Bill Summary for H 14 (2013-2014)

Summary date: 

Jul 1 2013
S.L. 2013-414

Bill Information:

View NCGA Bill Details2013-2014 Session
House Bill 14 (Public) Filed Wednesday, January 30, 2013
A BILL TO BE ENTITLED AN ACT TO MAKE TECHNICAL, CLARIFYING, AND ADMINISTRATIVE CHANGES TO THE REVENUE LAWS AND RELATED STATUTES, AS RECOMMENDED BY THE REVENUE LAWS STUDY COMMITTEE.
Intro. by Howard.

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Bill summary

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

Amends GS 105-164.13 to add prepared food to items that are exempt from sales tax when it is sold not for profit by school cafeterias, served to students in dining rooms operated by the educational institution or student organizations, or sold by a church or religious organization not for profit where the proceeds are used for religious activities. Adds that the exemption for fuel and electricity sold to a manufacturer for use in connection with the operation of a manufacturing facility does not apply to electricity used at a facility where the primary activity is not manufacturing. Amends GS 105-164.13A by making conforming changes to include prepared food.

Amends GS 105-164.14(b) to add that sales and use tax liability indirectly incurred by a nonprofit through reimbursement to an employee of the entity for the purchase of tangible personal property and services other than electricity, telecommunication service, and ancillary services for use in carrying on the work of the nonprofit is considered a direct purchase by the entity.

Amends GS 105-164.27A to add that a person who purchases direct mail may apply for a direct pay permit for the purchase of the direct mail. Specifies that the permit does not apply to any purchase other than the purchase of direct mail.

Deletes proposed changes to GS 105-187.51(a) and to GS 105-242.2(b).

Makes Section 22 of the act, concerning a tobacco distributor's licenses, effective September 1, 2013.

Amends GS 105-164.4B(d) to make a conforming change. Also amends the statute to remove the provision stating that direct mail is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller maintained in the ordinary course of business when use of the address does not constitute bad faith when other provisions do not apply.

Amends GS 62A-54(a) to make a technical change.

Amends GS 66-255 to provide that a specialty market operator or operator of an event where space is provided to a vendor must keep a daily registration list of all specialty market or other vendors selling or offering goods for sale. Makes conforming changes. Adds that the daily registration lists must be made available to the Secretary of Revenue or the Secretary's agent. Provides that the exemptions in GS 66-256 do not apply to the registration list.

Amends GS 105-129.16H to provide that the statute is repealed as of the date that GS 105-129.16A is repealed. Provides that the repeal applies to donations made for renewable energy property placed in service on or after the date the section is repealed.

Amends GS 105-129.26(c) so that the forfeiture provision applies only to major recycling facilities (was, large or major).

Amends GS 105-130.5 to delete from the additions that are to be made to federal income when determining state income outdated provisions as well as other provisions concerning accelerated depreciation deductions; adds in the amount required to be added under GS 105-130.5B when the state decouples from federal accelerated depreciation and expensing, as well as the amount allowed as a deduction under GS 105-130.5B as a result of an add back for federal accelerated deprecation and expensing. Effective for taxable years beginning on or after January 1, 2013.

Enacts new GS 105-130.5 to require a taxpayer taking a special accelerated deprecation deduction for specified property to add to their taxable income 85% of the amount taken for that year under the specified Code provisions. Allows a taxpayer to deduct 20% of the add back in each of the first five taxable years following the year the taxpayer is required to include the add back in income. Includes special provisions for taxpayers placing property in service during the 2009 taxable year when the taxable income for 2009 reflected a special accelerated deprecation deduction. Requires a taxpayer who places section 179 property in service during taxable year 2010 through 2013 to add to the taxpayer's federal taxable income 85% of the amount by which the taxpayers' expense deduction under section 179 exceeds the specified dollar and investment limitations. Allows a deduction of 20% of the add back in each of the first five taxable years following the year the taxpayer is required to include the add back in income. Allows a taxpayer that transfers an asset where the basis of the asset transferred carries over from the transferor to the transferee for federal income tax purposes to fully deduct the amount of accelerated deprecation added in a prior year unless any portion was previously deducted. Allows any unused portion of the amount of the accelerated deprecation to be fully deducted in one of two specified ways. Effective for taxable years beginning on or after January 1, 2013.

