Bill Summaries: H998 TAX SIMPLIFICATION AND REDUCTION ACT (NEW)

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  • Summary date: Jul 24 2013 - More information

    AN ACT TO SIMPLIFY THE NORTH CAROLINA TAX STRUCTURE AND TO REDUCE INDIVIDUAL AND BUSINESS TAX RATES. Enacted July 23, 2013. Effective July 23, 2013, except as otherwise provided.


  • Summary date: Jul 16 2013 - More information

    The conference report makes the following changes to the 6th edition.

    Part I. Individual Income Tax Changes

    Amends new GS 105-153.3 (previously codified as GS 105-134.1 and recodified by PartI of this act), to define North Carolina taxable income as defined in newGS 105-153.5 (was, defined in GS 105-134.5). Makes an organizational change, removing the repeal of statutes providing business tax credits from this Part, and instead indicating their repeal under Part II, as amended in this edition, which reflects corporate income tax changes. Makes additional organizational changes, technical corrections, and conforming changes to reflect the repeal of statutes by this act and the recodification of statutes under this act.

    Amends GS 105-153.5 to make clarifying changes as to a taxpayer's options in determining the deduction amount a taxpayer may deduct from adjusted gross income. Clarifies that the itemized deduction amount is the amount equal to the sum of the listed items in GS 105-153.5(a)(2). Additionally, provides that the amounts allowed under subdivision(a)(2) are not subject to the overall limitation on itemized deductions under section 68 of the Internal Revenue Code (Code). Clarifies that the itemized deduction amount is the amount allowed as a deduction (was, the amount claimed by the taxpayer). Prohibits the amount allowed as a deduction for interest that is paid or accrued during the taxable year for any qualified residence, plus the amount claimedas a deduction for property taxes paid or accrued on real estate, from exceeding $20,000 for that taxable year.

    Adds a new subsection (d) to GS 105-153.5 to provide that each shareholder's pro rata share of an S Corporation's income is subject to the adjustments provided in GS 105-153.5 (Modifications to adjusted gross income) and new GS 105-153.6 (Adjustments when state decouples from federal accelerated depreciation and expensing).

    Amends new GS 105-153.7 to set the individual annualincome tax imposed on the NorthCarolina taxable income of every individual at 5.8%, effective for taxable years beginning on or after January 1, 2014. Also amends GS 105-153.7 to set the individual tax rate at 5.75%, effective for taxable years beginning on or after January 1, 2015.

    RecodifiesGS 105-151.24(a) as GS 105-153.10(a), and amends this section to provide that a taxpayer is allowed a credit against the tax imposed by Part I of this act for each dependent child for whom the taxpayer is allowed a federal child tax credit under section 24 of the Code. Provides a table that calculatesthe amount of the credit allowed under this section for the taxable year based on the taxpayer's filing status and adjusted gross income (was, set a fixed amount for the credit of $100, provided that the taxpayer's adjusted gross income (AGI) was within specified parameters for the taxpayer's filing stats). Provides that the amount of the allowed credit ranges from $0 to $125 depending upon the taxpayer's filing status and AGI. Effective for taxable years beginning on or after January 1, 2014.

    Amends GS 105-153.4 to define North Carolina taxable income to mean the taxpayer's adjusted gross income as modified in GS 105-153.5 and GS 105-153.6.

    Makes conforming changes toGS 105-131.2(a) and GS 105-131.7(c) to correct references to statutes repealed by this act. Makes a conforming change to GS 105-154(d).

    Part II. Corporate Income Tax Changes

    Deletes all of the prior content of this Part which enacted a new Article 31, Business Privilege Tax, in GS Chapter 105.

    Amend GS 105-130.3 to impose a tax on the state net income of every C Corporation doing business in North Carolina at the rate of 6% (was, imposed a tax on the net income of every C Corporation doing business in this state as a percentage of the taxpayer's net income computed annually at a rate as specified for each year). Effective for taxable years beginning on or after January 1, 2014. Reduces the rate to 5% effective January 1, 2015.

    Repeals GS 105-139.39 and GS 105-130.43, effective January 1, 2014.

    Enacts new GS 105-130.3A to provide that a rate deduction in the tax imposed on a C Corporation under GS 105-130.3 is triggered if the amount of net General Fund tax collected in fiscal years 2014-15or 2015-16 exceeds the anticipated General Fund tax collection for that fiscal year. Details amounts that will trigger such a rate reduction and sets the percentage amount of the reduction. Provides that effective January 1, 2017, the tax rate set in GS 105-130.3 is the rate determined in accordance with this section.

    Rewrites the title of Article 3F of GS Chapter 105 as Research and Development (was, Technology Development). Repeals GS 105-129.50(4a) and GS 105-129.56.Amends GS 105-129.51(b) to repeal Article 3F effective for taxable years beginning on or afterJanuary 1, 2016 (was, January 1, 2014). Amends GS 105-129.54 to delete the requirement that the Department ofRevenue must include in required economic incentive reports information regarding taxpayers taking a credit under GS 105-129.55 and regarding the credit allowed under GS 105-129.56. Effective for taxable years beginning on or after January 1, 2014.

    Part III. Sales Tax Changes

    Deletes all of the prior content of this Part which made changes tolower thefranchise tax rate.Instead,includes changes to the sales tax.

    Amends GS 105-467(a) to restore the sales price of bread, rolls, and buns, sold at a bakery thrift store and exempt from state tax under GS 105-164.12(27a), tothe list of items subject to the first1% local government sales and use tax. Effective January 1, 2014, and applies to sales made on orafter that date.

    Restores previously repealed subdivision (30), regarding tax on vending machine sales,of GS 105-164.13 (providing for exemptions from the sales and use tax for listed items and services). Deletes changes to subdivision (50) of this section and deletes provision that repealed subdivision (50).Amends subdivision (26) of this section to clarify that the exemption from the sales and use tax for food sold not-for-profit by a school, applies to a public school or a nonpublic school, including a charter school and a regional school.

    Amends GS 105-164.15A to make its provisions apply to the effective date of atax change (was, applied to services and items taxed at combined general rates) for personal property, digital property, or services that are taxable under this Article. Makes conforming changes, replacing "service" with "taxable item."

    Amends new GS 105-164.13E which exempts qualified farmers from sales and use tax for tangible personal property, digital property, and services purchased by the farmer and used in the planting, harvesting, or curing of farm crops or in the production of dairy products, eggs, or animals. Specifies that the exemption for fuel and electricity applies to fuel and electricity that is measured by a separate meter or another separate device and used for purposes other than food preparation, heating dwellings, and other household purposes. Adds an exemption for grain, feed, or soybean storage facility and the parts and accessories attached to the facility. Also adds an exemption for a commercially manufactured facility,commercially manufactured equipment and its parts and accessories, andbuilding materials used in construction, repair, or improvement of enclosures for the housing, raising or feeding of animals. The exemption also includes a bulk tobacco barn or rack, parts, and accessories that are attached and any similar apparatus used to cure or dry tobacco or another crop. Makes a conforming change, deleting GS 105-164.13(4c). Effective July 1, 2014 and applies to sales made on or after that date.

    Amends GS 105-164.14(b) to provide that the aggregate amount for an annual refund allowed under this subsection, Nonprofit Entities and Hospital Drugs, for a fiscal year may not exceed $31.7 million.

    Makes conforming changes to GS 105-467(b) to provide that theexemptions and exclusionsthat apply to the local sales and use tax are contained in GS 105-164.13 as a result of amendments under this act.Provides that the state refund provisions contained in GS 105-164.14 through GS 105-164.14B apply to the local sales and use tax authorized to be levied and imposed under this Article. Provides that the aggregate local refund amount allowed an entity under GS 105-164.14(b) for a fiscal year may not be more than $13.3 million. Makes a request for a refund due in the same time and manner as provided in GS 105-164.14 (was, within six months after the end of the entity's fiscal year).

    This PartamendsGS 105-467(a),which sets a sales tax rate under Article 39 of GS Chapter 105 at1% for specified categories, to remove the sales price of bread, rolls, and buns sold at a bakery thrift store, and exempt from state tax under GS 105-164.13(27a)from the list of items subject to the first1% local government sales and use tax. Effective July 1, 2014 and applies to purchases made after this date.

    Amends GS 105-164.14A(a) to repeal the subdivisions (1), (4) and (5) which allow the followingtaxpayers an annual refund of sales and use tax: passenger air carrier, motor sports team or sanctioning body, and professionalmotor sports team, effective for purchases made on or after January 1, 2016 (was, repealed effective for purchases made on or after January 1, 2014).

    Part IV. Electricity and Piped Natural Gas Tax Changes

    Deletes the changes to GS 105-164.15A regarding the effective date of a rate change for an item taxable at the combined general rate.

    Amends new GS 105-164-44K regarding the distribution of part of the tax on electricity to the cities less the cost of administering the distribution.Provides for distributing the franchise share of each city on a pro rata basis if the net proceeds of the tax are insufficient to distribute the franchise share to each city. Clarifies that the quarterly franchise tax share is the total amount of electricity gross receipts franchise distributed to the city and provides that the quarterly franchise tax share of a city includes adjustments made for the hold-harmless amounts under repealed GS 105-116. Provides that if the franchise tax share of a city is is less than zero then the amount is zero. Deletes subsection regarding methodology. Effective July 1, 2014.

