Bill Summary for S 94 (2011-2012)

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Summary date: 

Feb 21 2011

Bill Information:

View NCGA Bill Details2011-2012 Session
Senate Bill 94 (Public) Filed Monday, February 21, 2011
Intro. by Hartsell, Tillman, Newton.

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Bill summary

Identical to H 124, filed 2/16/11.

Background: North Carolina's tax law maintains conformity with many provisions of the federal tax law by reference to the federal Internal Revenue Code (IRC). Each year, the General Assembly decides whether to update North Carolina's reference to the IRC. Under current state law, the reference date to the IRC is May 1, 2010; however, the U.S. Congress has enacted two acts that make substantial changes to the federal tax code: (1) the Small Business Jobs Act of 2010 [2010 Jobs Act] and (2) the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act [2010 Tax Relief Act]. Both Acts contain provisions that became effective retroactively on January 1, 2010.
Changes: Amends GS 105-228.90(b)(1b) to define the term Code to reference the Internal Revenue Code as enacted January 1, 2011 (was, as enacted May 1, 2010). This proposed change would conform North Carolina tax law to many of the changes made by the federal 2010 Jobs Act and the 2010 Tax Relief Act, including part of the estate tax changes, some of the enhanced section 179 expense deduction changes under the Code, and all of the business and individual income tax extenders from the federal tax legislation of 2001.
Amends GS 105-130.5(a), GS 105-130.5(b), GS 105-134.6(c), and GS 105-134.6(b) to decouple the state tax code from the extension of the bonus depreciation provision (applies only to new equipment) of the federal 2010 Jobs Act and the 2010 Tax Relief Act. The proposed legislation decouples the state tax code from the bonus depreciation provisions for 2010, 2011, and 2012, and instead requires that under state tax law, a taxpayer must add back 85% of the accelerated depreciation amount in the year that the asset is claimed for federal purposes and in subsequent tax years deduct from federal taxable income the total amount of the add-back, divided into five equal annual installments of the normal depreciation amount plus 20% of the accelerated depreciation amount the taxpayer had to add back.
Section 179 of the IRC permits the expensing of the purchase price of some business assets in the year in which they are purchased rather than taking depreciation throughout the life of the asset (applies to new and used equipment). Section 179 expense deduction provisions for 2010 and 2011 are enhanced by the federal 2010 Jobs Act. Proposed legislation enacts new subdivisions to GS 105-130.5 subsections (a) and (b) and adds new subdivisions to GS 105-134.6 subsections (b) and (c) to decouple the state tax code from the enhanced deduction limits for taxable years 2010 and 2011. Provides that the basis for the affected assets is the same for federal and state tax purposes.
Enacts new GS 105-32.2A to allow the estate of a decedent dying in 2010 that pays the federal estate tax and receives the federal stepped-up basis of the property to elect to receive the stepped-up basis for North Carolina purposes by paying the state estate tax for 2010. Details filing requirements.
Effective date: Provides that any amendments to the Internal Revenue Code enacted after May 1, 2010, that increase North Carolina taxable income for the 2010 taxable year become effective for taxable years beginning on or after January 1, 2011.