Chapter 105.

Taxation.

SUBCHAPTER I. LEVY OF TAXES.

§ 105‑1.  Title and purpose of Subchapter.

The title of this Subchapter shall be "The Revenue Act." The purpose of this Subchapter shall be to raise and provide revenue for the necessary uses and purposes of the government and State of North Carolina during the next biennium and each biennium thereafter, and the provisions of this Subchapter shall be and remain in full force and effect until changed by law. It is the policy of this State that as many State taxes as possible be structured so that they are deductible for federal income tax purposes under the Internal Revenue Code. (1939, c. 158, ss. A, B; 1941, c. 50, s. 1; 1983 (Reg. Sess., 1984), c. 1097, s. 1.)

 

§ 105‑1.1.  Supremacy of State Constitution.

The State's power of taxation is vested in the General Assembly. Under Article V, Section 2(1), of the North Carolina Constitution, this power cannot be surrendered, suspended, or contracted away. In the exercise of this power, the General Assembly may amend or repeal any provision of this Subchapter in its discretion. No provision of this Subchapter constitutes a contract that the provision will remain in effect in future years, and any representation made to the contrary is of no effect. (2003‑416, s. 12.)

 

Article 1.

Inheritance Tax.

§§ 105‑2 through 105‑32:  Repealed by Session Laws 1998‑212, s.  29A.2(a), effective January 1, 1999, and applicable to the estates of decedents dying on or after that date.

 

Article 1A.

Estate Taxes.

§ 105‑32.1.  Definitions.

The following definitions apply in this Article:

(1)        Code. – Defined in G.S. 105‑228.90.

(2)        Personal representative. – The person appointed by the clerk of superior court under Chapter 28A of the General Statutes to administer the estate of a decedent or, if no one is appointed under that Chapter, the person required to file a federal estate tax return for the estate of the decedent.

(3)        Secretary. – Defined in G.S. 105‑228.90. (1998‑212, s. 29A.2(b).)

 

§ 105‑32.2.  Estate tax imposed in amount equal to federal state death tax credit.

(a)        Tax. – An estate tax is imposed on the estate of a decedent when a federal estate tax is imposed on the estate under section 2001 of the Code and any of the following apply:

(1)        The decedent was a resident of this State at death.

(2)        The decedent was not a resident of this State at death and owned any of the following:

a.         Real property or tangible personal property that is located in this State.

b.         Intangible personal property that has a tax situs in this State.

(b)        Amount. – The amount of the estate tax imposed by this section is the amount of the state death tax credit that, as of December 31, 2001, would have been allowed under section 2011 of the Code against the federal taxable estate. The tax may not exceed the amount of federal estate tax due under the Code. The federal taxable estate and the amount of the federal estate tax due are determined without taking into account the deduction for state death taxes allowed under Section 2058 of the Code and the credits allowed under sections 2011 through 2015 of the Code.

If any property in the estate is located in a state other than North Carolina, the amount of tax payable depends on whether the decedent was a resident of this State at death. If the decedent was a resident of this State at death, the amount of tax due under this section is reduced by an amount computed by multiplying the credit by a fraction, the numerator of which is the gross value of the estate that has a tax situs in another state and the denominator of which is the value of the decedent's gross estate. If the decedent was not a resident of this State at death, the amount of tax due under this section is an amount computed by multiplying the credit by a fraction, the numerator of which is the gross value of real property that is located in North Carolina plus the gross value of any personal property that has a tax situs in North Carolina and the denominator of which is the value of the decedent's gross estate. For purposes of this section, the gross value of property is its gross value as finally determined in the federal estate tax proceedings.  (1998‑212, s. 29A.2(b); 2002‑87, s. 9; 2002‑126, ss. 30C.3(a), 30C.3(b); 2003‑284, ss. 37A.4, 37A.5; 2003‑416, s. 1; 2004‑170, ss. 1, 4(a), (b); 2005‑144, ss. 8.1, 8.2; 2006‑162, s. 26; 2008‑107, s. 28.17(a).)

 

§ 105‑32.3.  Liability for estate tax.

(a)        Primary. – The tax imposed by this Article is payable from the assets of the estate. A person who receives property from an estate is liable for the amount of estate tax attributable to that property.

(b)        Personal Representative. – The personal representative of an estate is liable for an estate tax that is not paid within two years after it was due. This liability is limited to the value of the assets of the estate that were under the control of the personal representative. The amount for which the personal representative is liable may be recovered from the personal representative or from the surety on any bond filed by the personal representative under Article 8 of Chapter 28A of the General Statutes.

(c)        Clerk of Court. – A clerk of court who allows a personal representative to make a final settlement of an estate without presenting one of the following is liable on the clerk's bond for any estate tax due:

(1)        An affirmation by the personal representative certifying that no tax is due on the estate because this Article does not require an estate tax return to be filed for that estate.

(2)        A certificate issued by the Secretary stating that the tax liability of the estate has been satisfied. (1998‑212, s. 29A.2(b).)

 

§ 105‑32.4.  Payment of estate tax.

(a)        Due Date. – The estate tax imposed by this Article is due when an estate tax return is due. An estate tax return is due on the date a federal estate tax return is due.

(b)        Filing Return. – An estate tax return must be filed under this Article if a federal estate tax return is required. The return must be filed by the personal representative of the estate on a form provided by the Secretary.

(c)        Extension. – An extension of time to file a federal estate tax return is an automatic extension of the time to file an estate tax return under this Article. The Secretary may, in accordance with G.S. 105‑263, extend the time for paying the estate tax imposed by this Article or for filing an estate tax return.

(d)       Obtaining Amount Due. – The personal representative of an estate may sell assets in the estate to obtain money to pay the tax imposed by this Article.

(e)        Administration. – Article 9 of this Chapter applies to this Article. (1998‑212, s. 29A.2(b).)

 

§ 105‑32.5.  Making installment payments of tax due when federal estate tax is payable in installments.

A personal representative who elects under section 6166 of the Code to make installment payments of federal estate tax may elect to make installment payments of the tax imposed by this Article. An election under this section extends the time for payment of the tax due in accordance with the extension elected under section 6166 of the Code. Payments of tax are due under this section at the same time and in the same proportion to the total amount of tax due as payments of federal estate tax under section 6166 of the Code. Acceleration of payments under section 6166 of the Code accelerates the payments due under this section. (1998‑212, s. 29A.2(b).)

 

§ 105‑32.6.  Estate tax is a lien on real property in the estate.

The tax imposed by this Article on an estate is a lien on the real property in the estate and on the proceeds of the sale of the real property in the estate. The lien is extinguished when one of the following occurs:

(1)        The personal representative certifies to the clerk of court that no tax is due on the estate because this Article does not require an estate tax return to be filed for that estate.

(2)        The Secretary issues a certificate stating that the tax liability of the estate has been satisfied.

(3)        For specific real property, when the Secretary issues a tax waiver for that property.

(4)        Ten years have elapsed since the date of the decedent's death. (1998‑212, s. 29A.2(b).)

 

§ 105‑32.7.  Generation‑skipping transfer tax.

(a)        Tax. – A tax is imposed on a generation‑skipping transfer that is subject to the tax imposed by Chapter 13 of Subtitle B of the Code when any of the following apply:

(1)        The original transferor is a resident of this State at the date of the original transfer.

(2)        The original transferor is not a resident of this State at the date of the original transfer and the transfer includes any of the following:

a.         Real or tangible personal property that is located in this State.

b.         Intangible personal property that has a tax situs in this State.

(b)        Amount. – The amount of the tax imposed by this section is the maximum credit for state generation‑skipping transfer taxes allowed under section 2604 of the Code. If property in the transfer is located in a state other than North Carolina, the amount of tax payable is the North Carolina percentage of the credit.

If the original transferor was a resident of this State at the date of the original transfer, the North Carolina percentage is the net value of the property transferred that does not have a tax situs in another state, divided by the net value of all property transferred. If the original transferor was not a resident of this State at the date of the original transfer, the North Carolina percentage is the net value of real property that is located in North Carolina plus the net value of any personal property that has a tax situs in North Carolina, divided by the net value of all property transferred, unless the original transferor's state of residence uses a different formula to determine that state's percentage. In that circumstance, the North Carolina percentage is the amount determined by the formula used by the original transferor's state of residence.

The net value of property that is located in or has a tax situs in this State is its gross value reduced by any debt secured by that property. The net value of all the property in a transfer is its gross value reduced by any debts secured by the property.

(c)        Payment. – The tax imposed by this section is due when a return is due. A return is due the same date as the federal return for payment of the federal generation‑skipping transfer tax. The tax is payable by the person who is liable for the federal generation‑skipping transfer tax. (1998‑212, s. 29A.2(b).)

 

§ 105‑32.8.  Federal determination that changes the amount of tax payable to the State.

If the federal government corrects or otherwise determines the gross estate tax imposed under section 2001 of the Code or the amount of the maximum state death tax credit allowed an estate under section 2011 of the Code, the personal representative must, within six months after being notified of the correction or final determination by the federal government, file an estate tax return with the Secretary reflecting the correct amount of tax payable under this Article. If the federal government corrects or otherwise determines the amount of the maximum state generation‑skipping transfer tax credit allowed under section 2604 of the Code, the person who made the transfer must, within six months after being notified of the correction or final determination by the federal government, file a tax return with the Secretary reflecting the correct amount of tax payable under this Article.

The Secretary must propose an assessment for any additional tax due as provided in Article 9 of this Chapter and must refund any overpayment of tax as provided in Article 9 of this Chapter. A person who fails to report a federal correction or determination in accordance with this section is subject to the penalties in G.S. 105‑236 and forfeits the right to any refund due by reason of the determination. (1998‑212, s. 29A.2(b); 1999‑337, s. 13; 2005‑435, s. 24; 2006‑18, s. 3; 2007‑491, s. 6.)

 

Article 2.

Privilege Taxes.

§ 105‑33.  Taxes under this Article.

(a)        General. – Taxes in this Article are imposed for the privilege of carrying on the business, exercising the privilege, or doing the act named.

(b)        License Taxes. – A license tax imposed by this Article is an annual tax. The tax is due by July 1 of each year. The tax is imposed for the privilege of engaging in a specified activity during the fiscal year that begins on the July 1 due date of the tax. The full amount of a license tax applies to a person who, during a fiscal year, begins to engage in an activity for which this Article requires a license. Before a person engages in an activity for which this Article requires a license, the person must obtain the required license.

(c)        Other Taxes. – The taxes imposed by this Article on a percentage basis or another basis are due as specified in this Article.

(d)       Repealed by Session Laws 1998‑95, s. 2.

(e)        Repealed by Session Laws 1989, c. 584, s. 1.

(f),  (g) Repealed by Session Laws 1998‑95, s. 2.

(h)        Liability Upon Transfer. – A grantee, transferee, or purchaser of any business or property subject to the State taxes imposed in this Article must make diligent inquiry as to whether the State tax has been paid. If the business or property has been granted, sold, transferred, or conveyed to an innocent purchaser for value and without notice that the vendor owed or is liable for any of the State taxes imposed under this Article, the property, while in the possession of the innocent purchaser, is not subject to any lien for the taxes.

(i),  (j) Repealed by Session Laws 1998‑95, s. 2.

(k)        Repealed by Session Laws 1987, c. 190. (1939, c. 158, s. 100; 1943, c. 400, s. 2; 1951, c. 643, s. 2; 1953, c. 981, s. 1; 1963, c. 294, s. 3; 1973, c. 476, s. 193; 1977, c. 657, s. 1; 1981, c. 83, ss. 1, 2; 1985, c. 114, s. 10; 1985 (Reg. Sess., 1986), c. 826, ss. 1, 2; c. 934, s. 3; 1987, c. 190; 1989, c. 584, s. 1; 1989 (Reg. Sess., 1990), c. 814, s. 1; 1991 (Reg. Sess., 1992), c. 981, s. 1; 1993, c. 539, s. 688; 1994, Ex. Sess., c. 24, s. 14(c); 1996, 2nd Ex. Sess., c. 14, ss. 18, 19; 1998‑95, ss. 1, 2.)

 

§ 105‑33.1.  Definitions.

The following definitions apply in this Article:

(1)        City. – Defined in G.S. 105‑228.90.

(1a)      Code. – Defined in G.S. 105‑228.90.

(2)        Repealed by Session Laws 1998‑95, s. 3.

(3)        Person. – Defined in G.S. 105‑228.90.

(4)        Secretary. – Defined in G.S. 105‑228.90. (1991, c. 45, s. 1; 1991 (Reg. Sess., 1992), c. 922, s. 2; 1993, c. 12, s. 3; c. 354, s. 6; 1998‑95, s. 3.)

 

§ 105‑34: Repealed by Session Laws 1979, c.  63.

 

§ 105‑35: Repealed by Session Laws 1979, c.  72.

 

§§ 105‑36 through 105‑37:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑37.1.  (For contingent repeal, see note) Live entertainment and ticket resales.

(a)        Scope. – A privilege tax is imposed on the following:

(1)        The gross admissions receipts of a person who is engaged in providing admission to live entertainment of any kind. Gross admissions receipts under this subdivision do not include charges for amenities. If charges for amenities are not separately stated on the face of an admission ticket, then the charge for admission is considered to be equal to the admission charge for a ticket to the same event that does not include amenities and is for a seat located directly in front of or closest to a seat that includes amenities.

(2)        The gross admissions receipts of a person who is engaged in the business of reselling on the Internet under G.S. 14‑344.1 an admission ticket that is taxable under subdivision (1) of this subsection. If the price of an admission ticket is printed on the face of the ticket, gross receipts under this subdivision exclude the face price. If the price of an admission ticket is not printed on the face of the ticket, the tax under this subdivision applies to the difference between the amount the reseller paid for the ticket and the amount the reseller charges for the ticket.

(3)        Repealed by Session Laws 2010‑31, s. 31.7(a), effective June 30, 2010.

(b)        Rate and Payment. – The rate of the privilege tax imposed by this section is three percent (3%). The tax is due when a return is due. A return is due by the 10th day after the end of each month and covers the gross receipts received during the previous month.

(c)        Advance Report. – A person who owns or controls a live entertainment performance subject to the tax imposed by this section and who plans to bring the performance to this State from outside the State must file a statement with the Secretary that lists the dates, times, and places of the performance. The statement must be filed no less than five days before the first performance in this State.

(d)       Local Taxes. – Cities may levy a license tax on a person taxed under subdivision (a)(1) of this section; however, the tax may not exceed twenty‑five dollars ($25.00). Cities may not levy a license tax on a person taxed under subdivision (a)(2) of this section. Counties may not levy a license tax on a person taxed under this section.  (1939, c. 158, ss. 105, 106; 1943, c. 400, s. 2; 1945, c. 708, s. 2; 1947, c. 501, s. 2; 1963, c. 1231; 1967, c. 865; 1973, c. 476, s. 193; c. 476, s. 193; 1977, c. 657, s. 1; 1981, c. 2; c. 83, s. 3; c. 977; 1985, c. 376; 1985 (Reg. Sess., 1986), c. 819, s. 3; 1987 (Reg. Sess., 1988), c. 1082, s. 1.1; 1989, c. 584, ss. 5, 6; 1989 (Reg. Sess., 1990), c. 814, s. 2; 1991, c. 45, s. 2; 1996, 2nd Ex. Sess., c. 14, s. 20; 1998‑95, ss. 4, 5; 1999‑337, s. 14(a); 1999‑456, s. 26; 2010‑31, s. 31.7(a); 2011‑330, s. 1.)

 

§ 105‑37.2:  Repealed by Session Law 1998‑96, s. 3.

 

 

§ 105‑38:  Repealed by Session Laws 1999‑337, s. 14(b).

 

 

§ 105‑38.1.  Motion picture shows.

(a)        A privilege tax at the rate of one percent (1%) is imposed on the gross receipts of a person who is engaged in the business of operating a motion picture show for which an admission is charged. The tax is due when a return is due. A return is due by the 10th day after the end of each month and covers the gross receipts received during the previous month. If a person offers an entertainment or amusement that includes both a motion picture taxable under this section and an entertainment or amusement taxable under G.S. 105‑37.1, the tax in that statute applies to the entire gross receipts and the tax levied in this section does not apply.

(b)        Repealed by Session Laws 1999‑337, s. 15(a). (1998‑95, s. 5.1; 1999‑337, s. 15(a).)

 

§ 105‑39.  Repealed by Session Laws 1987 (Reg. Sess., 1988), c. 1082, s. 1.)

 

§ 105‑40.  Amusements – Certain exhibitions, performances, and entertainments exempt from tax.

The following forms of amusement are exempt from the taxes imposed under this Article:

(1)        All exhibitions, performances, and entertainments, except as in this Article expressly mentioned as not exempt, produced by local talent exclusively, for the benefit of religious, charitable, benevolent or educational purposes, as long as no compensation is paid to the local talent.

(2)        The North Carolina Symphony Society, Incorporated, as specified in G.S. 140‑10.1.

(3)        All exhibits, shows, attractions, and amusements operated by a society or association organized under the provisions of Chapter 106 of the General Statutes where the society or association has obtained a permit from the Secretary to operate without the payment of taxes under this Article.

(4)        All outdoor historical dramas, as specified in Article 19C of Chapter 143 of the General Statutes.

(5)        All elementary and secondary school athletic contests, dances, and other amusements.

(6)        The first one thousand dollars ($1,000) of gross receipts derived from dances and other amusements actually promoted and managed by civic organizations when the entire proceeds of the dances or other amusements are used exclusively for civic and charitable purposes of the organizations and not to defray the expenses of the organization conducting the dance or amusement. The mere sponsorship of a dance or another amusement by a civic or fraternal organization does not exempt the dance or other amusement, because the exemption applies only when the dance or amusement is actually managed and conducted by the civic or fraternal organization.

(6a)      A youth athletic contest with an admissions price that does not exceed ten dollars ($10.00) sponsored by a person exempt from income tax under Article 4 of this Chapter. For the purpose of this subdivision, a youth athletic contest means a contest in which each participating athlete is less than 20 years of age.

(7)        All dances, motion picture shows, and other amusements promoted and managed by a qualifying corporation that operates a center for the performing and visual arts if the dance or other amusement is held at the center. "Qualifying corporation" means a corporation that is exempt from income tax under G.S. 105‑130.11(a)(3). "Center for the performing and visual arts" means a facility, having a fixed location, that provides space for dramatic performances, studios, classrooms, and similar accommodations to organized arts groups and individual artists. This exemption does not apply to athletic events.

(7a)      All exhibitions, performances, and entertainments promoted and managed by "a nonprofit arts organization." This exemption does not apply to athletic events. A "nonprofit arts organization" is an organization that meets both of the following requirements:

a.         It is exempt from income tax under G.S. 105‑130.11(a)(3).

b.         Its primary purpose is to create, produce, present, or support music, dance, theatre, literature, or visual arts.

(8)        A person that is exempt from income tax under Article 4 of this Chapter and is engaged in the business of operating a teen center. A "teen center" is a fixed facility whose primary purpose is to provide recreational activities, dramatic performances, dances, and other amusements exclusively for teenagers.

(9)        All entertainments or amusements offered or given on the Cherokee Indian reservation when the person giving, offering, or managing the entertainment or amusement is authorized to do business on the reservation and pays the tribal gross receipts levy to the tribal council.

(10)      Arts festivals held by a person that is exempt from income tax under Article 4 of this Chapter and that meets the following conditions:

a.         The person holds no more than two arts festivals during a calendar year.

b.         Each of the person's arts festivals last no more than seven consecutive days.

c.         The arts festivals are held outdoors on public property and involve a variety of exhibitions, entertainments, and activities.

(11)      Community festivals held by a person who is exempt from income tax under Article 4 of this Chapter and that meets all of the following conditions:

a.         The person holds no more than one community festival during a calendar year.

b.         The community festival lasts no more than seven consecutive days.

c.         The community festival involves a variety of exhibitions, entertainments, and activities, the majority of which are held outdoors and are open to the public.

(12)      All farm‑related exhibitions, shows, attractions, or amusements offered on land used for bona fide farm purposes as defined in G.S. 153A‑340.  (1939, c. 158, s. 108; 1998‑95, ss. 5.1, 6; 1998‑96, s. 2; 1999‑337, s. 15(b); 2000‑140, s. 61; 2004‑84, s. 1; 2006‑216, s. 1; 2007‑527, ss. 2, 3(a), (b); 2009‑550, s. 5.1.)

 

§ 105‑41.  Attorneys‑at‑law and other professionals.

(a)        Every individual in this State who practices a profession or engages in a business and is included in the list below must obtain from the Secretary a statewide license for the privilege of practicing the profession or engaging in the business. A license required by this section is not transferable to another person. The tax for each license is fifty dollars ($50.00).

(1)        An attorney‑at‑law.

(2)        A physician, a veterinarian, a surgeon, an osteopath, a chiropractor, a chiropodist, a dentist, an ophthalmologist, an optician, an optometrist, or another person who practices a professional art of healing.

(3)        A professional engineer, as defined in G.S. 89C‑3.

(4)        A registered land surveyor, as defined in G.S. 89C‑3.

(5)        An architect.

(6)        A landscape architect.

(7)        A photographer, a canvasser for any photographer, or an agent of a photographer in transmitting photographs to be copied, enlarged, or colored.

(8)        A real estate broker as defined in G.S. 93A‑2. A real estate broker who is also a real estate appraiser is required to obtain only one license under this section to cover both activities.

(9)        A real estate appraiser, as defined in G.S. 93E‑1‑4. A real estate appraiser who is also a real estate broker is required to obtain only one license under this section to cover both activities.

(10)      A person who solicits or negotiates loans on real estate as agent for another for a commission, brokerage, or other compensation.

(11)      A mortician or embalmer licensed under G.S. 90‑210.25.

(12)      An individual licensed under Article 9F of Chapter 143 of the General Statutes, the Home Inspector Licensure Act.

(b)        The following persons are exempt from the tax:

(1)        A person who is at least 75 years old.

(2)        A person practicing the professional art of healing for a fee or reward, if the person is an adherent of an established church or religious organization and confines the healing practice to prayer or spiritual means.

(3)        A blind person engaging in a trade or profession as a sole proprietor. A "blind person" means any person who is totally blind or whose central visual acuity does not exceed 20/200 in the better eye with correcting lenses, or where the widest diameter of visual field subtends an angle no greater than 20 degrees. This exemption shall not extend to any sole proprietor who permits more than one person other than the proprietor to work regularly in connection with the trade or profession for remuneration or recompense of any kind, unless the other person in excess of one so remunerated is a blind person.

(c)        Every person engaged in the public practice of accounting as a principal, or as a manager of the business of public accountant, shall pay for such license fifty dollars ($50.00), and in addition shall pay a license of twelve dollars and fifty cents ($12.50) for each person employed who is engaged in the capacity of supervising or handling the work of auditing, devising or installing systems of accounts.

(d)       Repealed by Session Laws 1998‑95, s. 7, effective July 1, 1999.

(e)        Licenses issued under this section are issued as personal privilege licenses and shall not be issued in the name of a firm or corporation. A licensed photographer having a located place of business in this State is liable for a license tax on each agent or solicitor employed by the photographer for soliciting business. If any person engages in more than one of the activities for which a privilege tax is levied by this section, the person is liable for a privilege tax with respect to each activity engaged in.

(f)        Repealed by Session Laws 1981, c. 17.

(g)        Repealed by Session Laws 1998‑95, s. 7, effective July 1, 1999.

(h)        Counties and cities may not levy any license tax on the business or professions taxed under this section.

(i)         Obtaining a license required by this Article does not of itself authorize the practice of a profession, business, or trade for which a State qualification license is required.  (1939, c. 158, s. 109; 1941, c. 50, s. 3; 1943, c. 400, s. 2; 1949, c. 683; 1953, c. 1306; 1957, c. 1064; 1973, c. 476, s. 193; 1981, c. 17; c. 83, ss. 4, 5; 1989, c. 584, s. 7; 1991 (Reg. Sess., 1992), c. 974, s. 1; 1993, c. 419, s. 13.2; 1998‑95, s. 7; 2002‑158, s. 3; 2005‑276, s. 23A.1(b); 2008‑206, s. 1; 2009‑445, s. 1; 2011‑330, s. 6.)

 

§ 105‑41.1.  Repealed by Session Laws 1975, c. 619, s. 2, effective October 1, 1975.

 

§ 105‑42:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑43.  Repealed by Session Laws 1973, c. 1195, s. 8.

 

§ 105‑44: Repealed by Session Laws 1981 (Regular Session, 1982), c.  1228.

 

§§ 105-45 through 46:  Repealed by Session Laws 1996, Second Extra Session, c.14, s.  17.

 

§ 105‑47: Repealed by Session Laws 1979, c. 69.

 

§ 105‑48:  Repealed by Session Laws 1979, c. 67.

 

§ 105‑48.1:  Repealed by Session Laws 1981, c. 7.

 

§ 105‑49:  Repealed by Session Laws 1989, c.  584, s. 10.

 

§ 105‑50:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑51:  Repealed by Session Laws 1989, c. 584, s. 12.

 

§ 105‑51.1:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑52:  Repealed by Session Laws 1979, c. 16, s. 1.

 

§§ 105‑53 through 105‑55:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑56:  Repealed by Session Laws 1981, c. 5.

 

§ 105‑57: Repealed by Session Laws 1987 (Reg.  Sess., 1988), c. 1081, s. 1.

 

§ 105‑58:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑59:  Repealed by Session Laws 1981 (Regular Session, 1982), c. 1282, s. 44.

 

§§ 105‑60 through 105‑61:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑61.1:  Repealed by Session Laws 1989, c. 584, s. 17.

 

§ 105‑62:  Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

 

§ 105‑63:  Repealed by Session Laws 1979, c. 65.

 

§ 105‑64:  Repealed by Session Laws 1989, c.  584, s. 19.

 

§ 105‑64.1:  Repealed by Session Laws 1989, c.  584, s. 19.

 

§§ 105-65 through 105-65.1:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s.17.

 

§ 105‑65.2:  Repealed by Session Laws 1989, c.  584, s. 19.

 

§ 105‑66:  Repealed by Session Laws 1989, c.  584, s. 19.

 

§ 105‑66.1:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑67:  Repealed by Session Laws 1991 (Regular Session, 1992), c. 965, s. 1.

 

§ 105‑68:  Repealed by Session Laws 1981 (Regular Session, 1982), c. 1229.

 

§ 105‑69:  Repealed by Session Laws 1973, c. 1200, s. 1.

 

§ 105‑70:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑71:  Repealed by Session Laws 1979, c.  70.

 

§ 105‑72:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑73.  Repealed by Session Laws 1957, c. 1340, ss. 2, 9.

 

§ 105‑74:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑75:  Repealed by Session Laws 1979, 2nd Session, c. 1304, s. 1.

 

§ 105‑75.1:   Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑76: Repealed by Session Laws 1979, c. 62.

 

§ 105‑77:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑78: Repealed by Session Laws 1979, c. 66.

 

§ 105‑79: Repealed by Session Laws 1979, c. 150, s. 4.

 

§ 105‑80:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑81.  Repealed by Session Laws 1947, c. 501, s. 2.

 

§ 105‑82:  Repealed by Session Laws 1989, c.  584, s. 24.

 

§ 105‑83.  Installment paper dealers.

(a)        Every person engaged in the business of dealing in, buying, or discounting installment paper, notes, bonds, contracts, or evidences of debt for which, at the time of or in connection with the execution of the instruments, a lien is reserved or taken upon personal property located in this State to secure the payment of the obligations, shall submit to the Secretary quarterly no later than the twentieth day of January, April, July, and October of each year, upon forms prescribed by the Secretary, a full, accurate, and complete statement, verified by the officer, agent, or person making the statement, of the total face value of the obligations dealt in, bought, or discounted within the preceding three calendar months and, at the same time, shall pay a tax of two hundred seventy‑seven thousandths of one percent (.277%) of the face value of these obligations.

(b)        Repealed by Session Laws 1998‑95, s. 9.

(c)        If any person deals in, buys, or discounts any obligations described in this section without paying a tax imposed by this section, the person may not bring an action in a State court to enforce collection of an obligation dealt in, bought, or discounted during the period of noncompliance with this section until the person pays the amount of tax, penalties, and interest due.

(d)       This section does not apply to corporations liable for the tax levied under G.S. 105‑102.3 or to savings and loan associations.

(e)        Counties and cities shall not levy any license tax on the business taxed under this section. (1939, c. 158, s. 148; 1957, c. 1340, s. 2; 1973, c. 476, s. 193; 1981, c. 83, ss. 8, 9; 1991, c. 45, s. 3; 1991 (Reg. Sess., 1992), c. 965, s. 3; 1998‑95, s. 9; 1998‑98, s. 1(f).)

 

§ 105‑84:  Repealed by Session Laws 1979, c. 150, s. 5.

 

§§ 105‑85 through 105‑86:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑87:  Repealed by Session Laws 1981, c.  6.

 

§ 105‑88.  Loan agencies.

(a)        Every person, firm, or corporation engaged in any of the following businesses must pay for the privilege of engaging in that business an annual tax of two hundred fifty dollars ($250.00) for each location at which the business is conducted:

(1)        The business of making loans or lending money, accepting liens on, or contracts of assignments of, salaries or wages, or any part thereof, or other security or evidence of debt for repayment of such loans in installment payment or otherwise.

(2)        The business of check cashing regulated under Article 22 of Chapter 53 of the General Statutes.

(3)        The business of pawnbroker regulated under Chapter 91A of the General Statutes.

