Bill Text: NC H961 | 2013-2014 | Regular Session | Amended
Bill Title: Tax Modernization and Simplification
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2013-04-18 - Ref to the Com on Rules, Calendar, and Operations of the House, if favorable, Finance [H961 Detail]
Download: North_Carolina-2013-H961-Amended.html
GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2013
H 1
HOUSE BILL 961
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Short Title: Tax Modernization and Simplification. |
(Public) |
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Sponsors: |
Representatives Alexander and R. Moore (Primary Sponsors). For a complete list of Sponsors, refer to the North Carolina General Assembly Web Site. |
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Referred to: |
Rules, Calendar, and Operations of the House, if favorable, Finance. |
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April 18, 2013
A BILL TO BE ENTITLED
AN ACT to modernize and simplify the tax code of north carolina.
The General Assembly of North Carolina enacts:
part i. franchise tax
SECTION 1.1. Article 3 of Subchapter I of Chapter 105 of the General Statutes is repealed.
SECTION 1.2. G.S. 58‑6‑7(a) reads as rewritten:
"§ 58‑6‑7. Licenses; perpetual licensing; annual license continuation fees for insurance companies.
(a) In order to do business in this State, an insurance company shall apply for and obtain a license from the Commissioner. The license shall be perpetual and shall continue in full force and effect, subject to timely payment of the annual license continuation fee in accordance with this Chapter and subject to any other applicable provision of the insurance laws of this State. The insurance company shall pay a fee for each year the license is in effect, as follows:
For each domestic farmer's mutual assessment fire insurance company............ $................................................................................................................ 25.00
For each fraternal order................................................................................. .............................................................................................................. 500.00
For
each of all other insurance companiescompanies, except mutual burial
associations taxed under G.S.105‑121.1........................................................ ..................................................................................................................... 2,500.00
The fees levied in this subsection are in addition to those specified in G.S. 58‑6‑5."
SECTION 1.3. G.S. 105‑130.6A(a) reads as rewritten:
"(a) Definitions. – The provisions of G.S. 105‑130.6 govern the determination of whether a corporation is a subsidiary or an affiliate of another corporation. In addition, the following definitions apply in this section:
(1) Affiliated group. – A group that includes a corporation, all other corporations that are affiliates or subsidiaries of that corporation, and all other corporations that are affiliates or subsidiaries of another corporation in the group.
(2) Bank holding company. – A holding company with an affiliate that is subject to the privilege tax on banks levied in G.S. 105‑102.3.
(3) Dividends. – Dividends received that are not taxed under this Part.
(4) Electric power holding company. – A holding company
with an affiliate or a subsidiary that is subject to the franchise tax on
electric power companies levied in G.S. 105‑116.an electric
power company engaged in the business of furnishing electricity, electric
lights, current, or power.
(5) Expense adjustment. – The adjustment required by G.S. 105‑130.5(c)(3) for expenses related to dividends not taxed under this Part.
(6) Holding company. – Defined in G.S. 105‑120.2.A
corporation that receives during its taxable year more than eighty percent (80%)
of its gross income from corporations in which it owns directly or indirectly
more than fifty percent (50%) of the outstanding voting stock or voting capital
interests."
SECTION 1.4. G.S. 105‑241(b) reads as rewritten:
"(b) Electronic Funds Transfer. – Payment by electronic funds transfer is required as provided in this subsection.
(1) Corporate estimated taxes. – A corporation that is required under the Code to pay its federal‑estimated corporate income tax by electronic funds transfer must pay its State‑estimated corporate income tax by electronic funds transfer as provided in G.S. 105‑163.40.
(2) Prepayment taxes. – A taxpayer that is required to
prepay tax under G.S. 105‑116 or G.S. 105‑164.16
must pay the tax by electronic funds transfer.
(2a) Motor fuel taxes. – A taxpayer that files an electronic return under Subchapter V of this Chapter or Article 3 of Chapter 119 of the General Statutes must pay the tax by electronic funds transfer.
(3) Large tax payments. – Except as otherwise provided in this subsection, the Secretary shall not require a taxpayer to pay a tax by electronic funds transfer unless, during the applicable period for that tax, the average amount of the taxpayer's required payments of the tax was at least twenty thousand dollars ($20,000) a month. The twenty thousand dollar ($20,000) threshold applies separately to each tax. The applicable period for a tax is a 12‑month period, designated by the Secretary, preceding the imposition or review of the payment requirement. The requirement that a taxpayer pay a tax by electronic funds transfer remains in effect until suspended by the Secretary. Every 12 months after requiring a taxpayer to pay a tax by electronic funds transfer, the Secretary must determine whether, during the applicable period for that tax, the average amount of the taxpayer's required payments of the tax was at least twenty thousand dollars ($20,000) a month. If it was not, the Secretary must suspend the requirement that the taxpayer pay the tax by electronic funds transfer and must notify the taxpayer in writing that the requirement has been suspended."
SECTION 1.5. G.S. 105‑259 reads as rewritten:
"(b) Disclosure Prohibited. – An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person except as provided in this subsection. Standards used or to be used for the selection of returns for examination and data used or to be used for determining the standards may not be disclosed for any purpose. All other tax information may be disclosed only if the disclosure is made for one of the following purposes:
…
(5b) To furnish to the finance officials of a city a list
of the utility taxable gross receipts and piped natural gas tax revenues
attributable to the city under G.S. 105‑116.1 and G.S. 105‑187.44
or under former G.S. 105‑116G.S. 105‑116, G.S. 105‑116.1,
and G.S. 105‑120.
