Bill Summaries: H228 (2023-2024 Session)

Tracking:
  • Bill H 228
    Summary date: May 22 2024 - View summary

    House amendment makes the following changes to the 3rd edition. Removes Part VII, which would have amended GS 105-282.1 to require an owner of a legacy airport property to file an application in order to receive a property tax benefit. Makes organizational changes. 


  • Summary date: May 22 2024 - View summary

    House committee substitute to the 2nd edition makes the following changes.

    Adds new Section 5.3A, amending GS 108A-145.3 by amending the definition of the University of North Carolina Health Care System to refer to it as being established under GS 116-350.5 instead of GS 116-37.

    Adds a new Part VII amending GS 105-282.1 to require an owner of a legacy airport property to file an application in order to receive a property tax benefit.


  • Summary date: May 15 2024 - View summary

    House committee substitute to the 1st edition makes the following changes.

    Section 2.2 of the act, previously Section 2.5, amends GS 105-164.3 by amending the definition of the Streamlined Agreement to now refer to the Streamlined Sales and Use Tax Agreement as amended as of November 7, 2023.

    Removes the remaining content of the 1st edition and replaces it with following new content.

    Part I.

    Repeals GS 105-160.4(f), which, effective for taxable years beginning on or after January 1, 2022, did not allow fiduciaries and beneficiaries of estates and trusts who are shareholders of a taxed S Corporation a credit for taxes paid by the estates and trusts or by the taxed S Corporation to another state or country on income that is taxed to the taxed S Corporation. Also repeals (g), which effective for taxable years beginning on or after January 1, 2022, did not allow fiduciaries and beneficiaries of estates and trusts who are partners of a taxed partnership a credit for taxes paid by the estates and trusts or by the taxed partnership to another state or country on income that is taxed to the taxed partnership. Effective for taxable years beginning on or after January 1, 2023.

    Adds and defines the following terms in GS 105-153.3, as they apply to the Individual Income Tax Act. Defines income attributable to the State as either (1) with respect to a partnership, all items of income, loss, deduction, or credit of the partnership apportioned and allocated to this State under GS 105-130.4 (allocation and apportionment of income for corporations) or (2) with respect to an S Corporation. Defines income not attributable to the State as either: (1) with respect to a partnership, all items of income, loss, deduction, or credit of the partnership other than income attributable to the State or (2) with respect to an S Corporation. Effective for taxable years beginning on or after January 1, 2023.

    Amends GS 105-153.8 by amending the provisions concerning the filing of joint income tax returns to require two lawfully married individuals who are required to file an income tax return and whose adjusted gross income is determined on a joint federal return to file a joint state income tax return. Provides that if two lawfully married individuals file a joint federal return, but only one is required to file a state income tax return, that individual must file the income tax return as either: (1) jointly based on the filing status of married, filing jointly/surviving spouse or (2) separately based on the filing status of married filing separately. Makes conforming and clarifying changes.

    Amends the following statutes to provide that a taxpayer or fiduciary (as applicable) may receive an extension of time to file a tax return (was, may ask the Secretary for an extension of time): GS 105-155, GS 105-160.6, GS 105-130.17, and GS 105-129.

    Part II.

    Amends GS 105-164.8 by amending two of the ten triggers for when a retailer makes a remote sale is engaged in business in this State and subject to sales tax, to now include: (1) a retailer who makes gross sales in excess of $100,000 from remote sales sourced to this State, including sales as a marketplace seller, for the previous or current calendar year (no longer includes remote sales sourced into this State that are in 200 or more separate transactions) and (2) a marketplace facilitator who makes gross sales in excess of $100,000, including all marketplace-facilitated sales for all marketplace sellers, from sales sourced to this State for the previous or current calendar year (no longer includes sales sourced into this State that are in 200 or more separate transactions). Effective July 1, 2024. Specifies that a person holding a certificate of registration with the Department as of June 30, 2024, and is solely engaged in business in the State because the person exceeds the 200 transaction threshold may close their certificate of registration. Requires the person to collect tax, file returns, and remit tax for periods ending before the later of (1) July 1, 2024, or (2) the date the person cancels their certificate of registration.