    Amends newGS 105-164.44L regarding the distribution to cities of a share of the net proceeds of the tax collected on piped natural gas less the cost of administering the distribution. Provides that each city's share of the distribution is its excise tax calculated under subsection (b) of this section plus its ad valoremshare calculated under subsection (c) of this section. Provides for the proceeds to be distributed on a pro rata basis if the net proceeds of the tax are insufficient to distribute the excise tax share of each city under subsection (b) of this section.Deletes subsection regarding methodology. Effective July 1, 2014.

    Amends Section 3 of SL 1965-347 to declare all property owned by Cape Hatteras Electric Membership Corporation (Corporation)to be exempt from property taxes to the same extent as property owned by a county or municipality of the state as long as the property is owned by the Corporation and is held and used solely for furnishing electricity to consumers on Hatteras Island and Ocracoke Island. Makes the Corporation subject to any other taxes to the same extent as any other electric membership corporations established under GS Chapter 117. Effective July 1, 2014.

    Part V. Admission Charges to an Entertainment Activity

    Amends new subdivision to GS 105-164.4(a) to provide that admission charges to a museum, a cultural site, a garden, an exhibit, a show, or a similar attraction, or a guided tour at any of these attractions are also subject the general rate of tax of 4.75%.

    Deletes therepeal ofGS 105-164.9, which makes it unlawful for any retailer to offerto absorb the tax levied inArticle 5 of GS Chapter 105,or in any manner directly or indirectly to advertise that the sales and use tax imposed is not considered an element in the price to the purchaser.

    Amends the catch line for GS 105-164.10 to read, Retail tax calculation (was, Retail bracket system). Makes additional conforming and technical changes to this Part.

    Makes the provisions inthis Part,effective January 1, 2014 (was, October 1, 2013), and applies to admissions purchased on or after that date. Provides that gross receipts received on or after January 1, 2014 (was, October 1, 2013) for admission to a live event for which the initial sale of tickets occurred before that date, other than gross receipts received by a ticket reseller, are taxable under GS 105-37.1.

    Part VI. Service Contracts

    Amends GS 105-164.13 to identify as exempt from the sales and usetax under Article 5 of GS Chapter 105, a service contract for tangible personal property as specified in this section and an item used to maintain or repair tangible personal property under a service contract if the contract purchaser is not charged for the item. Deletes a service contract on tangible personal property that is provided for a newly constructed building or structure from those the list of exemptions. Effective January 1, 2014 (was, July 1, 2014) and applies to sales made on or after that date.

    Part VIII. Cap Excise Tax on Motor Fuel

    Provides that the motor fuel excise tax rate may not exceed thirty-seven and one-half cents per gallon for the period from October 1, 2013 (was, September 1, 2013) through June 30, 2015.

    Part IX. Study and Effective Date

    Makes a conforming change to GS 105-237.1(a)(6) to reference the appropriate subdivisions of GS 105-164.4(a) as amended in this act.

    Adds the following tax issues to the list of those issues to be studied by the Revenue Laws Study Committee and reported on to the 2014 Regular Session of the 2013 General Assembly upon its convening: (1) the application of the corporate income tax rate reduction trigger formula, (2) the low-income housing credit, and (3) the distribution of the sales tax collected on electricity and piped natural gas to cities.

    Deletes all the provisions of Part V. Eliminate Annual Report Filing Fees, Part VII. Sales Tax Refunds, Part XII. Eliminate Earmarks and Credit to General Fund, and Part XIII. Repeal Tobacco Discount.

    Except as otherwise indicated, this act is effective when it becomes law.


  • Summary date: Jul 2 2013 - More information

    Senate amendment makes the following changes to the 5th edition.

    Makes a technical correction to delete a codification error, recodifying the second occurrence of GS 105-129.101, Exempt business entities, as GS 105-129.102.

    Rewrites Section 4.3(b) of this act to amend GS 105-129.27(b) to provide thatthestatute allows a credit, for investing in a major recycling facility, againstthe franchise tax levied in Article 3 of GS Chapter 105 (was,allowed a credit against the franchise taxand the income tax levied in Article 4 of GS Chapter 105). Previously, Section 4.3(b) repealed Article 3C and Article 3K of GS Chapter 105.

    Rewrites Section 4.3(c) of this act to amend GS 105-129.96(b) to provide that this section allows a credit, for constructing a railroad intermodal facility, againstthe franchise tax levied in Article 3 of GS Chapter 105 (was,allowed a credit against the franchise tax andthe income tax levied in Article 4 of GS Chapter 105). Moves previous 4.3(c) to new (d) and makes conforming changes to other subsections.

    Amends GS 105-275(8)d regarding classes of property designated as special classesunder Article V, Sec. 2(2), of the state Constitution to include the following classes of property as excludedfrom tax: real or personal propertyused or to be used by a major recycling facility as defined in GS 105-164.3 (was, GS 105-129.25).

    Makes GS 105-164.3, as amended, and GS 105-275(8)d, as amended, effective January 1, 2018.

    Amends GS 57D-1-22(a)(28), as enacted by SL 2013-157 (was, amended GS 57C-1-22(a)(25)), toprovide that there is no fee foran annual report delivered to the Secretary of State for filing.

    Amends GS 105-467(a), which sets a sales tax rate under Article 39 of GS Chapter 105 at one percent (1%) for specified categories, to remove the sales price of bread, rolls, and buns sold at a bakery thrift store, and exempt from state tax under GS 105-164.13(27a)from the list of items subject to the first1% local government sales and use tax.

    Amends GS 105-164.3(43) to amend the definition for state agency to clarify thatthe term does not include an affiliate of the University of North Carolina Health Care System that is a separately incorporated entity.

    Makes a technical correction, replacing Section 7.3.(d) with Section 7.2.(d) and renumbering the remaining sections in Part VII accordingly.

    Amends GS 105-467(b) as amended in this actto modify the maximum limits set on the aggregatelocal refund amount allowed to a nonprofit entity under GS 105-164.14(b) as follows:

    • Fiscal Year (FY) beginning July 1, 2014, $3 million (was, $1.5 million)
    • FY beginning July 1, 2015, $2 million (was, $300,000)
    • FY beginning on or after July 1, 2016, $1.5 million (was, $30,000)
    • FY beginning on or after July 1, 2017, $850,000 (new)

    Makes a technical correction to GS 105-164.13, replacing "service" with "service contract."

    Amends new subdivision (6) of GS 105-164.13 to provide thatthe exemption from the sales and use tax in Article 5 of GS Chapter 105 for a service contract on certain tangible personal property applies to a transmission, distribution, or other network cable or asset of an entity providing electric, gas, telecommunications, cable, broadband, or other utility services contained on utility-owned land or other right-of-way or easements authorized for utility and related purposes (was, a transmission,distribution, or othernetwork asset contained on utility-owned land, right-of-way, or easement).

    Caps the excise tax on motor fuel at thirty-seven and one-half cents for the period from September 1, 2013, through June 30, 2015 (was, June 30, 2014).


  • Summary date: Jul 2 2013 - More information

    Senate committee substitute makes the following changes to the 4th edition.

    Amends the short title.

    Amends GS 105-153.3, Definitions, making technical changes.

    Amends GS 105-153.5, making organizational changes. Provides that in determining North Carolina taxable income, a taxpayer may either deduct the standard deduction amount as indicated in this act or the itemized deductions amount. Provides that in cases when married couples file separate returns, a taxpayer cannot deduct the standard deduction amount if the taxpayer or the taxpayer's spouse claims the itemized deduction amount.  Provides that standard deduction amounts are as follows:  (1) married, filing jointly--$15,000; (2) head of household--$12,000; (3) single--$7,500; and (4) married, filing separately--$7,500.  Sets a maximum limit on the itemized deductions amount based on the taxpayer's filing status as follows: (1) married, filing jointly--maximum itemized deductions, $15,000; (2) head of household--maximum itemized deductions, $12,000; (3) single--maximum itemized deductions, $7,500; and (4) married, filing separately--maximum itemized deductions, $7,500. In regards to other deductions, provides that a taxpayer can deduct from their AGI any of the specified items (was, must deduct). Provides that taxpayers can deduct benefits received under Title II of the Social Security Act.

    Amends GS 105-153.6, concerning adjustments when North Carolina decouples from federal accelerated depreciation, deleting language regarding the placement of property in service to take a special accelerated depreciation.  Deletes table detailing specified add-backs and years of deduction. Makes clarifying and conforming changes. Amends Section 179, Expense provisions, providing that taxpayers that place certain property into use and take a special accelerated depreciation are required to add to the taxpayer's federal taxable income or adjusted gross income 85% of the amount by which the taxpayer's expense deduction exceeds dollar and investment limitations, which are, for 2010-2012, dollar limitation of $250,000 and the Investment Limitation,  $800,000. For 2013 the dollar limitation is $25,000, and the investment limitation is $125,000.

    Amends GS 105-153.7, Individual income tax imposed, providing that the NC taxable income tax is 5.75% (was, 5.4% of the amount that exceeds the previously included zero tax bracket levels). Deletes zero tax bracket tables previously included. Effective January 1, 2014. 