(b)        This section does not apply to banks, industrial banks, trust companies, savings and loan associations, cooperative credit unions, the business of negotiating loans on real estate as described in G.S. 105‑41, or insurance premium finance companies licensed under Article 35 of Chapter 58 of the General Statutes. This section applies to those persons or concerns operating what are commonly known as loan companies or finance companies and whose business is as hereinbefore described, and those persons, firms, or corporations pursuing the business of lending money and taking as security for the payment of the loan and interest an assignment of wages or an assignment of wages with power of attorney to collect the amount due, or other order or chattel mortgage or bill of sale upon household or kitchen furniture. No real estate mortgage broker is required to obtain a privilege license under this section merely because the broker advances the broker's own funds and takes a security interest in real estate to secure the advances and when, at the time of the advance, the broker has already made arrangements with others for the sale or discount of the obligation at a later date and does so sell or discount the obligation within the period specified in the arrangement or extensions thereof; or when, at the time of the advance the broker intends to sell the obligation to others at a later date and does, within 12 months from date of initial advance, make arrangements with others for the sale of the obligation and does sell the obligation within the period specified in the arrangement or extensions thereof; or because the broker advances the broker's own funds in temporary financing directly involved in the production of permanent‑type loans for sale to others; and no real estate mortgage broker whose mortgage lending operations are essentially as described above is required to obtain a privilege license under this section.

(c)        At the time of making any such loan, the person, or officer of the firm or corporation making the loan, shall give to the borrower in writing in convenient form a statement showing the amount received by the borrower, the amount to be paid back by the borrower, the time in which the amount is to be paid, and the rate of interest and discount agreed upon.

(d)       A loan made by a person who does not comply with this section is not collectible at law under G.S. 105‑269.13.

(e)        Counties, cities, and towns may levy a license tax on the business taxed under this section. Except as provided in G.S. 160A‑211 and G.S. 153A‑152, the tax may not exceed one hundred dollars ($100.00). (1939, c. 158, s. 152; 1967, c. 1080; c. 1232, s. 2; 1973, c. 476, s. 193; 1991, c. 45, s. 4; 1993, c. 539, s. 695; 1994, Ex. Sess., c. 24, s. 14(c); 1998‑98, s. 1(g); 1999‑438, s. 2; 2000‑120, s. 3; 2000‑173, s. 2.)

 

§§ 105‑89 through 105‑90:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑90.1:  Repealed by Session Laws 1989 (Regular Session, 1990), c.  814, s. 4.

 

§ 105‑91:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑92: Repealed by Session Laws 1981 (Regular Session, 1982), c.  1227.

 

§ 105‑93: Repealed by Session Laws 1979, c.  68.

 

§ 105‑94.  Repealed by Session Laws 1947, c. 501, s. 2.

 

§ 105‑95.  Repealed by Session Laws 1947, c. 831, s. 2.

 

§ 105‑96: Repealed by Session Laws 1981 (Regular Session, 1982), c. 1231.

 

§§ 105‑97 through 105‑99:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑100: Repealed by Session Laws 1979, c. 64.

 

§ 105‑101: Repealed by Session Laws 1979, c. 85, s. 1.

 

§ 105‑102: Repealed by Session Laws 1981 (Regular Session, 1982), c. 1230.

 

§ 105‑102.1:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑102.2: Repealed by Session Laws 1981 (Regular Session, 1982), c. 1213.

 

§ 105‑102.3.  Banks.

There is imposed upon every bank or banking association, including each national banking association, that is operating in this State as a commercial bank, an industrial bank, a savings bank created other than under Chapter 54B or 54C of the General Statutes or the Home Owners' Loan Act of 1933 (12 U.S.C. §§ 1461‑68), a trust company, or any combination of such facilities or services, and whether such bank or banking association, hereinafter to be referred to as a bank or banks, is organized, under the laws of the United States or the laws of North Carolina, in the corporate form or in some other form of business organization, an annual privilege tax. A report and the privilege tax are due by the first day of July of each year on forms provided by the Secretary. The tax rate is thirty dollars ($30.00) for each one million dollars ($1,000,000) or fractional part thereof of total assets held as provided in this section. The assets upon which the tax is levied shall be determined by averaging the total assets shown in the four quarterly call reports of condition (consolidating domestic subsidiaries) for the preceding calendar year as required by bank regulatory authorities. If a bank has been in operation less than a calendar year, then the assets upon which the tax is levied shall be determined by multiplying the average of the total assets by a fraction, the denominator of which is 365 and the numerator of which is the number of days of operation. If a bank operates an international banking facility, as defined in G.S. 105‑130.5(b)(13), the assets upon which the tax is levied shall be reduced by the average amount for the taxable year of all assets of the international banking facility which are employed outside the United States, as computed pursuant to G.S. 105‑130.5(b)(13)c. For an out‑of‑state bank with one or more branches in this State, or for an in‑state bank with one or more branches outside this State, the assets of the out‑of‑state bank or of the in‑state bank upon which the tax is levied shall be reduced by the average amount for the taxable year of all assets of the out‑of‑state bank or of the in‑state bank which are employed outside this State. The tax imposed in this section shall be for the privilege of carrying on the businesses herein defined on a statewide basis regardless of the number of places or locations of business within the State. Counties and cities may not levy a license or privilege tax on the businesses taxed under this section, nor on the business of an international banking facility as defined in subdivision (b)(13) of G.S. 105‑130.5. (1973, c. 1053, s. 7; 1981, c. 855, s. 2; 1985 (Reg. Sess., 1986), c. 985, s. 4; 1995, c. 322, s. 2; 1998‑95, s. 10; 1998‑98, s. 1(h).)

 

§ 105‑102.4:  Repealed by Session Laws 1989, c.  584, s. 35.

 

§ 105‑102.5:  Repealed by Session Laws 1996, Second Extra Session, c.  14, s. 17.

 

§ 105‑102.6.  Publishers of newsprint publications.

(a)        Purpose. – The purpose of this section is to provide incentives for the recycling of newsprint and magazines and for the use of newsprint that contains recycled content.

(b)        Definitions. – The following definitions apply in this section:

(1)        Gross tonnage of newsprint consumed. – The weight in metric tons of all newsprint consumed by a publisher.

(2)        Newsprint. – Uncoated paper, whether supercalendered or machine finished, made primarily from mechanical wood pulp combined with some chemical wood pulp, weighing between 24.5 and 35 pounds for 500 sheets of paper two feet by three feet in size, and having a brightness of less than 60.

(2a)      Nonvirgin newsprint. – Newsprint that contains recycled postconsumer recovered paper.

(3)        Postconsumer recovered paper. – Paper products, generated by a business or consumer, that have served their intended end uses and have been separated or diverted from solid waste.

(4)        Publisher. – A person engaged in the business of producing publications printed on newsprint who acquires and uses newsprint for this business.

(5)        Recycled content percentage. – The percentage by weight of the total gross tonnage of newsprint consumed by the publisher that is recycled postconsumer recovered paper. For example, if a publisher consumes 10 tons of virgin newsprint, 10 tons of nonvirgin newsprint that contains fifty percent (50%) recycled postconsumer recovered paper, and 10 tons of nonvirgin newsprint that contains ten percent (10%) recycled postconsumer recovered paper, the publisher's recycled content percentage is 6/30 or twenty percent (20%).

(6)        Recycled content tonnage. – The weight in metric tons of the total gross tonnage of newsprint consumed by the publisher that is recycled postconsumer recovered paper.

(7)        Recycling. – Any process by which solid waste, or materials that would otherwise become solid waste, are collected, separated, or processed, and reused or returned to use in the form of raw materials or products.

(8)        Recycling tonnage. – The weight in metric tons of newsprint and magazines recycled or diverted to recycling by a publisher.

(9)        Virgin newsprint. – Newsprint that does not contain recycled postconsumer recovered paper.

(c)        Minimum Recycled Content Percentage. – The recycled content percentage of newsprint consumed by a publisher shall equal or exceed the following minimum recycled content percentages:

During 1991 and 1992, twelve percent (12%).

During 1993, fifteen percent (15%).

During 1994, twenty percent (20%).

During 1995 and 1996, twenty‑five percent (25%).

During 1997 and 1998, thirty percent (30%).

During 1999 through 2004, thirty‑five percent (35%).

After 2004, forty percent (40%).

A publisher who has developed and operates or contracts for the operation of a newspaper or magazine recycling program shall receive partial credit toward the recycled content percentage goals established in this subsection on the basis of one ton of  credit toward its total recycled content tonnage for each ton of recycling tonnage.

(d)       Tax. – Every publisher shall apply for and obtain from the Secretary a newsprint publisher tax reporting number and shall file an annual report with the Secretary by January 31 of each year. The report shall include the following information for the preceding calendar year:

(1)        Tonnage of virgin newsprint consumed.

(2)        Tonnage of nonvirgin newsprint consumed.

(3)        Gross tonnage of newsprint consumed.

(4)        Itemized percentages of recycled postconsumer recovered paper contained in tonnage of nonvirgin newsprint consumed.

(5)        Recycled content tonnage.

(6)        Recycled content percentage.

(7)        Recycling tonnage.

In addition, each publisher whose recycled content percentage for a calendar year is less than the applicable minimum recycled content percentage provided in subsection (c) shall pay a tax of fifteen dollars ($15.00) on each ton by which the publisher's recycled content tonnage falls short of the tonnage of recycled postconsumer recovered paper needed to achieve the applicable minimum recycled content percentage provided in subsection (c). This tax is due when the report is filed. No county or city may impose a license tax on the business taxed under this section.

(e)        Exemption. – The tax levied in this section does not apply to an amount calculated pursuant to subsection (d) to the extent the amount is attributable solely to the publisher's inability to obtain sufficient recycled content newsprint because (i) recycled content newsprint was not available at a price comparable to the price of virgin newsprint; (ii) recycled content newsprint of a quality comparable to virgin newsprint was not available; or (iii) recycled content newsprint was not available within a reasonable period of time during the reporting period. In order to claim the exemption provided in this subsection, a publisher must certify to the Secretary:

(1)        The amount of virgin newsprint consumed by the publisher during the reporting period solely for one of the reasons listed above.

(2)        That the publisher attempted to obtain recycled content newsprint from every manufacturer of recycled content newsprint that offered to sell recycled content newsprint to the publisher within the preceding calendar year.

(3)        The name, address, and telephone number of each recycled content newsprint manufacturer contacted, including the company name and the name of the company's individual representative or employee.

(f)        Use of Proceeds. – The Secretary shall, on or before April 15 of each year, credit the net proceeds of the tax imposed by this section to the Solid Waste Management Trust Fund created in G.S. 130A‑309.12. (1991, c. 539, s. 2; c. 761, s. 18; 1991 (Reg. Sess., 1992), c. 1007, s. 1; 1995, c. 459, s. 1; 1997‑456, s. 27; 1998‑95, s. 11; 1999‑346, s. 1.)

 

§ 105‑103.  Unlawful to operate without license.

When a license tax is required by law, and whenever the General Assembly shall levy a license tax on any business, trade, employment, or profession, or for doing any act, it shall be unlawful for any person, firm, or corporation without a license to engage in such business, trade, employment, profession, or do the act; and when such tax is imposed it shall be lawful to grant a license for the business, trade, employment, or for doing the act; and no person, firm, or corporation shall be allowed the privilege of exercising any business, trade, employment, profession, or the doing of any act taxed in this schedule throughout the State under one license, except under a statewide license. (1939, c. 158, s. 181; 1998‑98, s. 41.)

 

§ 105‑104: Repealed by Session Laws 2007‑491, s. 2, effective January 1, 2008.

 

§ 105‑105.  Persons, firms, and corporations engaged in more than one business to pay tax on each.

Where any person, firm, or corporation is engaged in more than one business, trade, employment, or profession which is made under the provisions of this Article subject to State license taxes, such persons, firms, or corporations shall pay the license tax prescribed in this Article for each separate business, trade, employment, or profession. (1939, c. 158, s. 183.)

 

§ 105‑106.  Effect of change in name of firm.

No change in the name of a firm, partnership, or corporation, nor the taking in of a new partner, nor the withdrawal of one or more of the firm, shall be considered as commencing business; but if any one or more of the partners remain in the firm, or if there is change in ownership of less than a majority of the stock, if a corporation, the business shall be regarded as continuing. (1939, c. 158, s. 184.)

 

§ 105‑107: Repealed by Session Laws 1998‑95, s.  12, effective July 1, 1999.

 

§ 105‑108.  Property used in a licensed business not exempt from taxation.

A State license, issued under any of the provisions of this Article shall not be construed to exempt from other forms of taxation the property employed in such licensed business, trade, employment, or profession. (1939, c. 158, s. 186.)

 

§ 105‑109.  Obtaining license and paying tax.

(a)        Repealed by Session Laws 1998‑95, s. 13, effective July 1, 1999.

(b)        License Required. – Before a person may engage in a business, trade, or profession for which a license is required under this Article, the person must be licensed by the Department. To obtain a license, a person must submit an application to the Department for the license and pay the required tax. An application for a license is considered a return.

The Department must issue a license to a person who files a completed application and pays the required tax. A license must be displayed conspicuously at the location of the licensed business, trade, or profession.

(c)        Repealed by Session Laws 1998‑212, s. 29A.14(a), effective January 1, 1999.

(d)       Penalties. – The penalties in G.S. 105‑236 apply to this Article. The Secretary may collect a tax due under this Article in any manner allowed under Article 9 of this Chapter.

(e)        Local License Taxes. – The penalty and collection provisions of this section apply to taxes levied by counties of the State under the authority of this Article in the same manner and to the same extent as they apply to taxes levied by the State. The provisions of this section for the collection of delinquent license taxes apply to license taxes levied by the cities and towns of this State under authority of this Article, or any other provision of law, in the same manner and to the same extent as they apply to taxes levied by the State. (1939, c. 158, s. 187; 1957, c. 859; 1963, c. 294, s. 5; 1973, c. 108, s. 51; c. 476, s. 193; 1993, c. 539, ss. 698, 699; 1994, Ex. Sess., c. 24, s. 14(c); 1998‑95, s. 13; 1998‑212, s. 29A.14(a); 2007‑491, s. 7.)

 

§ 105‑109.1.  Repealed by Session Laws 1999-337, s. 16..

 

§ 105‑110: Repealed by Session Laws 1998‑212, s.  29A.14(b).

 

§ 105‑111: Repealed by Session Laws 2001‑414, s. 2.

 

§ 105‑112: Repealed by Session Laws 1998‑212, s.  29A.14(c).

 

§ 105‑113.  Repealed by Session Laws 1999‑337, s. 17.

 

§ 105‑113.1: Deleted.

 

Article 2A.

Tobacco Products Tax.

Part 1.  General Provisions.

§ 105‑113.2.  Short title.

This Article may be cited as the "Tobacco Products Tax Act" or "Tobacco Products Tax Article."  (1969, c. 1075, s. 2; 1991, c. 689, s. 266; 1998‑98, s. 56.)

 

§ 105‑113.3.  Scope of tax; administration.

(a)        Scope. – The taxes imposed by this Article shall be collected only once on the same tobacco product. Except as permitted by Article 2 of this Chapter, a city or county may not levy a privilege license tax on the sale of tobacco products.

(b)        Administration. – Article 9 of this Chapter applies to this Article. (1969, c. 1075, s. 2; 1991, c. 689, s. 268; 1998‑212, s. 29A.14(d).)

 

§ 105‑113.4.  Definitions.

The following definitions apply in this Article:

(1)        Affiliate. – A person who directly or indirectly controls, is controlled by, or is under common control with another person.

(1a)      Affiliated manufacturer. – A manufacturer licensed under G.S. 105‑113.12 who is an affiliate of a manufacturer licensed under G.S. 105‑113.12.

(1b)      Cigar. – A roll of tobacco wrapped in a substance that contains tobacco, other than a cigarette.

(1c)      Cigarette. – Any of the following:

a.         A roll of tobacco wrapped in paper or in a substance that does not contain tobacco.

b.         A roll of tobacco wrapped in a substance that contains tobacco and that, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to or purchased by a consumer as a cigarette described in subpart a. of this subdivision.

(2)        Cost price. – The price a person liable for the tax on tobacco products imposed by Part 3 of this Article paid for the products, before any discount, rebate, or allowance or the tax imposed by that Part.

(3)        Distributor. – Either of the following:

a.         A person, wherever resident or located, who purchases non‑tax‑paid cigarettes directly from the manufacturer of the cigarettes and stores, sells, or otherwise disposes of the cigarettes.

b.         A manufacturer of cigarettes.

(4)        Repealed by Session Laws 1991, c. 689, s. 267.

(4a)      Integrated wholesale dealer. – A wholesale dealer who is an affiliate of a manufacturer of tobacco products, other than cigarettes, and is not a retail dealer.

(5)        Licensed distributor. – A distributor licensed under Part 2 of this Article.

(6)        Manufacturer. – A person who produces tobacco products or a person who contracts with another person to produce tobacco products and is the exclusive purchaser of the products under the contract.

(7)        Package. – The individual packet, can, box, or other container used to contain and to convey tobacco products to the consumer.

(8)        Person. – Defined in G.S. 105‑228.90.

(9)        Retail dealer. – A person who sells a tobacco product to the ultimate consumer of the product.

(10)      Sale. – A transfer, a trade, an exchange, or a barter, in any manner or by any means, with or without consideration.

(10a)    Secretary. – The Secretary of Revenue.

(11)      Repealed by Session Laws 1993, c. 442, s. 1, effective January 1, 1994.

(11a)    Tobacco product. – A cigarette, a cigar, or any other product that contains tobacco and is intended for inhalation or oral use.

(12)      Repealed by Session Laws 1993, c. 442, s. 1, effective January 1, 1994.

(13)      Use. – The exercise of any right or power over cigarettes, incident to the ownership or possession thereof, other than the making of a sale thereof in the course of engaging in a business of selling cigarettes. The term includes the keeping or retention of cigarettes for use.

(14)      Wholesale dealer. – Either of the following:

a.         A person who acquires tobacco products other than cigarettes for sale to another wholesale dealer or to a retail dealer.

b.         A manufacturer of tobacco products other than cigarettes.  (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991, c. 689, s. 267; 1993, c. 354, s. 7; c. 442, s. 1; 2007‑435, s. 2; 2009‑559, s. 1; 2011‑330, s. 2(a).)

 

§ 105‑113.4A.  Licenses.

(a)        General. – To obtain a license required by this Article, an applicant must apply to the Secretary and pay the tax due for the license. A license is not transferable or assignable and must be displayed at the place of business for which it is issued.

(b)        Refund. – A refund of a license tax is allowed only when the tax was collected or paid in error. No refund is allowed when a license holder surrenders a license or the Secretary revokes a license.

(c)        Duplicate or Amended License. – Upon application to the Secretary, a license holder may obtain without charge one of the following:

(1)        A duplicate license, if the license holder establishes that the original license has been lost, destroyed, or defaced.

(2)        An amended license, if the license holder establishes that the location of the place of business for which the license was issued has changed.

A duplicate or amended license shall state that it is a duplicate or amended license, as appropriate. (1991 (Reg. Sess., 1992), c. 955, s. 3.)

 

§ 105‑113.4B.  Reasons why the Secretary can cancel a license.

(a)        Reasons. – The Secretary may cancel a license issued under this Article upon the written request of the license holder. The Secretary may summarily cancel the license of a license holder when the Secretary finds that the license holder is incurring liability for the tax imposed under this Article after failing to pay a tax when due under this Article. In addition, the Secretary may cancel the license of a license holder that commits one or more of the following acts after holding a hearing on whether the license should be cancelled:

(1)        A violation of this Article.

(2)        A violation of G.S. 14‑401.18.

(b)        Procedure. – The Secretary must send a person whose license is summarily cancelled a notice of the cancellation and must give the person an opportunity to have a hearing on the cancellation within 10 days after the cancellation. The Secretary must give a person whose license may be cancelled after a hearing at least 10 days' written notice of the date, time, and place of the hearing. A notice of a summary license cancellation and a notice of hearing must be sent by registered mail to the last known address of the license holder. (1999‑333, s. 6.)

 

§ 105‑113.4C.  Enforcement of Master Settlement Agreement Provisions.

The Master Settlement Agreement between the states and the tobacco product manufacturers, incorporated by reference into the consent decree referred to in S.L. 1999‑2, requires each state to diligently enforce Article 37 of Chapter 66 of the General Statutes. The Office of the Attorney General and the Secretary of Revenue shall perform the following responsibilities in enforcing Article 37:

(1)        The Office of the Attorney General must give to the Secretary of Revenue a list of the nonparticipating manufacturers under the Master Settlement Agreement and the brand names of the products of the nonparticipating manufacturers.

(2)        The Office of the Attorney General must update the list provided under subdivision (1) of this section when a nonparticipating manufacturer becomes a participating manufacturer, another nonparticipating manufacturer is identified, or more brands or products of nonparticipating manufacturers are identified.

(3)        The Secretary of Revenue must require the taxpayers of the tobacco excise tax to identify the amount of tobacco products of nonparticipating manufacturers sold by the taxpayers, and may impose this requirement as provided in G.S. 66‑290(10).

(4)        The Secretary of Revenue must determine the amount of State tobacco excise taxes attributable to the products of nonparticipating manufacturers, based on the information provided by the taxpayers, and must report this information to the Office of the Attorney General. (1999‑311, s. 2.)

 

§ 105‑113.4D.  Tax with respect to inventory on effective date of tax increase.

Every person subject to the taxes levied in this Article who, on the effective date of a tax increase under this Article, has on hand any tobacco products must file a complete inventory of the tobacco products within 20 days after the effective date of the increase, and must pay an additional tax to the Secretary when filing the inventory. The amount of tax due is the amount due based on the difference between the former tax rate and the increased tax rate.  (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991, c. 689, s. 263; 2009‑451, s. 27A.5(b).)

 

Part 2. Cigarette Tax.

§ 105‑113.5.  Tax on cigarettes.

A tax is levied on the sale or possession for sale in this State, by a distributor, of all cigarettes at the rate of two and one‑fourth cents (2.25¢) per individual cigarette.  (1969, c. 1075, s. 2; c. 1246, s. 1; 1991, c. 689, s. 262; 2004‑170, s. 5; 2005‑276, s. 34.1(a), (b); 2009‑451, s. 27A.5(a).)

 

§ 105‑113.6.  Use tax levied.

A tax is levied upon the sale or possession for sale by a person other than a distributor, and upon the use, consumption, and possession for use or consumption of cigarettes within this State at the rate set in G.S. 105‑113.5.  This tax does not apply, however, to cigarettes upon which the tax levied in G.S. 105‑113.5 has been paid. (1969, c. 1075, s. 2; 1993, c. 442, s. 2.)

 

§ 105‑113.7:  Recodified as G.S. 105-113.4D by Session Laws 2009-451, s. 27A.5(b), effective September 1, 2009.

 

§ 105‑113.8.  Federal Constitution and statutes.

Any activities which this Article may purport to tax in violation of the Constitution of the United States or any federal statute are hereby expressly exempted from taxation under this Article. (1969, c. 1075, s. 2.)

 

§ 105‑113.9.  Out‑of‑state shipments.

Any distributor engaged in interstate business shall be permitted to set aside part of the stock as necessary to conduct interstate business without paying the tax otherwise required by this Part, but only if the distributor complies with the requirements prescribed by the Secretary concerning keeping of records, making of reports, posting of bond, and other matters for administration of this Part.

"Interstate business" as used in this section means:

(1)        The sale of cigarettes to a nonresident where the cigarettes are delivered by the distributor to the business location of the nonresident purchaser in another state; and

(2)        The sale of cigarettes to a nonresident wholesaler or retailer registered through the Secretary who has no place of business in North Carolina and who purchases the cigarettes for the purposes of resale not within this State and where the cigarettes are delivered to the purchaser at the business location in North Carolina of the distributor who is also licensed as a distributor under the laws of the state of the nonresident purchaser. (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1977, c. 874; 1993, c. 442, s. 3.)

 

§ 105‑113.10.  Manufacturers exempt from paying tax.

(a)        Shipping to Other Distributors. – Any manufacturer shipping cigarettes to other distributors who are licensed under G.S. 105‑113.12 may, upon application to the Secretary and upon compliance with requirements prescribed by the Secretary, be relieved of paying the taxes levied in this Part. No manufacturer may be relieved of the requirement to be licensed as a distributor in order to make shipments, including drop shipments, to a retail dealer or ultimate user.

(b)        Shipping for Affiliated Manufacturer. – A manufacturer may, upon application to the Secretary and upon compliance with requirements prescribed by the Secretary, be relieved of paying the taxes levied in this Part on cigarettes that are manufactured by an affiliated manufacturer and temporarily stored at and shipped from its facilities.  (1969, c. 1075, s. 2; c. 1246, s. 2; 1973, c. 476, s. 193; 1975, c. 275, s. 2; 1993, c. 442, s. 4; 2011‑330, s. 2(b).)

 

§ 105‑113.11.  Licenses required.

After the effective date of this Article, no person shall engage in business as a distributor in this State, without having first obtained from the Secretary the appropriate license for that purpose as prescribed herein. Any license required by this Article shall be in addition to any and all other licenses which may be required by law. (1969, c. 1075, s. 2; 1973, c. 476, s. 193.)

 

§ 105‑113.12.  Distributor must obtain license.

(a)        A distributor shall obtain for each place of business a continuing distributor's license and shall pay a tax of twenty‑five dollars ($25.00) for the license.

(b)        For the purposes of this section, a "place of business" is a place where a distributor receives or stores non‑tax‑paid cigarettes.

(c)        An out‑of‑state distributor may obtain a distributor's license upon compliance with the provisions of G.S. 105‑113.24 and payment of a tax of twenty‑five dollars ($25.00). (1969, c. 1075, s. 2; 1991 (Reg. Sess., 1992), c. 955, s. 4; 1993, c. 442, s. 5.)

 

§ 105‑113.13.  Secretary may investigate applicant for distributor's license and require a bond.

(a)        Investigation. – The Secretary may investigate an applicant for a distributor's license to determine if the information the applicant submits with the application is accurate and if the applicant is eligible to be licensed as a distributor. The Secretary may decline to issue a distributor's license to an applicant when the Secretary has reasonable cause to believe any of the following:

(1)        That the applicant has willfully withheld information requested by the Secretary for the purpose of determining the applicant's eligibility for the license.

(2)        That information submitted with the application is false or misleading.

(3)        That the application is not made in good faith.

(b)        Bond. – The Secretary may require a distributor to furnish a bond in an amount that adequately protects the State from loss if the distributor fails to pay taxes due under this Part.  A bond shall be conditioned on compliance with this Part, shall be payable to the State, and shall be in the form required by the Secretary.  The Secretary shall set the bond amount based on the anticipated tax liability of the distributor.  The Secretary shall periodically review the sufficiency of bonds required of the distributor and shall increase the amount of a required bond if the bond amount no longer covers the anticipated tax liability of the distributor.  The Secretary shall decrease the amount of a required bond if the Secretary finds that a lower bond amount will protect the State adequately from loss. (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991 (Reg. Sess., 1992), c. 955, s. 5; 1993, c. 442, s. 6.)

 

§§ 105‑113.14 through 105‑113.15:  Repealed by Session Laws 1991 (Regular Session, 1992), c. 955, s. 6, effective July 15, 1992.

 

§ 105‑113.16.  Repealed by Session Laws 1999‑333, s. 7.

 

§ 105‑113.17.  Identification of dispensers.

Each vending machine that dispenses cigarettes must be marked to identify its owner in the manner required by the Secretary. (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991 (Reg. Sess., 1992), c. 955, s. 8.)

 

§ 105‑113.18.  Payment of tax; reports.

The taxes levied in this Part are payable when a report is required to be filed. The following reports are required to be filed with the Secretary:

(1)        Distributor's Report. – A distributor shall file a monthly report in the form prescribed by the Secretary. The report covers sales and other activities occurring in a calendar month and is due within 20 days after the end of the month covered by the report. The report shall state the amount of tax due and shall identify any transactions to which the tax does not apply.

(1a)      Report of Free Cigarettes. – A manufacturer who distributes cigarettes without charge shall file a monthly report in the form prescribed by the Secretary. The report covers cigarettes distributed without charge in a calendar month and is due within 20 days after the end of the month covered by the report. The report shall state the number of cigarettes distributed without charge and the amount of tax due.

(2)        Use Tax Report. – Every other person who has acquired non‑tax‑paid cigarettes for sale, use, or consumption subject to the tax imposed by this Part shall, within 96 hours after receipt of the cigarettes, file a report in the form prescribed by the Secretary showing the amount of cigarettes so received and any other information required by the Secretary. The report shall be accompanied by payment of the full amount of the tax.

(3)        Shipping Report. – Any person, except a licensed distributor, who transports cigarettes upon the public highways, roads, or streets of this State, upon notice from the Secretary, shall file a report in the form prescribed by the Secretary and containing the information required by the Secretary.

(4)        Repealed by Session Laws 1981 (Regular Session, 1982), c. 1209, s. 1. (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1981 (Reg. Sess., 1982), c. 1209, s. 1; 1993, c. 442, s. 7; 1993 (Reg. Sess., 1994), c. 745, s. 2.)

 

§§ 105‑113.19 through 105‑113.20:  Repealed by Session Laws 1993, c.  442, s. 8.

 

§ 105‑113.21.  Discount; refund.

(a)        Repealed by Session Laws 2003‑284, s. 45A.1(a), effective for reporting periods beginning on or after August 1, 2003.

(a1)      Discount. – A distributor who files a timely report under G.S. 105‑113.18 and who sends a timely payment may deduct from the amount due with the report a discount of two percent (2%). This discount covers expenses incurred in preparing the records and reports required by this Part, and the expense of furnishing a bond.

