M&A Advisory in North Dakota

North Dakota imposes a three-bracket graduated individual income tax of 0% / 1.95% / 2.50% (NDCC 57-38-30.3), with the 2.50% top rate reaching only at taxable income above $244,825 (single) / $298,075 (MFJ) for 2025. North Dakota is one of only four to five states with a personal income tax that has not enacted a PTET election, so ND-resident pass-through owners cannot federalize their state tax deduction at the entity level — though the 2.50% top rate makes the omission economically minor.

North Dakota allows individuals to exclude 40% of net long-term capital gain from ND taxable income under NDCC 57-38-30.3(2)(d), confirmed in effect for 2025 and 2026. Combined with the 2.50% top rate, the effective top state rate on long-term capital gain is ~1.50% — among the lowest effective LTCG rates in the country among states with an income tax. The exclusion applies broadly to closely held stock, partnership/LLC interests, real property, and goodwill on installment-method asset sales, provided the gain is included in federal taxable income and the asset was held long-term.

North Dakota fully conforms (rolling conformity) to IRC §1202 because ND taxable income for individuals starts from federal taxable income (NDCC 57-38-01(5), 57-38-30.3) and the state has not decoupled. Gain that qualifies federally for the 100% exclusion — or, post-OBBBA, the up-to-$15M / 10× basis exclusion for stock issued after July 4, 2025 — is also fully excluded for ND tax. Rolling conformity automatically pulls in OBBBA's expanded $75M gross-asset cap and the new tiered holding periods.

Corporate income tax is graduated at 1.41% on the first $25,000, 3.55% on $25,000–$50,000, and 4.31% above $50,000 (NDCC 57-38-30) — the 4th-lowest top corporate rate in the U.S. among income-taxing states (Tax Foundation 2026). There is no inventory tax, no franchise tax, and no estate tax. A 3.5% surtax applies to water's-edge filers. These rates make ND structurally superior to Montana (6.75%) and Minnesota (9.80%) for C-corp targets.

North Dakota imposes a combined 5% oil extraction tax + 5% gross production tax = 10% of gross value at the well on Bakken/Three Forks production (NDCC ch. 57-51 / 57-51.1). The gross production tax operates in lieu of property tax on mineral interests. Stripper wells (≤35 bbl/day for 12 consecutive months) are exempt from the 5% extraction tax — and ~48% of ND wells now qualify, materially affecting acquired-asset cash-flow modeling and acquisition economics in Bakken OFS deals.

North Dakota imposes a 5.00% state sales/use tax plus local rates up to 3.5% (combined avg 7.08%) on transfers of tangible personal property in an asset sale. Most M&A asset transfers qualify for the occasional/isolated sale exemption for non-inventory items; rolling stock and titled motor vehicles face a separate 5% motor vehicle excise tax. NDCC ch. 57-39.2 imposes successor liability on buyers who fail to withhold sufficient purchase price for outstanding sales/use tax — making a tax-clearance letter from the OSTC a routine closing condition.