    Amends GS 105-241.8 by setting the statute of limitation for proposing an assessment against the customer of any refunded tax, when the purchaser receives a refund from a seller of sales tax paid to the seller, at three years after the date of the refund. Applies to assessments not barred by the statute of limitations before July 1, 2024.

    Amends GS 105-236 by setting the penalty for the misuse of an affidavit of capital improvement at $250. Specifies that an affidavit of capital improvement substantiates that a contract, or a portion of work to be performed to fulfill a contract, must be taxed for sales and use tax as a real property contract.

    Amends GS 105-164.4H by amending the conditions under which a person who receives an affidavit of capital improvements from another person is not liable for any additional tax on the gross receipts from the transaction if it is determined that the transaction is not a capital improvement, to require that the affidavit be received within 90 days of the sale or within 120 days of a substantiation request by the Secretary of Revenue.

    Part III.

    Amends GS 105-113.83 to requires the excise tax on alcohol to be paid when a report is due, as specified below, and requires the report to be filed regardless of whether alcoholic beverages were sold or otherwise disposed of in this State. Specifies that the report covers liabilities that accrue in the reporting period and that liabilities accrue in the reporting period in which the alcoholic beverage is first sold or otherwise disposed of in this State. Sets the following reporting deadlines: (1) liquor--monthly for the local ABC Board and distillery, (2) malt beverages and wine—monthly for the wholesaler or importer, (3) brewery and winery—monthly, (4) wine shipper permittee—yearly, and (5) railroad sales—monthly for person operating a railroad train in this State. Specifies that the agreement in which a wholesaler agrees to be responsible for the tax on transferred malt beverages must be provided to the Secretary when requested. Makes additional conforming changes.

    Amends GS 105-449.45 by adding that the motor carrier’s quarterly report to the Secretary on its operations is due even if the person did not operate or cause to be operated a qualified motor vehicle during the reporting period.

    Amends GS 105-449.60 by amending the definition of diesel fuel as it is used in Article 36C, concerning the taxation of Gasoline, Diesel, and Blends, so that the term "diesel fuel" incudes renewable diesel. Adds and defines the term renewable diesel.

    Part IV.

    Amends Section 5.6 of SL 2022-13 by delaying the effective date of the changes to GS 105-236, which decreased the penalty for failure to pay a tax when it is due from 5% to 2%, with an additional 2% for each month after one month, not exceeding 10% in aggregate. Now makes the change effective July l, 2027, instead of 2024.

    Part V.

    Amends GS 108A-147.7 by amending the calculation of the State administration subcomponent, and the county administration subcomponent, of the Medicaid hospital assessments to specify that it is to be increased by a percentage that is the sum of each monthly percentage change in the Consumer Price Index: All Urban Consumers for the most recent twelve months available on the first day of the current quarter (was, increased by the Consumer Price Index: All Urban Consumers).

    Amends GS 108A-145.3 by amending the following definitions as they apply to the Hospital Assessment Act. Defines private hospital historical assessment share as 80.17% instead of 80.2%. Defines public hospital historical assessment share as 19.83% instead of 19.8%.

    Amends GS 108A-145.3 by adding and defining the term rural emergency hospital as it is used in the Hospital Assessment Act. Amends the definitions of private acute care hospital and public acute care hospital to specify that they cannot be a rural emergency hospital. Amends GS 108A-146.9, concerning the fee-for-service component, by providing that the subcomponent pertaining to claims for which there is third-party coverage is the product of the total fee-for-service payments for claims not attributable to newly eligible individuals for which there is third-party coverage made for inpatient hospital services and outpatient services to rural emergency hospitals (along with already included public acute care and private acute care hospitals and critical access hospitals) multiped by the nonfederal share for not newly eligible individuals.

    Treats rural emergency hospitals the same as critical access hospitals in (1) the calculation of the UNC Health Care System share and East Carolina University share in GS 108A-147.9 and (2) the calculation of the share of public hospital costs under GS 108A-14.11.

    Part VI.

    Amends GS 24-1.1E, concerning restrictions and limitations on high-cost home loans by amending the calculation of items that are excluded from the calculation of the total points and fees payable by the borrower, under the definition of the term thresholds; now refers to the average prime offer rate instead of the required net yield for comparable loans from Fannie Mae or the Federal Home Loan Mortgage Corporation. Effective June 1, 2024.