(b)        Refund. – A distributor in possession of packages of stale or otherwise unsalable cigarettes upon which the tax has been paid may return the cigarettes to the manufacturer as provided in this subsection and apply to the Secretary for refund of the tax. The application shall be in the form prescribed by the Secretary and shall be accompanied by an affidavit from the manufacturer stating the number of cigarettes returned to the manufacturer by the applicant. The Secretary shall refund the tax paid, less the discount allowed, on the unsalable cigarettes. The distributor must return the cigarettes to the manufacturer of the cigarettes or to the affiliated manufacturer who is contracted by the manufacturer of the cigarettes to serve as the manufacturer's agent for the purposes of validating quantities and disposing of unsalable cigarettes.  (1969, c. 1075, s. 2; cc. 1222, 1238; 1973, c. 476, s. 193; 1993, c. 442, s. 9; 2001‑414, s. 3; 2003‑284, s. 45A.1(a); 2004‑84, s. 2(a); 2011‑330, s. 2(c).)

 

§§ 105‑113.22 through 105‑113.23:  Repealed by Session Laws 1993, c.  442, s. 8.

 

§ 105‑113.24.  Out‑of‑State distributors to register and remit tax.

(a)        The Secretary may authorize any distributor outside this State engaged in the business of selling and shipping cigarettes into the State to obtain a license and report and pay taxes required by this Part.

(b)        A nonresident distributor must agree to submit the distributor's books, accounts, and records to reasonable examination by the Secretary or the Secretary's duly authorized agents. The Secretary may require a nonresident distributor to file a bond in accordance with G.S. 105‑113.13.

(c)        Each such nonresident distributor, other than a foreign corporation which has qualified with the Secretary of State as doing business in this State shall, by a duly executed instrument filed in the office of the Secretary of State, constitute and appoint the Secretary of State his lawful attorney in fact upon whom any original process in any action or legal proceeding against such nonresident distributor arising out of any matter relating to this Article may be served, and therein agree that any original process against him so served shall be of the same force and effect as if served on him within this State, and that the authority thereof shall continue in force irrevocably so long as any such nonresident distributor shall remain liable for any taxes, interest and penalties under this Article.

(d)       Any nonresident distributor who shall comply with the provisions of this section may be licensed as a distributor. (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991 (Reg. Sess., 1992), c. 955, s. 9; 1993, c. 442, ss. 9.1(a), 9.1(b).)

 

§ 105‑113.25:  Repealed by Session Laws 1993, c.  442, s. 8.

 

§ 105‑113.26.  Records to be kept.

Every person required to be licensed under this Article and every person required to make reports under this Article shall keep complete and accurate records of all sales and other information as required under this Article.  The records shall be in the form prescribed by the Secretary.

These records shall be safely preserved for a period of three years in a manner to ensure their security and accessibility for inspection by the Department.  The Secretary may consent to the destruction of any records at any time within this three‑year period. (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1993, c. 442, s. 10.)

 

§ 105‑113.27.  Non‑tax‑paid cigarettes.

(a)        Except as otherwise provided in this Article, licensed distributors shall not sell, borrow, loan, or exchange non‑tax‑paid cigarettes to, from, or with other licensed distributors.

(b)        No person shall sell or offer for sale non‑tax‑paid cigarettes.

(c)        The possession of more than six hundred cigarettes on which tax has been paid to another state or country, by any person other than a licensed distributor, is prima facie evidence that the cigarettes are possessed in violation of this Part. (1969, c. 1075, s. 2; 1993, c. 442, s. 11; 1999‑337, s. 18.)

 

§ 105‑113.28:  Repealed by Session Laws 1993, c.  442, s. 8.

 

§ 105‑113.29.  Unlicensed place of business.

It shall be unlawful for any person to maintain a place of business within this State required by this Article to be licensed to engaged in the business of selling or offering for sale cigarettes without first obtaining such licenses. (1969, c. 1075, s. 2.)

 

§ 105‑113.30.  Records and reports.

It shall be unlawful for any person who is required under the provisions of this Article to keep records or make reports, to fail to keep such records, refuse to keep such reports, make false entries in such records, fail to produce such records for inspection by the Secretary or his duly authorized agents, fail to file a report, or make a false or fraudulent report or statement. (1969, c. 1075, s. 2; 1973, c. 476, s. 193.)

 

§ 105‑113.31.  Possession and transportation of non‑tax‑paid cigarettes; seizure and confiscation of vehicle or vessel.

(a)        It shall be unlawful for any person to transport non‑tax‑paid cigarettes in violation of this Part.  The Secretary may adopt rules allowing quantities of non‑tax‑paid cigarettes, not exceeding six hundred, to be brought into this State by a transient, a tourist, or a person returning to this State after traveling outside this State, for their own use.  The possession or transportation of these cigarettes is not subject to the penalties imposed by this section.

(b)        (1)        Every person who transports non‑tax‑paid cigarettes on the public highways, roads, streets, or waterways of this State must transport with the cigarettes invoices or delivery tickets for the cigarettes showing the true name and complete and exact address of the consignee or purchaser, the quantity and brands of the cigarettes transported, and the true name and complete and exact address of the person who has paid or who will pay the tax imposed by this Part or the tax, if any, of the state or foreign country at the point of ultimate destination.

(2)        A common carrier that has issued a bill of lading for a shipment of cigarettes and is without notice to itself or to any of its agents or employees that the cigarettes are non‑tax‑paid in violation of this Part is considered to have complied with this Part and the vehicle or vessel in which the cigarettes are being transported is not subject to confiscation under this section.  In the absence of the required invoices, delivery tickets, or bills of lading, the cigarettes so transported, the vehicle or vessel in which the cigarettes are being transported, and any paraphernalia or devices used in connection with the non‑tax‑paid cigarettes are declared to be contraband goods and may be seized by any officer of the law, who shall take possession of the vehicle or vessel and cigarettes and shall arrest any person in charge of the vehicle or vessel and cigarettes.

(3)        The officer shall at once proceed against the person arrested, under the provisions of this Part, in any court having competent jurisdiction; but the vehicle or vessel shall be returned to the owner upon execution by the owner of a good and valid bond, with sufficient sureties, in a sum double the value of the property, which bond shall be approved by the officer and shall be conditioned to return the property to the custody of the officer on the day of trial to abide the judgment of the court.  All non‑tax‑paid cigarettes seized under this section shall be held and shall, upon the acquittal of the person so charged, be returned to the established owner.

(4)        Unless the claimant can show that the non‑tax‑paid cigarettes seized were not transported in violation of this Part and that the property seized belongs to the claimant or that in the case of property other than cigarettes, the property was used in transporting non‑tax‑paid cigarettes in violation of this Part without the claimant's knowledge or consent, with the right on the part of the claimant to have a jury pass upon this claim, the court shall order a sale by public auction of the property seized, and the officer making the sale, after deducting the cost of the tax due, which the officer shall pay upon sale, expenses of keeping the property, the fee for the seizure, and the costs of the sale, shall pay all liens according to their priorities, which are established, by intervention or otherwise, at the hearing or in another proceeding brought for the purpose as being bona fide and as having been created without the lien or having any notice that the vehicle or vessel was being used for the unlawful transportation of non‑tax‑paid cigarettes, and shall pay the balance of the proceeds to the State Treasurer for the General Fund.

(5)        All liens against property sold under the provisions of this section shall be transferred from the property to the proceeds of the sale of the property.  If, however, no one is found claiming the cigarettes, or the vehicle or vessel, then the taking of the cigarettes, vehicle, or vessel, along with a description, shall be advertised in a newspaper having circulation in the county where the items were taken, once a week for two weeks and by notices posted in three public places near the place of seizure, and if no claimant appears within ten days after the last publication of the advertisement, the property shall be sold, and the proceeds, after deducting the expenses and costs, shall be paid to the State Treasurer for the General Fund.

(6)        This section does not authorize an officer to search any vehicle or vessel or baggage of any person without a search warrant duly issued, except where the officer has knowledge that there are non‑tax‑paid cigarettes in the vehicle or vessel. (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1993, c. 442, s. 12.)

 

§ 105‑113.32.  Non‑tax‑paid cigarettes subject to confiscation.

All non‑tax‑paid cigarettes subject to the tax imposed by this Part, together with any container in which they are stored or displayed for sale (including but not limited to vending machines), are declared to be contraband goods and may be seized by any officer of the law.  The officer shall arrest any person in charge of the contraband goods and shall at once proceed against the person arrested, under the provisions of this Part, in any court having competent jurisdiction.  The disposition of the seized cigarettes and container shall be governed by the provisions of G.S. 105‑113.31. (1969, c. 1075, s. 2; 1993, c. 442, s. 13.)

 

§ 105‑113.33.  Criminal penalties.

Any person who violates any of the provisions of this Article for which no other punishment is specifically prescribed shall be guilty of a Class 1 misdemeanor. (1969, c. 1075, s. 2; 1993, c. 539, s. 700; 1994, Ex. Sess., c. 24, s. 14(c).)

 

§ 105‑113.34:  Repealed by Session Laws 1993, c.  442, s. 8.

 

Part 3. Tax on Other Tobacco Products.

§ 105‑113.35.  Tax on tobacco products other than cigarettes.

(a)        Tax. – An excise tax is levied on tobacco products other than cigarettes at the rate of twelve and eight‑tenths percent (12.8%) of the cost price of the products. This tax does not apply to the following:

(1)        A tobacco product sold outside the State.

(2)        A tobacco product sold to the federal government.

(3)        A sample tobacco product distributed without charge.

(b)        Primary Liability. – The wholesale dealer or retail dealer who first acquires or otherwise handles tobacco products subject to the tax imposed by this section is liable for the tax imposed by this section. A wholesale dealer or retail dealer who brings into this State a tobacco product made outside the State is the first person to handle the tobacco product in this State. A wholesale dealer or retail dealer who is the original consignee of a tobacco product that is made outside the State and is shipped into the State is the first person to handle the tobacco product in this State.

(c)        Secondary Liability. – A retail dealer who acquires non‑tax‑paid tobacco products subject to the tax imposed by this section from a wholesale dealer is liable for any tax due on the tobacco products. A retail dealer who is liable for tax under this subsection may not deduct a discount from the amount of tax due when reporting the tax.

(d)       Manufacturer's Option. – A manufacturer who is not a retail dealer and who ships tobacco products other than cigarettes to either a wholesale dealer or retail dealer licensed under this Part may apply to the Secretary to be relieved of paying the tax imposed by this section on the tobacco products. Once granted permission, a manufacturer may choose not to pay the tax until otherwise notified by the Secretary. To be relieved of payment of the tax imposed by this section, a manufacturer must comply with the requirements set by the Secretary.

Permission granted under this subsection to a manufacturer to be relieved of paying the tax imposed by this section applies to an integrated wholesale dealer with whom the manufacturer is an affiliate. A manufacturer must notify the Secretary of any integrated wholesale dealer with whom it is an affiliate when the manufacturer applies to the Secretary for permission to be relieved of paying the tax and when an integrated wholesale dealer becomes an affiliate of the manufacturer after the Secretary has given the manufacturer permission to be relieved of paying the tax.

If a person is both a manufacturer of cigarettes and a wholesale dealer of tobacco products other than cigarettes and the person is granted permission under G.S. 105‑113.10 to be relieved of paying the cigarette excise tax, the permission applies to the tax imposed by this section on tobacco products other than cigarettes. A cigarette manufacturer who becomes a wholesale dealer after receiving permission to be relieved of the cigarette excise tax must notify the Secretary of the permission received under G.S. 105‑113.10 when applying for a license as a wholesale dealer.

(d1)     Limitation. – Except as otherwise provided in this Article, integrated wholesale dealers may not sell, borrow, loan, or exchange non‑tax‑paid tobacco products other than cigarettes to, from, or with other integrated wholesale dealers.

(e)        Repealed by Session Laws 2009‑451, s. 27A.5(c), effective September 1, 2009.  (1969, c. 1075, s. 2; 1977, c. 1114, s. 4; 1991, c. 689, s. 269; 1991 (Reg. Sess., 1992), c. 955, s. 10; 2003‑284, s. 45A.1(b); 2004‑84, s. 2(b); 2005‑276, s. 34.1(c); 2007‑323, s. 6.23(a); 2007‑435, s. 3; 2009‑451, s. 27A.5(c); 2009‑559, s. 2.)

 

§ 105‑113.36.  Wholesale dealer and retail dealer must obtain license.

A wholesale dealer shall obtain for each place of business a continuing tobacco products license and shall pay a tax of twenty‑five dollars ($25.00) for the license. A retail dealer shall obtain for each place of business a continuing tobacco products license and shall pay a tax of ten dollars ($10.00) for the license. A "place of business" is a place where a wholesale dealer or where a retail dealer makes tobacco products other than cigarettes or a wholesale dealer or a retail dealer receives or stores non‑tax‑paid tobacco products other than cigarettes. (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991, c. 689, s. 270; 1991 (Reg. Sess., 1992), c. 955, s. 11.)

 

§ 105‑113.37.  Payment of tax.

(a)        Monthly Report. – Except for tax on a designated sale under subsection (b), the taxes levied by this Article are payable when a report is required to be filed. A report is due on a monthly basis. A monthly report covers sales and other activities occurring in a calendar month and is due within 20 days after the end of the month covered by the report. A report shall be filed on a form provided by the Secretary and shall contain the information required by the Secretary.

(b)        Designation of Exempt Sale. – A wholesale dealer who sells a tobacco product to a person who has notified the wholesale dealer in writing that the person intends to resell the item in a transaction that is exempt from tax under G.S. 105‑113.35(a)(1) or (2) may, when filing a monthly report under subsection (a), designate the quantity of tobacco products sold to the person for resale. A wholesale dealer shall report a designated sale on a form provided by the Secretary.

A wholesale dealer is not required to pay tax on a designated sale when filing a monthly report. The wholesale dealer shall pay the tax due on all other sales in accordance with this section. A wholesale dealer or a customer of a wholesale dealer may not delay payment of the tax due on a tobacco product by failing to pay tax on a sale that is not a designated sale or by overstating the quantity of tobacco products that will be resold in a transaction exempt under G.S. 105‑113.35(a)(1) or (2).

A person who does not sell a tobacco product in a transaction exempt under G.S. 105‑113.35(a)(1) or (2) after a wholesale dealer has failed to pay the tax due on the sale of the item to the person in reliance on the person's written notification of intent is liable for the tax and any penalties and interest due on the designated sale. If the Secretary determines that a tobacco product reported as a designated sale is not sold as reported, the Secretary shall assess the person who notified the wholesale dealer of an intention to resell the item in an exempt transaction for the tax due on the sale and any applicable penalties and interest. A wholesale dealer who does not pay tax on a tobacco product in reliance on a person's written notification of intent to resell the item in an exempt transaction is not liable for any tax assessed on the item.

(c)        Repealed by Session Laws 1991 (Regular Session, 1992), c. 955, s. 12.

(d)       Shipping Report. – Any person who transports other tobacco products upon the public highways, roads, or streets of this State must, upon notice from the Secretary, file a report in a form prescribed by and containing the information required by the Secretary.  (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991, c. 689, s. 271; 1991 (Reg. Sess., 1992), c. 955, s. 12; 2009‑559, s. 3.)

 

§ 105‑113.38.  Bond.

The Secretary may require a wholesale dealer or a retail dealer to furnish a bond in an amount that adequately protects the State from loss if the dealer fails to pay taxes due under this Part.  A bond shall be conditioned on compliance with this Part, shall be payable to the State, and shall be in the form required by the Secretary.  The Secretary shall proportion a bond amount to the anticipated tax liability of the wholesale dealer or retail dealer.  The Secretary shall periodically review the sufficiency of bonds required of dealers, and shall increase the amount of a required bond when the amount of the bond furnished no longer covers the anticipated tax liability of the wholesale dealer or retail dealer.  The Secretary shall decrease the amount of a required bond when the Secretary determines that a smaller bond amount will adequately protect the State from loss.  (1969, c. 1075, s. 2; 1991, c. 689, s. 272.)

 

§ 105‑113.39.  Discount; refund.

(a)        Discount. – A wholesale dealer or a retail dealer who is primarily liable under G.S. 105‑113.35(b) for the excise taxes imposed by this Part, who files a timely report under G.S. 105‑113.37, and who sends a timely payment may deduct from the amount due with the report a discount of two percent (2%). This discount covers expenses incurred in preparing the records and reports required by this Part and the expense of furnishing a bond.

(b)        Refund. – A wholesale dealer or retail dealer who is primarily liable under G.S. 105‑113.35(b) for the excise taxes imposed by this Part and is in possession of stale or otherwise unsalable tobacco products upon which the tax has been paid may return the tobacco products to the manufacturer and apply to the Secretary for refund of the tax. The application shall be in the form prescribed by the Secretary and shall be accompanied by an affidavit from the manufacturer listing the tobacco products returned to the manufacturer by the applicant. The Secretary shall refund the tax paid, less the discount allowed, on the listed products.  (1969, c. 1075, s. 2; 1991, c. 689, s. 273; 2001‑414, s. 4; 2003‑284, s. 45A.1(c); 2004‑84, s. 2(c); 2005‑406, s. 2; 2008‑207, s. 4.)

 

§ 105‑113.40.  Records of sales, inventories, and purchases to be kept.

Every wholesale dealer and retail dealer shall keep accurate records of the dealer's purchases, inventories, and sales of tobacco products.  These records shall be open at all times for inspection by the Secretary or an authorized representative of the Secretary. (1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991, c. 689, s. 274.)

 

§ 105‑113.40A.  Use of tax proceeds.

The Secretary must credit the net proceeds of the tax collected under this Part as follows:

(1)        An amount equal to three percent (3%) of the cost price of the products to the General Fund.

(2)        The remainder to the University Cancer Research Fund established under G.S. 116‑29.1.  (2009‑451, s. 27A.5(d); 2010‑95, s. 1.)

 

Article 2B.

Soft Drink Tax.

§§ 105‑113.41 through 105‑113.67:  Repealed by Session Laws 1996, Second Extra Session, c. 13, s. 4.2, effective July 1, 1999.

 

Article 2C.

Alcoholic Beverage License And Excise Taxes.

Part 1. General Provisions.

§ 105‑113.68.  Definitions; scope.

(a)        Definitions. – The following definitions apply in this Article:

(1)        ABC Commission. – The North Carolina Alcoholic Beverage Control Commission established under G.S. 18B‑200.

(2)        Repealed by Session Laws 2004‑170, s. 6, effective August 2, 2004.

(3)        ABC permit. – Defined in G.S. 18B‑101.

(4)        Alcoholic beverage. – Defined in G.S. 18B‑101.

(5)        Fortified wine. – Defined in G.S. 18B‑101.

(6)        License. – A certificate, issued pursuant to this Article by a city or county, that authorizes a person to engage in a phase of the alcoholic beverage industry.

(7)        Malt beverage. – Defined in G.S. 18B‑101.

(8)        Person. – Defined in G.S. 105‑228.90.

(9)        Sale. – Defined in G.S. 18B‑101.

(10)      Secretary. – The Secretary of Revenue.

(11)      Spirituous liquor or liquor. – Defined in G.S. 18B‑101.

(12)      Unfortified wine. – Defined in G.S. 18B‑101.

(13)      Wholesaler or importer. – When used with reference to wholesalers or importers of wine or malt beverages, the term includes resident wineries that sell their wines at retail and resident breweries that produce fewer than 25,000 barrels of malt beverages per year.

(14)      Wine. – Unfortified and fortified wine.

(15)      Wine shipper permittee. – A winery that holds a wine shipper permit issued by the ABC Commission under G.S. 18B‑1001.1.

(b)        Scope. – All alcoholic beverages shall be taxed as provided in this Article regardless whether they meet all criteria of these definitions. (1971, c. 872, s. 2; 1973, c. 476, s. 193; 1975, c. 411, s. 1; 1981, c. 747, s. 2; 1985, c. 114, s. 1; c. 596, s. 3; 1993, c. 354, s. 9; c. 415, s. 26; 1995, c. 466, s. 16; 1998‑95, s. 14; 1998‑98, s. 58; 2003‑402, s. 8; 2004‑135, s. 3; 2004‑170, s. 6; 2005‑277, s. 2; 2005‑435, s. 25(b).)

 

§ 105‑113.69.  License tax; effect of license.

The taxes imposed in Part 3 of this Article are license taxes on the privilege of engaging in the activity authorized by the license. Licenses issued under this Article authorize the licensee to engage in only those activities that are authorized by the corresponding ABC permit. The activities authorized by each retail ABC permit are described in Article 10 of Chapter 18B of the General Statutes and the activities authorized by each commercial ABC permit are described in Article 11 of that Chapter. (1949, c. 974, s. 6; 1951, c. 378, s. 4; 1963, c. 426, s. 12; 1971, c. 872, s. 2; 1981, c. 747, s. 3; 1985, c. 114, s. 1; 1998‑95, s. 15.)

 

§ 105‑113.70.  Issuance, duration, transfer of license.

(a)        Issuance, Qualifications. – Each person who receives an ABC permit shall obtain the corresponding local license, if any, under this Article. All local licenses are issued by the city or county where the establishment for which the license is sought is located. The information required to be provided and the qualifications for a local license are the same as the information and qualifications required for the corresponding ABC permit. Upon proper application and payment of the prescribed tax, issuance of a local license is mandatory if the applicant holds the corresponding ABC permit. No local license may be issued under this Article until the applicant has received from the ABC Commission the applicable permit for that activity, and no county license may be issued for an establishment located in a city in that county until the applicant has received from the city the applicable license for that activity.

(b)        Duration. – All licenses issued under this section are annual licenses for the period from May 1 to April 30.

(c)        Transfer. – A license may not be transferred from one person to another or from one location to another.

(d)       License Exclusive. – A local government may not require a license for activities related to the manufacture or sale of alcoholic beverages other than the licenses stated in this Article. (1985, c. 114, s. 1; 1998‑95, s. 16.)

 

§ 105‑113.71.  Local government may refuse to issue license.

(a)        Refusal to Issue. – Notwithstanding G.S. 105‑113.70, the governing board of a city or county may refuse to issue a license if it finds that the applicant committed any act or permitted any activity in the preceding year that would be grounds for suspension or revocation of his permit under G.S. 18B‑104. Before denying the license, the governing board shall give the applicant an opportunity to appear at a hearing before the board and to offer evidence. The applicant shall be given at least 10 days' notice of the hearing. At the conclusion of the hearing the board shall make written findings of fact based on the evidence at the hearing. The applicant may appeal the denial of a license to the superior court for that county, if notice of appeal is given within 10 days of the denial.

(b)        Local Exceptions. – The governing bodies of the following counties and cities in their discretion may decline to issue on‑premises unfortified wine licenses: the counties of Alamance, Alexander, Ashe, Avery, Chatham, Clay, Duplin, Granville, Greene, Haywood, Jackson, Macon, Madison, McDowell, Montgomery, Nash, Pender, Randolph, Robeson, Sampson, Transylvania, Vance, Watauga, Wilkes, Yadkin; any city within any of those counties; and the cities of Greensboro, Aulander, Pink Hill, and Zebulon. (1985, c. 114, s. 1.)

 

§ 105‑113.72:  Repealed by Session Laws 1998‑95, s.  17.

 

§ 105‑113.73.  Misdemeanor.

Except as otherwise expressly provided, violation of a provision of this Article is a Class 1 misdemeanor. (1939, c. 158, s. 525; 1971, c. 872, s. 2; 1981, c. 747, s. 32; 1985, c. 114, s. 1; 1993, c. 539, s. 701; 1994, Ex. Sess., c. 24, s. 14(c); 2003‑402, s. 9.)

 

Part 2.  State Licenses.

§ 105‑113.74:  Repealed by Session Laws 1998‑95, s.  18.

 

§ 105‑113.75:  Repealed by Session Laws 1998‑95, s.  19.

 

§ 105‑113.76:  Repealed by Session Laws 1998‑95, s. 20.

 

Part 3. Local Licenses.

§ 105‑113.77.  City beer and wine retail licenses.

(a)        License and Tax. – A person holding any of the following retail ABC permits for an establishment located in a city shall obtain from the city a city license for that activity. The annual tax for each license is as stated.

ABC Permit                                                                                      Tax for Corresponding License

On‑premises malt beverage.................................................................................................... $15.00

Off‑premises malt beverage....................................................................................................... 5.00

On‑premises unfortified wine,

  on‑premises fortified wine, or both....................................................................................... 15.00

Off‑premises unfortified wine,

  off‑premises fortified wine, or both...................................................................................... 10.00

(b)        Tax on Additional License. – The tax stated in subsection (a) is the tax for the first license issued to a person. The tax for each additional license of the same type issued to that person for the same year is one hundred ten percent (110%) of the base license tax, that increase to apply progressively for each additional license. (1985, c. 114, s. 1.)

 

§ 105‑113.78.  County beer and wine retail licenses.

A person holding any of the following retail ABC permits for an establishment located in a county shall obtain from the county a county license for that activity. The annual tax for each license is as stated.

ABC Permit                                                                                Tax for Corresponding License

On‑premises malt beverage.............................................................................................. $25.00

Off‑premises malt beverage................................................................................................. 5.00

On‑premises unfortified wine,

      on‑premises fortified wine, or both............................................................................. 25.00

Off‑premises unfortified wine,

      off‑premises fortified wine, or both............................................................................ 25.00

 (1985, c. 114, s. 1.)

 

§ 105‑113.79.  City wholesaler license.

A city may require city malt beverage and wine wholesaler licenses for businesses located inside the city, but may not require a license for a business located outside the city, regardless whether that business sells or delivers malt beverages or wine inside the city. The city may charge an annual tax of not more than thirty‑seven dollars and fifty cents ($37.50) for a city malt beverage wholesaler or a city wine wholesaler license. (1985, c. 114, s. 1; 1998‑95, s. 21.)

 

Part 4. Excise Taxes, Distribution of Tax Revenue.

§ 105‑113.80.  Excise taxes on beer, wine, and liquor.

(a)        Beer. – An excise tax of sixty‑one and seventy‑one hundredths cents (61.71¢) per gallon is levied on the sale of malt beverages.

(b)        Wine. – An excise tax of twenty‑six and thirty‑four hundredths cents (26.34¢) per liter is levied on the sale of unfortified wine, and an excise tax of twenty‑nine and thirty‑four hundredths cents (29.34¢) per liter is levied on the sale of fortified wine.

(c)        Liquor. – An excise tax of thirty percent (30%) is levied on liquor sold in ABC stores. Pursuant to G.S. 18B‑804(b), the price of liquor on which this tax is computed is the distiller's price plus (i) the State ABC warehouse freight and bailment charges, and (ii) a markup for local ABC boards.  (1985, c. 114, s. 1; 1987, c. 832, s. 2; 1998‑95, s. 22; 2001‑424, s. 34.23(c), (d); 2009‑451, s. 27A.4(a).)

 

§ 105‑113.81.  Exemptions.

(a)        Major Disaster. – Wholesalers and importers of malt beverages and wine are not required to remit excise taxes on malt beverages or wine rendered unsalable by a major disaster. To qualify for this exemption, the wholesaler or importer shall prove to the satisfaction of the Secretary that a major disaster occurred. A major disaster is the destruction, spoilage, or rendering unsalable of 50 or more cases, or the equivalent, of malt beverages or 25 or more cases, or the equivalent, of wine.

(b)        Sales to Oceangoing Vessels. – Wholesalers and importers of malt beverages and wine are not required to remit excise taxes on malt beverages and wine sold and delivered for use on oceangoing vessels. An oceangoing vessel is a ship that plies the high seas in interstate or foreign commerce, in the transport of freight or passengers, or both, for hire exclusively. To qualify for this exemption the beverages shall be delivered to an officer or agent of the vessel for use on that vessel. Sales made to officers, agents, crewmen, or passengers for their personal use are not exempt.

(c)        Sales to Armed Forces of the United States. – Wholesalers and importers of malt beverages and wine are not required to remit excise taxes on malt beverages and wine sold to the Armed Forces of the United States. The Secretary may require malt beverages and wine sold to the Armed Forces of the United States to be marked "For Military Use Only" to facilitate identification of those beverages.

(d)       Out‑of‑State Sales. – Wholesalers and importers of malt beverages and wine are not required to remit excise taxes on malt beverages and wine shipped out of this State for resale outside the State.

(e)        Tasting. – Resident breweries and wineries are not required to remit excise taxes on malt beverages and wine given free of charge to customers, visitors, and employees on the manufacturer's licensed premises for consumption on those premises.  (1963, c. 992, s. 1; 1967, c. 759, s. 24; 1971, c. 872, s. 2; 1975, c. 586, s. 3; 1985, c. 114, s. 1; 2011‑183, s. 71.)

 

§ 105‑113.81A:  Repealed by Session Laws 2009‑451, s. 14.19(f), effective July 1, 2009.

 

§ 105‑113.82.  Distribution of part of beer and wine taxes.

(a)        Amount. – The Secretary must distribute annually a percentage of the net amount of excise taxes collected on the sale of malt beverages and wine during the preceding 12‑month period ending March 31 to the counties or cities in which the retail sale of these beverages is authorized in the entire county or city. The percentages to be distributed are as follows:

(1)        Of the tax on malt beverages levied under G.S. 105‑113.80(a), twenty and forty‑seven hundredths percent (20.47%).

(2)        Of the tax on unfortified wine levied under G.S. 105‑113.80(b), forty‑nine and forty‑four hundredths percent (49.44%).

(3)        Of the tax on fortified wine levied under G.S. 105‑113.80(b), eighteen percent (18%).

(a1)      Method. – If malt beverages, unfortified wine, or fortified wine may be licensed to be sold at retail in both a county and a city located in the county, both the county and city receive a portion of the amount distributed, that portion to be determined on the basis of population. If one of these beverages may be licensed to be sold at retail in a city located in a county in which the sale of the beverage is otherwise prohibited, only the city receives a portion of the amount distributed, that portion to be determined on the basis of population. The amounts distributable under subsection (a) of this section must be computed separately.

