A complete copy of the federal income
tax return as filed with the IRS must
be attached to Form 40. Attachments
consisting of a CD, USB drive, or other
similar device cannot be accepted.
All applicable lines on Form 40 must
be completed and the return must
be signed. A signed Form 40 is a
declaration the return is correct and
complete.

Page 3	

A return with incomplete lines or
schedules or with notations such as “see
attached statement” or “available upon
audit” is not properly filed and may be
returned to the taxpayer. An incomplete
return that is returned will not be
considered filed until resubmitted with
the required items. For electronically
filed returns, any attachments for
extension forms or applicable schedules
that are not included with the software
must be attached as a PDF.

Ratios and decimals

On all schedules where a ratio or
decimal is called for, use six digits after
the decimal point.

To file or obtain additional
forms and instructions

Completed returns and written requests
for information and forms should
be mailed to the Office of State Tax
Commissioner, 600 E. Boulevard Ave.,
Dept. 127, Bismarck, ND 58505‑0599.

2023 North Dakota Corporation Income Tax Return Instructions

Estimated tax payments

If a corporation’s estimated state
income tax liability exceeds five
thousand dollars ($5,000) and its
previous year’s state income tax
liability exceeded five thousand dollars
($5,000), the corporation is generally
required to make an estimated tax
payment of at least one-fourth of the
amount due on each of four prescribed
dates.
Information regarding estimated
tax payments is located in the
instructions for Form 40-ES.

Amended returns/federal
audit changes

An Amended North Dakota Corporation
Income Tax Return, Form 40X, must be
filed if:
	 •	 North Dakota income is changed
when an amended federal income
tax return is filed or as a result of a
federal audit.

If you have corporate income tax
questions or are seeking tax forms,
please email us at [email protected],
visit our website at
www.tax.nd.gov, or call
our Corporate Tax Section at
701‑328‑1249.

	 •	 An error is discovered on a
previously filed return.

For the speech or hearing impaired,
call Relay North Dakota at
1-800-366-6888.

Information about amended returns can
be found in N.D.C.C. §§ 57-38‑38 and
57‑38­‑40.

Information at the source

Any corporation doing business in North
Dakota that is required to file a Federal
Form W-2 or 1099 must also file one
with this state. For more information on
the requirements and alternatives for
satisfying those requirements, contact
our office.

Quick refund

A quick refund of overpaid estimated
income tax may be requested by a
corporation prior to filing a return if
the expected overpayment exceeds
five hundred dollars ($500) and the
claim for quick refund is filed after the
close of the taxable year but before the
15th day of the fourth month thereafter.
The form for the Quick Refund Of
Estimated Income Tax For Corporations
(Form 40‑QR) must be obtained by
contacting our office.

	 •	 The corporation received a refund
of federal income tax which was
deducted on a previously filed
Form 40 for tax years beginning
before January 1, 2004.

Form 40X and instructions can be
obtained by visiting our website at
www.tax.nd.gov/forms.

Federalization

The North Dakota income tax law is
perpetually “federalized” for the Federal
Taxable Income starting point of the
North Dakota return.

Method of corporation
taxation

The North Dakota corporation income
tax applies only to that portion of a
corporation’s taxable income which is
derived from or attributable to sources
within this state.
A nonapportioning corporation, (a
corporation whose business activity is
conducted solely within North Dakota,)
computes North Dakota taxable income
by adjusting its federal taxable income
by North Dakota statutory adjustments.

An apportioning corporation, (a
corporation whose business activity
is conducted both within and without
North Dakota,) computes North Dakota
taxable income by adjusting its federal
taxable income by North Dakota
statutory adjustments and apportioning
this adjusted taxable income using
Schedule FACT or CR (Part II) of
Form 40.
A corporation engaged in a unitary
business with one or more corporations
(irrespective of the country or countries
in which the corporations conduct
business) must file using the combined
report method.
The starting point for computing North
Dakota taxable income is federal taxable
income. However, if the combined
report excludes any corporation that
was included in a federal consolidated
return, the starting point for computing
North Dakota taxable income is the pro
forma federal taxable income amount
for the combined group members that
were part of the federal consolidated
return.
A single, pro forma starting point is
not computed to reflect the inclusion of
additional nonconsolidated affiliates in a
North Dakota combined group. Instead,
the federal taxable income as actually
reported to the IRS for each additional
entity is added to the combined group.
Federal consolidated return rules are
not reapplied to this larger combined
group. Also, see Schedule WW (line 4)
or Schedule WE (line 2).
A unitary business is a group of
corporations which carries on activities,
the component parts of which transfer
value among themselves through the
unities of ownership, operation, and
use.
	 •	 “Unity of ownership” means the
group is under the common control
of a single corporation, which is also
a member of the group. Control
exists when the single corporation
owns, directly or indirectly, more
than 50% of the voting stock of
another corporation;
	 •	 “Unity of operation” means the
group receives benefits from
functional integration or economies
of scale;
	 •	 “Unity of use” means the group
of corporations contributes to or
receives benefits from centralized
management and policy formation.

2023 North Dakota Corporation Income Tax Return Instructions	

Whether a group of corporations is
engaged in a unitary business depends
on the facts and circumstances of each
case. If unity of ownership exists, any
of the following facts or circumstances
create a presumption that the unities of
operation and use exist; therefore, the
corporations are engaged in a unitary
business if:

Business Code

	 •	 All activities of the group are in
the same general line or type of
business;

Income

	 •	 The activities of the group constitute
different steps in a vertically
structured enterprise; or
	 •	 The group is characterized by
centralized management.