Amends GS 105-134.6 to delete from the items that a taxpayer may deduct, to the extent those items are included in the taxpayer's adjusted gross income, outdated provisions as well as other provisions concerning accelerated depreciation deductions; adds in the amount allowed as a deduction under GS 105-134.6A as a result of an add back for federal accelerated depreciation and expensing. Amends the items that must be added when a taxpayer deducts the itemized deductions, to the extent those items are included in the itemized deduction amount, to remove outdated provisions as well as other provisions concerning accelerated depreciation deductions; adds in the amount required to be added under GS 105-134.6A when the state decouples from federal accelerated depreciation and expensing. Effective for taxable years beginning on or after January 1, 2013.

Enacts new GS 105-134A requiring a taxpayer taking a special accelerated deprecation deduction for specified property to add to their federal taxable income, or adjusted gross income, 85% of the amount taken for that year under the specified Code provisions. Provides that for taxable years before 2012, the amount must be added to the federal taxable income; for 2012 and after, the amount must be added to the taxpayer's adjusted gross income. Allows a taxpayer to deduct 20% of the add back in each of the first five taxable years following the year the taxpayer is required to include the add back in income. Includes special provisions for taxpayers placing property in service during the 2009 taxable year when the taxable income for 2009 reflected a special accelerated depreciation deduction. Requires a taxpayer who places section 179 property in service during taxable year 2010 through 2013 to add to the taxpayer's federal taxable income, or adjusted gross income, 85% of the amount by which the taxpayer's expense deduction under section 179 exceeds the specified dollar and investment limitations. Provides that for taxable years before 2012, the amount must be added to the federal taxable income; for 2012 and after, the amount must be added to the taxpayer's adjusted gross income. Allows a deduction of 20% of the add back in each of the first five taxable years following the year the taxpayer is required to include the add back in income. Allows a taxpayer that transfers an asset where the basis of the asset transferred carries over from the transferor to the transferee for federal income tax purposes to fully deduct the amount of accelerated depreciation added in a prior year unless any portion was previously deducted. Allows any unused portion of the amount of the accelerated depreciation to be fully deducted in one of two specified ways. Effective for taxable years beginning on or after January 1, 2013.

Allows a taxpayer subject to income tax under GS Chapter 104, Article 4, for taxable years beginning on or after January 1, 2007, and on or before January 1, 2012, that meets the requirements of GS 105-130.5B(d) or GS 105-134.6A(d) to apply for a refund of any excess tax paid. Requires requests to be made on or before January 1, 2014.

Amends GS 105-134.6(d)(23) to provide that for 2013, the taxpayer who elects to itemize deductions may deduct the amount that would have been allowed as a charitable deduction under section 170 had the taxpayer not taken the income exclusion. Provides that this deduction is not subject to the charitable contribution limitation and carryover provision but is subject to the overall limitation on itemized deductions.

Amends GS 105-130.6A to provide that the definitions in GS 105-130.2 (was, provisions if GS 105-130.6) govern the determination of whether a corporation is a subsidiary or affiliate of another.

Amends GS 105-151.26 to provide that for tax year 2013, the taxpayer's excess charitable contributions also include the amount by which the taxpayer's charitable contributions for the taxable year would have been deductible under section 170 of the Code had the taxpayer not elected to take the income exclusion under section 408(d)(8) of the Code that exceed 2% of the taxpayer's adjusted gross income. Provides that for the purposes of computing this tax credit, charitable contributions are not subject to the charitable contribution limitation and carryover provisions of section 170 of the Code.