…."
SECTION 1.6. G.S. 159B‑27 reads as rewritten:
"§ 159B‑27. Taxes; payments in lieu of taxes.
(a) A project jointly owned by municipalities
or owned by a joint agency shall be exempt from property taxes; provided,
however, that each municipality possessing an ownership share of a project, and
a joint agency owning a project, shall, in lieu of property taxes, pay to any
governmental body authorized to levy property taxes the amount which would be
assessed as taxes on real and personal property of a project if such project
were otherwise subject to valuation and assessment by the Department of
Revenue. Such payments in lieu of taxes shall be due and shall bear interest if
unpaid, as in the cases of taxes on other property. Payments in lieu of taxes
made hereunder shall be treated in the same manner as taxes for purposes of all
procedural and substantive provisions of law. Any administrative building and
associated land shall be deemed a project for purposes of this paragraph.
(b) Each municipality having an ownership
share in a project shall pay to the State in lieu of an annual franchise or
privilege tax an amount equal to three and twenty‑two hundredths percent
(3.22%) of that percentage of all moneys expended by said municipality on
account of its ownership share, including payment of principal and interest on
bonds issued to finance such ownership share, which is equal to the percentage
of such city or town's total entitlement that is used or sold by it to any
person, firm or corporation exempted by law from the payment of the tax on
gross receipts pursuant to G.S. 105‑116.
(c) In lieu of an annual franchise or
privilege tax, each joint agency shall pay to the State an amount equal to
three and twenty‑two hundredths percent (3.22%) of the gross receipts
from sales of electric power or energy, less receipts from sales of electric
power or energy to a vendee subject to tax under G.S. 105‑116.
(d) The State shall distribute to cities and
towns which receive electric power and energy from their ownership share of a
project or to which electric power and energy is sold by a joint agency an
amount equal to a tax of three and nine hundredths percent (3.09%) of all
moneys expended by a municipality on account of its ownership share of a
project, including payment of principal and interest on bonds issued to finance
such ownership share, or an amount equal to a tax of three and nine hundredths
percent (3.09%) of the gross receipts from all sales of electric power and
energy to such city or town by a joint agency, as the case may be. The General
Assembly finds that the revenue distributed under this section is local
revenue, not a State expenditure, for the purpose of Section 5(3) of Article
III of the North Carolina Constitution. Therefore, the Governor may not reduce
or withhold the distribution.
(e) The reporting, payment and collection
procedures contained in G.S. 105‑116 shall apply to the levy herein
made.
(f) Except as herein expressly provided
with respect to jointly owned projects or projects owned by a joint agency, no
other property of a municipality used or useful in the generation, transmission
and distribution of electric power and energy shall be subject to payments in
lieu of taxes."
SECTION 1.7. G.S. 160A‑675 reads as rewritten:
"§ 160A‑675. Tax exemption.
A district, and its property, bonds and notes, and income,
are exempt from property taxes and income taxes to the same extent as if it
were a city. A district is subject to gross receipts tax under G.S. 105‑116."
SECTION 1.8. This Part becomes effective for taxable years beginning on or after January 1, 2014.
part ii. Sales tax modifications
SECTION 2.1. G.S. 105‑164.3 is amended by adding a new subdivision to read:
"§ 105‑164.3. Definitions.
The following definitions apply in this Article:
…
(38a) Service contract. – A warranty agreement, a maintenance agreement, a repair contract, or a similar agreement or contract by which the seller agrees to maintain or repair tangible personal property.
…."
SECTION 2.2. G.S. 105‑164.4(a) reads as rewritten:
"§ 105‑164.4. Tax imposed on retailers.
(a) A privilege tax is imposed on a retailer at the
following percentage rates of the retailer's net taxable sales or gross
receipts, as appropriate. The general rate of tax is four and three‑quarters
percent (4.75%).three and one‑half percent (3.5%).
…."
SECTION 2.3. G.S. 105‑164.4A is reenacted and is rewritten to read:
"§ 105‑164.4A. Tax imposed on service providers.
(a) Tax. – A privilege tax is imposed on a service provider at a percentage rate of its gross receipts. The rate of tax is the general rate set in G.S. 105‑164.4. For purposes of this Article, a service provider is considered a retailer and a service contract is considered a service.
(b) Exemptions. – A tax imposed by this section does not apply to any of the following:
(1) A service that is provided to a business for use in that business.
(2) Services taxed under G.S. 105‑164.4.
(3) Medical services."
SECTION 2.4. G.S. 105‑467 reads as rewritten:
"§ 105‑467. Scope of sales tax.
(a) Sales Tax. – The sales tax that may be imposed under this Article is limited to a tax at the rate of one percent (1%) of the following:
(1) A retailer's net taxable sales and gross receipts
that are subject to the general rate of sales tax imposed by the State under G.S. 105‑164.4.G.S. 105‑164.4
or G.S. 105‑164.4A.