Water’s edge election

A corporation required to file its North
Dakota return using the worldwide
unitary combined report method may
elect to use the water’s edge method.
The water’s edge election must be made
on the return as originally filed and is
binding for five consecutive tax years.
Also see Question #9 on page 2. If the
election is made, all corporations
covered by the election will be
subject to a 3.5% surtax on their
North Dakota taxable income.

Specific instructions for
Form 40, Page 1
Taxpayer Name

If filing a combined return (line 1,
circle b or c) the return should be filed
using the taxpayer name and FEIN of
the specific corporation having activity
in North Dakota.
If you previously filed a consolidated
return (line 1, circle b1 or c1) as a
member of a unitary group and are still
a member of that group, use the same
taxpayer name and FEIN as previously
filed returns. If not, file using the name
and FEIN of another affiliate having
activity in North Dakota in 2023.
Farming or Ranching Corporation
Answer yes if business is registered as a
farm or ranch corporation or LLC or an
authorized livestock farm corporation or
LLC with the North Dakota Secretary of
State.

Enter the business code from the NAICS
list found on our website at
www.tax.nd.gov that most closely
corresponds to the area from which you
derived the majority of your income for
the tax year.

Line 1

Mark the circle for the reporting method
used to complete the return and enter
the income reportable under that
method. Mark ONE circle only.

a. Single Corporate Entity

Page 4

•	 Except for 100% North Dakota
corporations required to file a
consolidated tax return, it is
essential to have a unitary group of
corporations before the combined
report method can be used. For
a discussion of a unitary group of
corporations, see item “Method of
corporation taxation” on page 3.
•	 If filing a combined report method
return where only one company
apportions income to North Dakota
(i.e., circle b or c is marked on
Form 40, line 1), the answer to
Question #8 on page 2 will be “No”.

The single corporate entity method
reports income or loss of only one
incorporated business that is not part of
a unitary business. (See item “Method
of corporation taxation” on page 2.)

•	 If filing a consolidated combined
report method North Dakota
tax return where more than one
company apportions income to
North Dakota. See Consolidated
Return below.

If the single corporate entity method is
used for both North Dakota and federal
purposes, enter the federal taxable
income from Federal Form 1120,
line 30.

Mark the “Combined Report Method”
circle if Form 40 includes only one
corporation from a unitary business
which apportions its income to North
Dakota.

If the single corporate entity method
is used for North Dakota purposes
and the corporation is included in a
consolidated Federal Form 1120, enter
the corporation’s federal taxable income
before consolidating adjustments/
eliminations from:

The return should be filed using the
taxpayer name and federal identification
number of the entity having activity in
North Dakota.

	 •	 A pro forma separate company
federal income tax return, line 30; or
	 •	 The by-company schedule showing
gross income and deductions, which
supports the consolidated federal
taxable income plus or minus
adjustments, if any, to make it a pro
forma equivalent.
Cooperatives and other organizations
using federal forms other than Federal
Form 1120 must enter the federal
taxable income from the appropriate
form.

b. Combined Report Method

For North Dakota corporation income
tax purposes, a “combined report”
means an income tax return on which
the tax liability is computed using
the methods described in N.D.C.C.
Ch. 57‑38, 57-38.1 and N.D. Admin.
Code Chs. 81-03-05.1, 81-03-05.2,
81-03-05.3, and 81‑03-09.

Complete Schedule WW on page 4
and enter the amount from line 10 on
page 1, line 1. Attach the completed
Schedule WW to Form 40 when filed.
Answer “No” to Question #8 on page 2.

Consolidated Return

For North Dakota corporation income
tax purposes, a North Dakota
“consolidated return” means a single
corporation income tax return that
reports the tax liability of more than
one corporation engaged in business or
having sources of income from North
Dakota.
	 •	 If part of the same unitary group,
file the return using the same
taxpayer name and FEIN as
previously filed returns if that entity
has activity in North Dakota in 2023.
If not, file using the name and FEIN
of another affiliate having activity in
North Dakota in 2023.
	 •	 Only taxpayers who compute their
North Dakota tax liability using the
combined report method may file a
consolidated return.

Page 5	

	 •	 Laws and rules governing
consolidated returns are found in
N.D.C.C. Ch. 57‑38, and N.D. Admin.
Code Ch. 81‑03‑05.1.
	 •	 If filing a consolidated North Dakota
tax return, circle b1 or c1 should be
marked on line 1.
	 •	 Because a North Dakota
consolidated return reports the
North Dakota tax liability of more
than one corporation, North Dakota
Schedule CR, Parts I, II, and III will
be completed.
	 •	 If filing a consolidated North Dakota
tax return (i.e., circle b1 or c1 is
marked on Form 40, line 1) the
answer to Question #8 on page 2
will be “Yes”.