    Amends the act's long title.


  • Summary date: Feb 28 2023 - View summary

    Identical to S 174, filed 2/28/23.

    Part I.

    Amends GS 105-228.90 to update the term Code as it applies to the general administration of taxation to mean the Internal Revenue Code as enacted as of January 1, 2023 (currently, April 1, 2021).

    Amends GS 105-122, which sets parameters for determining the net worth of a corporation for tax purposes, revising the statutory cross-references used to define the term qualified interest expense in the context of indebtedness owed to a parent, subsidiary, affiliate, or noncorporate entity in which the corporation or group owns more than 50% capital interest, which cannot be added to the corporation’s net worth amount.

    Amends GS 105-153.4 to enact a formula for determining North Carolina taxable income for a sole proprietorship operating in one or more other states, as specified.

    Amends GS 105-153.9, which allows a tax credit for income taxes paid to other states by individuals, enacting a new subsection to cap the credit at the amount of tax imposed by the Individual Income Tax Act, Part 2, Article 4, for the taxable year reduced by the sum of all credits allowed, less tax payments made by or on behalf of the taxpayer.

    Makes the following effective for taxable years beginning on or after January 1, 2022.

    Amends GS 105-154(d), which requires taxation of nonresident business owners and partners, deeming partners described in GS 105-154.1(a)(5), as enacted, of a taxed partnership within the scope of the subsection’s provisions (previously excluded all taxed partnerships).

    Amends GS 105-154.1(a), which allows taxed partnership election, enacting new subdivision (5) to include within the described types of partners of partnerships permitted to make the election, partnerships that have had a partner that is a partnership at any time during the taxable year. Adds that a partnership partner includes an entity that is classified as a partnership for federal income tax purposes.

    Amends GS 105-154.1(b), limiting the application of the formula for taxable income of taxes partnerships to partners who are individuals, estates, trusts, or identified organizations described in subdivision (a)(1) through (a)(4), excluding partnership partners described in new subdivision (a)(5).

    Further amends GS 105-153.9, enacting new subsections (d) and (e) to establish when each resident partner or shareholder of a taxed partnership or S Corporation is considered to have paid the tax imposed on that partner or shareholder in the amount of their distributive share or pro rata share of any income tax paid by the partnership or S Corporation to a state or D.C. Details when a partnership or S Corporation is taxable in another state or D.C. Prohibits taxpayers from claiming this credit and the credit under GS 105-131.8 with respect to the same income tax paid by the S Corporation.

    Makes the following effective for taxable years beginning on or after January 1, 2023.

    Repeals the following:  

    GS 105-131.1A(b)(1)b. (requiring an S Corporation to include in its taxable income each resident shareholder's pro rata share of the taxed S Corporation's income or loss not attributable to the State with respect to such taxable period);

    GS 105-131.1A(d) (allowing S Corporations a tax credit for income taxes paid to other states);   

    GS 105-153.9(a)(4) (regarding tax credits for S Corporations and their shareholders for income taxes paid to another state or country);

    GS 105-153.9(a)(5) (regarding tax credits for taxable partnerships and their partners for income taxes paid to another state or country); and   

    GS 105-154.1(b)(1)b. (requiring taxable partnerships to include in its taxable income each resident partner's distributive share of the taxed partnership's income or loss not attributable to the State with respect to such taxable period.

    Amends GS 105-131.1A(a), which permits an S Corporation to elect to be taxed for the taxable period covered by its timely filed return, required annually under GS 105-131.7, prohibiting making the election or revoking the election after the return is filed (previously prohibited revoking the election after the due date of the return, including extensions).

    Amends GS 105-153.3(c3), revising the adjustments for calculating taxable income of pass-through entities as follows. Separates deductions income of S Corporation shareholders and partnerships, based on income attributable to the State and income not attributable to the State. Makes income and losses attributable to the State subject to the adjustments under GS 105-153.5 and GS 105-153.6. Refers to the required addition of a shareholder or partner’s share of net taxable loss attributed to the State (was, loss, generally). Adds qualifications for a deduction of income not attributable to the State.