…
(b) Exemptions and Refunds. – The State exemptions and exclusions contained in G.S. 105‑164.4A, the State sales tax imposed on service providers, G.S. 105‑164.13, the State sales and use tax holidays contained in G.S. 105‑164.13C and G.S. 105‑164.13D, and the State refund provisions contained in G.S. 105‑164.14 through G.S. 105‑164.14B apply to the local sales and use tax authorized to be levied and imposed under this Article. Except as provided in this subsection, a taxing county may not allow an exemption, exclusion, or refund that is not allowed under the State sales and use tax. A local school administrative unit and a joint agency created by interlocal agreement among local school administrative units pursuant to G.S. 160A‑462 to jointly purchase food service‑related materials, supplies, and equipment on their behalf is allowed an annual refund of sales and use taxes paid by it under this Article on direct purchases of tangible personal property and services, other than electricity, telecommunications service, and ancillary service. Sales and use tax liability indirectly incurred by the entity on building materials, supplies, fixtures, and equipment that become a part of or annexed to any building or structure that is owned or leased by the entity and is being erected, altered, or repaired for use by the entity is considered a sales or use tax liability incurred on direct purchases by the entity for the purpose of this subsection. A request for a refund shall be in writing and shall include any information and documentation required by the Secretary. A request for a refund is due within six months after the end of the entity's fiscal year. Refunds applied for more than three years after the due date are barred.
…."
SECTION 2.5. This Part becomes effective January 1, 2014, and applies to sales made on or after that date.
part III. Personal Income tax changes
SECTION 3.1. G.S. 105‑134.2(a) reads as rewritten:
(a) A tax is imposed at the rate of six percent
(6%) upon the North Carolina taxable income of every individual. The tax
shall be levied, collected, and paid annually and shall be computed at the
following percentages of the taxpayer's North Carolina taxable income.annually.
(1) For married individuals who file a joint
return under G.S. 105‑152 and for surviving spouses, as defined in
section 2(a) of the Code:
Over Up
To Rate
‑0‑ $21,250 6%
$21,250 $100,000 7%
$100,000 NA 7.75%
(2) For heads of households, as defined in
section 2(b) of the Code:
Over Up
To Rate
‑0‑ $17,000 6%
$17,000 $80,000 7%
$80,000 NA 7.75%
(3) For unmarried individuals other than
surviving spouses and heads of households:
Over Up
To Rate
‑0‑ $12,750 6%
$12,750 $60,000 7%
$60,000 NA 7.75%
(4) For married individuals who do not file a
joint return under G.S. 105‑152:
Over Up
To Rate
‑0‑ $10,625 6%
$10,625 $50,000 7%
$50,000 NA 7.75%"
SECTION 3.2. G.S. 105‑134.6 reads as rewritten:
"§ 105‑134.6. Modifications to adjusted gross income.
(a) S Corporations. – Each shareholder's pro rata share of an S Corporation's income is subject to the adjustments provided in this section.
(a1) Personal Exemption. – In calculating North Carolina
taxable income, a taxpayer may deduct an exemption amount equal to six
thousand dollars ($6,000).the amount listed in the table below based on
the taxpayer's filing status and adjusted gross income. The taxpayer is
allowed the same personal exemptions allowed under section 151 of the Code for
the taxable year.
Filing Status Adjusted Gross Income Personal
Exemption
Married, filing jointly Up to $100,000 $2,500
Over $100,000 $2,000
Head of Household Up to $80,000 $2,500
Over $80,000 $2,000
Single Up to $60,000 $2,500
Over $60,000 $2,000
Married, filing separately Up to $50,000 $2,500
Over $50,000 $2,000
(a2) Deduction Amount. – In calculating North
Carolina taxable income, a taxpayer may deduct either the North Carolina
standard deduction amount for that taxpayer's filing status or the itemized
deductions amount claimed under the Code. The North Carolina standard deduction
amount is the lesser of the amount shown in the table below or the amount
allowed under the Code. In the case of a married couple filing separate returns,
a taxpayer may not deduct the standard deduction amount if the taxpayer or the
taxpayer's spouse claims itemized deductions for State purposes.
A taxpayer that deducts the standard deduction amount
under this subsection and is entitled to an additional deduction amount under
section 63(f) of the Code for the aged or blind may deduct an additional amount
under this subsection. The additional amount the taxpayer may deduct is six
hundred dollars ($600.00) in the case of an individual who is married and seven
hundred fifty dollars ($750.00) in the case of an individual who is not married
and is not a surviving spouse. The taxpayer is allowed the same number of
additional amounts that the taxpayer claimed under the Code for the taxable
year.
Filing Status Standard
Deduction
Married, filing jointly $6,000
Head of Household 4,400
Single 3,000
Married, filing separately 3,000.
(b) Other Deductions. – In calculating North Carolina taxable income, a taxpayer may deduct any of the following items to the extent those items are included in the taxpayer's adjusted gross income.
(1) Interest upon the obligations of any of the following:
a. The United States or its possessions.
b. This State, a political subdivision of this State, or a commission, an authority, or another agency of this State or of a political subdivision of this State.
c. A nonprofit educational institution
organized or chartered under the laws of this State.
(2) Gain from the disposition of obligations issued before July 1, 1995, to the extent the gain is exempt from tax under the laws of this State.
(3) Benefits Ten thousand dollars ($10,000)
of benefits received under Title II of the Social Security Act and amounts
received from retirement annuities or pensions paid under the provisions of the
Railroad Retirement Act of 1937.
…
(6) a. An
amount, not to exceed four thousand dollars ($4,000), equal to the sum of the
amount calculated in subparagraph b. plus the amount calculated in subparagraph
c.
b. The amount calculated in this
subparagraph is the amount received during the taxable year from one or more
state, local, or federal government retirement plans.
c. The amount calculated in this
subparagraph is the amount received during the taxable year from one or more
retirement plans other than state, local, or federal government retirement
plans, not to exceed a total of two thousand dollars ($2,000) in any taxable
year.
d. In the case of a married couple filing a
joint return where both spouses received retirement benefits during the taxable
year, the maximum dollar amounts provided in this subdivision for various types
of retirement benefits apply separately to each spouse's benefits.