(b)        Repealed by Session Laws 2000, c. 173, s. 3, effective August 2, 2000.

(c)        Exception. – Notwithstanding subsections (a) and (a1) of this section, in a county in which ABC stores have been established by petition, the revenue shall be distributed as though the entire county had approved the retail sale of a beverage whose retail sale is authorized in part of the county.

(d)       Time. – The revenue shall be distributed to cities and counties within 60 days after March 31 of each year. The General Assembly finds that the revenue distributed under this section is local revenue, not a State expenditure, for the purpose of Section 5(3) of Article III of the North Carolina Constitution. Therefore, the Governor may not reduce or withhold the distribution.

(e)        Population Estimates. – To determine the population of a city or county for purposes of the distribution required by this section, the Secretary shall use the most recent annual estimate of population certified by the State Budget Officer.

(f)        City Defined. – As used in this section, the term "city" means a city as defined in G.S. 153A‑1(1) or an urban service district defined by the governing body of a consolidated city‑county.

(g)        Use of Funds. – Funds distributed to a county or city under this section may be used for any public purpose.

(h)        Disqualification. – No municipality may receive any funds under this section if it was incorporated with an effective date of on or after January 1, 2000, and is disqualified from receiving funds under G.S. 136‑41.2. No municipality may receive any funds under this section, incorporated with an effective date on or after January 1, 2000, unless a majority of the mileage of its streets is open to the public. The previous sentence becomes effective with respect to distribution of funds on or after July 1, 1999.  (1985, c. 114, s. 1; 1987, c. 836, s. 2; 1989 (Reg. Sess., 1990), c. 813, s. 5; 1991, c. 689, s. 28(b); 1993, c. 321, s. 26(g); c. 485, s. 2; 1995, c. 17, s. 1; 1996, 2nd Ex. Sess., c. 18, s. 25.2(a); 1997‑261, s. 109; 1999‑458, s. 10; 2000‑173, s. 3; 2002‑120, s. 1; 2004‑203, s. 5(d); 2005‑435, s. 34(a); 2006‑162, s. 1; 2007‑527, s. 4; 2009‑451, s. 27A.4(b); 2011‑330, s. 7.)

 

Part 5. Administration.

§ 105‑113.83.  Payment of excise taxes.

(a)        Liquor. – The excise tax on liquor levied under G.S. 105‑113.80(c) is payable monthly by the local ABC board to the Secretary. The tax shall be paid on or before the 15th day of the month following the month in which the tax was collected.

(b)        Beer and Wine. – The excise taxes on malt beverages and wine levied under G.S. 105‑113.80(a) and (b), respectively, are payable to the Secretary by the resident wholesaler or importer who first handles the beverages in this State. The excise taxes levied under G.S. 105‑113.80(b) on wine shipped directly to consumers in this State pursuant to G.S. 18B‑1001.1 must be paid by the wine shipper permittee. The taxes on malt beverages and wine are payable only once on the same beverages. The tax is due on or before the 15th day of the month following the month in which the beverage is first sold or otherwise disposed of in this State by the wholesaler, importer, or wine shipper permittee. When excise taxes are paid on wine or malt beverages, the wholesaler, importer, or wine shipper permittee must submit to the Secretary verified reports on forms provided by the Secretary detailing sales records for the month for which the taxes are paid. The report must indicate the amount of excise tax due, contain the information required by the Secretary, and indicate separately any transactions to which the excise tax does not apply.

(c)        Railroad Sales. – Each person operating a railroad train in this State on which alcoholic beverages are sold must submit monthly reports of the amount of alcoholic beverages sold in this State and must remit the applicable excise tax due on the sale of these beverages when the report is submitted. The report is due on or before the 15th day of the month following the month in which the beverages are sold. The report must be made on a form prescribed by the Secretary. (1985, c. 114, s. 1; 1998‑95, s. 23; 2003‑402, s. 10; 2004‑170, s. 7; 2005‑435, s. 26.)

 

§ 105‑113.84.  Report of resident brewery, resident winery, nonresident vendor, or wine shipper permittee.

A resident brewery, resident winery, nonresident vendor, and wine shipper permittee must file a monthly report with the Secretary. The report must list the amount of beverages delivered to North Carolina wholesalers, importers, and purchasers under G.S. 18B‑1001.1 during the month. The report is due by the 15th day of the month following the month covered by the report. The report must be filed on a form approved by the Secretary and must contain the information required by the Secretary. (1985, c. 114, s. 1; 1998‑95, s. 24; 2000‑173, s. 4; 2003‑402, s. 11.)

 

§ 105‑113.85.  Discount.

Each wholesaler or importer who files a timely return and sends a timely payment may deduct from the amount payable a discount of two percent (2%). This discount covers losses due to spoilage and breakage, expenses incurred in preparing the records and reports required by this Article, and the expense of furnishing a bond. (1985, c. 114, s. 1; 2000‑173, s. 5; 2001‑414, s. 5; 2003‑284, s. 45A.2(a); 2004‑84, s. 2(d).)

 

§ 105‑113.86.  Bonds.

(a)        Wholesalers and Importers. – A wholesaler or importer shall furnish a bond in an amount of not less than five thousand dollars ($5,000) nor more than fifty thousand dollars ($50,000). The bond shall be conditioned on compliance with this Article, shall be payable to the State, shall be in a form acceptable to the Secretary, and shall be secured by a corporate surety or by a pledge of obligations of the federal government, the State, or a political subdivision of the State. The Secretary shall proportion the bond amount to the anticipated tax liability of the wholesaler or importer. The Secretary shall periodically review the sufficiency of bonds furnished by wholesalers and importers, and shall increase the amount of a bond required of a wholesaler or importer when the amount of the bond furnished no longer covers the wholesaler's or importer's anticipated tax liability.

(b)        Nonresident Vendors. – The Secretary may require the holder of a nonresident vendor ABC permit to furnish a bond in an amount not to exceed two thousand dollars ($2,000). The bond shall be conditioned on compliance with this Article, shall be payable to the State, shall be in a form acceptable to the Secretary, and shall be secured by a corporate surety or by a pledge of obligations of the federal government, the State, or a political subdivision of the State. (1985, c. 114, s. 1; 1987, c. 18; 1998‑95, s. 25.)

 

§ 105‑113.87.  Refund for excise tax paid on sacramental wine.

(a)        Refund Allowed. – A person who purchases wine for the purpose stated in G.S. 18B‑103(8) may obtain a refund from the Secretary for the amount of the excise tax levied under this Article. The Secretary shall make refunds annually.

(b)        Application. – An applicant for a refund authorized by this section shall file a written request with the Secretary for the refund due for the prior calendar year on or before April 15. The Secretary may by rule prescribe what information and records shall be supplied by the applicant to qualify for the refund. No refund may be made if the application is filed more than three years after the date it is due.

(c)        Repealed by Session Laws 1998‑212, s. 29A.14(e). (1985, c. 114, s. 1; 1998‑212, s. 29A.14(e).)

 

§ 105‑113.88. Record‑keeping requirements.

A person who is required to file a report or return under this Article must keep a record of all documents used to determine information the person provides in a report or return. The records must be kept for three years from the due date of the report or return to which the records apply. (1939, c. 158, s. 520; 1945, c. 903, s. 1; 1971, c. 872, s. 2; 1973, c. 476, s. 193; 1981, c. 747, s. 28; 1985, c. 114, s. 1; 2000‑173, s. 6.)

 

§ 105‑113.89.  Other applicable administrative provisions.

The administrative provisions of Article 9 of this Chapter apply to this Article. (1985, c. 114, s. 1; 1998‑95, s. 26.)

 

§§ 105‑113.90 through 105‑113.91: Repealed by Session Laws 1985, c. 114, s. 1.

 

§ 105‑113.92: Repealed by Session Laws 1981, c. 747, s. 25.

 

§ 105‑113.93: Repealed by Session Laws 1985, c. 114, s. 1.

 

§ 105‑113.94: Repealed by Session Laws 1975, c. 53, s. 3.

 

§§ 105‑113.95 through 105‑113.104: Repealed by Session Laws 1985, c.  114, s. 1.

 

 

Article 2D.

Unauthorized Substances Taxes.

§ 105‑113.105.  Purpose.

The purpose of this Article is to levy an excise tax to generate revenue for State and local law enforcement agencies and for the General Fund. Nothing in this Article may in any manner provide immunity from criminal prosecution for a person who possesses an illegal substance. (1989, c. 772, s. 1; 1995, c. 340, s. 1; 1997‑292, s. 1; 1998‑98, s. 59.)

 

§ 105‑113.106. Definitions.

The following definitions apply in this Article:

(1)        Controlled Substance. – Defined in G.S. 90‑87.

(2)        Repealed by Session Laws 1995, c. 340, s. 1.

(3)        Dealer. – Any of the following:

a.         A person who actually or constructively possesses more than 42.5 grams of marijuana, seven or more grams of any other controlled substance that is sold by weight, or 10 or more dosage units of any other controlled substance that is not sold by weight.

b.         A person who in violation of Chapter 18B of the General Statutes possesses illicit spirituous liquor for sale.

c.         A person who in violation of Chapter 18B of the General Statutes possesses mash.

d.         A person who in violation of Chapter 18B of the General Statutes possesses an illicit mixed beverage for sale.

(4)        Repealed by Session Laws 1995, c. 340, s. 1.

(4a)      Illicit mixed beverage. – A mixed beverage, as defined in G.S. 18B‑101, composed in whole or in part from spirituous liquor on which the charge imposed by G.S. 18B‑804(b)(8) has not been paid, but not including a premixed cocktail served from a closed package containing only one serving.

(4b)      Illicit spirituous liquor. – Spirituous liquor, as defined in G.S. 105‑113.68, not authorized by the North Carolina Alcoholic Beverage Control Commission. Some examples of illicit spirituous liquor are the products known as "bootleg liquor", "moonshine", "non‑tax‑paid liquor", and "white liquor".

(4c)      Local law enforcement agency. – A municipal police department, a county police department, or a sheriff's office.

(4d)     Low‑street‑value drug. – Any of the following controlled substances:

a.         An anabolic steroid as defined in G.S. 90‑91(k).

b.         A depressant described in G.S. 90‑89(4), 90‑90(4), 90‑91(b), or 90‑92(a).

c.         A hallucinogenic substance described in G.S. 90‑89(3) or G.S. 90‑90(5).

d.         A stimulant described in G.S. 90‑89(5), 90‑90(3), 90‑91(j), 90‑92(a)(3), or 90‑93(a)(3).

e.         A controlled substance described in G.S. 90‑91(c), (d), or (e), 90‑92(a)(3), or (a)(5), or 90‑93(a)1.

(5)        Repealed by Session Laws 1995, c. 340, s. 1.

(6)        Marijuana. – All parts of the plant of the genus Cannabis, whether growing or not; the seeds of this plant; the resin extracted from any part of this plant; and every compound, salt, derivative, mixture, or preparation of this plant, its seeds, or its resin.

(6a)      Mash. – The fermentable starchy mixture from which spirituous liquor can be distilled.

(7)        Person. – Defined in G.S. 105‑228.90.

(8)        Secretary. – Defined in G.S. 105‑228.90.

(8a)      State law enforcement agency. – Any State agency, force, department, or unit responsible for enforcing criminal laws.

(9)        Unauthorized substance. – A controlled substance, an illicit mixed beverage, illicit spirituous liquor, or mash. (1989, c. 772, s. 1; 1993, c. 354, s. 10; 1995, c. 340, s. 1; 1997‑292, s. 1; 1999‑337, s. 19; 2000‑119, ss. 3, 4.)

 

§ 105‑113.107.  Excise tax on unauthorized substances.

(a)        Controlled Substances. – An excise tax is levied on controlled substances possessed, either actually or constructively, by dealers at the following rates:

(1)        At the rate of forty cents (40¢) for each gram, or fraction thereof, of harvested marijuana stems and stalks that have been separated from and are not mixed with any other parts of the marijuana plant.

(1a)      At the rate of three dollars and fifty cents ($3.50) for each gram, or fraction thereof, of marijuana, other than separated stems and stalks taxed under subdivision (1) of this section.

(1b)      At the rate of fifty dollars ($50.00) for each gram, or fraction thereof, of cocaine.

(2)        At the rate of two hundred dollars ($200.00) for each gram, or fraction thereof, of any other controlled substance that is sold by weight.

(2a)      At the rate of fifty dollars ($50.00) for each 10 dosage units, or fraction thereof, of any low‑street‑value drug that is not sold by weight.

(3)        At the rate of two hundred dollars ($200.00) for each 10 dosage units, or fraction thereof, of any other controlled substance that is not sold by weight.

(a1)      Weight. – A quantity of marijuana or other controlled substance is measured by the weight of the substance whether pure or impure or dilute, or by dosage units when the substance is not sold by weight, in the dealer's possession. A quantity of a controlled substance is dilute if it consists of a detectable quantity of pure controlled substance and any excipients or fillers.

(b)        Illicit Spirituous Liquor. – An excise tax is levied on illicit spirituous liquor possessed by a dealer at the following rates:

(1)        At the rate of thirty‑one dollars and seventy cents ($31.70) for each gallon, or fraction thereof, of illicit spirituous liquor sold by the drink.

(2)        At the rate of twelve dollars and eighty cents ($12.80) for each gallon, or fraction thereof, of illicit spirituous liquor not sold by the drink.

(c)        Mash. – An excise tax is levied on mash possessed by a dealer at the rate of one dollar and twenty‑eight cents ($1.28) for each gallon or fraction thereof.

(d)       Illicit Mixed Beverages. – A tax is levied on illicit mixed beverages sold by a dealer at the rate of twenty dollars ($20.00) on each four liters and a proportional sum on lesser quantities. (1989, c. 772, s. 1; 1995, c. 340, s. 1; 1997‑292, s. 1; 1998‑218, s. 1.)

 

§ 105‑113.107A.  Exemptions.

(a)        Authorized Possession. – The tax levied in this Article does not apply to a substance in the possession of a dealer who is authorized by law to possess the substance. This exemption applies only during the time the dealer's possession of the substance is authorized by law.

(b)        Certain Marijuana Parts. – The tax levied in this Article does not apply to the following marijuana:

(1)        Harvested mature marijuana stalks when separated from and not mixed with any other parts of the marijuana plant.

(2)        Fiber or any other product of marijuana stalks described in subdivision (1) of this subsection, except resin extracted from the stalks.

(3)        Marijuana seeds that have been sterilized and are incapable of germination.

(4)        Roots of the marijuana plant. (1995, c. 340, s. 1; 1997‑292, s. 1.)

 

§ 105‑113.108.  Reports; revenue stamps.

(a)        Revenue Stamps. – The Secretary shall issue stamps to affix to unauthorized substances to indicate payment of the tax required by this Article. Dealers shall report the taxes payable under this Article at the time and on the return prescribed by the Secretary. Notwithstanding any other provision of law, dealers are not required to give their name, address, social security number, or other identifying information on the return, and the return is not required to be verified by oath or affirmation. Upon payment of the tax, the Secretary shall issue stamps in an amount equal to the amount of the tax paid. Taxes may be paid and stamps may be issued either by mail or in person.

(b)        Reports. – Every local law enforcement agency and every State law enforcement agency must report to the Department within 48 hours after seizing an unauthorized substance, or making an arrest of an individual in possession of an unauthorized substance, listed in this subsection upon which a stamp has not been affixed. The report must be in the form prescribed by the Secretary and it must include the time and place of the arrest or seizure, the amount, location, and kind of substance, the identification of an individual in possession of the substance and that individual's social security number, and any other information prescribed by the Secretary. The report must be made when the arrest or seizure involves any of the following unauthorized substances upon which a stamp has not been affixed as required by this Article:

(1)        More than 42.5 grams of marijuana.

(2)        Seven or more grams of any other controlled substance that is sold by weight.

(3)        Ten or more dosage units of any other controlled substance that is not sold by weight.

(4)        Any illicit mixed beverage.

(5)        Any illicit spirituous liquor.

(6)        Mash. (1989, c. 772, s. 1; 1995, c. 340, s. 1; 1997‑292, s. 1; 2000‑119, s. 5; 2004‑170, s. 8.)

 

§ 105‑113.109.  When tax payable.

The tax imposed by this Article is payable by any dealer who actually or constructively possesses an unauthorized substance in this State upon which the tax has not been paid, as evidenced by a stamp. The tax is payable within 48 hours after the dealer acquires actual or constructive possession of a non‑tax‑paid unauthorized substance, exclusive of Saturdays, Sundays, and legal holidays of this State, in which case the tax is payable on the next working day. Upon payment of the tax, the dealer shall permanently affix the appropriate stamps to the unauthorized substance. Once the tax due on an unauthorized substance has been paid, no additional tax is due under this Article even though the unauthorized substance may be handled by other dealers. (1989, c. 772, s. 1; 1995, c. 340, s. 1; 1997‑292, s. 1.)

 

§ 105‑113.110:  Repealed by Session Laws 1995, c.  340, s. 1.

 

§ 105‑113.110A.  Administration.

Article 9 of this Chapter applies to this Article. (1989 (Reg. Sess., 1990), c. 814, s. 7; 1995, c. 340, s. 1; 1997, c. 292, s. 1; 1998‑218, s. 2.)

 

§ 105‑113.111.  Assessments.

Notwithstanding any other provision of law, an assessment against a dealer who possesses an unauthorized substance to which a stamp has not been affixed as required by this Article shall be made as provided in this section. The Secretary shall assess a tax, applicable penalties, and interest based on personal knowledge or information available to the Secretary. The Secretary shall notify the dealer in writing of the amount of the tax, penalty, and interest due, and demand its immediate payment. The notice and demand shall be either mailed to the dealer at the dealer's last known address or served on the dealer in person. If the dealer does not pay the tax, penalty, and interest immediately upon receipt of the notice and demand, the Secretary shall collect the tax, penalty, and interest pursuant to the jeopardy collection procedures in G.S. 105‑241.23 or the general collection procedures in G.S. 105‑242, including causing execution to be issued immediately against the personal property of the dealer, unless the dealer files with the Secretary a bond in the amount of the asserted liability for the tax, penalty, and interest. The Secretary shall use all means available to collect the tax, penalty, and interest from any property in which the dealer has a legal, equitable, or beneficial interest. The dealer may seek review of the assessment as provided in Article 9 of this Chapter. (1989, c. 772, s. 1; 1989 (Reg. Sess., 1990), c. 1039, s. 2; 1991 (Reg. Sess., 1992), c. 900, s. 20(d); 1995, c. 340, s. 1; 1997‑292, s. 1; 2007‑491, s. 8.)

 

§ 105‑113.112.  Confidentiality of information.

Information obtained by the Department in the course of administering the tax imposed by this Article, including information on whether the Department has issued a revenue stamp to a person, is confidential tax information and is subject to the following restrictions on disclosure:

(1)        G.S. 105‑259 prohibits the disclosure of the information, except in the limited circumstances provided in that statute.

(2)        The information may not be used as evidence, as defined in G.S. 15A‑971, in a criminal prosecution for an offense other than an offense under this Article or under Article 9 of this Chapter. Under this prohibition, no officer, employee, or agent of the Department may testify about the information in a criminal prosecution for an offense other than an offense under this Article or under Article 9 of this Chapter. This subdivision implements the protections against double jeopardy and self‑incrimination set out in Amendment V of the United States Constitution and the restrictions in it apply regardless of whether information may be disclosed under G.S. 105‑259. This subdivision does not apply to information obtained from a source other than an employee, officer, or agent of the Department. This subdivision does not prohibit testimony by an officer, employee, or agent of the Department concerning an offense committed against that individual in the course of administering this Article. An officer, employee, or agent of the Department who provides evidence or testifies in violation of this subdivision is guilty of a Class 1 misdemeanor.  (1989, c. 772, s. 1; 1993, c. 539, s. 702; 1994, Ex. Sess., c. 24, s. 14(c); 1997, c. 292, s. 1; 2005‑435, s. 27; 2008‑134, s. 68(a).)

 

§ 105‑113.113.  Use of tax proceeds.

(a)        Special Account. – The Unauthorized Substances Tax Account is established as a special nonreverting account. The Secretary shall credit the proceeds of the tax levied by this Article to the Account.

(b)        Distribution. – The Secretary shall distribute unencumbered tax proceeds in the Unauthorized Substances Tax Account on a quarterly or more frequent basis. Tax proceeds in the Account are unencumbered when they are collectible under G.S. 105‑241.22. The Secretary shall distribute seventy‑five percent (75%) of the unencumbered tax proceeds in the Account that were collected by assessment to the State or local law enforcement agency that conducted the investigation of a dealer that led to the assessment. If more than one State or local law enforcement agency conducted the investigation, the Secretary shall determine the equitable share for each agency based on the contribution each agency made to the investigation. The Secretary shall credit the remaining unencumbered tax proceeds in the Account to the General Fund.

(c)        Refunds. – The refund of a tax that has already been distributed shall be drawn initially from the Unauthorized Substances Tax Account. The amount of refunded taxes that were distributed to a law enforcement agency under this section and any interest shall be subtracted from succeeding distributions from the Account to that law enforcement agency. The amount of refunded taxes that were credited to the General Fund under this section and any interest shall be subtracted from succeeding credits to the General Fund from the Account. (1991 (Reg. Sess., 1992), c. 900, s. 20(c); 1995, c. 340, s. 1; 1997‑292, s. 1; 2007‑491, s. 9.)

 

Article 3.

Franchise Tax.

§ 105‑114.  Nature of taxes; definitions.

(a)        Nature of Taxes. – The taxes levied in this Article upon persons and partnerships are for the privilege of engaging in business or doing the act named.

(a1)      Scope. – The taxes levied in this Article upon corporations are privilege or excise taxes levied upon:

(1)        Corporations organized under the laws of this State for the existence of the corporate rights and privileges granted by their charters, and the enjoyment, under the protection of the laws of this State, of the powers, rights, privileges and immunities derived from the State by the form of such existence; and

(2)        Corporations not organized under the laws of this State for doing business in this State and for the benefit and protection which these corporations receive from the government and laws of this State in doing business in this State.

(a2)      Condition for Doing Business. – If the corporation is organized under the laws of this State, the payment of the taxes levied by this Article is a condition precedent to the right to continue in the corporate form of organization. If the corporation is not organized under the laws of this State, payment of these taxes is a condition precedent to the right to continue to engage in doing business in this State.

(a3)      Tax Year. – The taxes levied in this Article are for the fiscal year of the State in which the taxes become due, except that the taxes levied in G.S. 105‑122 are for the income year of the corporation in which the taxes become due.

(a4)      No Double Taxation. – G.S. 105‑122 does not apply to holding companies taxed under G.S. 105‑120.2. G.S. 105‑122 applies to a corporation taxed under another section of this Article only to the extent the taxes levied on the corporation in G.S. 105‑122 exceed the taxes levied in other sections of this Article on the corporation or on a limited liability company whose assets must be included in the corporation's tax base under G.S. 105‑114.1.

(b)        Definitions. – The following definitions apply in this Article:

(1)        City. – Defined in G.S. 105‑228.90.

(1a)      Code. – Defined in G.S. 105‑228.90.

(2)        Corporation. – A domestic corporation, a foreign corporation, an electric membership corporation organized under Chapter 117 of the General Statutes or doing business in this State, or an association that is organized for pecuniary gain, has capital stock represented by shares, whether with or without par value, and has privileges not possessed by individuals or partnerships. The term includes a mutual or capital stock savings and loan association or building and loan association chartered under the laws of any state or of the United States. The term includes a limited liability company that elects to be taxed as a corporation under the Code, but does not otherwise include a limited liability company.

(3)        Doing business. – Each and every act, power, or privilege exercised or enjoyed in this State, as an incident to, or by virtue of the powers and privileges granted by the laws of this State.

(4)        Income year. – Defined in G.S. 105‑130.2(4b).

(c)        Recodified as G.S. 105‑114.1 by Session Laws 2002‑126, s. 30G.2.(b), effective January 1, 2003.  (1939, c. 158, s. 201; 1943, c. 400, s. 3; 1945, c. 708, s. 3; 1965, c. 287, s. 16; 1967, c. 286; 1969, c. 541, s. 6; 1973, c. 1287, s. 3; 1983, c. 713, s. 66; 1985, c. 656, s. 7; 1985 (Reg. Sess., 1986), c. 853, s. 1; 1987, c. 778, s. 1; 1987 (Reg. Sess., 1988), c. 1015, s. 2; 1989, c. 36, s. 2; 1989 (Reg. Sess., 1990), c. 981, s. 2; 1991, c. 30, s. 2; c. 689, s. 250; 1991 (Reg. Sess., 1992), c. 922, s. 3; 1993, c. 12, s. 4; c. 354, s. 11; c. 485, s. 5; 1997‑118, s. 4; 1998‑98, ss. 60, 76; 1999‑337, s. 20; 2000‑173, s. 8; 2001‑327, s. 2(b); 2002‑126, s. 30G.2(b); 2005‑435, s. 59.2(a); 2006‑66, s. 24A.2(a); 2006‑162, ss. 3(b), 22; 2008‑107, s. 28.7(a).)

 

§ 105‑114.1.  Limited liability companies.

(a)        Definitions. – The following definitions apply in this section:

(1)        Affiliated group. – Defined in section 1504 of the Code.

(2)        Capital interest. – The right under a limited liability company's governing law to receive a percentage of the company's assets upon dissolution after payments to creditors.

(3)        Entity. – A person that is not a human being.

(4)        Governing law. – A limited liability company's governing law is determined under G.S. 57C‑6‑05 or G.S. 57C‑7‑01, as applicable.

(5)        Noncorporate limited liability company. – A limited liability company that does not elect to be taxed as a corporation under the Code.

(b)        Controlled Companies. – If a corporation or an affiliated group of corporations owns more than fifty percent (50%) of the capital interests in a noncorporate limited liability company, the corporation or group of corporations must include in its three tax bases pursuant to G.S. 105‑122 the same percentage of (i) the noncorporate limited liability company's capital stock, surplus, and undivided profits; (ii) fifty‑five percent (55%) of the noncorporate limited liability company's appraised ad valorem tax value of property; and (iii) the noncorporate limited liability company's actual investment in tangible property in this State, as appropriate.

(c)        Constructive Ownership. – Ownership of the capital interests in a noncorporate limited liability company is determined by reference to the constructive ownership rules for partnerships, estates, and trusts in section 318(a)(2)(A) and (B) of the Code with the following modifications:

(1)        The term "capital interest" is substituted for "stock" each place it appears.

(2)        A noncorporate limited liability company and any noncorporate entity other than a partnership, estate, or trust is treated as a partnership.

(3)        The operating rule of section 318(a)(5) of the Code applies without regard to section 318(a)(5)(C).

(d)       No Double Inclusion. – If a corporation is required to include a percentage of a noncorporate limited liability company's assets in its tax bases under this Article pursuant to subsection (b) of this section, its investment in the noncorporate limited liability company is not included in its computation of capital stock base under G.S. 105‑122(b).

(e)        Affiliated Group. – If the owner of the capital interests in a noncorporate limited liability company is an affiliated group of corporations, the percentage to be included pursuant to subsection (b) of this section by each group member that is doing business in this State is determined by multiplying the capital interests in the noncorporate limited liability company owned by the affiliated group by a fraction. The numerator of the fraction is the capital interests in the noncorporate limited liability company owned by the group member, and the denominator of the fraction is the capital interests in the noncorporate limited liability company owned by all group members that are doing business in this State.

(f)        Exemption. – This section does not apply to assets owned by a noncorporate limited liability company if the total book value of the noncorporate limited liability company's assets never exceeded one hundred fifty thousand dollars ($150,000) during its taxable year.

(g)        Timing. – Ownership of the capital interests in a noncorporate limited liability company is determined as of the last day of its taxable year. The adjustments pursuant to subsections (b) and (d) of this section must be made to the owner's next following return filed under this Article. If a noncorporate limited liability company and a corporation or an affiliated group of corporations have engaged in a pattern of transferring assets between them with the result that each did not own the capital interests on the last day of its taxable year, the ownership of the capital interests in the noncorporate limited liability company must be determined as of the last day of the corporation or group of corporations' taxable year.

(h)        Penalty. – A taxpayer who, because of fraud with intent to evade tax, underpays the tax under this Article on assets attributable to it under this section is guilty of a Class H felony in accordance with G.S. 105‑236(7).  (2002‑126, s. 30G.2(b); 2004‑74, ss. 1, 2; 2004‑170, s. 8.1; 2006‑66, s. 24A.2(b); 2008‑107, s. 28.7(b).)

 

§ 105‑115.  Repealed by Session Laws 1989 (Reg. Sess., 1990), c. 1002, s. 1.

 

§ 105‑116.  Franchise or privilege tax on electric power, water, and sewerage companies.

(a)        Tax. – An annual franchise or privilege tax is imposed on the following:

(1)        An electric power company engaged in the business of furnishing electricity, electric lights, current, or power.

(2),       (2a) Repealed by Session Laws 1998‑22, s. 2, effective July 1, 1999.

(3)        A water company engaged in owning or operating a water system subject to regulation by the North Carolina Utilities Commission.

(4)        A public sewerage company engaged in owning or operating a public sewerage system.

The tax on an electric power company is three and twenty‑two hundredths percent (3.22%) of the company's taxable gross receipts from the business of furnishing electricity, electric lights, current, or power. The tax on a water company is four percent (4%) of the company's taxable gross receipts from owning or operating a water system subject to regulation by the North Carolina Utilities Commission. The tax on a public sewerage company is six percent (6%) of the company's taxable gross receipts from owning or operating a public sewerage company. A company's taxable gross receipts are its gross receipts from business inside the State less the amount of gross receipts from sales reported under subdivision (b)(2). A company that engages in more than one business taxed under this section shall pay tax on each business.