Amends GS 105-159, federal corrections, to make the statute applicable to corrections to a taxpayer's adjusted gross income or federal tax credit (was, federal taxable income). Makes conforming changes.

Amends GS 105-163.3(d), providing that certain payers of contractors must file with the Secretary an annual report that compiles the information contained in each of the payer's statements to contractors and any other information required by the Secretary in the manner required by the Secretary.  Amends GS 105-163.6(a), also providing that the returns required by this section must be filed with the Secretary in the manner required by the Secretary.

Amends GS 105-164.4(a)(6b), providing that the general rate of tax charged to retailers also applies to the sales price of digital property that is sold at retail.

Amends GS 105-164.4C(a2), providing that the sourcing principle in this subdivision applies to a product provided as an adjunct to mobile telecommunications service if the charge for the product is included within the term "charges for mobile telecommunications services."

Amends GS 105-164.14(c)(24), providing that the subsection applies to a public library created pursuant to an act of the General Assembly or established pursuant to GS 153A-270 (previously, only applied to a public library created by the General Assembly). Effective January 1, 2013, applying to purchases occurring on or after that date.

Amends GS 105-164.28, certificate of exemption, providing that, except as provided in subsection (b) of this section, a seller is not liable for the tax otherwise applicable if the Secretary determines that a purchaser improperly claimed an exemption or if the seller, within 90 days of the sale, meets specified new and amended requirements.  Adds new subsection regarding substantiation requests, providing that if the Secretary determines that a certificate of exemption or the required data elements obtained by the seller are incomplete, then the Secretary can request substantiation from a seller. Provides that a seller is not required to verify that a certificate of registration number provided by a purchaser is correct. Provides that a seller is not liable for tax otherwise applicable to the seller who completes specified requirements within 120 days after a request for substantiation by the Secretary.  Sets out specific times when relief from liability does not apply to a seller. Provides that the Secretary cannot require a seller to renew a blanket certificate or to update exemption certificate information or data elements when there is a recurring business relationship between the buyer and seller. Provides that a recurring business relationship exists when a period of no more than 12 months elapses between sales transactions.

Amends GS 105-164.28A, Other exemption certificates, providing that a seller is relieved of the liability for tax owed from a transaction involving an exemption certificate when the seller obtains the purchaser's name, address, type of business, reason for exemption, and exemption number in lieu of obtaining an exemption certificate. Provides that GS 105-164.28A will be administered in accordance with GS 105-164.28. Provides that the Secretary can authorize in writing the Streamline Sales Tax Governing Board to contract on the behalf of the Secretary with a certified service provider for the purpose of collecting and remitting sales and use tax (previously, only the Secretary was authorized to contract).

Amends GS 105-164.44I, concerning the distribution of sales tax from video/telecommunications service, providing that the Secretary must first, from the amounts listed in this subsection, make the distribution required in subsection (b) of this section and then distribute the remainder in accordance with subsections (c) and (d) (previously, the Secretary was required to first distribute $2 million in accordance with subsection (b)).

Amends GS 105-197.51B, providing that a privilege tax is imposed on companies that are primarily engaged in specific activities at their establishments in lieu of companies labeled as a certain type of company.  For example, a tax is imposed on a company primarily engaged at their establishment in research and development activities in lieu of a research and development company.  Makes conforming changes throughout the subsection.

Amends GS 105-241.6(b), providing a new subsection dealing with contingent events and overpayment of taxes, establishing that if a taxpayer is subject to a contingent event and files notice with the Secretary, then the period to request a refund of an overpayment is six months after the contingent event concludes. Defines a contingent event as litigation or a state tax audit initiated prior to the expiration of the statute of limitations under GS 105-241.6(a), which prevents the taxpayer from possessing the information needed to file an accurate request for a refund of an overpayment. Provides that "notice to the Secretary" means a written notice filed with the Secretary prior to expiration of the statute of limitations noted above. Sets out what the written notice must state and identify. Provides that a taxpayer can solicit, by written request, the Secretary for an extension on the statute of limitations in regards to requesting an overpayment of taxes for events or conditions which are not considered to be contingent events.  Sets out what the written notice must state and identify, including clear and convincing proof that the event or condition was beyond the taxpayer's control and that it prevented timely filing. Effective January 1, 2014, applying to a request for a refund of an overpayment of tax filed on or after that date.

