New Ranking from the Tax Foundation is covered in a report provided by the Economic Development Partnership of North Carolina (EDPNC)

North Carolina ranks among the nation’s best-performing states overall in a study comparing state corporate tax costs across the country, according to a Tax Foundation report.

The Tax Foundation produced the comprehensive Location Matters report in collaboration with the audit, tax, and advisory firm KPMG.

The distinctive study modeled eight different types of new and mature firms and analyzed what each would pay in state and local taxes in each state. North Carolina ranked third overall for the lowest effective state tax rates for the new firms and fifth overall for the mature firms.

The study points out that “over the past decade, North Carolina has implemented historic tax reforms which involved, among other provisions, reductions in the state’s corporate income tax rate and paring back targeted tax incentives.”

“We see the national Location Matters study as a tool site selectors can use to quickly screen states for their clients, because the study illustrates how state tax burdens play out in real-world scenarios,” said Christopher Chung, chief executive officer of the Economic Development Partnership of North Carolina. “Along with a strong education ecosystem, workforce talent and solid infrastructure, a state’s tax competitiveness is an important consideration for a company deciding where to locate, remain and grow.”

Tax Foundation economists designed eight model firms—a corporate headquarters, a research and development facility, a technology center, a data center, a capital-intensive manufacturer, a labor-intensive manufacturer, a shared services center, and a distribution center. Then KPMG calculated each firm’s tax bill twice in every state: once as a new firm eligible for tax incentives and once as a mature firm not eligible for such incentives.

One key finding? A new corporate headquarters in North Carolina has very low income and property taxes, resulting in an effective rate of 7.1%, the lowest such rate in the country and 57% below the national median. North Carolina ranks third for the mature corporate headquarters with an effective rate of 10.4%.

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Taxes and Incentives