    Deletes section 1.2 of the previous edition, which provided for a reduction in the NC income tax rate to 5.25% to have been effective on January 1, 2015.

    Amends GS 105-153.4, NC taxable income defined, previously GS 105-134.5,  replacing references to GS 105-134.6 (now repealed) with GS 105-153.5 and GS 105-153.6. Makes technical changes.

    Amends GS 105-153.8, Income tax returns, making technical changes.

    Amends GS 105-153.9, concerning the conditions on tax credits for taxes paid to other states, to require the state income tax before credit to be multiplied by the fraction of the gross income, modified as provided in GS 105-134.6 and GS 105-134.7 (was, the fraction of the adjusted gross income as modified in GS 105-153.5).

    Deletes changes made in the previous edition to the following statutes:

    GS 105-131.2, Adjustment and characterization of income.

    GS 105-131.5, Part-year resident shareholder.

    GS 105-131.7(c), concerning S Corporations.

    GS 105-131.8(a), concerning resident shareholders.

    GS 105-154(d), concerning tax payments on behalf of nonresident owners or partners.

    GS 105-163.1, concerning definitions for provisions regarding estimated taxes.

    GS 105-163.22, Reciprocity.

    GS 105-309(d), the listing of personal property for taxation.

    GS 105-320(a)(16), previously repealed.

    GS 110-130.1(a), concerning child support collection and paternity determination.

    GS 105-277.3(d1), concerning conservation land easements.

    GS 113-77.9(d), concerning acquisition by the Department of Administration.

    GS 113A-231, Program to accomplish conservation purposes.

    GS 113A-232, Conservation Grant Fund.

    GS 113A-233, Uses of a grant from the Conservation Grant Fund.

    Amends GA 105-160.3(b), concerning tax credits, deleting all of the included provisions and providing that tax credits allowed under GS 105-153.9 and GS 105-153.10 cannot be claimed by an estate or trust. Effective January 1, 2014.

    Amends GS 105-163.2B, NC State Lottery Commission must withhold taxes, providing that the NC Lottery Commission must withhold the applicable individual income tax rate as specified in GS 105-153.7 (previously, specified the current tax rate of 7% must be withheld). Effective for taxable years beginning on or after January 1, 2014. Effective January 1, 2014.

    Amends GS 105-129.100, Business privilege tax, clarifying that when a non-corporate business entity is doing business in North Carolina, each owner of the entity is doing business in North Carolina. Deletes language stating that the tax is imposed for the income year in which the business entity's taxes are due. Provides that the annual privilege tax will be $400, due when a return is due, which is on or before the 15th day of the 4th month of the business entity's income year. Specifies procedures for seeking an extension and for filing a return. Provides, in regards to the income year for taxes, that the tax imposed is for the income year of the corporation in which the tax becomes due. Further provides that any business entity that ceases its operations in North Carolina before the end of its income year is not entitled to a refund for any tax paid for the months remaining.

    Amends GS 105-129.101, making changes to the definition for a business entity. Adds the term and definition for doing business, meaning acts, powers, or privileges exercised or enjoyed in North Carolina as an incident to or by the powers and privileges granted by the laws in North Carolina. Provides that C corporations are exempt from the business privilege tax.

    Amends GS 105-129.100(b), providing that the annual privilege tax imposed on a business entity is $500. Effective for taxable years beginning January 1, 2016.

    Changes the title of Part III to Lower Franchise Tax Rate (was, Phased Elimination of the Franchise Tax).

    Amends GS 105-125(a), concerning exemptions to the franchise tax, providing that S corporations subject to the privilege license tax are exempt from the francise tax but might be required to establish their claims for exemption in writing upon the request of the Secretary.

    Amends GS 105-122, Franchise or privilege tax on domestic and foreign corporations, changing the tax rate per $1,000 of capital stock, surplus, and undivided profits to $1.25 for 2015 (was, $1.20) with a minimum tax of $500 due, $1 for 2016 (was, $0.90) with a minimum tax of $1,000 due (was, $2,000), and $0.75 for 2017(was, $0.60) with a minimum tax of $1,000 due (was, $3,000).

    Amends GS 105-120.2(b), Franchise or privilege tax holding companies, deleting language that required a $1.50 per $1,000 tax in lieu of language that establishes that the franchise or privilege tax will be that rate established in GS 105-120(d2) and that the minimum tax due is as defined in GS 105-120(d2) (was, $35). Deletes language that stated that when the amount of tax produced pursuant to GS 105-120.2(b1) is less than the tax produced pursuant to GS 105-120.2(b2), then the tax will be levied at a rate of $1.50 per $1,000. Deletes the repeal of GS Chapter 105, Article 3. Deletes the effective date of January 1, 2018, for the above changes.

    Amends GS Chapter 105, Article 3E, changing the title to Work Force Housing Construction Loan Program (was, Low Income Housing Tax Credits).

    Amends GS 105-129.42(a), concerning credit for low‑income housing, adding a new definition for development tier, providing that it is considered a classification assigned to an area pursuant to GS 143B-437.08.

    Amends GS 105-129.42(b) to allow a credit to a taxpayer who is allocated a federal low-income housing tax credit under section 42 of the Code to construct or substantially rehabilitate a qualified North Carolina low-income housing development that is located in a development tier one or two area. Further provides that the amount of the credit is equal to a percentage of the development's qualified basis as determined to section 42 of the Code and limited as follows: taxable year 2014-- 100%, 2015--75%, 2016--50%, and 2017--25%.

    Amends GS 105-129.45, the sunset provision for the low income housing tax credits, changing the repeal effective date to January 1, 2018, (was, January 1, 2015). Effective for developments to which federal credits are allocated on or after January 1, 2018 (was, January 1, 2015).

    Amends GS 105-131.7(a), concerning an S Corporation's tax return, providing that the return is due on or before the 15th day of the 4th month following the close of its income year. An income year ending on any day other than the last day of the month is considered to end on the last day of the calendar month ending nearest to the last day of a taxpayer's actual income year. Effective January 1, 2018.

    Amends GS 105-164.3, concerning definitions for use in the administration of sales and use tax, expanding the definition of major recycling facility and adding a new term and definition for recycling facility. These changes are effective January 1, 2018.

    Amends GS 105-164.13(50), concerning exemptions from the retail sales and use tax, providing that specified percentages of the sales price of tangible personal property sold through a coin-operated vending machine, other than tobacco, are exempt from sales and use tax in the decreasing amounts outlined in the table covering 2013-2016 included in the subsection.

    Amends new section GS 105-164.13E, Exemption for farmers, specifying that exempted specified personal property, digital property, and services are only exempt when used in the cultivating, harvesting, or curing of farm crops or in the production of dairy products, eggs, or animals (previously, stated they only had to be used in "farming" to be exempt). Makes technical and conforming changes.  Deletes previously specified tobacco items that were exempt in the previous edition.

    Amends the effective date for Section 6.4, concerning privilege and sales tax, changing it to July 1, 2014 (was, October 1, 2014).

    Amends GS 105-164.3(43), concerning definitions for use in the administration of sales and use tax, providing that the University of North Carolina Health Care System is included in the definition of a state agency.

    Amends GS 105-164.14(b) to provide that the aggregate annual refund amount allowed for a nonprofit under the subsection (concerning nonprofits and hospital drugs) for a fiscal year may not exceed $7.5 million beginning July 1, 2014; $5 million beginning July 1, 2015; $ 3.5 million (was, $1 million) beginning on or after July 1, 2016; and $2 million (was, $100,000) beginning on or after July 1, 2017.

    Amends GS 105-467(b), concerning state exemptions and exclusions, changing the aggregate local refund amount to a nonprofit for a fiscal year to $3 million (was, $2.25 million) beginning July 1, 2014; $2 million (was, $1.5 million) beginning July 1, 2015; $1.5 million (was, $300,000) beginning July 1, 2016; and $850,000 (was, $30,000) beginning July 1, 2017.

    Amends GS 105-164.14C, Phaseout of sales tax preferences, changing the schedule for the refund amount allowed, which is a percentage of sales and use taxes paid during the fiscal year, whereby the percentage is decreased from 80% to 20% from 2014 through 2017 (was, 75% to 25% from 2014 to 2016). Deletes certain specified types of containers and certain tobacco parts and accessories from the list of items for which farmers can receive an annual refund of sales and use taxes, if the farmer is qualified under GS 105-164.14E for such exemptions, and adds a bulk tobacco banner rack and related items. Provides that cable service providers cannot receive a refund for cable. Deletes a provision which allowed a manufacturer, producer, or retailer a refund on packaging items.

    Restores GS 105-164.13(1a) and (23)a, provisions regarding tax exemptions for specified items which were deleted in the previous edition.

    Amends the effective date for Section 7.5 (previously, Section 11.2 in the 4th edition), concerning exemptions and refunds, to be July 1, 2018 (was, July 1, 2018).

    Amends GS 105-164.14A, Economic incentive refunds, providing that subsection (a)4, concerning refunds for the purchase of aviation fuel, will be repealed for purchases made on or after July 1, 2014 (was, January 1, 2014).

    Amends GS 105-164.15A, Effective date of tax changes on services and items taxed at combined general rate, providing that for an item, taxable at the combined rate, and billed on a monthly or periodic basis, the change applies to the first billing period that is at least 30 days after enactment and starts on or after the effective date.

