Amends GS 105-153.4, which sets forth provisions concerning North Carolina taxable income for individual state residents, to provide that North Carolina taxable income does not include the military pay of an active service member of any branch of the US Armed Forces for any period of time that the service member is not present in this State so long as the member is a North Carolina resident and the member is not present in North Carolina solely in compliance with military orders reassigning the member to a permanent duty station located outside of the state.

Under GS 105-153.5, in calculating North Carolina taxable income, a taxpayer can deduct from the adjusted gross income the itemized deductions set out in subsection (b). This act adds new subdivision (5a) to establish a deduction for the amount received during the taxable year from the US government as retirement pay for a retired member of the US Armed Forces or as survivorship benefits for survivors of active duty or retired members of the US Armed Forces. Prohibits deduction for amounts under both subdivision (5a) and subdivision (5), which provides for a deduction for amounts from one or more State, local, or federal government retirement plans exempt from tax as specified. Makes conforming changes to subdivision (5).

Effective for taxable years beginning on or after January 1, 2017.