Current law provides that the Secretary of Revenue (Secretary) may not determine the state net income properly attributable to a corporation's business carried on in the state under GS 105‑130.5A, until a rule adopted by the Secretary under GS 105-262.1 becomes effective. Amends GS 105-262.1(d), which provides an expedited procedure for the adoption of rules needed to administer GS 105‑130.5A, to allow a person to object to a rule and request a review by the Rules Review Commission (Commission) following the agency's adoption of the rule (was, prior to the adoption of the rule).

Amends GS 105-468 to direct that the administration and collection of the use tax authorized under Article 39 of GS Chapter 105 be done in accordance with Article 5 of GS Chapter 105. Deletes provisions requiring a retailer engaged in business in the state and in the taxing county to collect the use tax levied under GS 105-164.6 and specifying that the use tax under this section is levied against the purchaser.

Amends GS 105-467(c) to provide that the sourcing principles in GS 105-164.4B apply in determining whether the local sales tax applies to a transaction, deleting the provision that the local sales tax applies to taxable transactions by retailers whose place of business is located within the taxing county.

Amends GS 105-561(d) to apply the provisions regarding a special tax district to a regional public transportation authority created under Article 26 of GS Chapter 160A.

Amends Section 27A.2(f) of SL 2009-451 to provide that the general state rate of tax in effect on or after July 1, 2011, applies to gross receipts received on or after July 1, 2011, under a lease  or rental agreement entered into for a definite, stipulated period of time during the period between September 1, 2009, through June 30, 2011.

Amends Section 8 of SL 2011-122, to provide that the Department of Revenue may retain the cost of collection under this section that includes costs incurred prior to July 1, 2013.

Provides that the Department of Revenue allocates and distributes to cities and counties (1) the local sales and use tax under Subchapter VIII of GS Chapter 105 and (2) a portion of various state taxes under GS Chapter 105. Requires that if the Department of Revenue is unable to accurately calculate the amount of tax proceeds to be distributed to a county or city because of implementation issues with the Tax Information Management System (TIMS), the Department of Revenue must allocate and distribute an amount to a county and city that is equal to the average of the applicable tax proceeds allocated and distributed to the county or city for the same distributional period in the three preceding fiscal years. Effective when this provision becomes law and expires on July 1, 2015.

Amends various session laws to delete exemptions from the listed counties' levy of a room occupancy and tourism development tax on accommodations furnished by the following entities (as applicable): (1) religious organizations; (2) educational organizations; (3) any business that rents fewer than five units; (4) summer camps; or (5) charitable, benevolent, and other nonprofit organizations. Amends appropriate session laws affecting the following counties: Alamance, Alleghany, Buncombe, Carteret, Currituck, Dare, Forsyth, Johnston, Lenoir, Madison, Martin, Washington, and Richmond. Also deletes the exemptions for the occupancy tax levied by the Greensboro City Council, the Washington City Council, and the Kinston City Council.

Repeals the following to delete the exemptions on the room occupancy tax for the indicated counties: Section 3 of SL 1983-980, as amended (Craven); Section 3 of SL 1983-988 (Guilford); Section 3 of SL 1985-857 (Onslow); and Section 3 of SL 1987-950, as amended (Johnston).

Amends Section 22(d) of SL 2007-527, as amended, to make subsection (c) of this section, regarding the monthly transfer of interest collected on unpaid registration fees to the NC Highway Fund for technology improvements, effective July 1, 2013 (was, effective July 1, 2013, or when specified conditions regarding establishing the operation of an integrated computer system for registration renewal and property tax collection, whichever occurred first).

