Form NC-NPA: North Carolina Nonresident Partner Affirmation Explained

Form NC-NPA, the North Carolina Nonresident Partner Affirmation, is a one-page statement an eligible nonresident entity partner signs so the partnership does not have to withhold state income tax on that partner’s share. The completed form goes to the partnership, which attaches it to Form D-403 by the return’s due date — April 15 for calendar-year partnerships.¹ One detail trips people up right away: individual nonresident partners and grantor trusts cannot use it. The partnership must withhold on their shares no matter what.

Who Can Use the Form

Eligibility is limited to nonresident partners that are not individuals and not grantor trusts. The form’s first screening question asks exactly that, and a “yes” answer ends the process. The rule also reaches through disregarded entities: if the beneficial owner is an individual or grantor trust, the disregarded entity cannot use the affirmation either.²

Entities that do qualify include:

C corporations organized outside North Carolina
S corporations that are partners in a North Carolina partnership
Partnerships that hold an interest in another North Carolina partnership
Estates and non-grantor trusts with a nonresident connection

The authority is N.C. Gen. Stat. § 105-154(d). It requires a partnership doing business in the state to pay tax on each nonresident partner’s distributive share, and then carves out the exception: if the partner is not an individual and has executed an affirmation agreeing either to file its own North Carolina return and pay the tax, or to certify that it is not subject to North Carolina income tax, the partnership is relieved of withholding on that partner’s share.³

One qualifier for taxed partnerships. If the partnership has made the Taxed Partnership election under G.S. 105-154.1, the NC-NPA applies only to partners that are corporations or other partnerships; other entity types follow different rules.⁴

What Individual Nonresident Partners Do Instead

Individual nonresident partners have no opt-out. The partnership computes and pays tax on the individual’s distributive share of North Carolina income at the state individual income tax rate, which is 3.99% for tax years beginning after 2025.⁵ The individual then claims credit for the amount paid on their behalf when filing their own return.

Filling Out the Form

The form is a single page. Work the eligibility questions first. If the partner is an individual or grantor trust, stop.

Partnership Block

Enter the partnership’s full legal name, address, zip code, and FEIN exactly as they appear on Form D-403 so nothing mismatches at processing. Enter the partnership’s tax year using beginning and ending dates in month-day-year format.²

Nonresident Partner Block

Enter the partner’s legal name, mailing address, zip code, and identifying number (usually the FEIN). Fill in the date the entity became a partner and the partner’s own tax year, both in month-day-year format. Fill in the circle for the entity type: S corporation, C corporation, partnership, or estate/non-grantor trust. If a disregarded entity is involved, provide the beneficial owner’s information along with the disregarded entity’s name and taxpayer identification number in the designated fields.²

The Affirmation

The partner then affirms one of two things: that it will timely file the appropriate North Carolina return and pay the tax due, or that it is not subject to North Carolina income tax. The first fits an entity with North Carolina-source income that plans to report on its own return. The second fits a tax-exempt organization or an entity with no North Carolina filing obligation.

Signature

A manager, officer, or fiduciary authorized to bind the entity must sign, date, and provide a contact phone number. An unsigned NC-NPA is not valid. The Department of Revenue treats it as if no affirmation was filed, which means the partnership gets assessed for withholding on that partner’s share.⁶

Submitting the Affirmation

The partner does not send the NC-NPA to the Department of Revenue. The signed form goes to the partnership, which attaches it to Form D-403 when the return is originally filed. The D-403 has a checkbox asking whether an NC-NPA is attached; the partnership marks “Yes” and includes the form.⁶

The D-403 is due on the 15th day of the fourth month after the partnership’s tax year ends. For calendar-year partnerships, that’s April 15. A federal extension automatically extends the North Carolina filing deadline as long as the partnership marks the Federal Extension circle on page one of Form D-403; otherwise, Form D-410P must be filed by the original due date to get a state extension.⁶

Keep a copy of every NC-NPA in the partnership’s permanent records. If auditors later ask why no withholding was performed for a particular nonresident partner, the affirmation is the answer.

A New Form Every Year

NC-NPA is not one-and-done. Prior-year affirmations do not carry forward. The statute requires the affirmation to be “annually filed by the nonresident partner and submitted by the due date of the report,” so each tax year needs its own form attached to that year’s D-403.³ Once properly filed, an affirmation covers the original return, any amended return for that year, and any proposed assessments of additional tax for that year.

What Skipping or Botching the Form Costs

Without a valid NC-NPA for a nonresident partner, the partnership owes the tax on that partner’s distributive share of North Carolina income. The rate is the individual income tax rate — 3.99% for tax years beginning after 2025 — applied to the partner’s share attributable to North Carolina.⁵ The partnership may deduct that payment from the partner’s distributive share.³

A costly and common mistake: marking “Yes” on the D-403 checkbox but not attaching a valid form, whether because a signature was missing or the affirmation was never actually completed. The Department will assess the partnership for the tax on that partner’s share. Intent to attach later does not cure the problem.⁶

Penalties and Interest

Failing to pay tax when due triggers a flat 5% penalty on the net tax due, regardless of how late the payment is.⁷ Interest runs on top of that from the original due date until payment. For the first half of 2026, the interest rate is 7%.⁸ If the Department finds negligence rather than honest oversight, the penalty rises to 10% of the deficiency, and intentional fraud carries a 50% penalty.

The Partner’s Side of the Promise

Signing NC-NPA is a promise to file. A nonresident entity that affirms it will file its own North Carolina return has to actually file and pay by the applicable deadline. For calendar-year filers, that deadline is April 15.⁹ Corporate returns follow their own schedule. If the partner signs but does not follow through, the Department can pursue the tax directly. That jurisdictional consent is the entire reason the affirmation exists.

If the deadline is tight, request an extension before April 15. An extension gives more time to file, not more time to pay. Any tax still owed after the deadline accrues interest and can pick up the 5% failure-to-pay penalty. And if neither the partnership nor the partner pays, the state can pursue both — the partnership through an assessment under G.S. 105-241.9, and the partner through its own filing obligation.³

1
North Carolina Department of Revenue. NC-NPA Nonresident Partner Affirmation
2
North Carolina Department of Revenue. D-403 NC-NPA Nonresident Partner Affirmation
3
North Carolina General Assembly. North Carolina General Statutes Chapter 105 – 105-154
4
North Carolina Department of Revenue. North Carolina Partnership Income Tax Return Instructions
5
North Carolina Department of Revenue. Tax Rate Schedules
6
North Carolina Department of Revenue. North Carolina Partnership Income Tax Return Instructions
7
North Carolina General Assembly. North Carolina General Statutes Chapter 105 – 105-236
8
North Carolina Department of Revenue. Interest Rate
9
North Carolina Department of Revenue. NCDOR Urges Taxpayers to File April 15 Deadline