Schedule CR

Schedule CR, Parts I, II, and III will be
completed only for corporations which:
	 •	 apportion income to North Dakota
(i.e., have property, payroll, or sales
in North Dakota, ) or
	 • allocate nonbusiness income or loss
to North Dakota, or
	 • do not apportion or allocate any
income or loss to North Dakota, but
choose to be disclosed as having
filed a North Dakota return.
The factor denominator of the
apportionment factor computation on
Part II will be the total property, payroll,
and sales for all unitary companies in
the combined group.
The Schedule CR in this booklet allows
for three separate companies to be
reported. If more companies are to
be reported, photocopy Parts I, II,
and III of Schedule CR and continue
to complete the additional schedule
copies for companies that apportion
their income to North Dakota. (See
page 11 for specific instructions for
Schedule CR.)

b1. Combined Report Method
Consolidated Return

Mark the “Combined Report Method
Consol. Return” circle if the corporation
is filing one consolidated North Dakota
return using the combined report
method.
Two or more apportioning corporations
may file one North Dakota consolidated
return if the corporations are required
to use the combined report method and
more than one of the corporations has a
filing requirement in North Dakota.

2023 North Dakota Corporation Income Tax Return Instructions

If circle b1 is marked:

If circle c1 is marked:

	1.	 If part of the same unitary group,
file the return using the same
taxpayer name and FEIN as
previously filed returns if that entity
has activity in North Dakota in
2023. If not, file using the name
and FEIN of another affiliate having
activity in North Dakota in 2023.

	1.	 If part of the same unitary group,
file the return using the same
taxpayer name and FEIN as
previously filed returns if that entity
has activity in North Dakota in
2023. If not, file using the name
and FEIN of another affiliate having
activity in North Dakota in 2023.

	2.	 Complete Schedule WW on page 4
and enter the amount from line 10
on page 1, line 1. Attach the
completed Schedule WW to Form 40
when filed.

	2.	 Complete Schedule WE on page 5
and enter the amount from line 12
on page 1, line 1. Attach the
completed Schedule WE to Form 40
when filed.

	3.	 Complete North Dakota
Schedule CR, Parts I, II and III.

	3.	 Complete North Dakota
Schedule CR, Parts I, II, and III.

	4.	 Answer “Yes” to Question #8 on
page 2.

	4.	 Answer “Yes” to Question #8 on
page 2.

c. Water’s Edge Method

d. Other

Mark the “Water’s Edge Method” circle
if:
	 •	 The corporation is a member of a
worldwide unitary business group of
corporations, and
	 •	 The corporation elects to file a North
Dakota tax return using the water’s
edge method, and
	 •	 No other corporations in the
combined report have a filing
requirement in North Dakota, if more
than one, see c1 method below.
If circle c is marked:
	1.	 The return should be filed using
the taxpayer name and FEIN of
the entity having activity in North
Dakota.
	2.	 Complete Schedule WE on page 5
and enter the amount from line 12
on page 1, line 1. Attach the
completed Schedule WE to Form 40
when filed.
	3.	 Answer “No” to Question #8 on
page 2.

c1. Water’s Edge Method 	
Consolidated Return
Mark the “Water’s Edge Method
Consolidated Return” circle if:

	 •	 The members of a worldwide unitary
business group of corporations elect
to file a consolidated tax return
using the water’s edge method, and
	 •	 If two or more apportioning
corporations in the combined report
have a filing requirement in North
Dakota.

Mark the “Other” circle if the
corporation has received written
permission from the Office of State Tax
Commissioner to file a North Dakota
return using a filing method other than
those specified above.
Other filing methods are contained in
N.D.C.C. § 57-38.1-18 (for example,
separate accounting or a method using
an apportionment factor different from
that computed on Schedules FACT
or CR).
If the circle entitled “Other” is marked:
	1.	 Attach a copy of the letter from the
Office of State Tax Commissioner
granting permission to use, or
requiring the use of, this filing
method.
	2.	 Attach a worksheet substantiating
and explaining the computation of
income.
	3.	 Enter the income from the
worksheet on page 1, line 1.

Line 4

North Dakota apportionable
income

If completing Schedule CR, enter
the amount from page 1, line 4 on
Schedule CR, Part I, line 4 (enter
the same amount for each company)
and complete Parts I, II, and III of
Schedule CR.
If a North Dakota consolidated
tax return is being filed to report
the tax liability of more than one
corporation engaged in business in or
having sources of income from North
Dakota:

2023 North Dakota Corporation Income Tax Return Instructions	

	1.	 Do not complete lines 5-19 on
page 1 until Schedule CR has
been completed.
	2.	 Complete Schedule CR, Parts I,
II, and III on pages 6, 7, and 8
and enter the totals on page 1.
	3.	 Complete Form 40, page 1.
	4.	 Attach the completed
Schedule CR to Form 40 when
filed.

Line 5

Apportionment factor

If a corporation has business income
from activity solely within this state,
enter 1.000000 on this line.
Corporations not filing a consolidated
return, enter the apportionment factor
from Schedule FACT, line 14 or 16.
Corporations completing Schedule CR
must enter the apportionment factor
from Schedule CR, Part II, line 14a or
16a.
It is required that the supporting
Schedule FACT or CR, Part II, whichever
is applicable, be completed, and that
the 6-digit factor from the supporting
schedule be carried to page 1, line 5.
If the supporting schedule is not
completed, the return will be
considered incomplete.

Line 7

Income allocated to North
Dakota

Enter nonbusiness income allocated to
North Dakota, less related expenses.
Nonbusiness income is allocated
to North Dakota if the income is
attributable to North Dakota.
Expenses must be attributed to
nonbusiness income in a manner which
fairly distributes all of the corporation’s
expenses to its various types of income.
Corporations completing Schedule CR
must enter the total nonbusiness
income for all corporations having
nonbusiness income attributable to
North Dakota.