    Deletes effective date clause for Section 8.4 (was Section 7.1 in the previous edition).

    Amends GS 105-164.4, tax imposed on retailers, providing that admission charges received for a motion picture or film are subject to a tax (was, movie) and deletes language that previously levied taxes on admission charges received for museums, cultural sites, gardens, exhibits, shows, or similar attractions.

    Amends GS 105-164.13, Retail sales and use tax, providing that admission charges for a state attraction are also exempted from the tax imposed by this article.

    Amends GS 105-164.4(a)(9), providing that effective July 1, 2014, there will be taxes levied on admission charges received for museums, cultural sites, gardens, exhibits, shows, or similar attractions.

    Amends GS 105-164.3, concerning definitions for use in the administration of sales and use tax, adding the term and definition for service contract, which means a warranty agreement, a maintenance agreement, a repair contract, or a similar agreement or contract by which the provider agrees to maintain or repair tangible personal property.

    Amends GS 105-113.21, Refund, and GS 105-113.39, Refund, making technical changes.

    Provides that notwithstanding GS 105-449.80(a), for the period September 1, 2013, through June 30, 2014, the motor fuel excise tax rate may not exceed 37 1/2¢ per gallon.

    Directs the Revenue Law Study Committee to study six specified tax issues, including the feasibility of expanding the sales tax base to include additional services and the simplification of the franchise tax base calculation and the elimination of the franchise tax. The report is to be submitted to the 2014 Regular Session of the 2013 General Assembly when it convenes.

     

     


  • Summary date: Jul 1 2013 - More information

    Senate committee substitute to the 4th edition is to be summarized.


  • Summary date: Jun 13 2013 - More information

    Senate committee substitute makes the following changes to the 3rd edition.

    Changes the long title.

    Deletes Part I, General Findings and Intent, from the previous edition.

    Part I, Individual Income Tax Changes (new)

    Recodifies numerous statutes.

    Current Statute            Recodified Statute

    GS 105-133               GS 105-153.1

    GS 105-134               GS 105-153.2

    GS 105-134.1            GS 105-153.3

    GS 105-134.5            GS 105-153.4

    GS 105-151               GS 105-153.9

    GS 105-151.24           GS 105-153.10

    GS 105-152               GS 105-153.8

    The following statutes are repealed:

    GS 105-134.2,   Individual income tax imposed.

    GS 105-134.3,  Year of assessment.

    GS 105-134.6,  (Effective for taxable years beginning before January 1, 2012) Adjustments to taxable income.

    GS 105-134.7,  Transitional adjustments.

    GS 105-134.8,  Inventory.

    GS 105-151.1 and GS 105-130.22, Tax credit for construction of dwelling units for handicapped persons.

    GS 105-151.11,  Credit for child care and certain employment-related expenses.

    GS 105-151.12 and GS 105-130.34, Credit for certain real property donations.

    GS 105-151.13 and GS 105-130.36, Credit for conservation tillage equipment.

    GS 105-151.14 and GS 105-130.37, Credit for gleaned crop.

    GS 105-151.18, Credit for the disabled.

    GS 105-151.20, Credit or partial refund for tax paid on certain federal retirement benefits.

    GS 105-151.21, Credit for property taxes paid on farm machinery.

    GS 105-151.25 and GS 105-130.44, Credit for construction of a poultry composting facility.

    GS 105-151.26,  (Effective for taxable years beginning before January 1, 2012) Credit for charitable contributions by nonitemizers.

    GS 105-151.33, Education expenses credit.

    Amends GS 105-134.1, recodified by this act at GS 105-153.3 (Definitions), deleting the term and definition for retirement benefits.

    Amends GS Chapter 105 by creating a new section GS 105-153.5 (Modifications to adjusted gross income), providing that in calculating NC taxable income, a taxpayer must deduct any of eight items that are included in the taxpayer's adjusted gross income, including amounts received from retirement annuities or pensions paid under the provisions of the Railroad Retirement Act of 1937 or the amount received during the taxable year from one or more state, local, or federal government retirement plans to the extent the amount is exempt from tax.

    Specifies five items that taxpayers must add to their adjusted gross income if not already included, including (1) the amount excluded from gross income under section 199 of the Code; (2) interest on the obligations of other states, political subdivisions of those states, or agencies; (3) the amount required to be added under GS 105-153.6 when the state decouples from federal accelerated depreciation and expensing.

    Creates new GS 105-153.7 (Individual income tax imposed), establishing that a tax is charged for each taxable year on the NC taxable income of an individual. The tax is 5.4% of NC taxable income that exceeds the zero tax brackets for the taxpayer's filing status. Includes a table demonstrating the zero tax brackets, (pg. 5 of bill), for all filing statuses. Specifies the Secretary of Revenue (Secretary) can provide tables that compute amount of tax due for a taxable year under this section.  Tables will not apply to individuals filing a return under section 443(a)(1) of the Code for a period of less than 12 months, due to accounting periods, estates, or trusts.

    Provides Section 1.1 will become effective for taxable years beginning on or after January 1, 2014.

    Amends GS 105-153.7(a), providing that the individual income tax will be 5.25%, effective for taxable years beginning on or after January 1, 2015.

    Amends GS 105-153.8 (Income tax returns) (previously G.S. 105-152), making technical, conforming, and clarifying changes. Provides that anyone whose taxable income exceeds the zero tax brackets must file an income tax return.  Clarifies that nonresidents who have received gross income from NC sources, including gambling, are required to file a return for the taxable year under the Code.

    Provides that if a taxpayer is deceased or unable to file a return, an authorized agent or guardian must file the return.  If the taxpayer has died before making the return, the administrator or executor of the estate must file the return and any tax due is payable by the estate. Replaces "taxable income" with "adjusted gross income" and all instances of "shall" with "must."

    Amends GS 105-153.9 (Tax Credits for income taxes paid to other states by individuals) (previously, GS 105-151), making conforming and technical changes. Amends GS 105-153.9(a)(2), to read The fraction of the adjusted gross income as modified in GS 105-153.5 (previously, The fraction of the gross income, as calculated under the Code and adjusted as provided in GS 105-134.6 and GS 105-134.7). Provides that the changes to the above two sections become effective for taxable years beginning on or after January 1, 2014.

    Updates statutory references in GS 105-131.2, GS 105-131.5, GS 105-131.7, GS 105-131.8, and GS 105-154. Makes clarifying changes. Amends GS 105-163.1 to update statutory references and remove the amount of severance wages paid to an employee during the taxable year that are exempt from state income tax for that year to those items excluded from the definition of wages. Amends GS 105-163.22 to update statutory references.  Amends GS 105-309(d) to delete the requirement that personal property be listed to indicate which property is subject to a tax credit under GS 105-151.21 (Credit for property tax paid on farm machinery). Repeals GS 105-320(a)(16), which removes the requirement that a tax receipt form show the total assessed value of farm machinery, attachments, and repair parts of individual owners and S corporations engaged in farming subject to the income tax credit in GS 105‑151.21 and the amount of ad valorem taxes due on farm machinery, attachments, and repair parts subject to that credit. Amends GS 110-130.1(a) to update the definition of the term Code. Provides that the above changes are effective January 1, 2014.

    Amends GS 105-277.3(d1) to provide that property that is appraised at its present use value will continue to qualify for appraisal, assessment, and taxation as provided in specified statutes, as long as the property is subject to a conservation easement that meets the property eligibility requirements under GS 113A-232. Amends GS 113-77.9 to remove references to GS 105-151.12 and GS 130.34. Amends GS 113A-231, GS 113A-232, and GS 113A-233 to remove references to the conservation tax credits. Further amends GS 113A-232 to add to the eligibility requirements for the Conservation Grant Fund that the property must be (1) useful for one or more of seven specified purposes including public beach access or use, forestland or farmland conservation, or watershed protections or (2) donated in perpetuity to and accepted by the state or a local government or a body that is organized to receive and administer lands for conservation purposes and qualified to receive charitable contributions (disqualifies land required to be dedicated under local government regulation or ordinance and dedications made to increase building density levels).  Repeals GS 113A-256(g), deleting the power of the Clean Water Management trustees to determine whether land donated for a tax credit under specified statutes may be certified for a tax credit. The above changes are effective January 1, 2014.

    Deletes Part II, Simple Flat Tax Rate for Individual Income Tax, included in the previous edition. Also deletes changes made to GS 105-134.2, Individual income tax imposed; GS 105-134.6, Modifications to adjusted gross income; GS 105-151.24(a), concerning child tax credits; and GS 105-160.2, Imposition of tax.

    Part II, Phased Elimination of the Corporate Income Tax

    Amends GS 105-130.3 (Corporations), reducing the tax imposed on the state net income of a C Corporation doing business in North Carolina over a three year span, beginning in 2014. The rate in 2014 is 6%, decreasing over time to 2% for years after 2016.  Effective for taxable years beginning on or after January 1, 2014.

    Repeals GS 105, Article 4, Part 1, Corporation Income Tax; GS 105, Article 3C, Tax Incentives for Recycling Facilities; and Article 3K, Tax Incentives for Railroad Intermodal Facilities.

