How is the franchise tax calculated?
Corporations pay the greater of the tax on net taxable capital or net taxable earned surplus. The rates and computations discussed below are effective for reports originally due on or after January 1, 1994. Taxable capital is a corporation’s stated capital (capital stock) plus surplus. Surplus means the net assets of a corporation minus its stated capital. For a limited liability company, surplus means the net assets of the company minus its members’ contributions. For more details on surplus, see Rule 3.551. Taxable capital is apportioned using a single gross receipts factor. Taxable capital for an annual report is based on the end of the corporation’s last accounting period in the calendar year prior to the calendar year in which the report is due. The tax rate on taxable capital is 0.25 percent per year of privilege period. Earned surplus basically includes the corporation’s federal net taxable income, plus compensation paid to officers and directors of the corporation. S corporatio