Line 9

Exemption for new and
expanding business

If the corporation received a new
and expanding business exemption
from the State Board of Equalization,

enter the amount of exempt income
computed pursuant to N.D. Admin.
Code § 81‑03‑01.1-06. If line 8, page 1
is negative, do not enter an amount.
Corporations completing Schedule CR
must enter the exempt income for each
corporation having an exemption.
Attach a schedule showing the
computation of exempt income for
each corporation and a Property Tax
Clearance Record form.

Line 10

Renaissance zone income
exemption

If the corporation is claiming exempt
income as a result of the Renaissance
Zone Act, enter the total amount
of exemption from the summary
part of Schedule RZ. The amount of
exemption cannot exceed the amount
of related income assigned to North
Dakota. Contact the Office of State Tax
Commissioner at 701-328-1243 to
obtain Schedule RZ. Attach Schedule RZ
and the Property Tax Clearance Record
form to the Form 40 when filed.

Line 11

ND income after income
exemptions

If the amount on line 11 is a loss, the
loss must be carried forward.

Line 12

North Dakota loss carryforward
The North Dakota loss carryforward
allowed on the Form 40 is the amount
of the accumulated North Dakota loss
less any previously deducted loss.

North Dakota net operating losses
incurred in taxable years beginning
after December 31, 2002, cannot be
carried back to a previous taxable year.
These net operating losses must be
carried forward. Capital losses must
still be carried back and then carried
forward.
Attach a worksheet showing the
accumulated loss, by year, less any
previously deducted loss carryback or
carryforward.
Corporations completing Schedule CR
must enter the loss carryforward from
all corporations listed on Schedule CR.

Page 6

Line 14

Gross proceeds allocated to
North Dakota from sale of North
Dakota research tax credits
Enter on this line the gross proceeds
from the sale, assignment, or transfer
of unused North Dakota research
tax credits. See the 2023 Corporate
Income Tax Credits booklet for more
information.

Line 15

North Dakota taxable income

If line 14 is zero enter the amount from
line 13.
If line 13 is zero or less and line 14 is
greater than zero, enter the amount
from line 14.
If line 13 is greater than zero, enter the
total of line 13 and line 14.

Line 21

Tax year 2023 estimated income
tax payments
Enter the total 2023 estimated
income tax payments. Also, enter any
2022 overpayment credited to the
2023 taxable year and any payment
voluntarily made to the state with an
extension of time for filing.

Line 22

North Dakota income tax
withheld on oil and gas royalties

Enter the amount of North Dakota
income tax withheld on oil and
gas royalty payments that were
reported to the company on a 2023
Form 1099‑MISC. The amount to enter
should only be income tax withheld and
should not include any production or
extraction taxes. Do not enter income
tax withheld and reported on a K-1
received from a partnership. Income tax
withheld on K-1 distributive income for
a corporation is not allowed. In order
to substantiate the amount withheld, a
copy of the Form 1099-MISC must be
attached or credit will not be allowed
for the tax withheld. If the return is
filed electronically, the Form 1099-MISC
should be attached as a PDF.
Do not enter income tax withheld and
reported on a K-1 received from a
partnership. Income tax withheld on K-1
distributive income for a corporation is
not allowed.

Page 7	

Enter the amount of tax withheld for the
company only if its FEIN is identified as
the recipient on the Form 1099-MISC.
If this return is a consolidated return,
the amount to enter should also include
any amount withheld on behalf of any
corporation that is included in this
return as identified by the recipient’s
FEIN on the Form 1099-MISC.
Income tax withheld on royalties
received by a disregarded entity cannot
be claimed. If income tax was withheld
on a disregarded entity owned by a
corporation, a corrected Form W-9
(to correctly identify the owner of the
disregarded entity as the royalty owner)
must be provided to the payer, and a
corrected Form 1099-MISC identifying
the corporate owner must be obtained.
If the company is filing with a tax year
end other than a calendar year basis, it
will claim withholding on the corporate
income tax return for the year following
the year of Form 1099-MISC. A
taxpayer with a fiscal year end in 2023
will claim the amount withheld as shown
on its 2022 Form 1099-MISC, and so on
for each subsequent year and return.

Line 24a

Interest and penalty for balance
due
The Office of State Tax Commissioner
will notify the taxpayer of any interest
and penalty owed on tax due. If
desired, interest and penalty may be
computed by the taxpayer on tax due
and entered on the return.

Interest
If the full amount of the tax is not paid
by the original due date, the following
provisions for interest apply:
	 •	 If an extension was obtained,
interest on the tax due during
the extension period is computed
at 12% per annum, through the
extended due date. Beginning with
the month thereafter, interest is
computed at 1% per month or
fraction of a month.
	 •	 If an extension was not obtained,
interest on the tax due is computed
at 1% per month or fraction of a
month, except the month in which
the tax became due.

2023 North Dakota Corporation Income Tax Return Instructions

Penalty
	 •	 If the full amount of tax is not paid
by the due date (or extended due
date), penalty is equal to 5% of the
unpaid tax due or $5.00, whichever
is greater.
	 •	 If the return is not filed by the due
date (or extended due date), a
penalty of 5% of the net tax liability
or $5.00, whichever is greater,
applies for the month in which the
return is due, with an additional
5% for each additional month (or a
fraction of a month) during which
the delinquency continues, not to
exceed 25% of the net tax liability.