(b)        Report and Payment. – The tax imposed by this section is payable quarterly or monthly as specified in this subsection. A return is due quarterly.

A water company or public sewerage company must pay tax quarterly when filing a return. An electric power company must pay tax in accordance with the schedule and requirements that apply to payments of sales and use tax under G.S. 105‑164.16 and must file a return quarterly.

A quarterly return covers a calendar quarter and is due by the last day of the month that follows the quarter covered by the return. A taxpayer must submit a return on a form provided by the Secretary. The return must include the taxpayer's gross receipts from all property it owned or operated during the reporting period in connection with its business taxed under this section. A taxpayer must report its gross receipts on an accrual basis. A return must contain the following information:

(1)        The taxpayer's gross receipts for the reporting period from business inside and outside this State, stated separately.

(2)        The taxpayer's gross receipts from commodities or services described in subsection (a) that are sold to a vendee subject to the tax levied by this section or to a joint agency established under Chapter 159B of the General Statutes or a city having an ownership share in a project established under that Chapter.

(3)        The amount of and price paid by the taxpayer for commodities or services described in subsection (a) that are purchased from others engaged in business in this State and the name of each vendor.

(4)        For an electric power company the entity's gross receipts from the sale within each city of the commodities and services described in subsection (a).

(c)        Repealed by Session Laws 1998‑22, s. 2, effective July 1, 1999.

(d)       Distribution. – Part of the taxes imposed by this section on electric power companies is distributed to cities under G.S. 105‑116.1. If a taxpayer's return does not state the taxpayer's taxable gross receipts derived within a city, the Secretary must determine a practical method of allocating part of the taxpayer's taxable gross receipts to the city.

(e)        Local Tax. – So long as there is a distribution to cities from the tax imposed by this section, no city shall impose or collect any greater franchise, privilege or license taxes, in the aggregate, on the businesses taxed under this section, than was imposed and collected on or before January 1, 1947.

(e1)      An electric power company engaged in the business of furnishing electricity, electric lights, current, or power that collects the annual franchise or privilege tax pursuant to subsection (a) of this section and remits the tax collected to the Secretary shall not be subject to any additional franchise or privilege tax imposed upon it by any city or county.

(f)        Repealed by Session Laws 1998‑22, s. 2, effective July 1, 1999. (1939, c. 158, s. 203; 1949, c. 392, s. 2; 1951, c. 643, s. 3; 1955, c. 1313, s. 2; 1957, c. 1340, s. 3; 1959, c. 1259, s. 3; 1963, c. 1169, s. 1; 1965, c. 517; 1967, c. 519, ss. 1, 3; c. 1272, ss. 1, 3; 1971, c. 298, s. 1; c. 833, s. 1; 1973, c. 476, s. 193; c. 537, s. 3; c. 1287, s. 3; c. 1349; 1975, c. 812; 1983 (Reg. Sess., 1984), c. 1097, ss. 2, 16; 1987 (Reg. Sess., 1988), c. 882, s. 4.4; 1989 (Reg. Sess., 1990), c. 813, s. 3; c. 814, s. 10; c. 945, ss. 3, 17; 1991, c. 598, s. 4; c. 689, s. 28(c); 1991 (Reg. Sess., 1992), c. 1007, s. 2; 1993, c. 321, s. 26(h); 1997‑118, s. 2; 1997‑426, s. 3; 1998‑22, s. 2; 1998‑98, s. 72; 1998‑217, s. 32(a); 2000‑140, s. 62; 2001‑427, s. 6(c), (d); 2002‑72, s. 10; 2002‑120, s. 8; 2006‑33, s. 10; 2006‑162, s. 31.)

 

§ 105‑116.1.  Distribution of gross receipts taxes to cities.

(a)        Definitions. – The following definitions apply in this section:

(1)        Freeze deduction. – The amount by which the percentage distribution amount of a city was required to be reduced in fiscal year 1995‑96 in determining the amount to distribute to the city.

(2)        Percentage distribution amount. – Three and nine hundredths percent (3.09%) of the gross receipts derived by an electric power company from sales within a city that are taxable under G.S. 105‑116.

(b)        Distribution. – The Secretary must distribute to the cities part of the taxes collected under this Article on electric power companies. Each city's share for a calendar quarter is the percentage distribution amount for that city for that quarter minus one‑fourth of the city's hold‑back amount and one‑fourth of the city's proportionate share of the annual cost to the Department of administering the distribution. The Secretary must make the distribution within 75 days after the end of each calendar quarter. The General Assembly finds that the revenue distributed under this section is local revenue, not a State expenditure, for the purpose of Section 5(3) of Article III of the North Carolina Constitution. Therefore, the Governor may not reduce or withhold the distribution.

(c)        Limited Hold‑Harmless Adjustment. – The hold‑back amount for a city that, in the 1995‑96 fiscal year, received from gross receipts taxes on electric power companies and natural gas companies less than ninety‑five percent (95%) of the amount it received in the 1990‑91 fiscal year but at least sixty percent (60%) of the amount it received in the 1990‑91 fiscal year is the amount determined by the following calculation:

(1)        Adjust the city's 1995‑96 distribution by adding the city's freeze deduction attributable to receipts from electric power companies and natural gas companies to the amount distributed to the city for that year.

(2)        Compare the adjusted 1995‑96 amount with the city's 1990‑91 distribution.

(3)        If the adjusted 1995‑96 amount is less than or equal to the city's 1990‑91 distribution, the hold‑back amount for the city is zero.

(4)        If the adjusted 1995‑96 amount is more than the city's 1990‑91 distribution, the hold‑back amount for the city is the city's freeze deduction attributable to receipts from electric power companies and natural gas companies minus the difference between the city's 1990‑91 distribution and the city's 1995‑96 distribution.

(c1)      Additional Limited Hold‑Harmless Adjustment. – The hold‑back amount for a city that, in the 1995‑96 fiscal year, received from gross receipts taxes on electric power companies and natural gas companies less than sixty percent (60%) of the amount it received in the 1990‑91 fiscal year is the amount determined by the following calculation:

(1)        Adjust the city's 1999‑2000 distribution by adding the city's freeze deduction attributable to receipts from electric power companies and natural gas companies to the amount distributed to the city for that year.

(2)        Compare the adjusted 1999‑2000 amount with the city's 1990‑91 distribution.

(3)        If the adjusted 1999‑2000 amount is less than or equal to the city's 1990‑91 distribution, the hold‑back amount for the city is zero.

(4)        If the adjusted 1999‑2000 amount is more than the city's 1990‑91 distribution, the hold‑back amount for the city is the city's freeze deduction attributable to receipts from electric power companies and natural gas companies minus the difference between the city's 1990‑91 distribution and the city's 1999‑2000 distribution.

(d)       Allocation of Hold‑Harmless Adjustment. – The hold‑back amount for a city that, in the 1995‑96 fiscal year, received from gross receipts taxes on electric power companies and natural gas companies at least ninety‑five percent (95%) of the amount it received in the 1990‑91 fiscal year is the amount determined by the following calculation:

(1)        Determine the amount by which the freeze deduction attributable to receipts from electric power companies and natural gas companies is reduced for all cities whose hold‑back amount is determined under subsections (c) and (c1) of this section. This amount is the total hold‑harmless adjustment.

(2)        Determine the amount of gross receipts taxes that would be distributed for the quarter to cities whose hold‑back amount is determined under this subsection if these cities received their percentage distribution amount minus one‑fourth of their freeze deduction attributable to receipts from electric power companies and natural gas companies.

(3)        For each city included in the calculation in subdivision (2) of this subsection, determine that city's percentage share of the amount determined under that subdivision.

(4)        Add to the city's freeze deduction attributable to receipts from electric power companies and natural gas companies an amount equal to the city's percentage share under subdivision (3) of this subsection multiplied by the total hold‑harmless adjustment.

(e)        Disqualification. – No municipality may receive any funds under this section if it was incorporated with an effective date of on or after January 1, 2000, and is disqualified from receiving funds under G.S. 136‑41.2. No municipality may receive any funds under this section, incorporated with an effective date on or after January 1, 2000, unless a majority of the mileage of its streets is open to the public. The previous sentence becomes effective with respect to distribution of funds on or after July 1, 1999. (1997‑118, s. 1; 1997‑426, s. 3.1; 1997‑439, s. 3; 1997‑456, s. 55.5; 1998‑22, s. 3; 1999‑458, s. 11; 2000‑128, s. 2; 2001‑430, s. 11; 2002‑120, s. 2; 2005‑435, s. 34(b).)

 

§§ 105‑117 through 115‑118:  Repealed by Session Laws 1995 (Regular Session, 1996), c.  646, s. 3.

 

§ 105‑119: Repealed by Session Laws 2000‑173, s. 7.

 

§ 105‑120: Repealed by Session Laws 2001‑430, s. 12, effective January 1, 2002, and applies to taxable services reflected on bills dated on or after January 1, 2002.

 

§ 105‑120.1: Repealed by Session Laws 2000‑173, s. 7.

 

§ 105‑120.2.  Franchise or privilege tax on holding companies.

(a)        Every corporation, domestic and foreign, incorporated or, by an act, domesticated under the laws of this State or doing business in this State which, at the close of its taxable year is a holding company as defined in subsection (c) of this section, shall, pursuant to the provisions of G.S. 105‑122:

(1)        Make a report and statement, and

(2)        Determine the total amount of its issued and outstanding capital stock, surplus and undivided profits, and

(3)        Apportion such outstanding capital stock, surplus and undivided profits to this State.

(b)       (1)        Every corporation taxed under this section shall annually pay to the Secretary of Revenue, at the time the report and statement are due, a franchise or privilege tax, which is hereby levied, at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of the amount determined under subsection (a) of this section, but in no case shall the tax be more than seventy‑five thousand dollars ($75,000) nor less than thirty‑five dollars ($35.00).

(2)        Notwithstanding the provisions of subdivision (1) of this subsection, if the tax produced pursuant to application of this paragraph (2) exceeds the tax produced pursuant to application of subdivision (1), then the tax shall be levied at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) on the greater of the amounts of

a.         Fifty‑five percent (55%) of the appraised value as determined for ad valorem taxation of all the real and tangible personal property in this State of each such corporation plus the total appraised value of intangible property returned for taxation of intangible personal property as computed under G.S. 105‑122(d); or

b.         The total actual investment in tangible property in this State of such corporation as computed under G.S. 105‑122(d).

(c)        For purposes of this section, a "holding company" is a corporation that receives during its taxable year more than eighty percent (80%) of its gross income from corporations in which it owns directly or indirectly more than fifty percent (50%) of the outstanding voting stock or voting capital interests.

(d)       Repealed by Session Laws 1985, c. 656, s. 39.

(e)        Counties, cities and towns shall not levy a franchise tax on corporations taxed under this section. The tax imposed under the provisions of G.S. 105‑122 shall not apply to businesses taxed under the provisions of this section.

(f)        Repealed by Session Laws 2011‑330, s. 3, effective June 27, 2011.  (1975, c. 130, s. 1; 1985, c. 656, s. 39; 1985 (Reg. Sess., 1986), c. 854, s. 1; 1987 (Reg. Sess., 1988), c. 882, s. 4.2; 1991, c. 30, s. 4; 1998‑98, s. 72; 2006‑196, s. 9; 2011‑330, s. 3.)

 

§ 105‑121:  Repealed by Session Laws 1945, c.  752, s. 1.

 

§ 105‑121.1.  Mutual burial associations.

An annual franchise or privilege tax on all domestic mutual burial associations shall be due and payable to the Secretary of Revenue on or before the first day of April of each year. The amount of this franchise or privilege tax shall be based on the membership of such associations according to the following schedule:

                                    Membership less than 3,000 ..............................................................  $15.00

                                    Membership of 3,000 to 5,000 ............................................................. 20.00

                                    Membership of 5,000 to 10,000 .........................................................   25.00

                                    Membership of 10,000 to 15,000 .......................................................   30.00

                                    Membership of 15,000 to 20,000 .......................................................   35.00

                                    Membership of 20,000 to 25,000 .......................................................   40.00

                                    Membership of 25,000 to 30,000 .......................................................   45.00

                                    Membership of 30,000 or more ..........................................................   50.00

 (1943, c. 60, s. 2; 1973, c. 476, s. 193.)

 

§ 105‑122.  Franchise or privilege tax on domestic and foreign corporations.

(a)        An annual franchise or privilege tax is imposed on a corporation doing business in this State. The tax is determined on the basis of the books and records of the corporation as of the close of its income year. A corporation subject to the tax must file a return under affirmation with the Secretary at the place and in the manner prescribed by the Secretary. The return must be signed by the president, vice‑president, treasurer, or chief financial officer of the corporation. The return is due on or before the fifteenth day of the fourth month following the end of the corporation's income year.

(b)        Determination of Capital Base. – A corporation taxed under this section shall determine the total amount of its issued and outstanding capital stock, surplus, and undivided profits. No reservation or allocation from surplus or undivided profits is allowed except as provided below:

(1)        Definite and accrued legal liabilities.

(1a)      Billings in excess of costs that are considered a deferred liability under the percentage of completion method of revenue recognition.

(2)        Taxes accrued, dividends declared, and reserves for depreciation of tangible assets and for amortization of intangible assets as permitted for income tax purposes.

(3)        When including deferred tax liabilities, a corporation may reduce the amount included in its base by netting against that amount deferred tax assets. The reduction may not decrease deferred tax liabilities below zero (0).

(4)        Reserves for the cost of any air‑cleaning device or sewage or waste treatment plant, including waste lagoons, and pollution abatement equipment purchased or constructed and installed which reduces the amount of air or water pollution resulting from the emission of air contaminants or the discharge of sewage and industrial wastes or other polluting materials or substances into the outdoor atmosphere or streams, lakes, or rivers, upon condition that the corporation claiming such deductible liability shall furnish to the Secretary a certificate from the Department of Environment and Natural Resources or from a local air pollution control program for air‑cleaning devices located in an area where the Environmental Management Commission has certified a local air pollution control program pursuant to G.S. 143‑215.112 certifying that the Environmental Management Commission or local air pollution control program has found as a fact that the air‑cleaning device, waste treatment plant or pollution abatement equipment purchased or constructed and installed as above described has actually been constructed and installed and that such plant or equipment complies with the requirements of the Environmental Management Commission or local air pollution control program with respect to such devices, plants or equipment, that such device, plant or equipment is being effectively operated in accordance with the terms and conditions set forth in the permit, certificate of approval, or other document of approval issued by the Environmental Management Commission or local air pollution control program and that the primary purpose thereof is to reduce air or water pollution resulting from the emission of air contaminants or the discharge of sewage and waste and not merely incidental to other purposes and functions.

(5)        Reserves for the cost of purchasing and installing equipment or constructing facilities for the purpose of recycling or resource recovering of or from solid waste or for the purpose of reducing the volume of hazardous waste generated shall be treated as deductible for the purposes of this section upon condition that the corporation claiming such deductible liability shall furnish to the Secretary a certificate from the Department of Environment and Natural Resources certifying that the Department of Environment and Natural Resources has found as a fact that the equipment or facility has actually been purchased, installed or constructed, that it is in conformance with all rules and regulations of the Department of Environment and Natural Resources, and the recycling or resource recovering is the primary purpose of the facility or equipment.

(6)        Reserves for the cost of constructing facilities of any private or public utility built for the purpose of providing sewer service to residential and outlying areas shall be treated as deductible for the purposes of this section; the deductible liability allowed by this section shall apply only with respect to such pollution abatement plants or equipment constructed or installed on or after January 1, 1955.

(7)        The cost of treasury stock.

(8)        In the case of an international banking facility, the capital base shall be reduced by the excess of the amount as of the end of the taxable year of all assets of an international banking facility which are employed outside the United States over liabilities of the international banking facility owed to foreign persons. For purposes of such reduction, foreign persons shall have the same meaning as defined in G.S. 105‑130.5(b)(13)d.

Every corporation doing business in this State which is a parent, subsidiary, or affiliate of another corporation shall add to its capital stock, surplus, and undivided profits all indebtedness owed to a parent, subsidiary, or affiliated corporation as a part of its capital used in its business and as a part of the base for franchise tax under this section. If any part of the capital of the creditor corporation is capital borrowed from a source other than a parent, subsidiary, or affiliate, the debtor corporation, which is required under this subsection to include in its tax base the amount of debt by reason of being a parent, subsidiary, or affiliate of the creditor corporation, may deduct from the debt included a proportionate part determined on the basis of the ratio of the borrowed capital of the creditor corporation to the total assets of the creditor corporation. If the creditor corporation is also taxable under the provisions of this section, the creditor corporation is allowed to deduct from the total of its capital, surplus, and undivided profits the amount of any debt owed to it by a parent, subsidiary or affiliated corporation to the extent that the debt has been included in the tax base of the parent, subsidiary, or affiliated debtor corporation reporting for taxation under the provisions of this section.

(b1)      Definitions. – The following definitions apply in subsection (b) of this section:

(1)        Affiliate. – The same meaning as specified in G.S. 105‑130.6.

(2)        Indebtedness. – All loans, credits, goods, supplies, or other capital of whatsoever nature furnished by a parent, subsidiary, or affiliated corporation, other than indebtedness endorsed, guaranteed, or otherwise supported by one of these corporations.

(3)        Parent. – The same meaning as specified in G.S. 105‑130.6.

(4)        Subsidiary. – The same meaning as specified in G.S. 105‑130.6.

(c)        Repealed by Session Laws 2007‑491, s. 2, effective January 1, 2008.

(c1)      Apportionment. – A corporation that is doing business in this State and in one or more other states must apportion its capital stock, surplus, and undivided profits to this State. A corporation must use the apportionment method set out in subdivision (1) of this subsection unless the Department has authorized it to use a different method under subdivision (2) of this subsection. The portion of a corporation's capital stock, surplus, and undivided profits determined by applying the appropriate apportionment method is considered the amount of capital stock, surplus, and undivided profits the corporation uses in its business in this State.

(1)        Statutory. – A corporation that is subject to income tax under Article 4 of this Chapter must apportion its capital stock, surplus, and undivided profits by using the fraction it applies in apportioning its income under that Article. A corporation that is not subject to income tax under Article 4 of this Chapter must apportion its capital stock, surplus, and undivided profits by using the fraction it would be required to apply in apportioning its income if it were subject to that Article. The apportionment method set out in this subdivision is considered the statutory method of apportionment and is presumed to be the best method of determining the amount of a corporation's capital stock, surplus, and undivided profits attributable to the corporation's business in this State.

(2)        Alternative. – A corporation that believes the statutory apportionment method set out in subdivision (1) of this subsection subjects a greater portion of its capital stock, surplus, and undivided profits to tax under this section than is attributable to its business in this State may make a written request to the Secretary for permission to use an alternative method. The request must set out the reasons for the corporation's belief and propose an alternative method. The corporation has the burden of establishing by clear, cogent, and convincing proof that the statutory apportionment method subjects a greater portion of the corporation's capital stock, surplus, and undivided profits to tax under this section than is attributable to its business in this State and that the proposed alternative method is a better method of determining the amount of the corporation's capital stock, surplus, and undivided profits attributable to the corporation's business in this State.

The Secretary must issue a written decision on a corporation's request for an alternative apportionment method. If the decision grants the request, it must describe the alternative method the corporation is authorized to use and state the tax years to which the alternative method applies. A decision may apply to no more than three tax years, unless the provisions of subdivision (3) of this subsection applies. A corporation may renew a request to use an alternative apportionment method by following the procedure in this subdivision. A decision of the Secretary on a request for an alternative apportionment method is final and is not subject to administrative or judicial review. A corporation authorized to use an alternative method may apportion its capital stock, surplus, and undivided profits in accordance with the alternative method or the statutory method.

(3)        Repealed by Session Laws 2011‑330, s. 5, effective June 27, 2011.

(d)       After determining the proportion of its total capital stock, surplus and undivided profits as set out in subsection (c) of this section, which amount shall not be less than fifty‑five percent (55%) of the appraised value as determined for ad valorem taxation of all the real and tangible personal property in this State of each corporation nor less than its total actual investment in tangible property in this State, every corporation taxed under this section shall annually pay to the Secretary of Revenue, at the time the report and statement are due, a franchise or privilege tax at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of the total amount of capital stock, surplus and undivided profits as provided in this section. The tax imposed in this section shall not be less than thirty‑five dollars ($35.00) and shall be for the privilege of carrying on, doing business, and/or the continuance of articles of incorporation or domestication of each corporation in this State. Appraised value of tangible property including real estate is the ad valorem valuation for the calendar year next preceding the due date of the franchise tax return. The term "total actual investment in tangible property" as used in this section means the total original purchase price or consideration to the reporting taxpayer of its tangible properties, including real estate, in this State plus additions and improvements thereto less reserve for depreciation as permitted for income tax purposes, and also less any indebtedness incurred and existing by virtue of the purchase of any real estate and any permanent improvements made thereon. In computing "total actual investment in tangible personal property" there shall also be deducted reserves for the entire cost of any air‑cleaning device or sewage or waste treatment plant, including waste lagoons, and pollution abatement equipment purchased or constructed and installed which reduces the amount of air or water pollution resulting from the emission of air contaminants or the discharge of sewage and industrial wastes or other polluting materials or substances into the outdoor atmosphere or into streams, lakes, or rivers, upon condition that the corporation claiming this deduction shall furnish to the Secretary a certificate from the Department of Environment and Natural Resources or from a local air pollution control program for air‑cleaning devices located in an area where the Environmental Management Commission has certified a local air pollution control program pursuant to G.S. 143‑215.112 certifying that said Department or local air pollution control program has found as a fact that the air‑cleaning device, waste treatment plant or pollution abatement equipment purchased or constructed and installed as above described has actually been constructed and installed and that the device, plant or equipment complies with the requirements of the Environmental Management Commission or local air pollution control program with respect to the devices, plants or equipment, that the device, plant or equipment is being effectively operated in accordance with the terms and conditions set forth in the permit, certificate of approval, or other document of approval issued by the Environmental Management Commission or local air pollution control program and that the primary purpose is to reduce air or water pollution resulting from the emission of air contaminants or the discharge of sewage and waste and not merely incidental to other purposes and functions. The cost of constructing facilities of any private or public utility built for the purpose of providing sewer service to residential and outlying areas is treated as deductible for the purposes of this section; the deductible liability allowed by this section shall apply only with respect to pollution abatement plants or equipment constructed or installed on or after January 1, 1955.

(d1)     Credits. – A corporation is allowed a credit against the tax imposed by this section for a taxable year equal to one‑half of the amount of tax payable during the taxable year under Article 5E of this Chapter. The credit allowed by this subsection may not exceed the amount of tax imposed by this section for the taxable year, reduced by the sum of all other credits allowed against that tax, except tax payments made by or on behalf of the taxpayer.

(e)        Any corporation which changes its income year, and files a "short period" income tax return pursuant to G.S. 105‑130.15 shall file a franchise tax return in accordance with the provisions of this section in the manner and as of the date specified in subsection (a) of this section. Such corporation shall be entitled to deduct from the total franchise tax computed (on an annual basis) on such return the amount of franchise tax previously paid which is applicable to the period subsequent to the beginning of the new income year.

(f)        The report, statement and tax required by this section shall be in addition to all other reports required or taxes levied and assessed in this State.

(g)        Counties, cities and towns shall not levy a franchise tax on corporations taxed under this section.

(h)        Repealed by Session Laws 1981 (Regular Session, 1982), c. 1211, s. 5.  (1939, c. 158, s. 210; 1941, c. 50, s. 4; 1943, c. 400, s. 3; 1945, c. 708, s. 3; 1947, c. 501, s. 3; 1951, c. 643, s. 3; 1953, c. 1302, s. 3; 1955, c. 1100, s. 2½; c. 1350, s. 17; 1957, c. 1340, s. 3; 1959, c. 1259, s. 3; 1963, c. 1169, s. 1; 1967, c. 286; c. 892, ss. 10, 11; c. 1110, s. 2; 1973, c. 476, s. 193; c. 695, s. 17; c. 1262, s. 23; c. 1287, s. 3; 1975, c. 764, s. 2; 1977, c. 771, s. 4; 1981, c. 704, s. 18; c. 855, s. 3; 1981 (Reg. Sess., 1982), c. 1211, s. 5; 1985, c. 656, s. 40; 1985 (Reg. Sess., 1986), c. 826, s. 6; c. 854, s. 1; 1987 (Reg. Sess., 1988), c. 882, s. 4.3; 1989, c. 148, s. 1; c. 727, ss. 218(39), 219(27); 1991, c. 30, s. 5; 1993, c. 532, s. 11; 1995 (Reg. Sess., 1996), c. 560, s. 1; 1997‑443, s. 11A.119(a); 1998‑22, ss. 8, 9; 1998‑98, ss. 72, 77; 1998‑217, s. 43; 1999‑337, s. 21; 2001‑427, s. 12(a); 2003‑416, s. 5(j); 2006‑95, s. 1.1; 2006‑162, s. 2; 2007‑491, ss. 2, 10, 11; 2008‑134, ss. 3(a), (b); 2009‑422, s. 1; 2009‑445, s. 2; 2010‑31, s. 31.9(a); 2010‑89, s. 2(c); 2011‑145, s. 31A.2(a); 2011‑330, s. 5.)

 

§ 105‑122.1.  Credit for additional annual report fees paid by limited liability companies subject to franchise tax.

A limited liability company subject to tax under this Article is allowed a credit against the tax imposed by this Article equal to the difference between the annual report fee for corporations under G.S. 55‑1‑22(a)(23) and the annual report fee for limited liability companies under G.S. 57C‑1‑22(a). The credit allowed by this section may not exceed the amount of tax imposed by this Article for the taxable year reduced by the sum of all credits allowed, except payments of tax made by or on behalf of the taxpayer. (2006‑66, s. 24A.2(c); 2007‑323, s. 30.6(b).)

 

 

§ 105‑123: Repealed by Session Laws 1991, c. 30, s. 1.

 

§ 105‑124.  Repealed by Session Laws 1959, c. 1259, s. 9.

 

§ 105‑125.  Exempt corporations.

(a)        Exemptions. – The following corporations are exempt from the taxes levied by this Article. Upon request of the Secretary, an exempt corporation must establish its claim for exemption in writing:

(1)        A charitable, religious, fraternal, benevolent, scientific, or educational corporation not operated for profit.

(2)        An insurance company subject to tax under Article 8B of this Chapter.

(3)        A mutual ditch or irrigation association, a mutual or cooperative telephone association or company, a mutual canning association, a cooperative breeding association, or a similar corporation of a purely local character deriving receipts solely from assessments, dues, or fees collected from members for the sole purpose of meeting expenses.

(4)        A cooperative marketing association that operates solely for the purpose of marketing the products of members or other farmers and returns to the members and farmers the proceeds of sales, less the association's necessary operating expenses, including interest and dividends on capital stock, on the basis of the quantity of product furnished by them. The association's operations may include activities directly related to these marketing activities.

(5)        A production credit association organized under the federal Farm Credit Act of 1933.

(6)        A club organized and operated exclusively for pleasure, recreation, or other nonprofit purposes, a civic league operated exclusively for the promotion of social welfare, a business league, or a board of trade.

(7)        A chamber of commerce or merchants' association not organized for profit, no part of the net earnings of which inures to the benefit of a private stockholder, an individual, or another corporation.

(8)        An organization, such as a condominium association, a homeowners' association, or a cooperative housing corporation not organized for profit, the membership of which is limited to the owners or occupants of residential units in the condominium, housing development, or cooperative housing corporation. To qualify for the exemption, the organization must be operated exclusively for the management, operation, preservation, maintenance, or landscaping of the residential units owned by the organization or its members or of the common areas and facilities that are contiguous to the residential units and owned by the organization or by its members. To qualify for the exemption, no part of the net earnings of the organization may inure, other than through the performance of related services for the members of the organization, to the benefit of any person.

(9)        Except as otherwise provided by law, an organization exempt from federal income tax under the Code.

Provided, that an entity that qualifies as a real estate mortgage investment conduit, as defined in section 860D of the Code, is exempt from all of the taxes levied in this Article. Upon request by the Secretary of Revenue, a real estate mortgage investment conduit must establish in writing its qualification for this exemption.

(b)        Certain Investment Companies. – A corporation doing business in North Carolina that meets one or more of the following conditions may, in determining its capital stock, surplus, and undivided profits base for franchise tax, deduct the aggregate market value of its investments in the stocks, bonds, debentures, or other securities or evidences of debt of other corporations, partnerships, individuals, municipalities, governmental agencies, or governments:

(1)        A regulated investment company. – A regulated investment company is an entity that qualifies as a regulated investment company under section 851 of the Code.

(2)        A REIT, unless the REIT is a captive REIT. – The terms "REIT" and "captive REIT" have the same meanings as defined in G.S. 105‑130.12. (1939, c. 158, s. 213; 1951, c. 937, s. 3; 1955, c. 1313, s. 1; 1957, c. 1340, s. 3; 1963, c. 601, s. 3; c. 1169, s. 1; 1967, c. 1110, s. 2; 1971, c. 820, s. 3; c. 833, s. 1; 1973, c. 476, s. 193; c. 1053, s. 2; c. 1287, s. 3; 1975, c. 591, s. 1; 1983, c. 28, s. 2; c. 713, s. 67; 1985 (Reg. Sess., 1986), c. 826, s. 4; 1991, c. 30, s. 6; 1993, c. 485, s. 4; c. 494, s. 1; 2008‑107, s. 28.7(c); 2011‑330, s. 8.)

 

§ 105‑126.  Repealed by Session Laws 1959, c. 1259, s. 9.