    Changes the effective date for changes made to GS 115C-546.1, Creation of Fund; administration, and the repeal of GS 115C-546.2(a) to becoming effective when it becomes law (was, April 1, 2014, for distributions for collections for quarters beginning on or after that date).

    Part III, Business Privilege Tax on Corporations, LLCs, and Other Limited Liability Entities (was, Reduce Corporate Income and Franchise Tax Rates)

    Establishes a privilege tax on business entities for the privilege of doing business in North Carolina in an organizational form that gives limited liability to one or more owners. Payment of the tax is a condition precedent of doing business in North Carolina. Establishes that each owner of a non-corporate business entity doing business in North Carolina is considered to be doing business in North Carolina. Establishes that the tax imposed will be $400 for Income Year 2015, $600 for 2016, and $750 for any year after 2016. Establishes when taxes and returns are due. Provides for an extension of time to file tax returns.  Also states that the president, vice president, treasurer, or chief financial officer must sign the tax return. Provides that the income year of a business entity is the calendar year or fiscal year upon which the basis of the net income is computed for federal income tax purposes. Includes terms and definitions for use in this Article, including business entity, C Corporation, Code, Person, S Corporation, and Secretary. Provides that certain entities are exempt from the privilege tax, including (1) a business entity exempt from federal income tax under section 501 of the Code and (2) an insurance company subject to tax under Article 8B of this Chapter. The above changes are effective for taxable years beginning on or after January 1, 2015, and apply to taxes due in that year or a subsequent year.

    Amends GS 105-129.100(b), providing that the tax for a C Corporation will be $5,000, with the tax for all other business entities set at $750 (previously, the tax was $400 in 2014, $600 in 2015, and $750 after 2015). Amends GS 105-129.101, changing the definition for business entity, establishing, among other types, a domestic corporation organized under GS 55 or a foreign corporation with a certificate of authority, an electric membership corporation organized under GS 117, or any other business whose form provides limited liability to one or more of its owners is considered a business entity. Provides that the above changes become effective for taxable years beginning on or after January 1, 2018, and apply to taxes due in that year or a subsequent year.

    Deletes previous changes made to GS 105-130.3, concerning taxes on corporations. Deletes the new section, GS 105-130.5, adjustments to federal taxable income, and GS 105-130B, concerning adjustments to taxes when the state decouples (included as a new section in the previous edition). Also deletes changes made to GS 105-129.42(a), GS 105-129.42(b), and the repeal of GS 105-129.45, all provided for in Part III of the previous edition.

    Part IV, Phased Elimination of the Franchise Tax (was, Expand Sales Tax Base to Include Services Commonly Taxed in Other States)

    Repeals GS 105-114(a), concerning the nature of the tax imposed by that section, and GS 105-122.1, Credit for additional annual report fees by LLCs. Amends GS 105-125(a), adding S corporations subject to the privilege license tax to the list of corporations exempt from the franchise tax.  Changes above are effective for taxable years beginning on or after January 1, 2015, and apply to taxes due in that year or a subsequent year.

    Amends GS 105-122, concerning the calculation of the franchise or privilege tax on domestic and foreign corporations, to set the rate of the franchise or privilege tax required of every corporation taxed under this section, establishing that the rate set is an amount per $1,000 of the total amount of capital stock, surplus, and undivided profits. The amount for 2015 is $1.20 per $1,000 for 2015, $0.90 per $1,000 for 2016, and $0.60 per $1,000 for 2017. Sets a minimum tax due for each year. Makes conforming changes to GS 105-122(d). Effective for taxable years beginning on or after January 1, 2015.

    Repeals GS 105, Article 3, Franchise tax, effective January 1, 2018.

    Deletes changes made to GS 105-467(b), GS 105-164.13, GS 160A-211 and deletes the previously added new subsections GS 105-164.4, GS 105-164.3(1c), GS 105-164.4(a)(11), and GS 105-164.13(61) and (62).

    Deletes the repeal of GS 105-164.13(13c), GS 105-164.13D, GS 105-37.1, GS 105-38.1, GS 105-40, and GS 105-164.13(49).

    Part V, Eliminate Annual Report Filing Fees

    Amends GS 55-1-22 (Filing, service, and copying fees), deleting references to an annual paper or electronic report in lieu of specifying just an annual report with no fee to submit the report (was, $25 for paper report and $18 for electronic report). Deletes reference to the fee for annual reports being nonrefundable. Amends GS 55-16-22 (Annual report), reorganizing the majority of language through GS 55-16-22(d), providing clarifying language that simplifies and specifies exactly which types of business entities must submit annual reports and the information that must be included in each annual report.  Establishes a firm due date for annual reports, the 15th day of the 4th month following the close of the entity's fiscal year.  Clarifies the requirements and expectations in cases where the Secretary deems an annual report to be incomplete.  Deletes GS 55-16-22(e-h).  Makes technical and conforming changes.

    Amends GS 57C-1-22(a)(25),  GS 59-35.2(a)(18), GS 59-1106(a)(22), changing the associated fees for the required annual reports of these sections to "No fee."

    Repeals GS 105-122.1 (Credit for additional annual report fees paid by limited liability companies subject to franchise tax).

    Amends GS 105-228.90(a), making technical and conforming changes.

    Repeals GS 105-256.1 (Secretary and deputies to administer oath).

    Amends GS 105-259(a), making technical and conforming changes.

    Effective January 1, 2015. Subsection (f) repealing GS 105-122.1 of this section applies to returns due on or after April 15, 2015, for taxable years beginning on or after January 1, 2015. The remaining sections apply to annual reports due on or after January 1, 2015.

    Part VI, Eliminate Archaic State and Local Privilege License Taxes

    Repeals GS 105, Article 2, Privilege Taxes, effective January 1, 2018, and applies as follows:

    (1) For taxes payable under G.S. 105-41, 105-88, or 105-102.3, the section applies to taxes imposed under those statutes for taxable years beginning on or after July 1, 2018. 

    (2) For taxes payable under G.S. 105-102.6, the section applies to taxes due on or after January 31, 2018. 

    (3) For taxes payable under G.S. 105-83, the section applies to obligations dealt in, bought, or discounted on or after January 1, 2018.

    Amends GS 153A-152, deleting a county's general authority to impose privilege license taxes on certain trades, occupations, professions, businesses, and franchises . Prohibits a county from levying a privilege tax on any of those entities carrying out business in that county unless a statute or an act of the General Assembly authorizes the county to do so. Amends GS 160A-211, deleting a city's general authority to impose privilege license taxes on certain trades, occupations, professions, businesses, and franchises. Prohibits a city from levying a privilege tax on any of those entities carrying out business in that city unless a statute or an act of the General Assembly authorizes the city to do so. Effective January 1, 2018, and applies to taxes imposed for fiscal years beginning on or after that date.

    Repeals GS 93-12(12) (requiring the Secretary of Revenue to submit the names of persons who have qualified under this Chapter as certified public accountants and providing that a privilege license issued under GS 105‑41 designates whether it was issued to a certified public accountant or an accountant) and GS 105-259(b)(4) (allowing the disclosing to a governmental agency or an officer of an organized association of taxpayers a list of taxpayers who have paid a privilege license tax). Amends GS 53-165 to make clarifying and technical corrections to the definitions.  Adds a definition of installment paper dealer and amends the definition of loanable assets to mean cash, bank deposits, installment loans, or any combination. Expands the definition of person to also include a group acting as a unit. Amends GS 53-172 to provide that the business of making loans includes acting as an installment paper dealer and collecting a loan made by a government regulated lender. Makes conforming changes.  Amends GS 53-191 to make conforming and technical changes. Amends GS 95-47.2 to amend the reasons for denying a license for operating a private personnel service when the employment agency will be operating on the same premises as specified businesses to include, in addition to a collection agency, a business making loans and taking an assignment of wages as security or any other type of security (was, a loan agency as defined in GS 105-88), a check cashing business, and a pawnbroker business. Amends GS 105-130A.6A to remove the reference to the privilege tax. These changes are effective July 1, 2018.

    Part VII, Electricity and Piped Natural Gas Tax Changes

    Modifies the definition for electric power holding company in GS 105-130.6A to mean a holding company with an affiliate or a subsidiary that is engaged in the business of producing electric power (was, that is subject to the franchise tax on electric power companies levied in GS 105-116).

    Amends GS 160A-211 to provide that certain businesses identified as exempt from a city's license, franchise, or privilege tax (1) are subject to a state tax at the combined general rate for which the city receives a share of the tax revenue or (2) are subject to the local sales tax. Authorizes a city to continue to impose and collect the license, franchise, or privilege taxes on an electric power company that the city imposed and collected before January 1, 1947. Prohibits a city from imposing or collecting any greater franchise, privilege, or license taxes that are greater in the aggregate than the taxes imposed or collected on or before January 1, 1947. Effective July 1, 2014, unless otherwise indicated.

    Amends GS 105-164.44K, Distribution of part of tax on electricity to cities, defining the franchise tax share as the quarterly franchise tax share of a city is the amount of electricity gross receipts franchise tax distributed to the city under repealed GS 105-115.1 for the same related quarter that was the last quarter in which taxes were imposed on electric power companies under repealed GS 105-116. Deletes language concerned with the recalculation of the franchise tax share of a city every five years.

