A BILL TO BE ENTITLED AN ACT TO SIMPLIFY THE NORTH CAROLINA TAX STRUCTURE AND TO REDUCE INDIVIDUAL AND BUSINESS TAX RATES.
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.
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