…
(11) Severance wages received by a taxpayer
from an employer as the result of the taxpayer's permanent, involuntary termination
from employment through no fault of the employee. The amount of severance wages
deducted as the result of the same termination may not exceed thirty‑five
thousand dollars ($35,000) for all taxable years in which the wages are
received.
…
(14) The amount paid to the taxpayer by the
State under G.S. 148‑84 as compensation for pecuniary loss suffered
by reason of erroneous conviction and imprisonment.
(15) Interest, investment earnings, and gains
of a trust, the settlors of which are two or more manufacturers that signed a
settlement agreement with this State to settle existing and potential claims of
the State against the manufacturers for damages attributable to a product of
the manufacturers, if the trust meets all of the following conditions:
a. The purpose of the trust is to address
adverse economic consequences resulting from a decline in demand of the
manufactured product potentially expected to occur because of market
restrictions and other provisions in the settlement agreement.
b. A court of this State approves and
retains jurisdiction over the trust.
c. Certain portions of the distributions
from the trust are made in accordance with certifications that meet the
criteria in the agreement creating the trust and are provided by a nonprofit
entity, the governing board of which includes State officials.
(16) The amount paid to the taxpayer during the
taxable year from the Hurricane Floyd Reserve Fund in the Office of State
Budget and Management for hurricane relief or assistance, but not including payments
for goods or services provided by the taxpayer.
(17) In each of the taxpayer's first five
taxable years beginning on or after January 1, 2005, an amount equal to twenty
percent (20%) of the amount added to taxable income in a previous year as
accelerated depreciation under subdivision (c)(8) of this section.
…
(18) The amount paid to the taxpayer during the
taxable year from the Disaster Relief Reserve Fund in the Office of State
Budget and Management for hurricane relief or assistance, but not including
payments for goods or services provided by the taxpayer.
(19) Five percent (5%) of the gross purchase
price of a qualified sale of a manufactured home community. A qualified sale is
a transfer of land comprising a manufactured home community in a single
purchase to a group composed of a majority of the manufactured home community
leaseholders or to a nonprofit organization that represents such a group. To be
eligible for this deduction, a taxpayer must give notice of the sale to the
North Carolina Housing Finance Agency under G.S. 42‑14.3.
…
(22) An amount not to exceed fifty thousand
dollars ($50,000) of net business income the taxpayer receives during the
taxable year. In the case of a married couple filing a joint return where both
spouses receive or incur net business income, the maximum dollar amounts apply
separately to each spouse's net business income, not to exceed a total of one
hundred thousand dollars ($100,000). For purposes of this subdivision, the term
"business income" does not include income that is considered passive
income under the Code.
(23) An amount not to exceed five thousand dollars ($5,000) paid by the taxpayer during the taxable year for costs incurred for funeral services and for tangible personal property used for human burial purposes or as a repository for human remains.
(c) Additions. – In calculating North Carolina taxable income, a taxpayer must add any of the following items to the extent those items are not included in the taxpayer's adjusted gross income. For a taxpayer who deducts the itemized deductions amount under subsection (a2) of this section, the taxpayer must add any of the following items to the extent those items are included in the itemized deductions amount.
…
(2) Any amount allowed as a deduction from
gross income under the Code that is taxed under the Code by a separate tax
other than the tax imposed in section 1 of the Code.
(3) Any amount deducted from gross income
under section 164 of the Code as state, local, or foreign income tax, as state
or local general sales tax, or as qualified motor vehicle tax to the extent
that the taxpayer's total itemized deductions deducted under the Code for the
taxable year exceed the standard deduction allowable to the taxpayer under
subsection (a2) of this section.
…
(5) The market price of the gleaned crop for
which the taxpayer claims a credit for the taxable year under G.S. 105‑151.14.
(5a) The market price of the oyster shells for
which the taxpayer claims a credit for the taxable year under G.S. 105‑151.30.
(5b) The amount of a donation made to a
nonprofit organization or a unit of State or local government for which a
credit is claimed under G.S. 105‑129.16H.
…
(7) The amount of federal estate tax that is
attributable to an item of income in respect of a decedent and is deducted from
gross income under section 691(c) of the Code.
(8) For taxable years 2002‑2005, the
applicable percentage of the amount allowed as a special accelerated
depreciation deduction under section 168(k) or section 1400L of the Code, as
set out in the table below. In addition, a taxpayer who was allowed a special
accelerated depreciation deduction under section 168(k) or section 1400L of the
Code in a taxable year beginning before January 1, 2002, and whose North
Carolina taxable income in that earlier year reflected that accelerated
depreciation deduction must add to federal taxable income in the taxpayer's
first taxable year beginning on or after January 1, 2002, an amount equal to
the amount of the deduction allowed in the earlier taxable year. These
adjustments do not result in a difference in basis of the affected assets for
State and federal income tax purposes. The applicable percentage is as follows:
Taxable Year Percentage
2002 100%
2003 70%
2004 70%
2005 0%
(8a) The applicable percentage of the amount
allowed as a special accelerated depreciation deduction under section 168(k) or
168(n) of the Code for property placed in service after December 31, 2007, but
before January 1, 2010. The applicable percentage under this subdivision is
eighty‑five percent (85%).
