Skip to agency navigation
Skip to main content

Official Website

of the Commonwealth of Pennsylvania

    The .gov means its official.

    Local, state, and federal government websites often end in .gov. Commonwealth of Pennsylvania government websites and email systems use "pennsylvania.gov" or "pa.gov" at the end of the address. Before sharing sensitive or personal information, make sure you're on an official state website. 
    Corporation Taxes

    Capital Stock and Foreign Franchise Taxes

    Overview

    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.

    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:

    First reports of domestic corporations must begin with the date of incorporation. All domestic corporations are required to file annual reports even if no business activity was conducted during the taxable period. Please refer to the “CT-1 PA CORPORATION TAX INSTRUCTIONS” for more information on how to complete the RCT-101 and on the Capital Stock and Foreign Franchise Tax.

    IMPORTANT: All corporations are required to file annual reports even if no business activity was conducted within the commonwealth during the tax period. In general, PA Corporate Tax Reports are due 30 days after the original due date of the federal tax return.

    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.

    The Capital Stock/Foreign Franchise Tax has expired for tax years beginning after December 31, 2015. With its expiration, corporations will need to re-evaluate their RCT-101 filing requirements. Corporations that annually file the RCT-101 to report only Capital Stock/Foreign Franchise Tax will not have an annual filing requirement for tax years beginning after December 31, 2015. Such corporations should file a final RCT-101 for their 2015 reporting period. 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.

    The PA Corporate Tax Report (RCT-101) is due annually on April 15 of the year following the year for which the report is submitted for a calendar year reporting corporation, or 30 days after the federal due date for corporations reporting to the federal government on a fiscal year basis. Domestic International Sales Companies (DISC) must file on or before the 15th day of the 10th month following the close of the fiscal year.

    The Bureau of Corporation Taxes is requesting that all taxpayers only subject to Capital Stock/Foreign Franchise Tax identify their 2015 return as their “final report” by checking the indicator box on page 5 of the return under Section E: Corporate Status Changes. In addition, the Bureau of Corporation Taxes is requesting a statement accompany the final RCT-101 filing stating the entity is no longer subject to the Capital Stock/Foreign Franchise Tax.

    Example: RCT-101 Final Report Example: RCT-101 Final Report

    This means that entities that are not subject to the Corporate Net Income Tax will not have a RCT-101 filing requirement and can be closed. These entities include: single member LLC’s, Multi Member LLC’s taxed as a partnership or S Corporation, S Corporations, and Business Trusts that are not federally taxed as a C corporation. Solicitation only corporations would also no longer be required to file the RCT-101.

    Important: Complete Step F on Page 1 of the RCT-101 if you have an overpayment that needs refunded or transferred to another tax.

    Example: RCT-101 Final Report, Step F Example: RCT-101 Final Report, Step F

    Taxpayers who, in addition to no longer being subject to Capital Stock/Foreign Franchise Tax, intend to go out of existence and close their corporate charter will also need to file the REV-181 (Application For Tax Clearance Certificate) to close their charter with the Department of State. Simply checking the “Final Report” box on the RCT-101 will not close the account with the Department of State.

    • PA S Corporations that have Built-In-Gains would file a final RCT-101 for tax year 2015.
    • If Built-In-Gains are triggered in any subsequent tax year, the PA S Corporation would have to file the RCT-101 to report the amount of gain subject to tax. Such return should be marked as both “First Report” and “Final Report”. If the PA S Corporation does not have any Built-In-Gain to be recognized in a subsequent year, the PA S Corporation does not have an RCT-101 filing requirement for that year.

    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.)