    Amends GS 105-164.44L, providing that the quarterly excise tax share of a city that is not a gas city is the amount of piped natural gas excise tax distributed to the city under repealed GS 105-187.44 for the same related quarter that was the last quarter in which taxes were imposed on  piped natural gas. Adds language that the Secretary must determine the excise tax share of a gas city and divide that amount by four to calculate the quarterly distribution amount for a gas city.

    Part VIII, Eliminate Sales Tax Special Exemptions

    Repeals the following subdivisions of GS 105-164.13 to delete the exemptions for certain property and services: (13c), nutritional supplements sold by a chiropractor to patients as a part of treatment; (27), meals and food products served to students in dining rooms regularly operated by state or private educational institutions or student organizations; (27a), bread, rolls, and buns sold at a bakery thrift store; (28), sales of newspapers by street vendors, door-to-door carriers, and vending machines; and (50) 50% of the sales price of tangible property, other than tobacco, sold through a coin-operated vending machine. Also repeals GS 105-164.13C (sales and use tax holiday) and GS 105-164.13D (sales and use tax holiday for Energy Star-qualified products). Effective July 1, 2014.

    Repeals the following statutes under Article 2 (Privilege Tax) of The Revenue Act (Subchapter I of GS Chapter 105) having to do with admissions, ticket sales, and licensing: GS 105-37.1, 105-38.1, and 105-40. Amends GS 105-164.4 to apply the 4.75% privilege tax on admission charges to the following entertainment activities: a live performance or other live event; a movie; and a museum, cultural site, garden, exhibit, show, or similar attraction or a guided tour at any of these attractions. Provides that an admission charge includes a charge for a single ticket, a multi-occasion ticket, a seasonal pass, an annual pass, and a cover charge, but does not include a charge for amenities. Includes provisions concerning the resale of a ticket. Amends GS 105-164.13 to exempt the admission charges to the following recreational or entertainment activities from sales tax: a school-sponsored event held at an elementary or secondary school; a commercial agricultural fair meeting the requirements of GS 106-520.1; a festival or recreational entertainment activity sponsored by a nonprofit that lasts no more than seven days where the proceeds are used for the entity's nonprofit purposes; and a youth athletic contest sponsored by a nonprofit. Repeals the following statutes: GS 106-507 (exempting county societies from state and local taxes on exhibits, shows, attractions, and amusements), GS 106-516 through GS 106-520 (related to licensing and permits for agricultural fair vendors and exhibitors and carnival permits), GS 140-10.1 (exempting the North Carolina Symphony Society from all privilege license and gross receipts taxes), and GS 105-164.9 (prohibiting a retailer from offering to absorb the sales tax). Amends GS 105-164.10 to remove provisions concerning rate tables for the general rate, preferential rate, and combined state and local rates, requiring instead that the a separate table be issued for each rate of tax that may apply to a sale. Effective October 1, 2013, and applies to admissions purchased on or after that date. The tax applies to the initial sale or resale of tickets occurring on or after that date for admissions to a live event; receipts received on or after October 1, 2013, for admission to a live event for which the initial sale of tickets occurred before that date are taxable under GS 105-37.1.

    Repeals GS 105-164.14(c) regarding refunds of sales and use tax on specified purchases to certain governmental entities. Amends GS 105-164.14(b) to provide that the aggregate annual refund amount allowed for a nonprofit under the subsection (concerning nonprofits and hospital drugs) for a fiscal year may not exceed $7.5 million beginning July 1, 2014; $5 million beginning July 1, 2015, $1million beginning on or after July 1, 2016, and $100,000 beginning on or after July 1, 2017. Amends (d) to bar refunds applied for more than one year (was, three years) after the due date. Amends GS 105-467(b) to provide that the state exemptions and exclusions in GS 105-164.13 apply to the local sales and use tax authorized to be levied and imposed under the Article. Adds that the refund provisions in GS 105-164.14 through GS 105-164.14B apply to the local sales tax authorized to be levied and imposed under the Article. Limits the aggregate local refund amount to a nonprofit for a fiscal year to $2.25 million beginning July 1, 2014; $1.5 million beginning July 1, 2015; $300,000 beginning on or after July 1, 2016, and $30,000 beginning on or after July 1, 2017. Also amends the statute to bar refunds applied for more than one year (was, three years) after the due date. Applies to purchases made on or after July 1, 2014.

    Amends GS 105-164.4 to apply the 4.75% privilege tax rate on the sales price of manufactured homes sold at retail (was, 2%) and deletes the $300 tax cap as well as the provision making each section of a manufactured home that is transported separately to a site where it is to be erected as a separate article. Also applies the 4.75% privilege tax rate to the sales price of each modular home sold at retail (was, 2%). Repeals GS 105-164.44G requiring distribution of part of the tax on modular homes to the county of residence. Amends GS 105-467 to provide that the sales tax does not apply to manufactured homes or modular homes. Effective October 1, 2014, and applies to sales made on or after that date.

    Part IX, Eliminate Sales Tax on Food and Authorize Counties to Levy a Local Sales Tax on Food

    Amends GS 105-483  and GS 105-498 to provide that a tax under Article 40 (First One-Half Cent (1/2¢) Local Government Sales and Use Tax) or Article 42 (Second One-Half Cent (1/2¢) Local Government Sales and Use Tax) does not apply to the sales price of food that is exempt from tax under GS 105-164.13B or to the sales price of a bundled transaction taxable under GS 105-467(a)(5a). Effective November 1, 2014, and applies to sales made on or after that date. Amends GS 105-164.13 to exempt food from the tax, but does not exempt dietary supplements, food sold in a vending machine, prepared food, soft drinks, and candy. Repeals GS 105-164.13B, amends GS 105-467(a), and amends GS 105-469(a) to repeal the local sales tax on food. Effective November 1, 2014, and applies to sales made on or after that date.

     

    Enacts new Article 47, Local Government Sales and Use Tax on Food. Allows a county board of commissioners to levy local sales and use taxes on food by resolution, only if a majority of those voting in a referendum vote to approve the levy. Also allows the board, if no election has been held within five years where the tax was defeated, to impose and levy the tax on food, after at least 10 days' public notice and a public hearing, to the same extent and with the same effect as if the levy had been approved in an election. Sets the rate of the local sales and use tax on food as the sum of the rates of the local sales and use taxes authorized and levied by the county. Requires the Secretary of Revenue to divide and distribute the funds between the county and the cities located in the county. Prohibits a city from receiving funds if it was incorporated with an effective date of on or after January 1, 2000, and is disqualified from receiving funds under GS 136-41.2. Prohibits cities from receiving funds  if incorporated on or after January 1, 2000, unless a majority of the mileage of its streets are open to the public. Effective January 1, 2015.

    Part X, Sales Tax Preferences for Farmers

    Enacts new GS 105-164.13E to exempt specified personal property, digital property, and services from the sales and use tax if they are puchased by a farmer and used for farming. A farmer qualifies if the farmer has an annual gross income of $10,000 or more from farming operations for the preceding calendar year. Defines farmer for the purposes of the statute. Exempted items include fuel and electricity; farm machinery, attachment and repair parts for farm machinery and lubricants applied to farm machinery; and specified tobacco items. Repeals GS 105-164.13(1), (1b), (2a), (4a), and (4d), which are exemptions incorporated into the new GS 105-163.13E. Effective July 1, 2014, and applies to sales made on or after that date.

    Part XI, Phased Elimination of Various Sales Tax Exemptions and Refunds

    Enacts new GS 105-164.14C to set out a schedule for the refund amount allowed, which is a percentage of sales and use taxes paid during the fiscal year, whereby the percentage is decreased from 75% to 25% from 2014 through 2016. Allows an annual refund of sales and use taxes for famers  who purchase specified items and who qualify for a sales tax exemption under GS 105-164.14E, persons engaged in commercial logging on specified items, wood chippers meeting specified requirements, specified packaging items, telephone companies, radio or television companies, cable service providers, individuals involved in activities related to commercial fishing, commercial laundries and dry cleaners, commercial printers and publishers, railroad companies, and passenger air carries meeting specified requirements and purchasing specified items. Makes a conforming change by deleting the following existing exemptions and refunds that are now included in new GS 105-164.14C: GS 105-164.13 (1a), (4c), (4f), (4g), (5b), (5c), (5d), (9), (10), (11), (23a), and (39). Amends GS 105-467(b) to provide that the amount of a refund allowed under GS 105-164.14C is the same percentage as allowed for a state refund under the statute. Effective July 1, 2014, and applies to sales and purchases made on or after that date. Repeals these changes and the new statute effective July 1, 2017.

    Part XII, Eliminate Estate Tax

    Repeals GS Chapter 105, Article 1A (estate taxes), and makes conforming changes to GS 105-241.10 and GS 105-236(a)(5). Effective January 1, 2013, and applies to the estates of decedents dying on or after that date.

    Part XIII, Deed Stamp Tax Proceeds Credited to General Fund

    Amends GS 105-228.30(b) to require the Department of Revenue to credit the proceeds of the deed stamp tax to the General Fund (was, specified amounts were to go to the Parks and Recreation Trust Fund and the Natural Heritage Trust Fund). Amends GS 113-44.15 to make conforming changes to the Parks and Recreation Trust Fund. Amends GS 114-77.9 to make conforming changes to the Natural Heritage Trust Fund. Effective July 1, 2013, and applies to transfers made on or after that date.