    Further amends GS 105-153.9, prohibiting a credit for taxes paid to another state or D.C. on income eligible for the deduction provided in GS 105-153.3(c3), as amended. Makes conforming changes to eliminate references to repealed provisions. 

    Further amends GS 105-154.1(a), which provides for taxes partnership election for the taxable period covered by it timely filed return, required annually under GS 105-154(c), prohibiting making the election or revoking the election after the return is filed (previously prohibited revoking the election after the due date of the return, including extensions).

    Amends GS 105-249.2(b) to prohibit the assessment of the $50 fee for failure to file returns or reports required by Articles 2A, 2C, 4, 4A, 5, 9, 36C, or 36D of the Chapter for any period in which the time for filing a federal return or report or for paying a federal tax is extended due to a presidentially declared disaster. Applies to presidentially declared disasters occurring on or after the date the act becomes law.

    Part II.

    Removes the existing definition of “prepared food” in GS 105-164.3(179), and substitutes a reference to the new GS 105-164.4L (Prepared food). The "prepared food” definition in GS 105-164.4L reorganizes and expands on the previous definition, including detailing when the term prepared food includes food sold with eating utensils provided by the retailer based on what type of person places utensils in a package with the food. Uses prepared food sales percentage to determine what sold with eating utensils “provided by the retailer” means when determining if an item qualifies as “prepared food” under subdivision (a)(3). Specifies that a retailer’s prepared food sales percentage is calculated by dividing the numerator of the retailer’s annual sales of prepared food as defined by the section by the total sales of all food, including prepared food, but excluding alcohol. The definition of “provided by the retailer” for retailers with a prepared food sales percentage over 75% includes making eating utensils available to purchasers, but an item with four or more servings packaged together and sold for a single price is not prepared food unless the retailer physically gives or hands utensils to the purchaser of the food item. For retailers with 75% or less of prepared food sales percentage, “provided by the retailer” means that the retailer physically gives or hands eating utensils to the purchasers, except that plates, bowls, glasses, and cups only need to be made available to purchasers.

    Adds new subsection (k) (Efficient Administration) to GS 105-164.4J (Marketplace-facilitated sales), permitting the Secretary of the Department of Revenue (Secretary) to classify sales representatives, solicitors, and similar persons as agents of the dealers, distributors, or similar entities under which they operate or from whom they obtained the items they sell, regardless of whether the sales are made on the sales representatives’ or other persons’ own behalf or on the behalf of the dealers or other entities. Permits the Secretary to regard the dealers, distributors or similar entities as “marketplace facilitators,” the sales made as “marketplace-facilitated sales,” and the sellers as “marketplace sellers” for purposes of Article 5, GS Chapter 105.

    Creates new subsection (b) (Marketplace Facilitators) in GS 105-164.11B (Recover sales tax paid), permitting marketplace facilitators to recover sales tax paid to marketplace sellers when the marketplace facilitator is considered the retailer under GS 105-164.4J(b) and the tax is separately stated on an invoice or similar billing document given to the marketplace facilitator at the time of the sale. Outlines requirements and limitations on the amount of sales tax recovered and adjustments to taxable receipts.

    Adds a reference to the refund of tax allowed under GS 105-449.106 subsection (d) (Off-highway Use) to the list of alternative fuels exempt from tax under GS 105-164.13(11)b., and makes this change retroactive to January 1, 2023, and applicable to applications for refunds submitted on or after that date.

    Requires that exempt sales by nonprofits under GS 105-164.13(35) must occur at least 60 days after the beginning of the prior annual sales period, that each annual sales period funds a distinct and different project from the other annual sales periods occurring during the year, and that each annual sales period sells products that are distinct and different from the other products sold during other annual sales periods occurring during the year, in addition to the already required conditions.

    Revises the date reference in GS 105-164.3(259) regarding the Streamlined Sales and Use Tax Agreement to December 22, 2022, from December 21, 2021.

    Part III.

    Clarifies that the definition of “vapor product” in GS 105-113.4(13a) includes products that produce vapor from nicotine, however derived, in a solution. Amends the definition of “cost price” in GS 105-113.4(2) to include the actual price paid for an item identified as a stock keeping unit by a unique code or identifier, and remove the previous language regarding the method of determining the average of the actual price paid for the item over the past 12 calendar months if the actual price is not available. Includes a method for determining the value when documentation is not available using the average of the actual price paid over the past 12 calendar months in new subdivision (b)(2) of GS 105-113.36A.