Amends Section 24(c) of SL 2009-445, as amended, to provide that with the exception of amendments to GS 105-330.9 and GS 105-330.11, the remainder of subsection (a) of Section 24 and all of subsection (b) of Section 24 become effective July 1, 2013, and apply to combined tax and registration notices issued on or after that date and deletes the alternative option for becoming effective when the DMV and the Department of Revenue certify that the integrated computer system or registration renewal and property tax collection for motor vehicles is in operation. Provides that counties may continue to collect property taxes on motor vehicles for taxable years beginning on or before September 1, 2013, under Article 22A of GS Chapter 105 as those statutes are in effect on June 30, 2013. Makes identical changes regarding the respective stated effective dates for Section 8 of SL 2007-471, as amended, and Section 13 of SL 2005-294, as amended.

Repeals Sections 3.2 (amending GS 105-330.2), 3.3 (amending GS 105-330.3), and 3.4 (amending GS 105-330.4) of SL 2012-79, effective June 26, 2012.

Amends GS 105-330.2, as amended by Section 2 of SL 2005-294 and Section 24(a) of SL 2009-445, to provide that the owner of a classified motor vehicle may appeal the appraised value of the vehicle but not the taxability of the vehicle (was, appraised value or taxability). Provides that appeals filed under this subsection, (b1), are to proceed as provided in GS 105-312(d). Adds a new subsection (b2) to provide that an owner of a classified motor vehicle may appeal the vehicle's eligibility for an exemption or exclusion within 30 days of the initial deicision. Provides that appeals filed under this new subsection are to proceed in the manner provided in GS 105-312(d). Effective July 1, 2013.

Amends GS 105-330.3, as amended by Section 24(a) of SL 2009-445, pertaining to the listing of unregistered classified motor vehicles for tax purposes. Provides criteria for taxing a classified motor vehicle that is required to be listed under subsection (a1) and that is registered before the end of the fiscal year for which it is required to be listed.  Additionally, provides criteria for determining the tax on a vehicle for any months during which the vehicle was not taxed between the date the registration expired and the start of the current registered vehicle tax year and designates that the vehicle is to be taxed as an unregistered vehicle under the specified criteria. Provides that a vehicle that is required under this subsection to be listed and that is not listed by January 31 and is not registered before the end of the fiscal year in which it is required to be listed is subject to discovery under GS 105-312. Requires an owner of a classified motor vehicle claiming exclusion or exemption from tax to file an application for exempt status with the tax assessor within 30 days of the date on which taxes for the vehicle are due (was, did not specify a time period in which the application had to be filed). Effective July 1, 2013.

Amends GS 105-330.4, as amended, to provide that the registration of a classified motor vehicle may not be issued or renewed unless the taxes for the tax year that begins on the first day of the first month following registration have been paid (was, may not be renewed unless the taxes that are due have been paid). Adds that if the registration of a classified motor vehicle is renewed earlier than the date the taxes are due, the taxes must be paid as if they are due. Specifies that interest accrues on unpaid taxes and registration fees at the rate of 5% for the remainder of the month following the date the registration renewal sticker expired (was, for the remainder of the month following the month the taxes are due). Specifies that interest accrues at the rate of 3/4% beginning the second month following the due date. Provides that the enforcement remedies in this subchapter do not apply to unpaid taxes on a registered classified motor vehicle for which the tax year begins on or after October 1, 2013. Effective July 1, 2013.

Amends GS 105-330.1(b), as amended, to add that motor vehicles owned by participants in the Address Confidentiality Program are not designated as a special class of property. Effective July 1, 2013.

Makes Section 5, 6, and 7 of the act effective for taxable years beginning on or after January 1, 2012. Except as otherwise provided, the remainder of the act is effective when it becomes law.

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