Line 24b

Interest on underpayment of
estimated tax

Instructions for making estimated tax
payments are found on Form 40-ES.
If estimated payments are not timely
made or in the correct amount, interest
is charged.
The amount of interest due for
underpaid or late payments of
estimated tax can be computed on
North Dakota Form 40-UT. Instructions
for Form 40-UT are on the Form 40-UT.
Enter the interest from Form 40-UT,
line 9 on line 24b. Attach Form 40-UT to
Form 40 when filed.

Line 25a

Amount to be credited to year
2024
A corporation may elect to have the
overpayment credited to their 2024
estimated tax. The overpayment
will be credited to the first quarterly
installment for 2024.

Specific instructions for
Schedule SA
Additions
Line 1

Federal net operating loss
deduction

Enter the amount of federal net
operating loss deducted in arriving
at federal taxable income, generally
as reflected on Federal Form 1120,
line 29a. Any North Dakota net
operating loss carryover deduction is
separately computed and deductible
on page 1, line 12 (or Schedule CR,
line 12).

Line 2

Special deductions

Enter the amount of special deductions
claimed in arriving at federal taxable
income, generally as reflected on
Federal Form 1120, line 29b. Even
though this amount includes the
deduction for foreign derived intangible
income, that amount is separately
deducted on Schedule SA, line 9
(below).

Line 3

All taxes measured by income
deducted to arrive at federal
taxable income

Enter all taxes measured by income,
including income taxes, franchise or
privilege taxes measured by income
(paid to or withheld by any taxing
authority, including a foreign country) to
the extent such taxes were deducted to
arrive at federal taxable income.

Line 5

Contribution to endowment fund
credit adjustment
Enter the contribution made to an
endowment fund that was deducted on
your federal income tax return to the
extent a credit has been earned.

Line 6

Other additions
	•	Safe harbor leases
		 The safe harbor lease provisions in
§ 168(f)(8) of the IRC of 1954, as
amended, are not adopted in North
Dakota in those instances where the
minimum investment by the lessor is
less than 100%. Enter amounts on
line 8.
	 • 	Seller/Lessee: sale proceeds, rent
expense, amortization expense,
lease acquisition cost.
	 •	 Buyer/Lessor: interest expense,
depreciation expense, amortization
expense, acquisition cost, loss on
sale of property.
		 See N.D.C.C. § 57-38-01(5)(a) for
more information.
	•	Real estate investment trusts
		 Include on this line, the dividends
paid deduction allowed by a captive
real estate investment trust (REIT)
on its federal income tax return and
included in the taxpayer’s federal
taxable income. See N.D.C.C.

2023 North Dakota Corporation Income Tax Return Instructions	

§ 57‑38-01.3(1)(l) for further
information. The dividends paid
should be added back only to the
extent they have not otherwise been
included in apportionable income.

Line 10

Interest on United States
Obligations
Enter the following on this line:

	•	ACRS depreciation adjustment
		 Enter the amount of depreciation
deducted on the federal return for
all currently held assets placed in
service between January 1, 1981,
and the end of the 1982 tax year
using methods allowed under
the IRC provisions in effect as of
December 31, 1980. North Dakota
income tax statutes did not allow
for the use of ACRS depreciation for
assets placed in service for 1981
and 1982 only and federal taxable
income must be adjusted for the
difference in these two methods. In
computing this adjustment, exclude
safe harbor lease adjustments.

	 •	 Interest income from U.S.
obligations.

A worksheet explaining any
adjustment on this line must be
attached.

Lines 11 and 12

	 •	 Interest income from other securities
that is specifically exempted from
state income tax by federal statute.
Not all interest income from securities
issued by federal government agencies
is includable on this line. Examples of
interest income not includable on this
line are from certain mortgage backed
securities of the Federal Home Loan
Mortgage Corporation, Federal National
Mortgage Association, Government
National Mortgage Association, and
interest received from a federal tax
refund.

Allocated income and related
expenses

Enter all income, franchise, or privilege
tax refunds received in 2023, to the
extent such taxes were previously
included in North Dakota taxable
income.

Business income: N.D. Admin. Code
Ch. 81-03-09-03. All income arising
from transactions and activity in the
regular course of the taxpayer’s trade
or business operations including income
from tangible and intangible property
if the acquisition, management, and
disposition of the property constitute
integral parts of the taxpayer’s regular
trade or business operations.

Federal income tax refunds received
cannot be included on this line.

Nonbusiness income: All income
other than business income.

Subtractions
Line 8

Tax refunds received in year
2023

Line 9

Foreign derived intangible
income deduction

Enter the amount of the foreign derived
intangible income deduction that was
included in the deduction on Federal
Form 1120, line 29b, which was also
included in the amount entered on
Schedule SA, line 2 (above). Because
this deduction is allowable in computing
North Dakota income but was added
back as a special deduction, the
deduction is restored by entering on this
line.
The amount entered on this line should
be the amount from Federal Form 8993,
line 28. Attach the form to the return.

Page 8

Line 14

IC-DISC distributions

Enter the actual distributions made by a
corporation who elects to be an interestcharge domestic international sales
corporation, elects to use intercompany
pricing rules under IRC § 994, and is
owned by one or more individuals or
passthrough entities. Answer “Yes” to
Question #4 on page 2.