    Removes the requirement that a duplicate license state that it is a duplicated or amended license in GS 105-113.4A(e).

    Amends GS 105-113.4F subsection (c) (Filing Requirement) to insert “for which tax is due under this Article” to the requirement that a delivery seller file a copy of the invoice for every delivery sale made during the previous month, effective when the act becomes law and applicable to sales made during the previous month.

    Amends GS 105-113.4G to organize the section into subsections (a) and (b). New subsection (a) includes an amendment changing the requirement to make reports as required under the article to as required by the Secretary of Revenue. New subsection (b) makes the applicable statute of limitations for preserving the required records as provided in Article 9 of GS Chapter 105, and for records applying to transactions not required to be reported, three years.

    Changes the language in GS 105-113.12 subdivision (a)(2) and GS 105-113.39A subdivision (a)(3) from “ships” to “receives or stores non-tax-paid cigarettes (or tobacco products, as relevant)for” regarding delivery sales of cigarettes and tobacco products. Requires a remote seller required to be licensed to maintain the records required under GS 105-113.38B. Creates two new license types, a vapor products license and an other tobacco products license, for wholesale dealers and retailers selling vapor products and other tobacco products at locations where they make, receive, store, and receive or store the products for delivery sales. The new license types are effective July 1, 2024.

    Amends GS 105-113.88 (Record-keeping requirements) to change that persons make reports or returns as required under the article to as required by the Secretary of Revenue, including any additional information required. Makes the applicable statute of limitations for preserving the required records as provided in Article 9 of GS Chapter 105, and for records applying to transactions not required to be reported in a return, three years. Permits the Secretary’s designee to inspect records at any reasonable time, and this authority is ongoing and not limited to records for transactions on or after the effective date of the act.

    Changes the reference from “time period covered by the return” to “reporting period” in GS 105-449.39, and reorganizes that section into subsections (a) and (b).

    Amends GS 105-449.42 to specify that if motor carriers are exempt from filing a tax return under GS 105-449.45(b)(2), the tax levied is due when collectable under GS 105-241.22.

    Changes the due date of motor carrier quarterly returns from the last day of April, July, October, or January to the last day of the month following the quarter in GS 105-449.45. Amends subdivision (b)(2) to clarify that exemptions only apply to a motor carrier who operates exclusively in North Carolina.

    Amends the title of GS 105-449.46 to “Record-keeping requirements; inspection authority,” and inserts new subsection (a) regarding record keeping requirements for interstate motor carriers, while maintaining existing language authorizing inspections in new subsection (b). Specifies that the Secretary’s authority to authorize inspections is ongoing and not limited to records for transactions occurring on or after the effective date of the act.

    Creates a grace period for motor carriers to display the new calendar year decals required by the section if they meet the applicable requirements in new subsection (a3) under GS 105-449.47, and makes clarifying changes to existing text reorganized as subsection (a2).

    Amends GS 105-449.61 to also prohibit a county or city from imposing a tax on the sale, distribution, or use of motor fuel, except for those for which a refund of the per gallon excise tax is allowed under GS 105-449.106(d).

    Amends GS 105-449.97, concerning deductions and discounts that are allowed when a supplier (a position holder or a person who receives motor fuel pursuant to a two-party exchange, a fuel alcohol provider, or a biodiesel provider) files a return, by adding that when filing a return, a licensed supplier who is the position holder may take a credit for tax-paid motor fuel entering the terminal system. Makes organizational changes to the statute.

    Amends GS 105-449.106(a), under which a nonprofit, in one of the specified categories, that purchases and uses motor fuel may receive a quarterly refund at the specified rate. Removes the requirement that the refund application be made in accordance with the specified Part and signed by the organization’s chief executive officer.

    Amends GS 105-449.121 which requires a person subject to audit to keep a record of all shipping documents or other documents used to determine information the person provides in a return or to determine the person’s motor fuel transactions. Requires the records to be kept for the applicable period of statute of limitations, and if the records apply to a transaction not required to be reported in a return, the records must be kept for three years from the date of transaction. Gives the Secretary or their designee the right to inspect the records at any reasonable time. Apples to documents required to be kept for transactions occurring on or after the date that this section becomes law. Specifies that the authority of the Secretary or their designee to inspect records at any reasonable time is ongoing and not limited to records for transactions occurring on or after the section’s effective date.