 

§ 105‑127.  When franchise or privilege taxes payable.

(a)        Every corporation, domestic or foreign, from which a report is required by law to be made to the Secretary of Revenue, shall, unless otherwise provided, pay to said Secretary annually the franchise tax as required by G.S. 105‑122.

(b)        Repealed by Session Laws 1998‑98, s. 78, effective August 14, 1998.

(c)        It shall be the duty of the treasurer or other officer having charge of any such corporation, domestic or foreign, upon which a tax is herein imposed, to transmit the amount of the tax due to the Secretary of Revenue within the time provided by law for payment of same.

(d),      (e) Repealed by Session Laws 2002‑72, s. 11, effective August 12, 2002.

(f)        After the end of the income year in which a domestic corporation is dissolved pursuant to Part 1 of Article 14 of Chapter 55 of the General Statutes, the corporation is no longer subject to the tax levied in this Article unless the Secretary of Revenue finds that the corporation has engaged in business activities in this State not appropriate to winding up and liquidating its business and affairs.  (1939, c. 158, s. 215; 1973, c. 476, s. 193; 1991, c. 30, s. 7; 1993, c. 485, s. 6; 1998‑98, s. 78; 2002‑72, s. 11; 2011‑330, s. 9.)

 

§ 105‑128.  Power of attorney.

The Secretary of Revenue shall have the authority to require a proper power of attorney of each and every agent for any taxpayer under this Article. (1939, c. 158, s. 217; 1973, c. 476, s. 193.)

 

§ 105‑129.  Extension of time for filing returns.

A return required by this Article is due on or before the date set in this Article. A taxpayer may ask the Secretary for an extension of time to file a return under G.S. 105‑263. (1939, c. 158, s. 216; 1955, c. 1350, s. 17; 1959, c. 1259, s. 9; 1973, c. 476, s. 193; 1977, c. 1114, s. 6; 1989 (Reg. Sess., 1990), c. 984, s. 7; 1997‑300, s. 2.)

 

§ 105‑129.1:  Repealed by Session Laws 1989, c.  582, s. 1.

 

Article 3A.

Tax Incentives For New And Expanding Businesses.

§§ 105‑129.2 through 105‑129.13: Repealed effective for business activities occurring on or after January 1, 2007.

 

Article 3B.

Business And Energy Tax Credits.

§ 105‑129.15.  Definitions.

The following definitions apply in this Article:

(1)        Business property. – Tangible personal property that is used by the taxpayer in connection with a business or for the production of income and is capitalized by the taxpayer for tax purposes under the Code. The term does not include, however, a luxury passenger automobile taxable under section 4001 of the Code or a watercraft used principally for entertainment and pleasure outings for which no admission is charged.

(2)        (Effective for taxable years beginning before January 1, 2010) Cost. – In the case of property owned by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code, subject to the limitation on cost provided in section 179 of the Code. In the case of property the taxpayer leases from another, cost is value as determined pursuant to G.S. 105‑130.4(j)(2).

(2)        (Effective for taxable years beginning on or after January 1, 2010) Cost. – In the case of property owned by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code, subject to the limitation on cost provided in section 179 of the Code. In the case of property the taxpayer leases from another, cost is value as determined pursuant to G.S. 105‑130.4(j)(2), unless the property is renewable energy property for which the taxpayer claims either a federal energy credit under section 48 of the Code or a federal grant in lieu of that credit and makes a lease pass‑through election under the Code. In this circumstance, the cost of the leased renewable energy property is the cost determined under the Code.

(3)        Recodified as § 105‑129.15(5).

(4)        Hydroelectric generator. – A machine that produces electricity by water power or by the friction of water or steam.

(4a)      Repealed by Session Laws 2002‑87, s. 3, effective August 22, 2002.

(4b)      (Effective for taxable years beginning on or after January 1, 2010) Installation of renewable energy property. – Renewable energy property that, standing alone or in combination with other machinery, equipment, or real property, is able to produce usable energy on its own.

(5)        Purchase. – Defined in section 179 of the Code.

(6)        Renewable biomass resources. – Organic matter produced by terrestrial and aquatic plants and animals, such as standing vegetation, aquatic crops, forestry and agricultural residues, spent pulping liquor, landfill wastes, and animal wastes.

(7)        (Effective for taxable years beginning before January 1, 2010) Renewable energy property. – Any of the following machinery and equipment or real property:

a.         Biomass equipment that uses renewable biomass resources for biofuel production of ethanol, methanol, and biodiesel; anaerobic biogas production of methane utilizing agricultural and animal waste or garbage; or commercial thermal or electrical generation. The term also includes related devices for converting, conditioning, and storing the liquid fuels, gas, and electricity produced with biomass equipment.

b.         Hydroelectric generators located at existing dams or in free‑flowing waterways, and related devices for water supply and control, and converting, conditioning, and storing the electricity generated.

c.         Solar energy equipment that uses solar radiation as a substitute for traditional energy for water heating, active space heating and cooling, passive heating, daylighting, generating electricity, distillation, desalination, detoxification, or the production of industrial or commercial process heat. The term also includes related devices necessary for collecting, storing, exchanging, conditioning, or converting solar energy to other useful forms of energy.

d.         Wind equipment required to capture and convert wind energy into electricity or mechanical power, and related devices for converting, conditioning, and storing the electricity produced.

e.         Geothermal heat pumps that use the ground or groundwater as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure.

f.          Geothermal equipment that uses the internal heat of the earth as a substitute for traditional energy for water heating or active space heating and cooling.

(7)        (Effective for taxable years beginning on or after January 1, 2010) Renewable energy property. – Any of the following machinery and equipment or real property:

a.         Biomass equipment that uses renewable biomass resources for biofuel production of ethanol, methanol, and biodiesel; anaerobic biogas production of methane utilizing agricultural and animal waste or garbage; or commercial thermal or electrical generation. The term also includes related devices for converting, conditioning, and storing the liquid fuels, gas, and electricity produced with biomass equipment.

b.         Combined heat and power system property. – Defined in section 48 of the Code.

c.         Geothermal equipment that meets either of the following descriptions:

1.         It is a heat pump that uses the ground or groundwater as a thermal energy source to heat a structure or as a thermal energy sink to cool a structure.

2.         It uses the internal heat of the earth as a substitute for traditional energy for water heating or active space heating or cooling.

d.         Hydroelectric generators located at existing dams or in free‑flowing waterways, and related devices for water supply and control, and converting, conditioning, and storing the electricity generated.

e.         Solar energy equipment that uses solar radiation as a substitute for traditional energy for water heating, active space heating and cooling, passive heating, daylighting, generating electricity, distillation, desalination, detoxification, or the production of industrial or commercial process heat. The term also includes related devices necessary for collecting, storing, exchanging, conditioning, or converting solar energy to other useful forms of energy.

f.          Wind equipment required to capture and convert wind energy into electricity or mechanical power, and related devices for converting, conditioning, and storing the electricity produced or relaying the electricity by cable from the turbine motor to the power grid.

(8)        Renewable fuel. – Either of the following:

a.         Biodiesel, as defined in G.S. 105‑449.60.

b.         Ethanol either unmixed or in mixtures with gasoline that are seventy percent (70%) or more ethanol by volume.  (1996, 2nd Ex. Sess., c. 13, s. 3.12; 1997‑277, s. 3; 1998‑55, s. 2; 1999‑342, s. 2; 1999‑360, s. 1; 2000‑173, s. 1(a); 2001‑431, s. 1; 2002‑87, s. 3; 2004‑153, s. 1; 2005‑413, s. 4; 2006‑162, s. 23; 2009‑548, s. 1; 2010‑167, s. 2(a).)

 

§§ 105‑129.15A, 105‑129.16: Repealed by Session Laws 2005‑413, ss. 6 and 7, effective September 20, 2005.

 

§ 105‑129.16A.  (Effective for taxable years beginning before January 1, 2010) Credit for investing in renewable energy property.

(a)        Credit. – If a taxpayer that has constructed, purchased, or leased renewable energy property places it in service in this State during the taxable year, the taxpayer is allowed a credit equal to thirty‑five percent (35%) of the cost of the property. In the case of renewable energy property that serves a single‑family dwelling, the credit must be taken for the taxable year in which the property is placed in service. For all other renewable energy property, the entire credit may not be taken for the taxable year in which the property is placed in service but must be taken in five equal installments beginning with the taxable year in which the property is placed in service. No credit is allowed under this section to the extent the cost of the renewable energy property was provided by public funds. For the purposes of this section, "public funds" does not include grants made under section 1603 of the American Recovery and Reinvestment Tax Act of 2009.

(b)        Expiration. – If, in one of the years in which the installment of a credit accrues, the renewable energy property with respect to which the credit was claimed is disposed of, taken out of service, or moved out of State, the credit expires and the taxpayer may not take any remaining installment of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.17.

(c)        Ceilings. – The credit allowed by this section may not exceed the applicable ceilings provided in this subsection.

(1)        Nonresidential Property. – A ceiling of two million five hundred thousand dollars ($2,500,000) per installation applies to renewable energy property placed in service for any purpose other than residential.

(2)        Residential Property. – The following ceilings apply to renewable energy property placed in service for residential purposes:

a.         One thousand four hundred dollars ($1,400) per dwelling unit for solar energy equipment for domestic water heating, including pool heating.

b.         Three thousand five hundred dollars ($3,500) per dwelling unit for solar energy equipment for active space heating, combined active space and domestic hot water systems, and passive space heating.

c.         Ten thousand five hundred dollars ($10,500) per installation for any other renewable energy property for residential purposes.

d.         Eight thousand four hundred dollars ($8,400) per installation for a geothermal heat pump or geothermal equipment.

(d)       No Double Credit. – A taxpayer that claims any other credit allowed under this Chapter with respect to renewable energy property may not take the credit allowed in this section with respect to the same property. A taxpayer may not take the credit allowed in this section for renewable energy property the taxpayer leases from another unless the taxpayer obtains the lessor's written certification that the lessor will not claim a credit under this Chapter with respect to the property.

(e)        Sunset. – This section is repealed effective for renewable energy property placed into service on or after January 1, 2016.  (1999‑342, s. 2; 2005‑413, s. 5; 2009‑548, s. 2; 2010‑4, s. 1.)

 

§ 105‑129.16A.  (Effective for taxable years beginning on or after January 1, 2010, and repealed effective for renewable energy property placed into service on or after January 1, 2016) Credit for investing in renewable energy property.

(a)        Credit. – If a taxpayer that has constructed, purchased, or leased renewable energy property places it in service in this State during the taxable year, the taxpayer is allowed a credit equal to thirty‑five percent (35%) of the cost of the property. In the case of renewable energy property that serves a nonbusiness purpose, the credit must be taken for the taxable year in which the property is placed in service. For all other renewable energy property, the entire credit may not be taken for the taxable year in which the property is placed in service but must be taken in five equal installments beginning with the taxable year in which the property is placed in service. Upon request of a taxpayer that leases renewable energy property, the lessor of the property must give the taxpayer a statement that describes the renewable energy property and states the cost of the property. No credit is allowed under this section to the extent the cost of the renewable energy property was provided by public funds. For the purposes of this section, "public funds" does not include grants made under section 1603 of the American Recovery and Reinvestment Tax Act of 2009.

(b)        Expiration. – If, in one of the years in which the installment of a credit accrues, the renewable energy property with respect to which the credit was claimed is disposed of, taken out of service, or moved out of State, the credit expires and the taxpayer may not take any remaining installment of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.17.

(c)        Ceilings. – The credit allowed by this section may not exceed the applicable ceilings provided in this subsection.

(1)        Business. – A ceiling of two million five hundred thousand dollars ($2,500,000) applies to each installation of renewable energy property placed in service for a business purpose. Renewable energy property is placed in service for a business purpose if the useful energy generated by the property is offered for sale or is used on‑site for a purpose other than providing energy to a residence.

(2)        Nonbusiness. – The following ceilings apply to renewable energy property placed in service for a nonbusiness purpose:

a.         One thousand four hundred dollars ($1,400) per dwelling unit for solar energy equipment for domestic water heating, including pool heating.

b.         Three thousand five hundred dollars ($3,500) per dwelling unit for solar energy equipment for active space heating, combined active space and domestic hot water systems, and passive space heating.

c.         Eight thousand four hundred dollars ($8,400) for each installation of geothermal equipment.

d.         Ten thousand five hundred dollars ($10,500) for each installation of any other renewable energy property.

(3)        (Effective for taxable years beginning on or after January 1, 2011) Eco‑Industrial Park. – A ceiling of five million dollars ($5,000,000) applies to each installation of renewable energy property placed in service at an Eco‑Industrial Park certified under G.S. 143B‑437.08 for a business purpose described in subdivision (1) of this subsection.

(d)       No Double Credit. – A taxpayer that claims any other credit allowed under this Chapter with respect to renewable energy property may not take the credit allowed in this section with respect to the same property. A taxpayer may not take the credit allowed in this section for renewable energy property the taxpayer leases from another unless the taxpayer obtains the lessor's written certification that the lessor will not claim a credit under this Chapter with respect to the property.

(e)        Sunset. – This section is repealed effective for renewable energy property placed into service on or after January 1, 2016. (1999‑342, s. 2; 2005‑413, s. 5; 2009‑548, s. 2; 2010‑4, s. 1; 2010‑147, s. 5.4; 2010‑167, s. 2(b).)

 

§ 105‑129.16B: Recodified as G.S. 105‑129.41 by Session Laws 2002‑87, s. 2, as amended by Session Laws 2003‑416, s. 1, effective August 22, 2002, and applicable to credits for buildings for which a federal tax credit is first claimed for a taxable year beginning on or after January 1, 2002.

 

§ 105‑129.16C:  Repealed effective for taxable years beginning on or after January 1, 2006.

 

§ 105‑129.16D.  (Repealed effective for facilities placed in service on or after January 1, 2013) Credit for constructing renewable fuel facilities.

(a)        Dispensing Credit. – A taxpayer that constructs and installs and places in service in this State a qualified commercial facility for dispensing renewable fuel is allowed a credit equal to fifteen percent (15%) of the cost to the taxpayer of constructing and installing the part of the dispensing facility, including pumps, storage tanks, and related equipment, that is directly and exclusively used for dispensing or storing renewable fuel. A facility is qualified if the equipment used to store or dispense renewable fuel is labeled for this purpose and clearly identified as associated with renewable fuel.

The entire credit may not be taken for the taxable year in which the facility is placed in service but must be taken in three equal annual installments beginning with the taxable year in which the facility is placed in service. If, in one of the years in which the installment of a credit accrues, the portion of the facility directly and exclusively used for dispensing or storing renewable fuel is disposed of or taken out of service, the credit expires and the taxpayer may not take any remaining installment of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.17.

(b)        Production Credit. – A taxpayer that constructs and places in service in this State a commercial facility for processing renewable fuel is allowed a credit equal to twenty‑five percent (25%) of the cost to the taxpayer of constructing and equipping the facility. The entire credit may not be taken for the taxable year in which the facility is placed in service but must be taken in seven equal annual installments beginning with the taxable year in which the facility is placed in service. If, in one of the years in which the installment of a credit accrues, the facility with respect to which the credit was claimed is disposed of or taken out of service, the credit expires and the taxpayer may not take any remaining installment of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.17.

(b1)      Alternative Production Credit. – In lieu of the credit allowed under subsection (b) of this section, a taxpayer that constructs and places in service in this State three or more commercial facilities for processing renewable fuel and that invests a total amount of at least four hundred million dollars ($400,000,000) in the facilities is allowed a credit equal to thirty‑five percent (35%) of the cost to the taxpayer of constructing and equipping the facilities. In order to claim the credit, the taxpayer must obtain a written determination from the Secretary of Commerce that the taxpayer is expected to invest within a five‑year period a total amount of at least four hundred million dollars ($400,000,000) in three or more facilities. The credit must be taken in seven equal annual installments beginning with the taxable year in which the first facility is placed in service. If, in one of the years in which the installment of credit accrues, a facility with respect to which the credit was claimed is disposed of or taken out of service and the investment requirements of this subsection are no longer satisfied, the credit expires and the taxpayer may take any remaining installment of the credit only to the extent allowed under subsection (b) of this section. The taxpayer may, however, take the portion of an installment under this subsection that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.17. Notwithstanding the provisions of G.S. 105‑129.17, a taxpayer may carry forward unused portions of the credit allowed under this subsection for the succeeding 10 years.

If a taxpayer that claimed a credit under this subsection fails to meet the requirements of this subsection but meets the requirements of subsection (b) of this section, the taxpayer forfeits the difference between the alternative credit claimed under this subsection and the credit allowed under subsection (b) of this section. A taxpayer that forfeits part of the alternative credit under this subsection is liable for the additional taxes avoided plus interest at the rate established under G.S. 105‑241.21, computed from the date the additional taxes would have been due if the credit had not been allowed. The additional taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer that fails to pay the additional taxes and interest by the due date is subject to penalties provided in G.S. 105‑236.

(c)        No Double Credit. – A taxpayer may not claim the credits allowed under subsections (b) and (b1) of this section with respect to the same facility. A taxpayer that claims any other credit allowed under this Chapter with respect to the costs of constructing and installing a facility may not take the credit allowed in this section with respect to the same costs.

(d)       Sunset. – This section is repealed effective for facilities placed in service on or after January 1, 2013.  (2004‑153, s. 2; 2006‑66, s. 24.7(a); 2006‑259, s. 19.5(a); 2007‑323, s. 31.9(a); 2010‑95, s. 2; 2010‑167, s. 1(a).)

 

§ 105‑129.16E.  (Effective for taxable years beginning on or after January 1, 2007, and expires for taxable years beginning on or after January 1, 2010) Credit for small business employee health benefits.

(a)        Credit. – A small business that provides health benefits for all of its eligible employees during the taxable year is allowed a credit to offset its costs in providing health benefits for its eligible employees. For the purposes of this subsection, a taxpayer provides health benefits if it pays at least fifty percent (50%) of the premiums for health care coverage that equals or exceeds the minimum provisions of the basic health care plan of coverage recommended by the Small Employer Carrier Committee pursuant to G.S. 58‑50‑125 or if its employees have qualifying existing coverage.

The credit is equal to a dollar amount per eligible employee whose total wages or salary received from the business does not exceed forty thousand dollars ($40,000) on an annual basis. The dollar amount is two hundred fifty dollars ($250.00), not to exceed the taxpayer's costs of providing health benefits for the employee during the taxable year.

(b)        Allocation. – If the taxpayer is an individual who is a nonresident or a part‑year resident, the taxpayer must reduce the amount of the credit by multiplying it by the fraction calculated under G.S. 105‑134.5(b) or (c), as appropriate. If the taxpayer is not an individual and is required to apportion its multistate business income to this State, the taxpayer must reduce the amount of the credit by multiplying it by the apportionment fraction used to apportion its apportionable income to this State.

(c)        Definitions. – The following definitions apply in this section:

(1)        Eligible employee. – Defined in G.S. 58‑50‑110.

(2)        Qualifying existing coverage. – Defined in G.S. 58‑50‑130(a)(4a).

(3)        Small business. – A taxpayer that employs no more than 25 eligible employees throughout the taxable year.

(d)       Sunset. – This section expires for taxable years beginning on or after January 1, 2010.  (2006‑66, s. 24.4(a); 2007‑527, s. 5; 2008‑107, s. 28.9A(a).)

 

§ 105‑129.16F.  (Repealed for taxable years beginning on or after January 1, 2013) Credit for biodiesel producers.

(a)        Credit. – A biodiesel provider that produces at least 100,000 gallons of biodiesel during the taxable year is allowed a credit equal to the per gallon excise tax the producer paid under Article 36C of this Chapter on the biodiesel. For the purposes of this section, "biodiesel" is liquid fuel derived in whole from agricultural products, animal fats, or wastes from agricultural products or animal fats. The credit does not apply to tax paid on diesel fuel included in a biodiesel blend. The credit may not exceed five hundred thousand dollars ($500,000) and is subject to the limitations of G.S. 105‑129.17.

(b)        Sunset. – This section is repealed for taxable years beginning on or after January 1, 2013.  (2006‑66, s. 24.8(a); 2010‑167, s. 1(b).)

 

§ 105‑129.16G.  (Expiring for taxable years beginning on or after January 1, 2012) Work Opportunity Tax Credit.

(a)        Credit. – A taxpayer who is allowed a federal tax credit under Part IV, Subpart F of the Code for the taxable year is allowed a credit against the tax imposed by this Part. The credit is equal to six percent (6%) of the amount of credit allowed under the Code for wages paid during the taxable year for positions located in this State. A position is located in this State if more than fifty percent (50%) of the employee's duties are performed in the State.

(b)        Sunset. – This section expires for taxable years beginning on or after January 1, 2012.  (2007‑323, s. 31.21(a); 2008‑134, s. 2(a).)

 

§ 105‑129.16H.  Credit for donating funds to a nonprofit organization or unit of State or local government to enable the nonprofit or government unit to acquire renewable energy property.

(a)        Credit. – A taxpayer who donates money to a tax‑exempt nonprofit organization or a unit of State or local government for the purpose of providing funds for the organization or government unit to construct, purchase, or lease renewable energy property is allowed a credit under this section if the donation is used for its intended purpose. A tax‑exempt nonprofit organization is an organization that is exempt from tax under section 501(c)(3) of the Code.

The amount of the credit allowed in this section is the taxpayer's share of the credit the nonprofit organization or the unit of State or local government could claim under G.S. 105‑129.16A if the nonprofit organization or government unit were subject to tax. The taxpayer's share of the credit is calculated by dividing the taxpayer's donation by the cost of the renewable energy property constructed, purchased, or leased by the nonprofit organization or government unit and placed in service during the taxable year and then multiplying this percentage by the amount of the credit the nonprofit organization or government unit could claim if it were subject to tax. A taxpayer must take the credit allowed by this section for the taxable year in which the property is placed in service. The installment requirements in G.S. 105‑129.16A for nonresidential property do not apply to the credit allowed in this section.

(b)        Records. – A nonprofit organization or a unit of State or local government must keep a record of all donations it receives for the purpose of providing funds for the organization to construct, purchase, or lease renewable energy property and of the amount of the donations used for this purpose. If a nonprofit organization or government unit places renewable energy property in service that is purchased in whole or in part from donations made for this purpose, the nonprofit organization or government unit must give each taxpayer who made a donation a statement setting out the amount of the credit for which the taxpayer qualifies under this section. The statement must describe the renewable energy property placed in service and state the cost of the property, the amount of the credit the nonprofit organization or government unit could claim under G.S. 105‑129.16A if it were subject to tax, and the taxpayer's share of the credit allowed in this section. If the donations made for the renewable energy property exceed the cost of the property, the nonprofit organization or government unit must prorate each taxpayer's share of the credit. The sum of the credits allowed under this section to taxpayers who make donations to a nonprofit organization or a government unit may not exceed the amount of the credit the nonprofit organization or government unit could claim under G.S. 105‑129.16A if it were subject to tax.

(c)        No Double Benefit. – A taxpayer who claims a credit under this section based on a donation to a nonprofit organization or a unit of State or local government is not allowed to deduct this donation as a charitable contribution.  (2007‑397, s. 13(a); 2008‑107, s. 28.25(a); 2008‑134, s. 70.)

 

§ 105‑129.16I.  (Effective for taxable years beginning on or after January 1, 2011, and repealed effective for a renewable energy property facility placed in service on or after January 1, 2014) Credit for a renewable energy property facility.

(a)        Credit. – A taxpayer that places in service in this State a commercial facility for the manufacture of renewable energy property or a major component subassembly for a solar array or a wind turbine is allowed a credit. A taxpayer places a facility in service if it constructs the facility or converts its existing manufacturing facility to change the product it manufactures. For a taxpayer that constructs a facility, the credit is twenty‑five percent (25%) of the taxpayer's cost to construct and equip the facility. For a taxpayer that converts a facility, the credit is twenty‑five percent (25%) of the taxpayer's cost to convert and equip the existing facility. A taxpayer that claims any other credit allowed under this Chapter with respect to the facility may not take the credit allowed in this section with respect to that facility.

(b)        Installments. – The entire credit may not be taken for the taxable year in which the facility is placed in service but must be taken in five equal annual installments beginning with the taxable year in which the facility is placed in service. If, in one of the years in which the installment of a credit accrues, the facility with respect to which the credit was claimed is disposed of or taken out of service, the credit expires and the taxpayer may not take any remaining installment of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.17.

(c)        Sunset. – This section is repealed effective for a renewable energy property facility placed in service on or after January 1, 2014.  (2010‑167, s. 3(a).)

 

§ 105‑129.16J.  Temporary unemployment insurance refundable tax credit.

(a)        Credit. – A small business that makes contributions during the taxable year to the State Unemployment Insurance Fund with respect to wages paid for employment in this State is allowed a credit equal to twenty‑five percent (25%) of the contributions. A small business is a business whose cumulative gross receipts from business activity for the taxable year do not exceed one million dollars ($1,000,000).

(b)        Refundable. – Notwithstanding G.S. 105‑129.17, the credit allowed by this section is subject to the following:

(1)        The credit may only be claimed against the income taxes imposed by Article 4 of this Chapter.

(2)        If the credit exceeds the amount of tax imposed by Article 4 of this Chapter for the taxable year reduced by the sum of all credits allowable, the excess is refundable. The refundable excess is governed by the provisions governing a refund of an overpayment by the taxpayer of the tax imposed in that Article. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before refundable credits.

(c)        Applicability. – This section applies only to taxable years 2010 and 2011.  (2010‑31, s. 31.1A(a).)

 

§ 105‑129.17.  Tax election; cap.

(a)        Tax Election. – The credit allowed in G.S. 105‑129.16A is allowed against the franchise tax levied in Article 3 of this Chapter, the income taxes levied in Article 4 of this Chapter, or the gross premiums tax levied in Article 8B of this Chapter. All other credits allowed in this Article are allowed against the franchise tax levied in Article 3 of this Chapter or the income taxes levied in Article 4 of this Chapter. The taxpayer must elect the tax against which a credit will be claimed when filing the return on which the first installment of the credit is claimed. This election is binding. Any carryforwards of a credit must be claimed against the same tax.

(b)        Cap. – The credits allowed in this Article may not exceed fifty percent (50%) of the tax against which they are claimed for the taxable year, reduced by the sum of all other credits allowed against that tax, except tax payments made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of credit, including carryforwards, claimed by the taxpayer under this Article against each tax for the taxable year. Any unused portion of the credits may be carried forward for the succeeding five years.  (1996, 2nd Ex. Sess., c. 13, s. 3.12; 1997‑277, s. 3; 1999‑342, s. 2; 1999‑360, ss. 1, 13; 2000‑140, ss. 63(a), 88; 2001‑431, s. 3; 2002‑87, s. 5; 2009‑548, s. 3.)

 

§ 105‑129.18. (See Editor's note for repeal) Substantiation.

To claim a credit allowed by this Article, the taxpayer must provide any information required by the Secretary of Revenue. Every taxpayer claiming a credit under this Article must maintain and make available for inspection by the Secretary of Revenue any records the Secretary considers necessary to determine and verify the amount of the credit to which the taxpayer is entitled. The burden of proving eligibility for a credit and the amount of the credit rests upon the taxpayer, and no credit may be allowed to a taxpayer that fails to maintain adequate records or to make them available for inspection. (1996, 2nd Ex. Sess., c. 13, s. 3.12; 1997‑277, s. 3; 1999‑342, s. 2; 1999‑360, ss. 1, 14; 2000‑140, ss. 63(b), 88.)

 

§ 105‑129.19.  Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by credit and by taxpayer:

(1)        The number of taxpayers that took the credits allowed in this Article.

(2)        The cost of renewable energy property with respect to which credits were taken.

(2a)      Repealed by Session Laws 2002‑87, s. 6, effective August 22, 2002.

(3)        The total cost to the General Fund of the credits taken.  (1996, 2nd Ex. Sess., c. 13, s. 3.12; 1997‑277, s. 3; 1999‑342, s. 2; 1999‑360, ss. 1, 15; 2000‑140, ss. 63(c), 88; 2001‑414, s. 10; 2002‑87, s. 6; 2005‑429, s. 2.3; 2010‑166, s. 1.2.)

 

§§ 105‑129.20 through 105‑129.24.  Reserved for future codification purposes.

 

Article 3C.

Tax Incentives For Recycling Facilities.

§ 105‑129.25.  Definitions.

The following definitions apply in this Article:

(1)        Reserved.

(2)        Reserved.

(3)        Repealed by Session Laws 2010‑166, s. 2.1, effective July 1, 2010.

(4)        Machinery and equipment. – Engines, machinery, tools, and implements used or designed to be used in the business for which the credit is claimed. The term does not include real property as defined in G.S. 105‑273 or rolling stock as defined in G.S. 105‑333.

(5)        Major recycling facility. – A recycling facility that qualifies under G.S. 105‑129.26(a).

(6)        Owner. – A person who owns or leases a recycling facility.

(7)        Post‑consumer waste material. – Any product that was generated by a business or consumer, has served its intended end use, and has been separated from the solid waste stream for the purpose of recycling. The term includes material acquired by a recycling facility either directly or indirectly, such as through a broker or an agent.

(8)        Purchase. – Defined in section 179 of the Code.

(9)        Recycling facility. – A manufacturing plant at least three‑fourths of whose products are made of at least fifty percent (50%) post‑consumer waste material measured by weight or volume. The term includes real and personal property located at or on land in the same county and reasonably near the plant site and used to perform business functions related to the plant or to transport materials and products to or from the plant. The term also includes utility infrastructure and transportation infrastructure to and from the plant.  (1998‑55, s. 12; 2010‑166, s. 2.1.)

 

§ 105‑129.26.  Qualification; forfeiture.