In addition, a
taxpayer who was allowed a special accelerated depreciation deduction in
taxable year 2007 or 2008 for property placed in service during that year, and
whose North Carolina taxable income for that year reflected that accelerated
depreciation deduction must make the adjustments set out below. These
adjustments do not result in a difference in basis of the affected assets for
State and federal income tax purposes.
a. A taxpayer must add to federal taxable
income in the taxpayer's 2008 taxable year an amount equal to the applicable
percentage of the accelerated depreciation deduction reflected in the taxpayer's
2007 North Carolina taxable income.
b. A taxpayer must add to federal taxable
income in the taxpayer's 2009 taxable year an amount equal to the applicable
percentage of the accelerated depreciation deduction reflected in the taxpayer's
2008 North Carolina taxable income.
…
(10) The amount excluded from gross income under section 199 of the Code.
…
(14) The amount allowed as a deduction under
section 163(e)(5)(F) of the Code for an original issue discount on an
applicable high yield discount obligation.
…
(d) Other Adjustments. – In calculating
North Carolina taxable income, a taxpayer must make the following adjustments to
adjusted gross income.
(1) The amount of inheritance or estate tax
attributable to an item of income in respect of a decedent required to be
included in gross income under the Code, adjusted as provided in G.S. 105‑134.5,
105‑134.6, and 105‑134.7, may be deducted in the year the item of
income is included. The amount of inheritance or estate tax attributable to an
item of income in respect of a decedent is (i) the amount by which the
inheritance or estate tax paid under Article 1 or 1A of this Chapter on
property transferred to a beneficiary by a decedent exceeds the amount of the
tax that would have been payable by the beneficiary if the item of income in
respect of a decedent had not been included in the property transferred to the
beneficiary by the decedent, (ii) multiplied by a fraction, the numerator of
which is the amount required to be included in gross income for the taxable
year under the Code, adjusted as provided in G.S. 105‑134.5, 105‑134.6,
and 105‑134.7, and the denominator of which is the total amount of income
in respect of a decedent transferred to the beneficiary by the decedent. For an
estate or trust, the deduction allowed by this subdivision shall be computed by
excluding from the gross income of the estate or trust the portion, if any, of
the items of income in respect of a decedent that are properly paid, credited,
or to be distributed to the beneficiaries during the taxable year.
The Secretary may
provide to a beneficiary of an item of income in respect of a decedent any
information contained on an inheritance or estate tax return that the
beneficiary needs to compute the deduction allowed by this subdivision.
(2) The taxpayer may deduct the amount by
which the taxpayer's deductions allowed under the Code were reduced, and the
amount of the taxpayer's deductions that were not allowed, because the taxpayer
elected a federal tax credit in lieu of a deduction. This deduction is allowed
only to the extent that a similar credit is not allowed by this Chapter for the
amount.
(3) The taxpayer shall add to taxable income
the amount of any recovery during the taxable year not included in taxable
income, to the extent the taxpayer's deduction of the recovered amount in a
prior taxable year reduced the taxpayer's tax imposed by this Part but, due to
differences between the Code and this Part, did not reduce the amount of the
taxpayer's tax imposed by the Code. The taxpayer may deduct from taxable income
the amount of any recovery during the taxable year included in taxable income
under section 111 of the Code, to the extent the taxpayer's deduction of the
recovered amount in a prior taxable year reduced the taxpayer's tax imposed by
the Code but, due to differences between the Code and this Part, did not reduce
the amount of the taxpayer's tax imposed by this Part.
(4) A taxpayer may deduct from taxable income
the amount, not to exceed two thousand five hundred dollars ($2,500),
contributed to an account in the Parental Savings Trust Fund of the State
Education Assistance Authority established pursuant to G.S. 116‑209.25.
In the case of a married couple filing a joint return, the maximum dollar
amount of the deduction is five thousand dollars ($5,000).
(5) The taxpayer shall add to taxable income
the amount deducted from taxable income in a prior taxable year under
subdivision (4) of this subsection to the extent this amount was withdrawn from
the Parental Savings Trust Fund of the State Education Assistance Authority
established pursuant to G.S. 116‑209.25 and not used to pay for the
qualified higher education expenses of the designated beneficiary, unless the
withdrawal was made without penalty under section 529 of the Code due to the
death or permanent disability of the designated beneficiary.
(6) A taxpayer who is an eligible firefighter
or an eligible rescue squad worker may deduct from taxable income the sum of
two hundred fifty dollars ($250.00). In the case of a married couple filing a
joint return, each spouse may qualify separately for the deduction allowed
under this subdivision. In order to claim the deduction allowed under this
subdivision, the taxpayer must submit with the tax return any documentation
required by the Secretary. An individual may not claim a deduction as both an
eligible firefighter and as an eligible rescue squad worker in a single taxable
year. The following definitions apply in this subdivision:
a. Eligible firefighter. – An unpaid member
of a volunteer fire department who attended at least 36 hours of fire
department drills and meetings during the taxable year.
b. Eligible rescue squad worker. – An unpaid
member of a volunteer rescue or emergency medical services squad who attended
at least 36 hours of rescue squad training and meetings during the taxable
year.
(7) The taxpayer shall add to taxable income
the amounts listed in this subdivision. An addition is not required under this
subdivision for a net operating loss deduction of an eligible small business as
defined under section 172(b)(1)(H) of the Code. The amounts are:
a. For taxable years 2003, 2004, and 2005,
the amount of any 2008 net operating loss deduction claimed on a federal return
under section 172(b)(1)(H) or section 810(b)(4) of the Code.
b. For taxable years 2004, 2005, and 2006,
the amount of any 2009 net operating loss deduction claimed on a federal return
under section 172(b)(1)(H) or section 810(b)(4) of the Code.