    Amends GS 105-449.139 to require licensees as a provider of alternative fuel, a bulk end-user or as a retailer under Article 36D (Alternative Fuel) to keep a record of any information required by the Secretary, in addition to documents used to determine the information provided in a return under Article 36D. Requires the records to be kept for the applicable period of statute of limitations, and if the records apply to a transaction not required to be reported in a return, the records must be kept for three years from the date of transaction. Gives the Secretary or their designee the right to inspect the records at any reasonable time (was, during business hours). Apples to documents required to be kept for transactions occurring on or after the date that this section becomes law. Specifies that the authority of the Secretary or their designee to inspect records at any reasonable time is ongoing and not limited to records for transactions occurring on or after the section’s effective date.

    Amends GS 119-18, concerning the inspection tax of one-fourth of one cent per gallon that is levied on the listed types of fuel. Adds that the tax return must be in the form prescribed by, and contain information required by, the Secretary. Adds record keeping requirements for the person required to remit the tax and gives the Secretary or their designee the right at any reasonable time to inspect the records. Effective when the act becomes law and applies to documents required to be kept for transactions occurring on or after that date. Specifies that the authority of the Secretary or their designee to inspect records at any reasonable time is ongoing and not limited to records for transactions occurring on or after the effective date of this section.

    Part IV.

    Repeals GS 105-277.9, which designated real property that lies within a transportation corridor marked on an official map as a special class of property taxable at 20% of the appraised value of the property if (1) as of January 1, no building or other structure is located on the property, and (2) the property has not been subdivided, since it was included in the corridor.

    Part V.

    Amends GS 105-236 to provide that when the bank upon which an uncertified check tendered to the Department of Revenue (Department) in payment of any obligation due to the Department returns the check because of insufficient funds or the nonexistence of the account of the drawer, the Secretary must assess the drawer of the check, the specified penalties (was, assess a penalty without specifying whom it was to be assessed against). Defines the drawer, in the case of a garnishment payment, as the garnishee. Provides that the stated penalties are to be assess against the transferor (was, penalty was assessed without specifying whom it was assessed against), when an electronic funds transfer cannot be completed due to insufficient funds or the nonexistence of an account of the transferor. Provides that in the case of a garnishment payment, transferor means the garnishee.

    Amends GS 105-242.1(b), which requires a garnishee to comply with a notice of garnishment or file a written response to the notice, after which the Department must hold a conference to discuss the garnishee’s response or inform the garnishee of the Department’s position on the response. Provides that when the Department does not agree with the garnishee on the garnishee’s liability, the Department may proceed to enforce the garnishee’s liability for the tax by sending a notice of proposed assessment including any penalties that are to be imposed (previously did not include penalties). Adds that if the garnishee does not file a response to the notice within the set time frame and fails to comply with the notice, the garnishee is subject to penalties imposed under Article 9 (General Administration; Penalties and Remedies). Amends GS 105-241.11(a) which allows a taxpayer who objects to a proposed denial of a refund or a proposed assessment of a tax to request a Departmental review, to now allow the request for review to be, instead of on the required form, in a written statement clearly indicating the taxpayer requests review of a proposed denial of a refund or a proposed assessment of tax.

    Enacts new GS 105-241.24 allowing the Department to collect a tax for a period of 10 years from the date it becomes collectible. Allows tolling the 10 year period for the same reasons the enforcement period for a certificate of tax liability may be tolled under GS 105-242(c) (which allows tolling for the specified amounts of time for instances in which the taxpayer is absent from the State, upon the death of the taxpayer, while an action is pending to set aside a conveyance made by the taxpayer as a fraudulent conveyance, while an insolvency proceeding against the taxpayer is pending, during the period of any statutory or judicial bar to the enforcement of the certificate, and the period for which a taxpayer has waived the 10-year period). Specifies that if the tax is not collected within the authorized time frame, then the remaining liability is abated. Amends GS 105-242(c) by making conforming and clarifying changes.