AN ACT TO ALLOW SMALL BUSINESSES TO ELIMINATE STATE INCOME TAXES ON A PORTION OF REVENUE IF USED FOR CAPITAL EXPENDITURES.
Enacts a new allowable deduction in calculating a taxpayer's adjusted gross income under GS 105-153.5. Permits deduction of the amount deposited during the taxable year by the taxpayer that is a small business, defined as a business whose cumulative gross receipts from business activity for a taxable year does not exceed $10 million, to a capital improvement account, limited to deposits of 5% of the taxpayer's adjusted gross income up to $1 million, 2% of the taxpayer's adjusted gross income above $1 million up to $2 million, and 1% of the taxpayer's adjusted gross income above $2 million up to $3 million. Defines capital improvement account as an account at a federally insured banking institution into which are deposited amounts to be used solely for an improvement that adds value to real property owned and used exclusively by the small business, prolongs the useful life of such property at least 10 years, or adapts such property to new uses for the small business. Requires adding the amount deducted pursuant to this new provision in a prior taxable year, to the taxpayer's adjusted gross income, to the extent the amount was withdrawn and not used to pay for improvements listed. Effective for taxable years beginning on or after January 1, 2022.