Line 15

Other subtractions
Do not include intercompany
eliminations on this line when
filing a combined report (filing
methods b, b1, c, or c1). Report
all intercompany eliminations on
Schedule WW line 9 or Schedule WE
line 5.
	•	Eminent domain sale or transfer
		 If the amount on page 1, line 1
includes any gain, either ordinary
or capital, from property subjected
to eminent domain sale or transfer,
such gain is not taxable and must be
entered on this line.
	•	Safe harbor leases
		 The safe harbor lease provisions in
§ 168(f)(8) of the IRC of 1954, as
amended, are not adopted in North
Dakota in those instances where the
minimum investment by the lessor is
less than 100%. Enter amounts on
line 15.
	

•	 Seller/Lessee: interest income
and depreciation expense (for
assets placed in service between
January 1, 1981, and the end
of the 1982 taxable year, use
methods allowed under the IRC
as of December 30, 1980. For
assets placed in service after
the 1982 taxable year, use ACRS
depreciation).

	

•	 Buyer/Lessor: rental income.

Enter all nonbusiness income on
line 11 and enter related expenses on
line 12. The method used to attribute
expenses to nonbusiness income must
fairly distribute all of the corporation’s
deductions to all of its various types of
income.
If an entry is made, all of the following
must be attached to Form 40:
	 •	 A worksheet showing each type of
income or loss item allocated and its
amount;
	 •	 Documentation showing the state to
which the item of income or loss was
allocated (a copy of the other state’s
tax return is preferred); and
	 •	 A narrative explaining the reasons
for allocating each item of income or
loss.

	•	Regulated investment companies
		 Regulated investment companies, as
defined by the IRC, will be allowed
to subtract on this line certain
dividends paid to shareholders. The
dividends paid must be attributable
to income that is taxable under
N.D.C.C. Ch. 57-38 when the
regulated investment company earns
the income.

Page 9	

	•	North Dakota railway bonds
		 Enter the amount of interest on
bonds issued by a regional railway
authority in North Dakota.
	•	ACRS depreciation adjustment
		 Enter the amount of depreciation
deducted on the federal return for
all currently held assets placed in
service between January 1, 1981,
and the end of the 1982 tax year
using methods allowed under
the IRC provisions in effect as of
December 31, 1980. North Dakota
income tax statutes did not allow
for the use of ACRS depreciation for
assets placed in service for 1981
and 1982 only and federal taxable
income must be adjusted for the
difference in these two methods. In
computing this adjustment, exclude
safe harbor lease assets.
A worksheet explaining any
adjustment on this line must be
attached.

Specific instructions for
Schedule FACT
Apportionment factor in
general

In general, the apportionment factor is
a product of a formula consisting of an
equally weighted three-factor (property,
payroll, and sales) apportionment.
Each factor represents the percentage
of the corporation’s North Dakota
activity compared to its total activity
everywhere. Except where a sales
factor weighting election is made, the
apportionment factor calculation equally
weights property, payroll, and sales—
see “Sales factor weighting election”
below.
If a corporation files under a combined
report filing method, the denominator
(i.e., the everywhere amount) of each
factor must include the amounts for
all of the corporations included in
the combined report. Exclude from
each factor amounts attributable to
intercompany transactions between
corporations included in the combined
report. Also exclude from each factor
amounts attributable to allocable
income.
If the amount of any factor’s
denominator is zero, exclude that factor
from the calculation. If a corporation
owns an interest in a passthrough entity

2023 North Dakota Corporation Income Tax Return Instructions

and includes the distributable share of
income from the passthrough entity
in its apportionable business income,
include in the factors the corporation’s
proportionate share of the passthrough
entity’s apportionment factors.
Special apportionment rules may apply
in the case of certain industries or
unique circumstances. For example,
special apportionment rules apply to
financial institutions, as provided under
N.D. Admin. Code Ch. 81-03‑09.1.
For additional information on the
apportionment factor, see N.D. Admin.
Code Ch. 81-03-09.

Financial Institutions

For any corporation that meets the
definition of a financial institution,
special apportionment provisions apply
for the property and sales factors.
These apportionment provisions
are included in N.D. Admin. Code
Ch. 81‑03-09.1 and are identical to
the provisions that existed for financial
institutions that were subject to the
financial institution tax and filed
Form 35 for years prior to 2013. Loans
and receivables of a financial institution
that are included in the property factor
should be reported on the “Other
assets” line and a supporting schedule
should be attached. Please contact our
office if there are questions regarding
these special apportionment provisions.

Sales Factor Weighting Election

	 •	 After the fifth year of an election,
if a new election is not made (for
year six), the equally-weighted
three-factor apportionment formula
must be used for at least three tax
years before another election can be
made.
The application of special industry
apportionment provisions in N.D.
Admin. Code Ch. 81-03-09 does
not preclude making a sales factor
weighting election. If a corporation’s
apportionment factors include amounts
attributable to a passthrough entity,
the election applies to the calculation
of the corporation’s apportionment
factors, as adjusted to include the
passthrough entity amounts. (Note:
The passthrough entity itself may not
make a sales factor weighting election.)
For more information on the sales factor
weighting election, see N.D. Admin.
Code Ch. 81-03-09.2.
An election to use the water’s edge
filing method is unrelated to the sales
factor weighting election.

Specific line instructions

The following line instructions apply to
either Schedule FACT or Schedule CR,
Part II, whichever schedule applies. The
line items for the “Everywhere” amounts
on the two schedules correspond to
each other. If applicable, also see the
general instructions for Schedule CR,
Part II, on page 11.

A corporation has the option to make
an election to a 100% weighted sales
factor in its apportionment factor. The
following provisions apply to a 100%
weighted sales factor election:

If a sales factor weighting election
applies, the property and payroll
sections are not required.

