AN ACT TO REDUCE PERSONAL INCOME TAXES; TO MODERNIZE, SIMPLIFY, AND REDUCE BUSINESS TAXES; AND TO ENCOURAGE ECONOMIC DEVELOPMENT THROUGH PHASING IN A SINGLE SALES TAX FACTOR APPORTIONMENT FORMULA AND TARGETING THE DISCRETIONARY INCENTIVE PROGRAMS TO RURAL COUNTIES AND TRANSFORMATIVE INDUSTRIES.
Part I. Individual Income Tax
Amends GS 105-153.5 by removing the standard deduction for individual income taxes. Makes clarifying and conforming changes to the deductions allowed for charitable contributions and home mortgage and real property taxes, the sum of which determine the amount of the itemized deduction.
Amends GS 105-153.7, effective for taxable years beginning on or after January 1, 2016, to reduce the individual income tax rate from 5.75% to 5.625% and sets the rate at 0% for married individuals who file jointly and make up to $17,500; heads of household making up to $14,000; and unmarried individuals, or married individuals filing separately, making up to $8,750. Further amends GS 105-153.7, effective for taxable years beginning on or after January 1, 2017, to reduce the individual income tax rate to 5.5% and sets the rate at 0% for married individuals who file jointly and make up to $20,000; heads of household making up to $16,000; and unmarried individuals, or married individuals filing separately, making up to $10,000.
Part II. Franchise Tax
Amends GS 105-120.2 to require corporations to pay the greater of the following: (1) a franchise or privilege tax at the rate of $1.35 (was, $1.50) per $1,000 of the amount determined under the statute, and increases the cap on the tax from $75,000 to $150,00 and increases the minimum amount of the tax from $35 to $200 or (2) if the tax calculated under this provision exceeds the tax under (1), then the tax is levied at the rate of $1.35 per $1,000 on the greater of 55% of the appraised value of all the real and tangible personal property in this state of each such corporation plus the total appraised value of intangible property returned for taxation of intangible personal property or the total actual investment in tangible property in this state of such corporation.
Amends GS 105-122 to require a corporation taxed under the statute to define its net worth, which is the corporation's total assets less its total liability. Adjusts net worth by allowing a deduction for the accumulated depreciation and amortization, requires an addition for indebtedness the corporation owes to a parent, subsidiary, or an affiliate (allowing specified adjustments to the amount), and allows a deduction of the cost of treasure stock. Requires corporations doing business in the state and in one or more other states to apportion its net worth (was, its capital stock, surplus, and undivided profits) to this state. Makes conforming changes. Deletes (d1), concerning allowable credits.
Effective for taxable years beginning on or after January 1, 2016.
Part III. Corporate Income Tax
Amends GS 105-130.3 to reduce the corporate income tax rate for C Corporations from 5% to 4.5%. Effective for taxable years beginning on or after January 1, 2016.
Repeals GS 105-130.3C, concerning the rate reduction trigger.
Further amends GS 105-130.3 to again reduce the corporate income tax rate for C Corporations to 4%. Effective for taxable years beginning on or after January 1, 2017.
Amends GS 105-130.5 to require that royalty payments and interest expenses be added when determining state net income. Removes nine of the allowable deductions. Amends GS 105-130.7A to provide that royalty payments received for the use of intangible property in this state and interest expenses received from a related member are income derived from doing business in this state. Provides that the use of the royalty and interest expense reporting options does not prevent a corporation from otherwise having a filing requirement under other provisions of GS Chapter 105. Defines interest expense. Effective for taxable years beginning on or after January 1, 2016.
Part IV. Phase in Single Sales Factor Apportionment and Use Market-Based Sourcing
Amends GS 105-130.4(i) to require that all apportionable income of corporations other than public utilities, excluded corporations, and qualified capital intensive corporations be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus four times (was, plus twice) the sales factor, and the denominator of which is six (was, four). Provides that if the sales factor does not exist, the denominator of the fraction is the number of existing factors and if the sales factor exists but the payroll factor or the property factor does not exist, the denominator of the fraction is the number of existing factors plus three (was one). Effective for taxable years beginning on or after January 1, 2016.
Further amends GS 105-130.4(i) to provide that apportionable income of corporations must be apportioned to this state by the sales factor as determined under subsection (l) of the statute. Effective for taxable years beginning on or after January 1, 2017.
Effective for taxable years beginning on or after January 1, 2017, repeals GS 105‑130.4(a)(4) (defining excluded corporation), (j) (concerning the property factor in determining apportionable income), (k) (concerning the payroll factor in determining apportionable income), and (s1) (concerning apportionable income of a qualified capital intensive corporation), and GS 105‑130.4(r1) as enacted by Section 4.2 of this act.
Amends GS 105-130.4 to add the following to the items that are not included in the gross receipts of the corporation when determining sales: (1) the portion of receipts from financial swaps and other similar financial derivatives that represents the notional principal amount that generates the cash flow traded in the swap agreement and (2) receipts in the nature of dividends subtracted under GS 105‑130.5(b)(3a), (3b), and dividends excluded for federal tax purposes. Adds that other sales are in this state if the taxpayer's market for the sales is in this State. Clarifies that the taxpayers' market for sales is in this state if one or more of the three specified conditions apply, and provides within those conditions the circumstances under which intangbile property is used in the state. Provides that sales of tangible personal property are sourced as provided elsewhere in the statute; other sales are sourced to this state as follows: (1) the receipts are from real or tangible personal property located in this state, (2) the receipts are from intangible property and are received from sources within this state, and (3) the receipts are from services and the income‑producing activities are in this State. Specifies how apportionable income of an excluded corporation is apportioned. Effective for taxable years beginning on or after January 1, 2016.
Part V. JDIG Modifications
Amends GS 143B-437.51, adding definitions for (1) high-yield project and (2) major market community to those that apply to the Job Development Investment Grant Program (JDIG).
Amends GS 143B-437.52, which established the JDIG Program, to specify limitations that apply to grant amounts awarded via the JDIG Program. Sets out factors determining the maximum amount for total annual liability for grants awarded in a single calendar year, the quarterly commitment limitations, and the maximum percentage of the amount authorized for grants awarded in a major market community.
Amends GS 143B-437.53 regarding determining the eligibility of grant applicants. Adds the requirement that wage standards be met and increases the minimum number of eligible positions. Also amends GS 143B-437.56, providing that the grant amount awarded will be a percentage of the withholding of eligible positions for a period of years and sets out further guidelines for determining the maximum percentage. Amends the criteria for determining the duration of the grant.
Provides that the authority of the Economic Investment Committee to award new grants expires January 1, 2018 (was, January 1, 2016).
Effective when the section becomes law and applies to awards made under Part 2G of Article 10 of GS Chapter 143B on or after that date.
Except as otherwise provided, the act is effective when it becomes law.
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