Capital Stock and Foreign Franchise Taxes

Capital Stock and Foreign Franchise Taxes

These taxes are 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.

 

The tax is anticipated to be completely eliminated by 2016.

 

Entities exempt from the capital stock/foreign franchise tax include certain qualifying:


·          not-for-profit organizations

·          homeowners’ associations

·          membership organizations

·          family farm corporations

·          agricultural cooperatives

·          restricted professional companies

·          business trusts

 

Further, corporations subject to bank and trust companies shares tax, gross premiums tax, mutual thrift tax and title insurance company shares tax are exempt from 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 the gross receipts tax, corporate loans tax, surplus lines agent tax, and/or the gross premiums tax for premiums paid to unauthorized foreign insurance companies.