	 •	 The election must be made on an
original, timely filed return.

Lines 1 through 6

	 •	 The election is made by marking
the box on Schedule FACT, line 15a
or Schedule CR, Part II, line 15a,
depending on the filing method.

Enter on the applicable line the average
value of real and tangible personal
property owned and rented by the
corporation. For owned property, this
generally means the average of the
original cost (before depreciation) used
for federal income tax purposes. For
rented property, this generally means
the amount of rent paid multiplied
by eight. Certain property items are
subject to special rules.

	 •	 The election applies to all companies
included in a unitary group and to
all companies filing a consolidated
North Dakota return. See
Schedule CR, Part II, line 15a.
	 •	 The election is binding for a term of
five consecutive tax years, starting
with the year for which the election
is made.
	 •	 After the fifth tax year of the
election, a new election would be
applicable for a term of five years
(years six through 10).

Property Factor
Owned and rented property

Do not include amounts related to
construction in progress. A corporation’s
share of a passthrough entity’s
apportionment factors should be
included on line 5.

2023 North Dakota Corporation Income Tax Return Instructions	

The average value of owned and rented
property is assigned to North Dakota if
the property is located in North Dakota.
The amount attributable to mobile
property is generally assignable to
North Dakota based on a ratio of the
property’s time spent in North Dakota.
For more complete information on the
property factor, see N.D. Admin. Code
§§ 81-03-09-15 through 21 and 33.

Payroll Factor
Line 8

Enter the amount of total compensation
paid to employees for the tax year.
This includes gross wages, salaries,
commissions, and any other form of
remuneration paid to the employees.
Use the amount before deductions
for deferred compensation, flexible
spending plans, and other payroll
deductions. Do not include amounts
paid for employee benefit plans that
are not considered taxable wages
to the employee. An employee is an
individual treated as an employee
under the usual common law rules,
which generally mirror an individual’s
status for purposes of unemployment
compensation and the Federal Insurance
Contribution Act.
Compensation for an employee’s
services performed entirely within North
Dakota is assigned to North Dakota.
For an employee whose services are
performed in more than one state,
compensation is generally assigned to
North Dakota based on the amount of
compensation reported to North Dakota
for unemployment compensation
purposes. Whether or not state income
tax was withheld from an employee’s
compensation does not affect where
the compensation is assigned for
apportionment factor purposes. For
more complete information on the
payroll factor, see N.D. Admin. Code
§§ 81‑03‑09‑22 through 25.

Sales Factor
Line 9

Everywhere sales

Enter the corporation’s total sales or
receipts, after returns or allowances,
for the tax year. Sales generally means
all gross receipts of a corporation.
However, the types of sales or
gross receipts included in the sales
factor depend on the nature of the
corporation’s regular business activities

and may include amounts other than
sales reported on Form 1120, line 1. If
sales other than Form 1120, line 1 are
entered as everywhere sales, attach
a schedule listing the sales types and
amounts.

Line 10

North Dakota sales

For sales of tangible property, the
sale is assigned to North Dakota if the
destination of the property is in North
Dakota, regardless of the shipping
terms. For sales of other than tangible
property, the sale is assigned to
North Dakota if the income-producing
activity which gave rise to the receipt
is performed in North Dakota. For more
complete information, see N.D. Admin.
Code §§ 81-03-09-26 through 31
and 34.

Line 11

Throwback sales

Enter the amount of sales shipped
from a location in North Dakota that
are delivered to the U.S. government
or to another state or country where
the corporation is not subject to a tax
measured by income in that jurisdiction.
For more complete information, see
N.D. Admin. Code §§ 81-03-09-29
and 30.

Line 14

Apportionment factor

If making a sales factor weighting
election, skip this line and go to line 15.
Otherwise, divide line 13 by the number
of factors having an amount greater
than zero in column 1 on lines 7, 8, and
12. Enter the result on this line and on
page 1, line 5. Do not complete lines 15
and 16.

Sales Factor Weighting
Election Apportionment
Factor
Line 15

If making a sales factor weighting
election, mark the box on line 15a. See
“Sales factor weighting election” for
more information.
On line 15b, indicate the year within
the five-year election period for which
this return is being filed by entering a
number from 1 to 5. Entering year 2
or 3 does not constitute a new five year
election.

Page 10

Line 16

Enter the amount from line 12
column c.

Specific instructions for
Schedule TC
Lines 1 through 3

Nonprofit private school
tax credits

Tax credits are allowed for contributions
to qualifying nonprofit private primary,
secondary, and higher education schools
located in North Dakota. A separate
credit is allowed for each category of
school. To qualify, a contribution must
be made directly to or specifically
designated for the exclusive use of
a qualifying school. If a contribution
is made to an account, fund, or
entity benefiting both qualifying and
nonqualifying schools, it qualifies for
the credit only if the entity provides
the donor with a statement showing
the amount specifically designated
for the use of the qualifying school
or other documentation for non-cash
contributions. A list of qualifying schools
can be found in the Corporate Income
Tax Credit Booklet on our website at
www.tax.nd.gov/forms.
If a contribution is made to a qualifying
school that provides education in one
or more grades in both the primary
school category (K through 8th grades)
and secondary school category (9th
through 12th grades), a separate credit
is allowed for the amount contributed
to each category of school. Unless
the school provides the donor with
a statement showing the amount
specifically designated for the use of
each category of school, one-half of
the contribution will be deemed to have
been made to each category of school.
A corporation may elect to treat a
contribution as having been made
during a tax year if made on or before
the due date, including extensions, for
filing Form 40 for that tax year.
The credit allowed for each category
of school equals the lesser of (1) 50%
of the contributions made to eligible
schools within the category (2) 50% of
the corporation’s total income tax, or
(3) $2,500. Any excess credit may not
be carried forward.