(8) For taxable years 2011 through 2013, a
taxpayer who made an addition under subdivision (7) of this subsection may
deduct the following amounts:
a. For a taxpayer who made an addition under
sub‑subdivision (7)a. of this subsection, one‑third of the taxpayer's
net operating loss absorbed on the taxpayer's 2003, 2004, and 2005 federal
returns under section 172(b)(1)(H) or section 810(b)(4) of the Code, with the
exception of the portion of the net operating loss of an eligible small
business absorbed on the taxpayer's 2003, 2004, and 2005 federal returns.
b. For a taxpayer who made an addition under
sub‑subdivision (7)b. of this subsection, one‑third of the taxpayer's
net operating loss absorbed on the taxpayer's 2004, 2005, and 2006 federal
returns under section 172(b)(1)(H) or section 810(b)(4) of the Code, with the
exception of the portion of the net operating loss of an eligible small
business absorbed on the taxpayer's 2004, 2005, and 2006 federal returns.
(9) To the extent a deduction has not been
claimed for educator expenses in determining federal adjusted gross income, an
eligible educator may deduct an amount not to exceed two hundred fifty dollars
($250.00) paid or incurred in connection with items listed in this subdivision.
This deduction is allowed only to the extent the expense has not been claimed
under section 162 of the Code for the taxable year. For purposes of this
subdivision, the term "eligible educator" has the same meaning as
defined in section 62 of the Code, as it existed on December 31, 2011. In the
case of a married couple filing a joint return where both spouses are eligible
educators, the maximum dollar amount is five hundred dollars ($500.00).
a. Books.
b. Supplies, other than nonathletic supplies
for courses of instruction in health or physical education.
c. Computer equipment, including related
software and services.
d. Supplementary materials used by the eligible
educator in the classroom."
SECTION 3.3. The following statutes are repealed:
G.S. 105‑134.7
G.S. 105‑151.1
G.S. 105‑151.11
G.S. 105‑151.12
G.S. 105‑151.13
G.S. 105‑151.14
G.S. 105‑151.18
G.S. 105‑151.20
G.S. 105‑151.21
G.S. 105‑151.24
G.S. 105‑151.25
G.S. 105‑151.26
G.S. 105‑151.31(c)
G.S. 105‑151.33
SECTION 3.4. This Part is effective for taxable years beginning on or after January 1, 2014.
part IV. Economic incentives tax changes
SECTION 4.1. Article 3C of Chapter 105 of the General Statutes is repealed.
SECTION 4.2. G.S. 105‑129.39 reads as rewritten:
"§ 105‑129.39. Sunset.
This Article expires for qualified rehabilitation
expenditures and rehabilitation expenses incurred on or after January 1, 2015.2014."
SECTION 4.3. G.S. 105‑129.51(b) reads as rewritten:
"(b) This Article is repealed for taxable years
beginning on or after January 1, 2014.2016."
SECTION 4.4. G.S. 105‑129.75 reads as rewritten:
"§ 105‑129.75. Sunset.
This Article expires January 1, 2015,2014, for
rehabilitation projects for which an application for an eligibility
certification is submitted on or after that date."
SECTION 4.5. G.S. 105‑129.99 reads as rewritten:
"§ 105‑129.99. Sunset.
This Article is repealed effective for taxable years
beginning on or after January 1, 2038.2014."
SECTION 4.6. This Part is effective when it becomes law.
part v. corporate income tax changes
SECTION 5.1. G.S. 105‑130.3 reads as rewritten:
"§ 105‑130.3. Corporations.
A tax is imposed on the State net income of every C
Corporation doing business in this State. An S Corporation is not subject to the
tax levied in this section. The tax is a percentagefour percent (4%)
of the taxpayer's State net income computed as follows: income.
Income Years Beginning Tax
In 1997 7.5%
In 1998 7.25%
In 1999 7%
After 1999 6.9%."
SECTION 5.2. G.S. 105‑130.5 reads as rewritten:
"§ 105‑130.5. Adjustments to federal taxable income in determining State net income.
(a) The following additions to federal taxable income shall be made in determining State net income:
…
(3) The contributions deduction allowed by
the Code.
…
(10) The total amounts allowed under this
Chapter during the taxable year as a credit against the taxpayer's income tax. This
subdivision does not apply to a credit allowed under G.S. 105‑130.47.
A corporation that apportions part of its income to this State shall make the
addition required by this subdivision after it determines the amount of its
income that is apportioned and allocated to this State and shall not apply to a
credit taken under this Chapter the apportionment factor used by it in determining
the amount of its apportioned income.
(11) The amount by which the percentage
depletion allowance allowed by sections 613 and 613A of the Code for mines, oil
and gas wells, and other natural deposits exceeds the cost depletion allowance
for these items under the Code, except as otherwise provided herein. This
subdivision does not apply to depletion deductions for clay, gravel, phosphate
rock, lime, shells, stone, sand, feldspar, gemstones, mica, talc, lithium
compounds, tungsten, coal, peat, olivine, pyrophyllite, and other solid
minerals or rare earths extracted from the soil or waters of this State.