    Part XIV, Scrap Tire Disposal Tax Proceeds Credited to General Fund

    Amends GS 105-187.19(b) to require that 30% of the scrap tire disposal tax proceeds be credited to the General Fund insstead of to the Solid Waste Management Trust Fund, the Scrap Tire Disposal Account, the Inactive Hazardous Sites Cleanup Fund, and to the Bernard Allen Memorial Emergency Drinking Water Fund. Repeals GS 130A-309.63 (Scrap Tire Disposal Account). Enacts new GS 130A-309.64 to allow the Department of Environment and Natural Resources (Department) to make grants to lcoal governments to assist in disposing of scrap tires. Sets out critera that must be included in selecting among grant applicants. Specifies local government eligibility requirements. Allows the Deparment to clean up scrap tire collection sites that are determined to be a nuisance. Sets out reporting requirements. Amends GS 130A-309.06(c) and GS 130A-309.09C(g) to make conforming changes. Requires any tax proceeds remaining in the Scrap Tire Disposal Account as of the effective date of the section must continue to be used for the same purpose and in the same manner as the Account, except the funds in the Account cannot be used for grants to encourage the use of processed scrap tire materials. Effective July 1, 2013.

    Part XV, Repeal Tobacco Discount

    Repeals GS 105-113.21(a1) (distributor discount) and GS 105-113.39(a) (wholesaler or retailer discount), concerning a 2% discount received for filing a timely report and payment under GS 105-113.18. Makes technical changes. Changes effective July 1, 2014 and applies to returns filed for periods beginning on or after that date.

     

     

     

     

     


  • Summary date: Jun 12 2013 - More information

    The Senate committee substitute to the 3rd edition is to be summarized.


  • Summary date: Jun 6 2013 - More information

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

    Part II. Simple Flat Tax Rate for Individual Income Tax

    Repeals GS 105-134.6(b)(22), which provided for a deduction from taxable income in an amount not to exceed $25,000 of net business income the taxpayer receives during the taxable year. Effective for taxable years beginning on or after January 1, 2013.

    Amends GS 105-134.6 to make organizational changes. Makes a technical correction. Clarifies that in determining North Carolina taxable income, a taxpayer may either deduct the standard deduction amount as indicated in this actor the itemized deductions amount. Sets a maximum limit on the itemized deductions amount based on the taxpayer's filing status as follows: (1) married, filing jointly--maximum itemized deductions, $25,000; (2) head of household--maximum itemized deductions, $20,000; (3) single--maximum itemized deductions, $12,500; and (4) married, filing separately--maximum itemized deductions $12,500. Effective for taxable years beginning on or after January 1, 2014.

    Part IV. Expand Sales Tax Base to Include Services Commonly Taxed in Other States

    Amends new subdivisions (61) and (62) to GS 105-164.13 (providing exemptions from the retail sales and use tax for certain tangible personal property, digital property, and services). Exempts from the retail and sales use tax an item or service to maintain orrepair tangible personal property under a service contract, a manufacturer's warranty, or a dealer's warranty if the purchaser of the contract is not charged for the item or the service (was, applied the exemption to an item or service to maintain or repair tangible personal property under a service agreement).Also exempts a service on tangible personal property provided for a transmission, distribution, or other network asset contained on utility-owned land, right-of-way, or easement (was, exempted service on tangible personal property provided for a right-of-way or utility easement). Effective July 1, 2014, and applies to sales made on or after that date.

    Part V. Effective Date

    Deletes the appropriation of $4.5 millionfrom the General Fund to the Department of Revenue for fiscal year 2013-14 for use in implementing the tax reform provisions of this act.Amends section labelsto reflect the deletion.

    Provides that except as otherwise provided, this act is effective when it becomes law.


  • Summary date: Jun 4 2013 - More information

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

    Changes the short and long titles.

    Part I. General Findings and Intent

    Includes four findings in regards to North Carolina's tax structure. Establishes the intent of the legislation, including to initiate comprehensive tax reform and simplify the process of tax preparation and administration.  Provides that the NC General Assembly seeks to phase out the state's reliance on income taxes, increase the state's reliance on consumption taxes, and evaluate the changes made by this act and their impact on the state's revenue structure.

    Part II. Simple, Flat Tax Rate for Individual Income Tax

    Amends GS 105-134.6(b)(22), regarding permissible deductions from taxable income, providing that taxpayers can only deduct an amount not to exceed $25,000 of net business income. In regards to a married couple filing a joint return, where both spouses receive or incur net business income, the maximum deduction applies separately to each spouse's net business income, providing that the couple cannot deduct any amount that exceeds $50,000 of net business income. These changes are effective for taxable years beginning on or after January 1, 2013.

    Amends GS 105-134.2, Individual income tax imposed, abolishing the tiered individual income taxes imposed on NC taxable income in lieu of a flat 5.9% tax on the NC taxable income of every individual payable each year.  Makes conforming changes.

    Amends GS 105-134.6, Modifications to adjusted gross income, repealing GS 105-134.6(a1), dealing with Personal Exemptions, and providing that a taxpayer can deduct either the NC standard deduction; (as amended to $12,000 for married, filing jointly; $9,600 for head of household; $6,000 for single individuals; and $6,000 for married, filing separately) or the itemized deductions allowed for under new subsection GS 105-134.6(a3) for interest paid or accrued with respect to any qualified residence, for property taxes paid on real estate, and for charitable contributions. Provides that in the case of a married couple filing separate returns, a taxpayer may not deduct the standard deduction if the taxpayer or the taxpayer's spouse claims the itemized deductions. Enacts new GS 105-134.6(a3) providing that the allowable itemized deduction is the sum of (1) the amount the taxpayer claims as a deduction for interest paid or accrued during the taxable year with respect to any qualified residence, (2) the amount the taxpayer claimed for charitable contributions deductible for that taxable year, and (3) the amount the taxpayer claimed for state and local property taxes paid on real estate for that taxable year. Repeals GS 105-134.6(b)(11), regarding the deduction of specified severance wages, and GS 105-134.6(b)(22), regarding net business income deductions.

    Amends proposed GS 105-134.6A to require for taxable years before 2012 (was, 2013) that the taxpayer add the required amount (for taking a special accelerated depreciation deduction or for a deduction for a section 179 expense) to the taxpayer's federal taxable income, and for years 2012 (was, 2013) and after, the taxpayer must add the amount to the taxpayer's adjusted gross income. Makes clarifying changes.

    Repeals GS 105-134.6(b)(11), regarding the deduction of specified severance wages, and GS 105-134.6(b)(22), regarding net business income deductions.

    Repeals GS 105-151.26, Credit for charitable contributions by nonitemizers.

    Amends GS 105-151.24(a), providing that taxpayers who are allowed a federal child tax credit under section 24 of the Code will be allowed a credit against state income tax based on the taxpayers adjusted gross income, as amended and set out in table form in the act, in the amount of $125 or $250.

    Amends GS 105-160.2 to provide that the income tax is computed on the amount of the taxable income of the estate or trust that is for the benefit of a resident of this state or for the benefit of a nonresident to the extent that the income is (1) from North Carolina sources and attributable to the ownership of any interest in real or tangible personal property in the state or (2) derived from a business, trade, profession, or occupation carried on in the state. Provides that the itemized deductions amount allowed under GS 105-134.6(a3) is not limited when computing income tax on estates, trusts, and beneficiaries.

    Unless otherwise provided, the provisions of this Part are effective for taxable years beginning on or after January 1, 2014.

    Part III. Reduce Corporate Income and Franchise Tax Rate

    Amends GS 105-130.3 (Corporations), reducing the tax imposed on the state net income of a C Corporation doing business in North Carolina over a five year span, beginning in 2014. The rate in 2014 is 6.5%, decreasing the rate over time to 5.4% for years after 2017 (was, set tax rate schedule  with a rate of 6.9% in the income year beginning after 1999). Effective for taxable years beginning on or after January 1, 2014.

    Amends GS 105-122(d) to set the rate of the franchise or privilege tax required of every corporation taxed under this section at $1.35 per $1,000 (was, $1.50 per $1,000) of the total amount of capital stock, surplus, and undivided profits as provided in this section. Effective for taxable years beginning on or after January 1, 2015 and applies to taxes due in 2015, or a subsequent year.

    Makes clarifying changes to proposed GS 105-130.5B.

    Changes the title of Article 3E of GS Chapter 105 to Work Force Housing Construction Loan Program (was, Low Income Housing Tax Credits). Amends GS 105-129.42 to define the term development tier as the classification assigned to an area under GS 143B-437.08. Amends GS 105-129.42(b) to allow a credit to a taxpayer who is allocated a federal low-income housing tax credit under section 42 of the Code to construct or substantially rehabilitate a qualified North Carolina low-income housing development that is located in a development tier one or two area (previously did not require that the development be located in a development tier one or two area). Repeals GS 105-129.45, which sunsets the low income housing tax credits on January 1, 2015. Effective for taxable years beginning on or after January 1, 2014.

