Capital Stock and Foreign Franchise Taxes
For tax years beginning prior to January 1, 2016
Capital Stock/Foreign Franchise taxes were imposed on corporations with capital stock, joint-stock associations, limited liability companies, business trusts and all other entities classified as corporations for federal income tax purposes that were formed or do business in Pennsylvania.
- The capital stock tax for domestic firms is a property tax imposed on joint-stock associations, limited liability companies, business trusts and entities organized as corporations or considered corporations by the federal government.
- The foreign franchise tax is a tax on non-PA joint-stock associations, limited liability companies, business trusts and entities organized as corporations or considered corporations by the federal government for the privilege of doing business in Pennsylvania, rather than on property.
- Both taxes are imposed on a corporation’s capital stock value, as derived by the application of a formula.
Information on entities exempt from the Capital Stock/Foreign Franchise tax.
For detailed and historic Pennsylvania capital stock/foreign franchise tax information, please review the Tax Compendium.
Taxpayers subject to the capital stock/foreign franchise tax may also be subject to:
Filing a prior period Capital Stock/Foreign Franchise tax report.
For tax years beginning after January 1, 2016
The Capital Stock/Foreign Franchise tax has been eliminated for tax years beginning January 1, 2016 and after. This means that many business types, such as S corporations, LLCs taxed as pass-through entities and business trusts that are not federally taxed as a C corporation will need to file their final corporation tax RCT-101 returns for the 2015 reporting period. These returns should be marked as final returns.
Who does this affect?
- Corporations not subject to the Corporate Net Income Tax for the years mentioned above and after include: single member LLC’s, Multi Member LLC’s taxed as a partnership or S Corporation, Business Trusts and PA S Corporations (see below for exceptions related to PA S Corporations that have Built-In-Gains). Solicitation only corporations would also no longer be required to file the RCT-101.
- Corporations subject to the Corporate Net Income Tax (excluding PA S Corporations that have Built-In-Gains) must continue to file the RCT-101 annually.
Filing your final Capital Stock/Foreign Franchise tax report.
What if I am a PA S Corporation that has Built-In-Gains?
Important: For calendar year filers the final tax filing year is tax year ending December 31, 2015. The final tax year for fiscal filers includes those tax years beginning in 2015 and ending in 2016. (Please note that the elimination of the tax isn’t effective until your first tax period after 1/1/16. Therefore, fiscal year filers will still owe Capital Stock/Foreign Franchise Tax for any tax period starting on or before 12/31/15.)