Corporations required to apportion income to North Carolina shall first add to
federal taxable income the amount of all percentage depletion in excess of cost
depletion that was subtracted from the corporation's gross income in computing
its federal income taxes and shall then subtract from the taxable income
apportioned to North Carolina the amount by which the percentage depletion
allowance allowed by sections 613 and 613A of the Code for solid minerals or
rare earths extracted from the soil or waters of this State exceeds the cost
depletion allowance for these items.
…
(15) For taxable years 2002‑2005, the
applicable percentage of the amount allowed as a special accelerated
depreciation deduction under section 168(k) or section 1400L of the Code, as
set out in the table below. In addition, a taxpayer who was allowed a special
accelerated depreciation deduction under section 168(k) or section 1400L of the
Code in a taxable year beginning before January 1, 2002, and whose North
Carolina taxable income in that earlier year reflected that accelerated
depreciation deduction must add to federal taxable income in the taxpayer's
first taxable year beginning on or after January 1, 2002, an amount equal to
the amount of the deduction allowed in the earlier taxable year. These
adjustments do not result in a difference in basis of the affected assets for
State and federal income tax purposes. The applicable percentage is as follows:
Taxable Year Percentage
2002 100%
2003 70%
2004 70%
2005 0%
(15a) The applicable percentage of the amount
allowed as a special accelerated depreciation deduction under section 168(k) or
168(n) of the Code for property placed in service after December 31, 2007, but
before January 1, 2010. The applicable percentage under this subdivision is
eighty‑five percent (85%).
In addition, a
taxpayer who was allowed a special accelerated depreciation deduction in
taxable year 2007 or 2008 for property placed in service during that year, and
whose North Carolina taxable income for that year reflected that accelerated
depreciation deduction must make the adjustments set out below. These
adjustments do not result in a difference in basis of the affected assets for
State and federal income tax purposes.
a. A taxpayer must add to federal taxable
income in the taxpayer's 2008 taxable year an amount equal to the applicable
percentage of the accelerated depreciation deduction reflected in the taxpayer's
2007 North Carolina taxable income.
b. A taxpayer must add to federal taxable
income in the taxpayer's 2009 taxable year an amount equal to the applicable
percentage of the accelerated depreciation deduction reflected in the taxpayer's
2008 North Carolina taxable income.
…
(20) The amount of a donation made to a
nonprofit organization or a unit of State or local government for which a
credit is claimed under G.S. 105‑129.16H.
…
(22) The amount allowed as a deduction under
section 163(e)(5)(F) of the Code for an original issue discount on an
applicable high yield discount obligation.
…
(b) The following deductions from federal taxable income shall be made in determining State net income:
(1) Interest upon the obligations of the United States or its possessions, to the extent included in federal taxable income: Provided, interest upon the obligations of the United States shall not be an allowable deduction unless interest upon obligations of the State of North Carolina or any of its political subdivisions is exempt from income taxes imposed by the United States.
(1a) Interest upon the obligations of any of the
following, net of related expenses, to the extent included in federal taxable
income:
a. This this State, a political
subdivision of this State, or a commission, an authority, or another agency of
this State or of a political subdivision of this State.State, to the
extent included in federal taxable income.
b. A nonprofit educational institution
organized or chartered under the laws of this State.
(3a) Dividends treated as received from sources outside
the United States as determined under section 862 of the Code, net of related
expenses, to the extent included in federal taxable income. Notwithstanding
the proviso in subdivision (c)(3) of this section, the netting of related
expenses shall be calculated in accordance with subdivision (c)(3) of this
section and G.S. 105‑130.6A.
…
(5) Contributions or gifts made by any
corporation within the income year to the extent provided under G.S. 105‑130.9.
…
(7) Depreciation of emergency facilities
acquired prior to January 1, 1955. Any corporation shall be permitted to
depreciate any emergency facility, as such is defined in section 168 of the
Code, over its useful life, provided such facility was acquired prior to
January 1, 1955, and no amortization has been claimed on such facility for
State income tax purposes.
(8) The amount of losses realized on the sale
or other disposition of assets not allowed under section 1211(a) of the Code.
All losses recognized on the sale or other disposition of assets must be
included in determining State net income or loss in the year of disposition.
…
(12) Reasonable expenses, in excess of
deductions allowed under the Code, paid for reforestation and cultivation of
commercially grown trees; provided, that this deduction shall be allowed only
to those corporations in which the real owners of all the shares of such
corporation are natural persons actively engaged in the commercial growing of
trees, or the spouse, siblings, or parents of such persons. Provided, further,
that in no case shall a corporation be allowed a deduction for the same
reforestation or cultivation expenditure more than once.
(13) The eligible income of an international
banking facility to the extent included in determining federal taxable income,
determined as follows:
a. "International banking facility"
shall have the same meaning as is set forth in the laws of the United States or
regulations of the board of governors of the federal reserve system.
b. The eligible income of an international
banking facility for the taxable year shall be an amount obtained by
multiplying State taxable income as determined under G.S. 105‑130.3
(determined without regard to eligible income of an international banking
facility and allocation and apportionment, if applicable) for such year by a
fraction, the denominator of which shall be the gross receipts for such year
derived by the bank from all sources, and the numerator of which shall be the
adjusted gross receipts for such year derived by the international banking
facility from:
1. Making, arranging for, placing or
servicing loans to foreign persons substantially all the proceeds of which are
for use outside the United States;
2. Making or placing deposits with foreign
persons which are banks or foreign branches of banks (including foreign
subsidiaries or foreign branches of the taxpayer) or with other international
banking facilities; or
3. Entering into foreign exchange trading or
hedging transactions related to any of the transactions described in this
paragraph.