    Amends GS 115C-546.1 to delete requirement that the Secretary of Revenue (Secretary) quarterly remit a specified fraction of the net collections received in the previous quarter by the Department of Revenue, under GS 105-130.3, to the State Treasurer for credit to the Public School Building Capital Fund. Makes a conforming change, repealing GS 115C-546.2(a), which allowed the State Board of Education to allocate annually $1 million of the monies credited to the Public School Building Capital Fund by the Secretary to the Department of Public Instruction. Effective April 1, 2014, and applies to distributions for collections or quarters beginning on or after that date.

    Part IV. Expand Sales Tax Base to Include Services Commonly Taxed in Other States

    Repeals GS 105-164.13(13c) (exempting nutritional supplements sold at a chiropractic office to patients from the sales and use tax) and GS 105-164.13D (sales and use tax holiday for Energy Star qualified products). Makes conforming changes to GS 105-467(b). Effective July 1, 2013, and applies to sales made on or after that date.

    Repeals GS 105-37.1 (privilege tax on live entertainment and ticket resale), GS 105-38.1 (privilege tax on motion picture shows), and GS 105-40 (certain exhibitions, performances, and entertainments exempt from tax).

    Amends GS 105-164.4(a), adding a new subdivision specifying that the general rate of tax applies to admission charges for the following activities: (1) a live performance or other live event of any kind; (2) a movie; or (3) a museum, a cultural site, a garden, an exhibit, a show, or a similar attraction or a guided tour at any of these attractions. Clarifies what constitutes an admissions charge and determining the tax on an admission ticket that is resold. Amends GS 105-164.13 by adding a new subdivision (60) to identify exhibitions, performance, entertainments, and other amusements that are exempt from the sales and use tax imposed under GS Chapter 105, Article 5. Moves most of the provisions that were codified in GS 105-40 to new subdivision (60) (excluding provision exempting entertainment or amusements offered or given on the Cherokee Indian reservation and meeting certain specified criteria). Effective October 1, 2013, and applies to admissions purchased on or after that date. Provides that for admissions to a live event, the tax applies to the initial sale or resale of tickets occurring on or after that date; gross receipts received on or after October 1, 2013, for admission to a live event, for which the initial sale of tickets occurred before that date, other than gross receipts received by a ticket reseller, are taxable under GS 105-37.1.

    Repeals the following: (1) GS 105-116, franchise or privilege tax on electric power, water, and sewage companies; (2) GS 105-116.1, distribution of gross receipts taxes to cities; (3) GS 105-164.21A, deduction for municipalities that sell electric power; (4) GS 159B-27(b), (c), (d), and (e), regarding certain payments by municipalities in lieu of an annual franchise or privilege tax. Applies to taxes due in the 2014 tax year or a subsequent year. Also repeals GS 105-164.4(a)(1f) and (a)(4a), tax rates on the sale of electricity; GS 105-164.13(44), exempting piped natural gas from the Article  sale and use tax; and Article 5E of GS Chapter 105, Piped Natural Gas Tax. Amends GS 105-164.4(a) to provide that the combined general rate applies to the gross receipts derived from sales of electricity and piped natural gas. Effective when the act becomes law, directs the Utilities Commission to diffuse the rate set for the following utilities: (1) electricity, to reflect the repeal of GS 105-116 and the resulting tax liability of electric power companies, and (2) piped natural gas, to reflect the repeal of Article 5E of GS Chapter 105, the repeal of the credit under GS 105-422(d1), and tax liability under GS 105-164.4. Enacts new GS 105-164.44K to require that cities receive 44% of the net proceeds of the tax collected on electricity. Provides that each city's share of the amount is its franchise tax share, as calculated under the statute's provisions, plus its ad valorem share, as calculated under the statute's provisions. Provides that the Department's determination as to a city's franchise tax share is final and not subject to administrative or judicial review. Enacts new GS 105-164.44L requiring that 20% of the net proceeds of the tax on piped natural gas be distributed to the cities. The city's share is its excise tax share, as calculated under the statute's provisions, plus its ad valorem share, as calculated under the statute's provisions. Provides that the Department's determination as to a city's franchise tax share is final and not subject to administrative or judicial review. Amends GS 160A-211 to provide that certain businesses identified as exempt from a city's license, franchise, or privilege tax (1) are subject to a state tax at the combined general rate for which the city receives a share of the tax revenue or (2) are subject to the local sales tax. Authorizes a city to continue to impose and collect the license, franchise, or privilege taxes on an electric power company that the city imposed and collected before January 1, 1947. Prohibits a city from imposing or collecting any greater franchise, privilege, or license taxes that are greater in the aggregate than the taxes imposed or collected on or before January 1, 1947. Effective July 1, 2014, unless otherwise indicated.

    Amends GS 105-164.3 to add definitions for the following services on tangible personal property and amends GS 105-164.4(a) to provide that the general rate of tax applies to those services: (1) alteration, repair, maintenance, cleaning, and installation services and (2) service contracts. Repeals GS 105-164.13(49), which provides an exemption from the sales and use tax for certain installation charges. Amends GS 105-164.13 to provide exemptions from sales and use tax for (1) items or services used to maintain or repair tangible personal property under a service agreement if the purchaser is not charged for the item or service and (2) service on tangible personal property described in GS 105-164.4(a)(11) and provided for an item exempt from tax under the Article, a newly constructed building or structure, or a right of way or utility easement. Effective July 1, 2014, and applies to sales made on or after that date.

    Makes additional organizational changes to the provisions of this act.

    Part V. Effective Date

    Provides that this act does not affect the rights of the state, a taxpayer, or another person arising under a statute before the effective date of the amendment or repeal as indicated in this act. Also provides that this act does not affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal.

    Amends GS 105-237.1 to allow the Secretary of Revenue to compromise a taxpayer's liability for a tax when it is in the state's best interest and the taxpayer is a retailer or a person under Article 5 of GS Chapter 105, the assessment is for sales or use tax the retailer did not collect or the person did not pay on an item taxable under GS 105-164.4(a)(9) or (a)(11), and the retailer or person made a good faith effort to comply with the tax laws. Expires for assessments issued after July 1, 2020.

    Except as otherwise provided, this act is effective when it becomes law.


  • Summary date: Apr 18 2013 - More information

    Amends Part I (Corporation Income Tax)of GS Chapter 105, Article 4,by creating new section GS 105-153.6 (Adjustments when State decouples from federal accelerated depreciation and expensing), providing a special accelerated depreciation clause, which specifies that placing certain property into use and taking a special accelerated depreciation requires that taxpayer to add to the taxpayer's federal taxable income or adjusted gross income 85% of the amount taken for that year.

    Taxpayer is allowed 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 a table which indicates applicable periods.Specifies a 2009 Depreciation Exception, relating to property placed in service during the 2009 taxable year and whose taxable income reflects a special accelerated depreciation deduction. Provides that for this subdivision, the definition of section 179 property has the same meaning as section 179 of the Code as of January 2011. A taxpayer placing section 179 property into service during a taxable year will have to add to the taxpayer's taxable income85% ofthe amount by which the taxpayer's expense deduction under section 179of the Code exceeds the amount that would have been allowed for that taxable year under section 179 of the Code as of May 1, 2010.

    Also amends Part 2 (Individual Income Tax) of GS Chapter 105, Article 4 by creating new section GS 105-134.6A that is identical to the provisions of new section GS 105-153.6 (1) except that it applies to individual income tax instead of corporation income tax, and (2) provides that placing certain property into use and taking a special accelerated depreciationrequiring thetaxpayer to add to the taxpayer's federal taxable income or adjusted gross income 85% of the amount taken for that year, necessitates that for taxable years before 2013, the amount must be added to the taxpayer's federal taxable income. For years after 2013, the amount must be added to the taxpayer's adjusted gross income.

    Amends GS 105-130.5(a) to provide that the amount required to be added under GS 105-130.5B when the state decouples from federal accelerated depreciation and expensing is an addition to be made to federal tax income in determining state net income.

    Amends GS 105-130.5(b) to add as a deduction from federal taxable income to determine state net income, the amount allowed as a deduction under GS 105-130.5B as a result of an add-back for federal accelerated depreciation and expensing.

    Amends GS 105-134.6(b) to provide for the following deduction in calculating North Carolina taxable income, to the extent each item is included in taxable income: the amount allowed as deduction under GS 105-134.6A as a result of an add-back for federal accelerated depreciation and expensing.

    Amends GS 105-134.6(c) to provide that the following additions to taxable income are to be made in calculating North Carolina taxable income, to the extent that each item is not included in taxable income: the amount required to be added under GS 105-134.6A when the state decouples from federal accelerated depreciation and expensing.

    Makes conforming changesrepealing the following subdivisionsto GS 105-130.5(a), additions to federal taxable income to be made in determining state net income: (15), (15a), (15b), (23), and (23a). Also repeals the following subdivisions to GS 105-130.5(b), deductions from federal taxable income to be made in determining state net income: (21), (21a), (21b), (26), and (26a).

    Makes conforming changes, deleting GS 105-134.6(b)(17), (17a), (17b), (21), and (21a), subsections concerning allowable deductions in calculating North Carolina taxable income.

    Makes conforming changes, deleting GS 105-134.6(c)(8),(8a), (8b), (15), and (15a), subsections concerning required additions to income in calculating North Carolina taxable income.


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