(a)        Major Recycling Facility. – A recycling facility qualifies for the tax benefits provided in this Article and in Article 5 of this Chapter for major recycling facilities if it meets all of the following conditions:

(1)        The facility is located in an area that, at the time the owner began construction of the facility, was an enterprise tier one area pursuant to G.S. 105‑129.3.

(2)        The Secretary of Commerce has certified that the owner will, by the end of the fourth year after the year the owner begins construction of the recycling facility, invest at least three hundred million dollars ($300,000,000) in the facility and create at least 250 new, full‑time jobs at the facility.

(3)        The jobs at the recycling facility meet the wage standard in effect pursuant to G.S. 105‑129.4(b) as of the date the owner begins construction of the facility.

(b)        Repealed by Session Laws 2010‑166, s. 2.1, effective July 1, 2010.

(c)        Forfeiture. – If the owner of a large or major recycling facility fails to make the required minimum investment or create the required number of new jobs within the period certified by the Secretary of Commerce under this section, the recycling facility no longer qualifies for the applicable recycling facility tax benefits provided in this Article and in Article 5 of this Chapter and forfeits all tax benefits previously received under those Articles. Forfeiture does not occur, however, if the failure was due to events beyond the owner's control. Upon forfeiture of tax benefits previously received, the owner is liable under Part 1 of Article 4 of this Chapter for a tax equal to the amount of all past taxes under Articles 3, 4, and 5 previously avoided as a result of the tax benefits received plus interest at the rate established in G.S. 105‑241.21, computed from the date the taxes would have been due if the tax benefits had not been received. The tax and interest are due 30 days after the date of the forfeiture. An owner that fails to pay the tax and interest is subject to the penalties provided in G.S. 105‑236.

(d)       Substantiation. – To claim a credit allowed by this Article, the owner must provide any information required by the Secretary of Revenue. Every owner claiming a credit under this Article shall maintain and make available for inspection by the Secretary of Revenue any records the Secretary considers necessary to determine and verify the amount of the credit to which the owner is entitled. The burden of proving eligibility for the credit and the amount of the credit shall rest upon the owner, and no credit shall be allowed to an owner that fails to maintain adequate records or to make them available for inspection.

(e)        Report. – The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number and location of major recycling facilities qualified under this Article.

(2)        The number of new jobs created by each recycling facility.

(3)        The amount of investment in each recycling facility.

(4)        The amount of credits taken under this Article.  (1998‑55, s. 12; 2005‑429, s. 2.4; 2007‑491, s. 44(1)a; 2010‑166, ss. 1.3, 2.1.)

 

§ 105‑129.27.  Credit for investing in major recycling facility.

(a)        Credit. – An owner that purchases or leases machinery and equipment for a major recycling facility in this State during the taxable year is allowed a credit equal to fifty percent (50%) of the amount payable by the owner during the taxable year to purchase or lease the machinery and equipment.

(b)        Taxes Credited. – The credit provided in this section is allowed against the franchise tax levied in Article 3 of this Chapter and the income tax levied in Part 1 of Article 4 of this Chapter. Any other nonrefundable credits allowed the owner are subtracted before the credit allowed by this section.

(c)        Carryforwards. – The credit provided in this section may not exceed the amount of tax against which it is claimed for the taxable year, reduced by the sum of all other credits allowed against that tax, except tax payments made by or on behalf of the owner. Any unused portion of the credit may be carried forward for the succeeding 25 years.

(d)       Change in Ownership of Facility. – The sale, merger, consolidation, conversion, acquisition, or bankruptcy of a recycling facility, or any transaction by which the facility is reformulated as another business, does not create new eligibility in a succeeding owner with respect to a credit for which the predecessor was not eligible under this section. A successor business may, however, take any carried‑over portion of a credit that its predecessor could have taken if it had a tax liability.

(e)        Forfeiture. – If any machinery or equipment for which a credit was allowed under this section is not placed in service within 30 months after the credit was allowed, the credit is forfeited. A taxpayer that forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited; a taxpayer that fails to pay the past taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236.

(f)        No Double Credit. – A recycling facility that is eligible for the credit allowed in this section is not allowed the credit for investing in machinery and equipment provided in G.S. 105‑129.9 or G.S. 105‑129.88.  (1998‑55, s. 12; 1999‑369, s. 5.3; 2007‑491, s. 44(1)a; 2009‑445, s. 3(a); 2010‑166, s. 2.1.)

 

§ 105‑129.28:  Repealed by Session Laws 1998‑55, s, 19, effective for taxable years beginning on or after January 1, 2008.

 

§§ 105‑129.29 through 105‑129.34.  Reserved for future codification purposes.

 

Article 3D.

Historic Rehabilitation Tax Credits.

§ 105‑129.35.  Credit for rehabilitating income‑producing historic structure.

(a)        Credit. – A taxpayer who is allowed a federal income tax credit under section 47 of the Code for making qualified rehabilitation expenditures for a certified historic structure located in this State is allowed a credit equal to twenty percent (20%) of the expenditures that qualify for the federal credit. If the certified historic structure is a facility that at one time served as a State training school for juvenile offenders, the amount of the credit is equal to forty percent (40%) of the expenditures that qualify for the federal credit. To claim the credit allowed by this subsection, the taxpayer must provide a copy of the certification obtained from the State Historic Preservation Officer verifying that the historic structure has been rehabilitated in accordance with this subsection.

(b)        Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as an owner's adjusted basis in the pass‑through entity, as determined under the Code, at the end of the taxable year in which the certified historic structure is placed in service, is at least forty percent (40%) of the amount of credit allocated to that owner. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass‑through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass‑through entity and the allocation that would have been required under G.S. 105‑131.8 or G.S. 105‑269.15.

(c)        Definitions. – The following definitions apply in this section:

(1)        Certified historic structure. – Defined in section 47 of the Code.

(2)        Pass‑through entity. – Defined in G.S. 105‑228.90.

(3)        Qualified rehabilitation expenditures. – Defined in section 47 of the Code.

(4)        State Historic Preservation Officer. – Defined in G.S. 105‑129.36. (1993, c. 527, ss. 1, 2; 1997‑139, ss. 1, 2; 1998‑98, ss. 36, 69; 1999‑389, ss. 2, 5, 6; 2001‑476, s. 19(a); 2003‑284, s. 35A.1; 2003‑415, ss. 1, 2; 2003‑416, s. 4(c); 2004‑170, s. 14; 2006‑40, s. 2; 2007‑461, s. 1.)

 

§ 105‑129.36.  Credit for rehabilitating nonincome‑producing historic structure.

(a)        Credit. – A taxpayer who is not allowed a federal income tax credit under section 47 of the Code and who makes rehabilitation expenses for a State‑certified historic structure located in this State is allowed a credit equal to thirty percent (30%) of the rehabilitation expenses. If the certified historic structure is a facility that at one time served as a State training school for juvenile offenders, the amount of the credit is equal to forty percent (40%) of the expenditures that qualify for the federal credit. To qualify for the credit, the taxpayer's rehabilitation expenses must exceed twenty‑five thousand dollars ($25,000) within a 24‑month period. To claim the credit allowed by this subsection, the taxpayer must provide a copy of the certification obtained from the State Historic Preservation Officer verifying that the historic structure has been rehabilitated in accordance with this subsection.

(b)        Definitions. – The following definitions apply in this section:

(1)        Certified rehabilitation. – Repairs or alterations consistent with the Secretary of the Interior's Standards for Rehabilitation and certified as such by the State Historic Preservation Officer.

(2)        Rehabilitation expenses. – Expenses incurred in the certified rehabilitation of a certified historic structure and added to the property's basis. The term does not include the cost of acquiring the property, the cost attributable to the enlargement of an existing building, the cost of sitework expenditures, or the cost of personal property.

(3)        State‑certified historic structure. – A structure that is individually listed in the National Register of Historic Places or is certified by the State Historic Preservation Officer as contributing to the historic significance of a National Register Historic District or a locally designated historic district certified by the United States Department of the Interior.

(4)        State Historic Preservation Officer. – The Deputy Secretary of Archives and History or the Deputy Secretary's designee who acts to administer the historic preservation programs within the State.

(c)        Recodified as G.S. 105‑129.36A by Session Laws 2003‑284, s. 35A.2, effective July 15, 2003. (1993, c. 527, ss. 1, 2; 1997‑139, ss. 1, 2; 1998‑98, ss. 36, 69; 1999‑389, ss. 3, 5, 6; 2002‑159, s. 35(e); 2003‑284, ss. 35A.2, 35A.3; 2006‑40, ss. 3, 4.)

 

§ 105‑129.36A.  Rules; fees.

(a)        Rules. – The North Carolina Historical Commission, in consultation with the State Historic Preservation Officer, may adopt rules needed to administer the certification process required by this section.

(b)        Fees. – The North Carolina Historical Commission, in consultation with the State Historic Preservation Officer, may adopt a schedule of fees for providing certifications required by this Article. In establishing the fee schedule, the Commission shall consider the administrative and personnel costs incurred by the Department of Cultural Resources. An application fee may not exceed one percent (1%) of the completed qualifying rehabilitation expenditures. The proceeds of the fees are receipts of the Department of Cultural Resources and must be used for performing its duties under this Article. (1993, c. 527, ss. 1, 2; 1997‑139, ss. 1, 2; 1998‑98, ss. 36, 69; 1999‑389, ss. 3, 5, 6; 2002‑159, s. 35(e); 2003‑284, s. 35A.2.)

 

§ 105‑129.37.  Tax credited; credit limitations.

(a)        Tax Credited. – The credits provided in this Article are allowed against the income taxes levied in Article 4 of this Chapter.

(b)        Credit Limitations. – The entire credit may not be taken for the taxable year in which the property is placed in service but must be taken in five equal installments beginning with the taxable year in which the property is placed in service. Any unused portion of the credit may be carried forward for the succeeding five years. A credit allowed under this Article may not exceed the amount of the tax against which it is claimed for the taxable year reduced by the sum of all credits allowed, except payments of tax made by or on behalf of the taxpayer.

(c)        Forfeiture for Disposition. – A taxpayer who is required under section 50 of the Code to recapture all or part of the federal credit for rehabilitating an income‑producing historic structure located in this State forfeits the corresponding part of the State credit allowed under G.S. 105‑129.35 with respect to that historic structure. If the credit was allocated among the owners of a pass‑through entity, the forfeiture applies to the owners in the same proportion that the credit was allocated.

(d)       Forfeiture for Change in Ownership. – If an owner of a pass‑through entity that has qualified for the credit allowed under G.S. 105‑129.35 disposes of all or a portion of the owner's interest in the pass‑through entity within five years from the date the rehabilitated historic structure is placed in service and the owner's interest in the pass‑through entity is reduced to less than two‑thirds of the owner's interest in the pass‑through entity at the time the historic structure was placed in service, the owner forfeits a portion of the credit. The amount forfeited is determined by multiplying the amount of credit by the percentage reduction in ownership and then multiplying that product by the forfeiture percentage. The forfeiture percentage equals the recapture percentage found in the table in section 50(a)(1)(B) of the Code. The remaining allowable credit is allocated equally among the five years in which the credit is claimed.

(e)        Exceptions to Forfeiture. – Forfeiture as provided in subsection (d) of this section is not required if the change in ownership is the result of any of the following:

(1)        The death of the owner.

(2)        A merger, consolidation, or similar transaction requiring approval by the shareholders, partners, or members of the taxpayer under applicable State law, to the extent the taxpayer does not receive cash or tangible property in the merger, consolidation, or other similar transaction.

(f)        Liability From Forfeiture. – A taxpayer or an owner of a pass‑through entity that forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer or owner of a pass‑through entity that fails to pay the taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236. (1993, c. 527, ss. 1, 2; 1997‑139, ss. 1, 2; 1998‑98, ss. 36, 69; 1999‑389, ss. 4, 5, 6; 2007‑491, s. 44(1)a.)

 

§ 105‑129.38.  (See note for repeal) Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers that took the credits allowed in this Article.

(2)        The amount of rehabilitation expenses and qualified rehabilitation expenditures with respect to which credits were taken.

(3)        The total cost to the General Fund of the credits taken.  (2005‑429, s. 2.5; 2010‑166, s. 1.4.)

 

§ 105‑129.39.  Sunset.

This Article expires for qualified rehabilitation expenditures and rehabilitation expenses incurred on or after January 1, 2014.  (2010‑166, s. 1.5.)

 

Article 3E.

Low‑Income Housing Tax Credits.

(See Editor's note for repeal of this Article.)

§ 105‑129.40.  (See Editor's note for repeal) Scope and definitions.

(a)        Scope. – G.S. 105‑129.41 applies to buildings that are awarded a federal credit allocation before January 1, 2003. G.S. 105‑129.42 applies to buildings that are awarded a federal credit allocation on or after January 1, 2003.

(b)        Definitions. – The definitions in section 42 of the Code and the following definitions apply in this Article:

(1)        Housing Finance Agency. – The North Carolina Housing Finance Agency established in G.S. 122A‑4.

(2)        Pass‑through entity. – Defined in G.S. 105‑228.90. (2002‑87, s. 1; 2003‑416, s. 3.)

 

§ 105‑129.41.  (See note for repeal) Credit for low‑income housing awarded a federal credit allocation before January 1, 2003.

(a)        Credit. – A taxpayer that is allowed for the taxable year a federal income tax credit for low‑income housing under section 42 of the Code with respect to a qualified North Carolina low‑income building, is allowed a credit under this Article equal to a percentage of the total federal credit allowed with respect to that building. For the purposes of this section, the total federal credit allowed is the total allowed during the 10‑year federal credit period plus the disallowed first‑year credit allowed in the 11th year. For the purposes of this section, the total federal credit is calculated based on qualified basis as of the end of the first year of the credit period and is not recalculated to reflect subsequent increases in qualified basis. For buildings that meet condition (c)(1) or (c)(1a) of this section, the credit percentage is seventy‑five percent (75%). For other buildings, the credit percentage is twenty‑five percent (25%).

(a1)      Tax Election. – The credit allowed in this section is allowed against the franchise tax levied in Article 3 of this Chapter, the income taxes levied in Article 4 of this Chapter, or the gross premiums tax levied in Article 8B of this Chapter. The taxpayer must elect the tax against which the credit will be claimed when filing the return on which the first installment of the credit is claimed. This election is binding. Any carryforwards of the credit must be claimed against the same tax.

(a2)      Cap. – The credit allowed in this section may not exceed fifty percent (50%) of the tax against which it is claimed for the taxable year, reduced by the sum of all other credits made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of credit, including carryforwards, claimed by the taxpayer under this section against each tax for the taxable year. Any unused portion of the credit may be carried forward for the succeeding five years.

(b)        Timing. – The credit must be taken in equal installments over the five years beginning in the first taxable year in which the federal credit is claimed for that building. During the first taxable year in which the credit allowed under this section may be taken with respect to a building, the amount of the installment must be multiplied by the applicable fraction under section 42(f)(2)(A) of the Code. Any reduction in the amount of the first installment as a result of this multiplication is carried forward and may be taken in the first taxable year after the fifth installment is allowed under this section.

(b1)      Allocation. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as an owner's adjusted basis in the pass‑through entity, as determined under the Code at the end of the taxable year in which the federal credit is first claimed, is at least forty percent (40%) of the amount of credit allocated to that owner. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass‑through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass‑through entity and the allocation that would have been required under G.S. 105‑131.8 or G.S. 105‑269.15.

(c)        Qualifying Buildings. – As used in this section the term "qualified North Carolina low‑income building" means a qualified low‑income building that was allocated a federal credit under section 42(h)(1) of the Code, was not allowed a federal credit under section 42(h)(4) of the Code, and meets any of the following conditions:

(1)        It is located in an area that, at the time the federal credit is allocated to the building, is a tier one or two enterprise area, as defined in G.S. 105‑129.3.

(1a)      Expired pursuant to Session Laws 2000‑56, s. 10(f), effective January 1, 2005.

(2)        It is located in an area that, at the time the federal credit is allocated to the building, is a tier three or four enterprise area, and forty percent (40%) of its residential units are both rent‑restricted and occupied by individuals whose income is fifty percent (50%) or less of area median gross income as defined in the Code.

(3)        It is located in an area that, at the time the federal credit is allocated to the building, is a tier five enterprise area, and forty percent (40%) of its residential units are both rent‑restricted and occupied by individuals whose income is thirty‑five percent (35%) or less of area median gross income as defined in the Code.

(d)       Expiration. – If, in one of the five years in which an installment of the credit under this section accrues, the taxpayer is no longer eligible for the corresponding federal credit with respect to the same qualified North Carolina low‑income building, then the credit under this section expires and the taxpayer may not take any remaining installment of the credit. If, in one of the five years in which an installment of the credit under this section accrues, the building no longer qualifies as a low‑income building under subdivision (2) or (3) of subsection (c) of this section because less than forty percent (40%) of its residential units are both rent‑restricted and occupied by individuals who meet the income requirements, then the credit under this section expires and the taxpayer may not take any remaining installments of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.17.

(e)        Forfeiture for Disposition. – If the taxpayer is required under section 42(j) of the Code to recapture all or part of a federal credit under that section with respect to a qualified North Carolina low‑income building, the taxpayer must report the recapture event to the Secretary and to the Housing Finance Agency. The taxpayer forfeits the corresponding part of the credit allowed under this section with respect to that qualified North Carolina low‑income building. If the credit was allocated among the owners of a pass‑through entity, the forfeiture applies to the owners in the same proportion that the credit was allocated. This subsection does not apply when the recapture of part or all of the federal credit is the result of an event that occurs after the credit period described in subsection (b) of this section.

(f)        Forfeiture for Change in Ownership. – If an owner of a pass‑through entity that has qualified for the credit allowed under this section disposes of all or a portion of the owner's interest in the pass‑through entity within five years from the date the federal credit is first claimed and the owner's interest in the pass‑through entity is reduced to less than two‑thirds of the owner's interest in the pass‑through entity at the time the federal credit is first claimed, the owner must report the change to the Secretary and to the Housing Finance Agency. The owner forfeits a portion of the credit. The amount forfeited is determined by multiplying the amount of credit by the percentage reduction in ownership and then multiplying that product by the forfeiture percentage. The forfeiture percentage equals the recapture percentage found in the table in section 50(a)(1)(B) of the Code. The remaining allowable credit is allocated equally among the five years in which the credit is claimed. Forfeiture as provided in this subsection is not required if the change in ownership is the result of any of the following:

(1)        The death of the owner.

(2)        A merger, consolidation, or similar transaction requiring approval by the shareholders, partners, or members of the taxpayer under applicable State law, to the extent the taxpayer does not receive cash or tangible property in the merger, consolidation, or other similar transaction.

(g)        Liability From Forfeiture. – A taxpayer or an owner of a pass‑through entity that forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer or owner of a pass‑through entity that fails to pay the taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236.  (1999‑360, s. 11; 2000‑56, s. 7; 2000‑140, s. 88; 2001‑431, s. 2; 2002‑87, s. 2; 2003‑416, s. 1; 2007‑491, s. 44(1)a.)

 

§ 105‑129.42.  (See note for repeal) Credit for low‑income housing awarded a federal credit allocation on or after January 1, 2003.

(a)        Definitions. – The following definitions apply in this section:

(1)        Qualified Allocation Plan. – The plan governing the allocation of federal low‑income housing tax credits for a particular year, as approved by the Governor after a public hearing and publication in the North Carolina Register.

(2)        Qualified North Carolina low‑income housing development. – A qualified low‑income project or building that is allocated a federal tax credit under section 42(h)(1) of the Code and is described in subsection (c) of this section.

(3)        Qualified residential unit. – A housing unit that meets the requirements of section 42 of the Code.

(b)        Credit. – 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 is allowed a credit equal to a percentage of the development's qualified basis, as determined pursuant to section 42 of the Code. For the purpose of this section, qualified basis is calculated based on the information contained in the carryover allocation and is not recalculated to reflect subsequent increases or decreases. No credit is allowed for a development that uses tax‑exempt bond financing.

(c)        Developments and Amounts. – The following table sets out the housing developments that are qualified North Carolina low‑income housing developments and are allowed a credit under this section. The table also sets out the percentage of the development's qualified basis for which a credit is allowed. The designation of a county or city as Low Income, Moderate Income, or High Income and determinations of affordability are made by the Housing Finance Agency in accordance with the Qualified Allocation Plan in effect as of the time the federal credit is allocated. A change in the income designation of a county or city after a federal credit is allocated does not affect the percentage of the developer's qualified basis for which a credit is allowed. The affordability requirements set out in the chart apply for the duration of the federal tax credit compliance period. If in any year a taxpayer fails to meet these affordability requirements, the credit is forfeited under subsection  (h) of this section.

                                                                                                                      Percentage of

                                                                                                                          Basis for

                      Type of Development                                                              Which Credit

                                                                                                                        is Allowed

Forty percent (40%) of the qualified residential units

are affordable to households whose income is fifty                                     Thirty percent

percent (50%) or less of area median income and the                                         (30%)

units are in a Low‑Income county or city.

 

Fifty percent (50%) of the qualified residential units

are affordable to households whose income is fifty                                   Twenty percent

percent (50%) or less of the area median income and                                         (20%)

the units are in a Moderate‑Income county or city.

 

Fifty percent (50%) of the qualified residential units

are affordable to households whose income is forty                                      Ten percent

percent (40%) or less of the area median income and                                         (10%)

the units are in a High‑Income county or city.

 

Twenty‑five percent (25%) of the qualified residential

units are affordable to households whose income is                                      Ten percent

thirty percent (30%) or less of the area median income                                      (10%)

and the units are in a High‑Income county or city.

 

(d)       Election. – When a taxpayer to whom a federal low‑income housing credit is allocated submits to the Housing Finance Agency a request to receive a carryover allocation for that credit, the taxpayer must elect a method for receiving the tax credit allowed by this section. A taxpayer may elect to receive the credit in the form of either a direct tax refund or a loan generated by transferring the credit to the Housing Finance Agency. Neither a direct tax refund nor a loan received as the result of the transfer of the credit is considered taxable income under this Chapter.

Under the direct tax refund method, a taxpayer elects to apply the credit allowed by this section to the taxpayer's liability under Article 4 of this Chapter. If the credit allowed by this section exceeds the amount of tax imposed by Article 4 for the taxable year, reduced by the sum of all other credits allowable, the Secretary must refund the excess. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before this credit. The provisions that apply to an overpayment of tax apply to the refundable excess of a credit allowed under this section.

Under the loan method, a taxpayer elects to transfer the credit allowed by this section to the Housing Finance Agency and receive a loan from that Agency for the amount of the credit. The terms of the loan are specified by the Housing Finance Agency in accordance with the Qualified Allocation Plan.

(e)        Exception When No Carryover. – If a taxpayer does not submit to the Housing Finance Agency a request to receive a carryover allocation, the taxpayer must elect the method for receiving the credit allowed by this section when the taxpayer submits to the Agency federal Form 8609. A taxpayer to whom this subsection applies claims the credit for the taxable year in which the taxpayer submits federal Form 8609.

(f)        Pass‑Through Entity. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this Article does not distribute the credit among any of its owners. The pass‑through entity is considered the taxpayer for purposes of claiming the credit allowed by this Article. If a return filed by a pass‑through entity indicates that the entity is paying tax on behalf of the owners of the entity, the credit allowed under this Article does not affect the entity's payment of tax on behalf of its owners.

(g)        Return and Payment. – A taxpayer may claim the credit allowed by this section on a return filed for the taxable year in which the taxpayer receives a carryover allocation of a federal low‑income housing credit. The return must state the name and location of the qualified low‑income housing development for which the credit is claimed.

If a taxpayer chooses the loan method for receiving the credit allowed under this section, the Secretary must transfer to the Housing Finance Agency the amount of credit allowed the taxpayer. The Agency must loan the taxpayer the amount of the credit on terms consistent with the Qualified Allocation Plan. The Housing Finance Agency is not required to make a loan to a qualified North Carolina low‑income housing development until the Secretary transfers the credit amount to the Agency.

If the taxpayer chooses the direct tax refund method for receiving the credit allowed under this section, the Secretary must transfer to the Housing Finance Agency the refundable excess of the credit allowed the taxpayer. The Agency holds the refund due the taxpayer in escrow, with no interest accruing to the taxpayer during the escrow period. The Agency must release the refund to the taxpayer upon the occurrence of the earlier of the following:

(1)        The Agency determines that the taxpayer has complied with the Qualified Allocation Plan and has completed at least fifty percent (50%) of the activities included in the development's qualified basis.

(2)        Within 30 days after the date the development is placed in service.

(h)        Forfeiture. – A taxpayer that receives a credit under this section must immediately report any recapture event under section 42 of the Code to the Housing Finance Agency. If the taxpayer or any of its owners are required under section 42(j) of the Code to recapture all or part of a federal credit with respect to a qualified North Carolina low‑income development, the taxpayer forfeits the corresponding part of the credit allowed under this section. This requirement does not apply in the following circumstances:

(1)        When the recapture of part or all of the federal credit is the result of an event that occurs in the sixth or a subsequent calendar year after the calendar year in which the development was awarded a federal credit allocation.

(2)        The taxpayer elected to transfer the credit allowed by this section to the Housing Finance Agency.

(i)         Liability From Forfeiture. – A taxpayer that forfeits all or part of the credit allowed under this section is liable for all past taxes avoided and any refund claimed as a result of the credit plus interest at the rate established under G.S. 105‑241.21. The interest is computed from the date the Secretary transferred the credit amount to the Housing Finance Agency. The past taxes, refund, and interest are due 30 days after the date the credit is forfeited. A taxpayer that fails to pay the taxes, refund, and interest by the due date is subject to the penalties provided in G.S. 105‑236. (2002‑87, s. 1; 2003‑416, ss. 6‑8; 2004‑110, s. 4.2; 2007‑491, s. 44(1)a.)

 

§ 105‑129.43.  (See Editor's note for repeal) Substantiation.

A taxpayer allowed a credit under this Article must maintain and make available for inspection any information or records required by the Secretary of Revenue or the Housing Finance Agency. The burden of proving eligibility for a credit and the amount of the credit rests upon the taxpayer. (2002‑87, s. 1.)

 

§ 105‑129.44.  (See note for repeal) Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers that took the credit allowed in this Article.

(2)        The location of each qualified North Carolina low‑income building or housing development for which a credit was taken.

(3)        The total cost to the General Fund of the credits taken.  (2002‑87, s. 1; 2005‑429, s. 2.6; 2010‑166, s. 1.6.)

 

§ 105‑129.45.  Sunset.

This Article is repealed effective January 1, 2015. The repeal applies to developments to which federal credits are allocated on or after January 1, 2015.  (2002‑87, s. 1; 2004‑110, s. 4.1; 2008‑107, s. 28.3(a).)

 

§ 105‑129.46:  Reserved for future codification purposes.

 

§ 105‑129.47:  Reserved for future codification purposes.

 

§ 105‑129.48:  Reserved for future codification purposes.

 

§ 105‑129.49:  Reserved for future codification purposes.

 

Article 3F.

Research and Development.

(Effective for taxable years beginning before January 1, 2011 – see note.)

§ 105‑129.50.  (Effective for taxable years beginning before January 1, 2011 – see note) Definitions.

The definitions in section 41 of the Code apply in this Article. In addition, the following definitions apply in this Article:

(1)        Development tier one area. – Defined in G.S. 143B-437.08.

(2),       (3)  Reserved.

(4)        North Carolina university research expenses. – Any amount the taxpayer paid or incurred to a research university for qualified research performed in this State or basic research performed in this State.

(5)        Period of measurement. – Defined in the Small Business Size Regulations of the federal Small Business Administration.

(6)        Qualified North Carolina research expenses. – Qualified research expenses, other than North Carolina university research expenses, for research performed in this State.

(7)        Receipts. – Defined in the Small Business Size Regulations of the federal Small Business Administration.

(8)        Related person. – Defined in G.S. 105‑163.010.

(9)        Research university. – An institution of higher education that meets one or both of the following conditions:

a.         It is classified as one of the following in the most recent edition of "A Classification of Institutions of Higher Education", the official report of The Carnegie Foundation for the Advancement of Teaching:

1.         Doctoral/Research Universities, Extensive or Intensive.

2.         Masters Colleges and Universities, I or II.

3.         Baccalaureate Colleges, Liberal Arts or General.

b.         It is a constituent institution of The University of North Carolina.

(10)      Small business. – A business whose annual receipts, combined with the annual receipts of all related persons, for the applicable period of measurement did not exceed one million dollars ($1,000,000).  (2004‑124, s. 32D.2; 2011‑330, s. 4.)

 

Article 3F.

Technology Development.

(Effective for taxable years beginning on or after January 1, 2011 – see note for repeal)

§ 105‑129.50.  (Effective for taxable years beginning on or after January 1, 2011 – see note for repeal) Definitions.

The definitions in section 41 of the Code apply in this Article. In addition, the following definitions apply in this Article:

(1)        Development tier one area. – Defined in G.S. 143B‑437.08.

(2)        Full‑time job. – Defined in G.S. 105‑129.81.

(3)        Reserved.

(4)        North Carolina university research expenses. – Any amount the taxpayer paid or incurred to a research university for qualified research performed in this State or basic research performed in this State.

(4a)      Participating community college. – A community college, as defined in G.S. 115D‑2, that offers an associate in applied science degree in simulation and game development.

(5)        Period of measurement. – Defined in the Small Business Size Regulations of the federal Small Business Administration.

(6)        Qualified North Carolina research expenses. – Qualified research expenses, other than North Carolina university research expenses, for research performed in this State.

(7)        Receipts. – Defined in the Small Business Size Regulations of the federal Small Business Administration.

(8)        Related person. – Defined in G.S. 105‑163.010.