c. The adjusted gross receipts shall be
determined by multiplying the gross receipts of the international banking
facility by a fraction the numerator of which is the average amount for the
taxable year of all assets of the international banking facility which are
employed outside the United States and the denominator of which is the average
amount for the taxable year of all assets of the international banking
facility.
d. For the purposes of this subsection the
term "foreign person" means:
1. An individual who is not a resident of
the United States;
2. A foreign corporation, a foreign
partnership or a foreign trust, as defined in section 7701 of the Code, other
than a domestic branch thereof;
3. A foreign branch of a domestic corporation
(including the taxpayer);
4. A foreign government or an international
organization or an agency of either, or
5. An international banking facility.
For purposes of this paragraph,
the terms "foreign" and "domestic" shall have the same
meaning as set forth in section 7701 of the Code.
…
(15) The amount paid during the income year,
pursuant to 7 U.S.C. § 1445‑2, as marketing assessments on tobacco grown
by the corporation in North Carolina.
…
(19) To the extent included in federal taxable
income, the amount paid to the taxpayer during the taxable year from the
Hurricane Floyd Reserve Fund in the Office of State Budget and Management for
hurricane relief or assistance, but not including payments for goods or
services provided by the taxpayer.
…
(21) In each of the taxpayer's first five
taxable years beginning on or after January 1, 2005, an amount equal to twenty
percent (20%) of the amount added to taxable income in a previous year as
accelerated depreciation under subdivision (a)(15) of this section.
…
(22) To the extent included in federal taxable
income, the amount paid to the taxpayer during the taxable year from the
Disaster Relief Reserve Fund in the Office of State Budget and Management for
hurricane relief or assistance, but not including payments for goods or
services provided by the taxpayer.
…
(24) Five percent (5%) of the gross purchase
price of a qualified sale of a manufactured home community. A qualified sale is
a transfer of land comprising a manufactured home community in a single
purchase to a group composed of a majority of the manufactured home community
leaseholders or to a nonprofit organization that represents such a group. To be
eligible for this deduction, a taxpayer must give notice of the sale to the
North Carolina Housing Finance Agency under G.S. 42‑14.3.
…
(c) The following other adjustments to federal taxable income shall be made in determining State net income:
(1) In determining State net income, no
deduction shall be allowed for annual amortization of bond premiums applicable to
any bond acquired prior to January 1, 1963. The amount of premium paid on any
such bond shall be deductible only in the year of sale or other disposition.
…
(5) A savings and loan association may deduct
interest earned on deposits at the Federal Home Loan Bank of Atlanta, or its
successor, to the extent included in federal taxable income.
(d) Repealed by Session Laws 1987, c. 778, s. 3.
(e) Notwithstanding any other provision of this section, any recapture of depreciation required under the Code must be included in a corporation's State net income to the extent required for federal income tax purposes.
(f) Expired."
SECTION 5.3. The following statutes are repealed:
G.S. 105‑130.9
G.S. 105‑130.22
G.S. 105‑130.25
G.S. 105‑130.34
G.S. 105‑130.36
G.S. 105‑130.37
G.S. 105‑130.39
G.S. 105‑130.43
G.S. 105‑130.44
G.S. 105‑130.45
G.S. 105‑130.46.
SECTION 5.4. This Part is effective for taxable years beginning on or after January 1, 2014.
part VI. Motor fuels tax changes
SECTION 6.1. G.S. 105‑449.80(a) reads as rewritten:
"(a) Rate. – The motor fuel excise tax rate is a
flat rate of seventeen and one‑half cents (17 1/2¢)thirteen and
one‑eighth cents (13 1/8¢) a gallon plus a variable wholesale
component. The variable wholesale component is either three and one‑half
cents (3 1/2¢)two and five‑eighths cents (2 5/8¢) a gallon or seven
percent (7%)five and one‑quarter percent (5.25%) of the
average wholesale price of motor fuel for the applicable base period, whichever
is greater.
The two base periods are six‑month periods; one ends on September 30 and one ends on March 31. The Secretary must set the tax rate twice a year based on the wholesale price for each base period. A tax rate set by the Secretary using information for the base period that ends on September 30 applies to the six‑month period that begins the following January 1. A tax rate set by the Secretary using information for the base period that ends on March 31 applies to the six‑month period that begins the following July 1."
SECTION 6.2. This Part becomes effective January 1, 2014.
part vii. tax credit for department of labor apprentice hires
SECTION 7.1. Article 3B of Subchapter I of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑129.16K. Credit for employing apprentices.
(a) Credit. – A taxpayer who employs an apprentice pursuant to an apprenticeship agreement registered with the Apprenticeship and Training Bureau of the North Carolina Department of Labor is allowed a credit equal to one thousand dollars ($1,000) for each apprentice employed. A credit is allowed if the apprentice was in the employ of the taxpayer for at least seven full months of the taxable year. A credit is allowed for an individual apprentice for up to four taxable years.
(b) Documentation. – In order to claim the credit allowed by this section, the taxpayer must make available to the Department a written certification from the Apprenticeship and Training Bureau of the Department of Labor containing the name and taxpayer identification number of each registered apprentice employed by the taxpayer during the taxable year."
SECTION 7.2. This Part is effective for taxable years beginning on or after January 1, 2014.
Part Viii. effective date
SECTION 8. Except as otherwise provided in this act, this act is effective when it becomes law. This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this act before the effective date of its amendment or repeal; nor does it affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal.