Page 11	

Enter on line 1 the credit for nonprofit
private colleges. Enter on line 2 the
credit for nonprofit private high schools.
Enter on line 3 the credit for nonprofit
private primary schools.
For each contribution, attach a
copy of a receipt from the nonprofit
private institution or a copy of a
cancelled check (front and back) or
other documentation for non-cash
contributions.

Lines 4-24

Instructions for the following tax credits
can be found in the Corporate Income
Tax Credit Booklet on our website at
www.tax.nd.gov/forms.
Line 4. Geothermal, solar, wind,
biomass energy device credits carried
forward.
Line 5. Employment of the individuals
with developmental disabilities or
severe mental illness credit.
Line 6. Research and experimental
expenditure credits generated by
taxpayer.
Line 7. Research and experimental
expenditure credits purchased by
taxpayer.
Line 8. Renaissance Zone credits.
Line 9. Biodiesel or green diesel fuel
production credit.
Line 10. Soybean and canola crushing
equipment costs credit.
Line 11. Seed capital business
investment credit.
Line 12. Biodiesel or green diesel fuel
blending credit.
Line 13. Biodiesel or green diesel fuel
sales equipment costs credit.
Line 14. Agricultural commodity
processing facility investment credit.
Line 15. Endowment fund contribution
credit.
Line 16. Internship employment credit.
Line 17. Angel fund investment credit
carried forward.
Line 18. Workforce recruitment credit.
Line 19. Wages paid to a mobilized
military employee credit.
Line 20. Housing incentive fund credit
carried forward.

2023 North Dakota Corporation Income Tax Return Instructions

Line 21. Maternity home, child placing
agency, or pregnancy help center tax
credit.

Schedule CR has three parts.

Line 22. Automation tax credit.

	 •	 Line 4 - Enter the amount from
page 1, line 4 (enter the same
amount for each company).

Line 23. Contributions to Rural
Leadership ND scholarship program
credit.
Line 24. Apprentice tax credit.
If a credit is being claimed on
Schedule TC or Schedule CR Part III,
line 6–14, 16–18, or 22, a local tax
clearance is required for each county
the corporation has 50% or more
interest in real property in North
Dakota. The tax clearance requirement
also applies to any officer(s) responsible
for the corporation’s state tax filing or
payment obligations. The tax incentives
listed may not be granted, or claimed
by, a taxpayer who is delinquent on
property tax owed on real property in
North Dakota or is delinquent on any
state or local tax obligation.
To satisfy the property tax clearance
requirement, a Property Tax Clearance
Record form is required for each
county in which the corporation or
responsible officer(s) holds a 50%
or more ownership interest. A new
Property Tax Clearance Record form
must be obtained and attached to the
Form 40 for each year a listed income
tax incentive is claimed. The form
and instructions are available on our
website.

Specific instructions for
Schedule CR
Schedule CR is a worksheet to
compute the North Dakota tax
liability of multiple nexus companies
in one unitary group on one North
Dakota “consolidated” return. The
tax liabilities are computed for each
company apportioning its income to
North Dakota, added together, and
the total carried to page 1. Before you
begin to complete the CR schedules,
you must complete lines 1-4, page 1.
Each company separately listed on
Schedule CR, including those with
a zero apportionment factor, will be
considered a taxpayer for purposes of
having filed a return.

Schedule CR, Part I calculates the tax
liability of each company.

Schedule CR, Part II calculates the
North Dakota apportionment factor for
each nexus company.
	 •	 Each company computes its separate
North Dakota apportionment factor
using the total everywhere property,
payroll, and sales of the entire
unitary group for the denominators.
Each company uses its own separate
North Dakota property, payroll, and
sales as the numerator.
	 •	 Line 5 - Enter the factor as
calculated for each company on
Schedule CR, Part II, line 14.
Schedule CR, Part III reports the tax
credits available for each company.
	 •	 The tax credits are calculated for
each company and totaled on
Line 25. The total is carried to
line 19 of Schedule CR, Part I.
After all tax credits are reported
on Schedule CR, Part III, each tax
credit is totaled for all companies
and reported on Schedule TC on
page 4.
After Schedule CR has been completed
and each separate company that
apportions its income to North Dakota
has computed its North Dakota tax
liability and net income tax due, page 1,
lines 5-20 are completed as follows:
	1.	 Copy the apportionment factor from
Schedule CR, Part II, line 14a or
from line 16a, if the sales factor
weighting election is made, to
page 1, line 5.
	2.	 Add together all the separate
companies’ amounts for lines 6
through 19 on Schedule CR, Part I
and copy the total of each line for all
companies to the corresponding line
on page 1.
	3.	 Complete Schedule TC. The total
credits for all companies included on
Schedule CR must equal the credits
reported on Schedule TC.
	4.	 Copy the amount from Schedule CR,
Part I, line 20a to page 1, line 20.
Attach the completed Schedule CR to
Form 40 when filed.

Taxpayer Bill of Rights
You may obtain a copy o