(9)        Research university. – An institution of higher education that meets one or both of the following conditions:

a.         It is classified as one of the following in the most recent edition of "A Classification of Institutions of Higher Education", the official report of The Carnegie Foundation for the Advancement of Teaching:

1.         Doctoral/Research Universities, Extensive or Intensive.

2.         Masters Colleges and Universities, I or II.

3.         Baccalaureate Colleges, Liberal Arts or General.

b.         It is a constituent institution of The University of North Carolina.

(10)      Small business. – A business whose annual receipts, combined with the annual receipts of all related persons, for the applicable period of measurement did not exceed one million dollars ($1,000,000).  (2004‑124, s. 32D.2; 2010‑147, s. 3.2; 2011‑330, s. 4.)

 

§ 105‑129.51.  (Effective for taxable years beginning before January 1, 2011 – see note) Administration; sunset.

(a)        A taxpayer is eligible for the credit allowed in this Article if it satisfies the requirements of G.S. 105‑129.83(c), (d), (e), and (f) relating to wage standard, health insurance, environmental impact, and safety and health programs, respectively.

(b)        This Article is repealed for taxable years beginning on or after January 1, 2014.

(c)        Repealed by Session Laws 2004‑124, s. 32D.4, effective for taxable years beginning on or after January 1, 2006.  (2004‑124, ss. 32D.2, s. 32D.4; 2006‑252, s. 2.20; 2008‑107, s. 28.2(a).)

 

§ 105‑129.51.  (Effective for taxable years beginning on or after January 1, 2011 – see note for repeal) Taxpayer standards and sunset.

(a)        A taxpayer is eligible for a credit allowed in this Article if it satisfies the requirements of G.S. 105‑129.83(c), (d), (e), (f), and (g) relating to wage standard, health insurance, environmental impact, safety and health programs, and overdue tax debts, respectively.

(b)        This Article is repealed for taxable years beginning on or after January 1, 2014.

(c)        Repealed by Session Laws 2004‑124, s. 32D.4, effective for taxable years beginning on or after January 1, 2006. (2004‑124, ss. 32D.2, s. 32D.4; 2006‑252, s. 2.20; 2008‑107, s. 28.2(a); 2010‑147, s. 3.3.)

 

§ 105‑129.52.  (Effective for taxable years beginning before January 1, 2011 – see note) Tax election; cap.

(a)        Tax Election. – The credit allowed in this Article is allowed against the franchise tax levied in Article 3 of this Chapter or the income taxes levied in Article 4 of this Chapter. The taxpayer must elect the tax against which a credit will be claimed when filing the return on which the credit is first claimed. This election is binding. Any carryforwards of a credit must be claimed against the same tax.

(b)        Cap. – A credit allowed in this Article may not exceed fifty percent (50%) of the amount of tax against which it is claimed for the taxable year, reduced by the sum of all other credits allowed against that tax, except tax payments made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of credit, including carryforwards, claimed by the taxpayer under this Article against each tax for the taxable year. Any unused portion of a credit allowed in this Article may be carried forward for the succeeding 15 years.  (2004‑124, s. 32D.2.)

 

§ 105‑129.52.  (Effective for taxable years beginning on or after January 1, 2011 – see note for repeal) Tax election; cap.

(a)        Tax Election. – A credit allowed in this Article is allowed against the franchise tax levied in Article 3 of this Chapter or the income taxes levied in Article 4 of this Chapter. The taxpayer must elect the tax against which a credit will be claimed when filing the return on which the credit is first claimed. This election is binding. Any carryforwards of a credit must be claimed against the same tax.

(b)        Cap. – A credit allowed in this Article may not exceed fifty percent (50%) of the amount of tax against which it is claimed for the taxable year, reduced by the sum of all other credits allowed against that tax, except tax payments made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of credit, including carryforwards, claimed by the taxpayer under this Article against each tax for the taxable year. Any unused portion of a credit allowed in this Article may be carried forward for the succeeding 15 years. (2004‑124, s. 32D.2; 2010‑96, s. 40.3; 2010‑147, s. 3.4.)

 

§ 105‑129.53.  (See notes) Substantiation.

To claim a credit allowed by this Article, the taxpayer must provide any information required by the Secretary. Every taxpayer claiming a credit under this Article must maintain and make available for inspection by the Secretary any records the Secretary considers necessary to determine and verify the amount of the credit to which the taxpayer is entitled. The burden of proving eligibility for a credit and the amount of the credit rests upon the taxpayer, and no credit may be allowed to a taxpayer that fails to maintain adequate records or to make them available for inspection. (2004‑124, s. 32D.2.)

 

§ 105‑129.54.  (Effective for taxable years beginning before January 1, 2011 – see note) Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers that took a credit allowed in this Article, itemized by the categories of small business, low‑tier, other, and university research.

(2)        The amount of each credit taken in each category.

(3)        The total cost to the General Fund of the credits taken.  (2004‑124, s. 32D.2; 2005‑429, s. 2.7; 2010‑166, s. 1.7.)

 

§ 105‑129.54.  (Effective for taxable years beginning on or after January 1, 2011 – see note for repeal) Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by credit and by taxpayer:

(1)        The number of taxpayers that took a credit allowed in this Article. The credit allowed under G.S. 105‑129.55 must be itemized by the categories of small business, low‑tier, university research, Eco‑Industrial Park, and other. The credit allowed under G.S. 105‑129.56 must be itemized by the categories of higher education collaboration and other.

(2)        The amount of each credit taken in each category.

(3)        The total cost to the General Fund of the credits taken. (2004‑124, s. 32D.2; 2005‑429, s. 2.7; 2010‑147, s. 3.5; 2010‑166, s. 1.7.)

 

§ 105‑129.55.  (Effective for taxable years beginning before January 1, 2011 – see note) Credit for North Carolina research and development.

(a)        Qualified North Carolina Research Expenses. – A taxpayer that has qualified North Carolina research expenses for the taxable year is allowed a credit equal to a percentage of the expenses, determined as provided in this subsection. Only one credit is allowed under this subsection with respect to the same expenses. If more than one subdivision of this subsection applies to the same expenses, then the credit is equal to the higher percentage, not both percentages combined. If part of the taxpayer's qualified North Carolina research expenses qualifies under subdivision (2) of this subsection and the remainder qualifies under subdivision (3) of this subsection, the applicable percentages apply separately to each part of the expenses.

(1)        Small business. – If the taxpayer was a small business as of the last day of the taxable year, the applicable percentage is three and one‑quarter percent (3.25%).

(2)        Low‑tier research. – For expenses with respect to research performed in a development tier one area, the applicable percentage is three and one‑quarter percent (3.25%).

(3)        Other research. – For expenses not covered under subdivision (1) or (2) of this subsection, the percentages provided in the table below apply to the taxpayer's qualified North Carolina research expenses during the taxable year at the following levels:

Expenses Over                 Up To                             Rate

-0-                                 $50 million                     1.25%

$50 million                        $200 million                     2.25%

$200 million                           –                                3.25%

(b)        North Carolina University Research Expenses. – A taxpayer that has North Carolina university research expenses for the taxable year is allowed a credit equal to twenty percent (20%) of the expenses.  (2004‑124, s. 32D.2; 2006‑252, s. 2.1; 2007‑323, s. 31.8(a).)

 

§ 105‑129.55.  (Effective for taxable years beginning on or after January 1, 2011 – see note for repeal) Credit for North Carolina research and development.

(a)        Qualified North Carolina Research Expenses. – A taxpayer that has qualified North Carolina research expenses for the taxable year is allowed a credit equal to a percentage of the expenses, determined as provided in this section. Only one credit is allowed under this section with respect to the same expenses. If more than one subdivision of this section applies to the same expenses, then the credit is equal to the higher percentage, not both percentages combined. If part of the taxpayer's qualified North Carolina research expenses qualifies under more than one subdivision of this section, the applicable percentages apply separately to each part of the expenses.

(1)        Small business. – If the taxpayer was a small business as of the last day of the taxable year, the applicable percentage is three and one‑quarter percent (3.25%).

(2)        Low‑tier research. – For expenses with respect to research performed in a development tier one area, the applicable percentage is three and one‑quarter percent (3.25%).

(2a)      University research. – For North Carolina university research expenses, the applicable percentage is twenty percent (20%).

(2b)      Eco‑Industrial Park. – For expenses with respect to research performed in an Eco‑Industrial Park certified under G.S. 143B‑437.08, the applicable percentage is thirty‑five percent (35%).

(3)        Other research. – For expenses not covered under another subdivision of this section, the percentages provided in the table below apply to the taxpayer's qualified North Carolina research expenses during the taxable year at the following levels:

Expenses Over                 Up To                             Rate

-0-                                 $50 million                     1.25%

$50 million                        $200 million                     2.25%

$200 million                           –                                3.25%

(b)        Repealed by Session Laws 2010‑147, s. 5.5, effective January 1, 2011. (2004‑124, s. 32D.2; 2006‑252, s. 2.1; 2007‑323, s. 31.8(a); 2010‑147, s. 5.5.)

 

§ 105‑129.56.  (Effective for taxable years beginning on or after January 1, 2011 – see note for repeal) Interactive digital media.

(a)        IDM Defined. – Interactive digital media is a product that meets all of the following requirements:

(1)        It is produced for distribution on electronic media, including distribution by file download over the Internet.

(2)        It contains a computer‑controlled virtual universe with which an individual who uses the program may interact in order to achieve a goal.

(3)        It contains a significant amount of at least three of the following five types of data: animated images, fixed images, sound, text, and 3D geometry.

(b)        Credit. – A taxpayer that develops in this State interactive digital media or a digital platform or engine for use in interactive digital media is allowed a credit equal to a percentage of the taxpayer's expenses that exceed fifty thousand dollars ($50,000) and that are paid during the taxable year in developing the media, platform, or engine. The percentage that applies to the expenses is determined under subsection (c) of this section. The expenses to which the credit applies are as follows:

(1)        Compensation and wages for a full‑time job on which withholding payments are remitted to the Department under Article 4A of this Chapter.

(2)        Employee fringe contributions on compensation and wages included under subdivision (1) of this subsection, including health, pension, and welfare contributions.

(3)        Amounts paid to a participating community college or a research university for services performed in this State.

(c)        Percentage. – The percentage of the credit allowed under this section is as follows:

(1)        Higher education collaboration. – Twenty percent (20%) for allowable expenses paid to a participating community college or a research university.

(2)        Other. – Fifteen percent (15%) for allowable expenses not covered in subdivision (1) of this subsection.

(d)       Limitations. – The amount of credit allowed a taxpayer under this section may not exceed seven million five hundred thousand dollars ($7,500,000). The credit allowed by this section does not apply to interactive digital media that meets any of the following descriptions:

(1)        It is developed by the taxpayer for internal use.

(2)        It is an interpersonal communications service, such as videoconferencing, wireless telecommunications, a text‑based channel, or a chat room.

(3)        It is an Internet site that is primarily static and primarily designed to provide information about one or more persons, businesses, companies, or firms.

(4)        It is a gambling or casino game.

(5)        It is political advertising.

(6)        It contains material that is obscene, as defined in G.S. 14‑190.1, or that is harmful to minors, as defined in G.S. 14‑190.13.

(e)        No Double Benefit. – A taxpayer that claims a credit under this section may not claim any of the following with respect to the expenses used to determine the credit under this section:

(1)        A credit allowed under any other section of this Chapter.

(2)        A grant from the Job Development Investment Grant Program, set out in Part 2G of Article 10 of Chapter 143B of the General Statutes.

(3)        A grant from the One North Carolina Fund, set out in Part 2H of Article 10 of Chapter 143B of the General Statutes.  (2010‑147, s. 3.6.)

 

§ 105‑129.57: Reserved for future codification purposes.

 

§ 105‑129.58: Reserved for future codification purposes.

 

§ 105‑129.59: Reserved for future codification purposes.

 

Article 3G.

Tax Incentives for Major Computer Manufacturing Facilities.

§ 105‑129.60: Repealed by Session Laws 2010‑166, s. 2.2, effective July 1, 2010.

 

§ 105‑129.61: Repealed by Session Laws 2010‑166, s. 2.2, effective July 1, 2010.

 

§ 105‑129.62: Repealed by Session Laws 2010‑166, s. 2.2, effective July 1, 2010.

 

§ 105‑129.63: Repealed by Session Laws 2010‑166, s. 2.2, effective July 1, 2010.

 

§ 105‑129.64: Repealed by Session Laws 2010‑166, s. 2.2, effective July 1, 2010.

 

§ 105‑129.65: Repealed by Session Laws 2010‑166, s. 2.2, effective July 1, 2010.

 

§ 105‑129.65A: Repealed by Session Laws 2010‑166, s. 2.2, effective July 1, 2010.

 

§ 105‑129.66: Repealed by Session Laws 2010‑166, s. 2.2, effective July 1, 2010.

 

§ 105‑129.67: Reserved for future codification purposes.

 

§ 105‑129.68: Reserved for future codification purposes.

 

§ 105‑129.69: Reserved for future codification purposes.

 

Article 3H.

Mill Rehabilitation Tax Credit.

(See G.S. 105-129.75 for repeal of this Article.)

§ 105‑129.70.  (See note for repeal) Definitions.

The following definitions apply in this Article:

(1)        Certified historic structure. – Defined in section 47 of the Code.

(2)        Certified rehabilitation. – Defined in G.S. 105‑129.36.

(3)        Cost certification. – The certification obtained by the State Historic Preservation Officer from the taxpayer of the amount of the qualified rehabilitation expenditures or the rehabilitation expenses incurred with respect to a certified rehabilitation of an eligible site.

(3a)      Development tier area. – Defined in G.S. 143B‑437.08.

(4)        Eligibility certification. – The certification obtained from the State Historic Preservation Officer that the applicable facility comprises an eligible site.

(5)        Eligible site. – A site located in this State that satisfies all of the following conditions:

a.         It was used as a manufacturing facility or for purposes ancillary to manufacturing, as a warehouse for selling agricultural products, or as a public or private utility.

b.         It is a certified historic structure or a State‑certified historic structure.

c.         It has been at least eighty percent (80%) vacant for a period of at least two years immediately preceding the date the eligibility certification is made.

d.         Repealed by Session Laws 2008‑107, s. 28.4(a), effective for taxable years beginning on or after January 1, 2008.

(6)        Repealed by Session Laws 2006‑252, s. 2.22, effective January 1, 2007.

(7)        Pass‑through entity. – Defined in G.S. 105‑228.90.

(8)        Qualified rehabilitation expenditures. – Defined in section 47 of the Code.

(9)        Rehabilitation expenses. – Defined in G.S. 105‑129.36.

(10)      State‑certified historic structure. – Defined in G.S. 105‑129.36.

(11)      State Historic Preservation Officer. – Defined in G.S. 105‑129.36.  (2006‑40, s. 1; 2006‑252, s. 2.22; 2008‑107, s. 28.4(a).)

 

§ 105‑129.71.  (See note for repeal) Credit for income‑producing rehabilitated mill property.

(a)        Credit. – A taxpayer who is allowed a credit under section 47 of the Code for making qualified rehabilitation expenditures of at least three million dollars ($3,000,000) with respect to a certified rehabilitation of an eligible site is allowed a credit equal to a percentage of the expenditures that qualify for the federal credit. The credit may be claimed in the year in which the eligible site is placed into service. When the eligible site is placed into service in two or more phases in different years, the amount of credit that may be claimed in a year is the amount based on the qualified rehabilitation expenditures associated with the phase placed into service during that year. In order to be eligible for a credit allowed by this Article, the taxpayer must provide to the Secretary a copy of the eligibility certification and the cost certification. The amount of the credit is as follows:

(1)        For an eligible site located in a development tier one or two area, determined as of the date of the eligibility certification, the amount of the credit is equal to forty percent (40%) of the qualified rehabilitation expenditures.

(2)        For an eligible site located in a development tier three area, determined as of the date of the eligibility certification, the amount of the credit is equal to thirty percent (30%) of the qualified rehabilitation expenditures.

(b)        Allocation. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as an owner's adjusted basis in the pass‑through entity, as determined under the Code, at the end of the taxable year in which the eligible site is placed in service, is at least forty percent (40%) of the amount of credit allocated to that owner. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass‑through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass‑through entity and the allocation that would have been required under G.S. 105‑131.8 or G.S. 105‑269.15.

(c)        Forfeiture for Change in Ownership. – If an owner of a pass‑through entity that has qualified for the credit allowed under this section disposes of all or a portion of the owner's interest in the pass‑through entity within five years from the date the eligible site is placed in service and the owner's interest in the pass‑through entity is reduced to less than two‑thirds of the owner's interest in the pass‑through entity at the time the eligible site was placed in service, the owner forfeits a portion of the credit. The amount forfeited is determined by multiplying the amount of credit by the percentage reduction in ownership and then multiplying that product by the forfeiture percentage. The forfeiture percentage equals the recapture percentage found in the table in section 50(a)(1)(B) of the Code.

(d)       Exceptions to Forfeiture. – Forfeiture as provided in subsection (c) of this section is not required if the change in ownership is the result of any of the following:

(1)        The death of the owner.

(2)        A merger, consolidation, or similar transaction requiring approval by the shareholders, partners, or members of the taxpayer under applicable State law, to the extent the taxpayer does not receive cash or tangible property in the merger, consolidation, or other similar transaction.

(e)        Liability from Forfeiture. – A taxpayer or an owner of a pass‑through entity that forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer or owner of a pass‑through entity that fails to pay the taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236.  (2006‑40, s. 1; 2006‑252, s. 2.23; 2006‑259, s. 47.5; 2007‑491, s. 44(1)a; 2008‑107, s. 28.4(b).)

 

§ 105‑129.72.  (See note for repeal) Credit for nonincome‑producing rehabilitated mill property.

(a)        Credit. – A taxpayer who is not allowed a federal income tax credit under section 47 of the Code and who makes rehabilitation expenses of at least three million dollars ($3,000,000) with respect to a certified rehabilitation of an eligible site is allowed a credit equal to a percentage of the rehabilitation expenses. The entire credit may not be taken for the taxable year in which the property is placed in service, but must be taken in five equal installments beginning with the taxable year in which the property is placed in service. When the eligible site is placed into service in two or more phases in different years, the amount of credit that may be claimed in a year is the amount based on the rehabilitation expenses associated with the phase placed into service during that year. In order to be eligible for a credit allowed by this Article, the taxpayer must provide to the Secretary a copy of the eligibility certification and the cost certification. For an eligible site located in a development tier one or two area, determined as of the date of the eligibility certification, the amount of the credit is equal to forty percent (40%) of the rehabilitation expenses. No credit is allowed for a site located in a development tier three area.

(b)        Allocation. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as an owner's adjusted basis in the pass‑through entity, as determined under the Code, at the end of the taxable year in which the eligible site is placed in service, is at least forty percent (40%) of the amount of credit allocated to that owner. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass‑through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass‑through entity and the allocation that would have been required under G.S. 105‑131.8 or G.S. 105‑269.15.

(c)        Forfeiture for Change in Ownership. – If an owner of a pass‑through entity that has qualified for the credit allowed under this section disposes of all or a portion of the owner's interest in the pass‑through entity within five years from the date the eligible site is placed in service and the owner's interest in the pass‑through entity is reduced to less than two‑thirds of the owner's interest in the pass‑through entity at the time the eligible site was placed in service, the owner forfeits a portion of the credit. The amount forfeited is determined by multiplying the amount of credit by the percentage reduction in ownership and then multiplying that product by the forfeiture percentage. The forfeiture percentage equals the recapture percentage found in the table in section 50(a)(1)(B) of the Code. The remaining allocable credit is allocated equally among the five years in which the credit is claimed.

(d)       Exceptions to Forfeiture. – Forfeiture as provided in subsection (c) of this section is not required if the change in ownership is the result of any of the following:

(1)        The death of the owner.

(2)        A merger, consolidation, or similar transaction requiring approval by the shareholders, partners, or members of the taxpayer under applicable State law, to the extent the taxpayer does not receive cash or tangible property in the merger, consolidation, or other similar transaction.

(e)        Liability from Forfeiture. – A taxpayer or an owner of a pass‑through entity that forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer or owner of a pass‑through entity that fails to pay the taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236.  (2006‑40, s. 1; 2006‑252, s. 2.24; 2007‑491, s. 44(1)a; 2008‑107, s. 28.4(c).)

 

§ 105‑129.73.  (See note for repeal) Tax credited; cap.

(a)        Taxes Credited. – The credits allowed by this Article may be claimed against the franchise tax imposed under Article 3 of this Chapter, the income taxes imposed under Article 4 of this Chapter, or the gross premiums tax imposed under Article 8B of this Chapter. The taxpayer may take the credits allowed by this Article against only one of the taxes against which it is allowed. The taxpayer must elect the tax against which a credit will be claimed when filing the return on which it is claimed. This election is binding. Any carryforwards of the credit must be claimed against the same tax.

(b)        Cap. – A credit allowed under this Article may not exceed the amount of the tax against which it is claimed for the taxable year reduced by the sum of all credits allowed, except payment of tax made by or on behalf of the taxpayer. Any unused portion of the credit may be carried forward for the succeeding nine years. (2006‑40, s. 1.)

 

§ 105‑129.74.  (See note for repeal) Coordination with Article 3D of this Chapter.

A taxpayer that claims a credit under this Article may not also claim a credit under Article 3D of this Chapter with respect to the same activity. The rules and fee schedule adopted under G.S. 105‑129.36A apply to this Article. (2006‑40, s. 1.)

 

§ 105‑129.75.  Sunset.

This Article expires January 1, 2014, for rehabilitation projects for which an application for an eligibility certification is submitted on or after that date.  (2006‑40, s. 1; 2008‑107, s. 28.4(d); 2010‑31, s. 31.5(a).)

 

§ 105‑129.75A.  (See note for repeal) Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers that took the credits allowed in this Article.

(2)        The amount of rehabilitation expenses and qualified rehabilitation expenditures with respect to which credits were taken.

(3)        The total cost to the General Fund of the credits taken.  (2010‑166, s. 1.8.)

 

Article 3I.

 

§ 105‑129.76.  Reserved for future codification purposes.

 

§ 105‑129.77.  Reserved for future codification purposes.

 

Article 3I.

§ 105‑129.78.  Reserved for future codification purposes.

 

§ 105‑129.79.  Reserved for future codification purposes.

 

Article 3J.

Tax Credits for Growing Businesses.

(Effective for taxable years beginning on or after January 1, 2007. See G.S. 105‑129.82(a) for repeal of Article.)

§ 105‑129.80.  (See notes) Legislative findings.

The General Assembly finds that:

(1)        It is the policy of the State of North Carolina to stimulate economic activity and to create new jobs for the citizens of the State by encouraging and promoting the expansion of existing business and industry within the State and by recruiting and attracting new business and industry to the State.

(2)        Both short‑term and long‑term economic trends at the State, national, and international levels have made the successful implementation of the State's economic development policy and programs both more critical and more challenging, and the decline in the State's traditional industries, and the resulting adverse impact upon the State and its citizens, have been exacerbated in recent years by adverse national and State economic trends that contribute to the reduction in the State's industrial base and that inhibit the State's ability to sustain or attract new and expanding businesses.

(3)        The economic condition of the State is not static, and recent changes in the State's economic condition have created economic distress that requires a reevaluation of certain existing State programs and the enactment of a new program as provided in this Article that is designed to stimulate new economic activity and to create new jobs within the State.

(4)        The enactment of this Article is necessary to stimulate the economy and create new jobs in North Carolina, and this Article will promote the general welfare and confer, as its primary purpose and effect, benefits on citizens throughout the State through the creation of new jobs, an enlargement of the overall tax base, an expansion and diversification of the State's industrial base, and an increase in revenue to the State and its political subdivisions.

(5)        The purpose of this Article is to stimulate economic activity and to create new jobs within the State.

(6)        The State is in need of a focused tax credit program that encourages and facilitates economic growth and development within the State.

(7)        The resources of the State are not evenly distributed throughout the State and different communities have different abilities and needs in attracting and maintaining new and expanding business and industry. (2006‑252, s. 1.1.)

 

§ 105‑129.81.  (See note for repeal) Definitions.

The following definitions apply in this Article:

(1)        Agrarian growth zone. – Defined in G.S. 143B‑437.010.

(2)        Air courier services. – The furnishing of air delivery of individually addressed letters and packages for compensation, in interstate commerce, except by the United States Postal Service.

(3)        Aircraft maintenance and repair. – The provision of specialized maintenance or repair services for commercial aircraft or the rebuilding of commercial aircraft.

(4)        Business property. – Tangible personal property that is used in a business and capitalized under the Code.

(5)        Company headquarters. – A corporate, subsidiary, or regional managing office, as defined by NAICS in United States industry 551114, that is responsible for strategic or organizational planning and decision making for the business on an international, national, or multistate regional basis.

(6)        Cost. – In the case of property owned by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code. In the case of property the taxpayer leases from another, cost is value as determined pursuant to G.S. 105‑130.4(j)(2).

(7)        Customer service call center. – The provision of support service by a business to its customers by telephone or other electronic means to support products or services of the business. For the purposes of this definition, an establishment is primarily engaged in providing support services by telephone or other electronic means only if at least sixty percent (60%) of its calls are incoming or at least sixty percent (60%) of its other electronic communications are initiated by its customers.

(8)        Development tier. – The classification assigned to an area pursuant to G.S. 143B‑437.08.

(9)        Electronic shopping and mail order houses. – An industry in electronic shopping and mail order houses industry group 4541 as defined by NAICS.

(9a)      Environmental disqualifying event. – Any of the following occurrences:

a.         During the tax year in which the activity occurred for which a credit is being claimed, a civil penalty was assessed against the taxpayer by the Department of Environment and Natural Resources for failure to comply with an order issued by an agency of the Department to abate or remediate a violation of any program administered by the agency.

b.         During the tax year in which the activity occurred for which a credit is being claimed or in the prior two tax years, any of the following:

1.         A finding was made by the Department of Environment and Natural Resources that the taxpayer knowingly and willfully, as defined in G.S. 143‑215.6B, including all limitations thereto, committed a violation of any program implemented by an agency of the Department.

2.         An assessment for damages to fish or wildlife pursuant to G.S. 143‑215.3(a)(7) was made against the taxpayer.

3.         A judicial order for injunctive relief was issued against the taxpayer in connection with a violation of any program implemented by an agency of the Department of Environment and Natural Resources.

c.         During the tax year in which the activity occurred for which the credit is being claimed or in the prior four tax years, a criminal penalty was imposed on the taxpayer in connection with a violation of any program implemented by an agency of the Department of Environment and Natural Resources.

(10)      Establishment. – Defined in 29 C.F.R. § 1904.46, as it existed on January 1, 2002.

(11)      Full‑time job. – A position that requires at least 1,600 hours of work per year and is intended to be held by one employee during the entire year. A full‑time employee is an employee who holds a full‑time job.

(12)      Hub. – Defined in G.S. 105‑164.3.

(13)      Information technology and services. – An industry in one of the following, as defined by NAICS:

a.         Data processing industry group 518.

b.         Software publishers industry group 5112.

c.         Computer systems design and related services industry group 5415.

d.         An Internet activity included in industry group 519130.

(14)      Long‑term unemployed worker. – An individual that has been totally unemployed for at least the preceding 26 consecutive weeks as evidenced by records maintained by the Division of Employment Security (DES) of the Department of Commerce.

(15)      Manufacturing. – An industry in manufacturing sectors 31 through 33, as defined by NAICS, but not including quick printing or retail bakeries.

(16)      Motorsports facility. – A motorsports racetrack classified in the United States racetrack national industry 711212, as defined by NAICS.

(17)      Motorsports racing team. – A professional racing team primarily engaged in the research and development, design, manufacture, repair, maintenance, and operation of motor vehicles used in live motorsports racing events before a paying audience.

(18)      NAICS. – Defined in G.S. 105‑228.90.

(19)      New job. – A full‑time job that represents a net increase in the number of the taxpayer's employees statewide. A new employee is an employee who holds a new job. The term does not include a job currently located in this State that is transferred to the business from a related member of the business.

(20)      Overdue tax debt. – Defined in G.S. 105‑243.1.

(20a)    (Effective for taxable years beginning on or after January 1, 2013) Port enhancement zone. – Defined in G.S. 143B‑437.013.

(21)      Purchase. – Defined in section 179 of the Code.

(22)      Related member. – Defined in G.S. 105‑130.7A.

(23)      Research and development. – An industry in scientific research and development services industry group 5417 as defined by NAICS.

(24)      Urban progress zone. – The classification assigned to an area pursuant to G.S. 143B‑437.09.

(25)      Warehousing. – An industry in warehousing and storage subsector 493 as defined by NAICS.

(26)      Wholesale trade. – An industry in wholesale trade sector 42 as defined by NAICS.  (2006‑252, s. 1.1; 2007‑484, s. 33(b); 2010‑147, s. 1.3; 2011‑302, s. 6; 2011‑330, s. 31(b); 2011‑401, s. 5.1.)

 

§ 105‑129.82.  (See notes) Sunset; studies.

(a)        Sunset. – This Article is repealed effective for business activities that occur on or after January 1, 2013.

(b)        Equity Study. – The Department of Commerce shall study the effect of the tax incentives provided in this Article on tax equity. This study shall include the following:

(1)        Reexamining the formula in G.S. 143B‑437.08 used to define development tiers, to include consideration of alternative measures for more equitable treatment of counties in similar economic circumstances.

(2)        Considering whether the assignment of tiers and the applicable thresholds are equitable for smaller counties.

(3)        Compiling any available data on whether expanding North Carolina businesses receive fewer benefits than out‑of‑State businesses that locate to North Carolina.

(c)        Impact Study. – The Department of Commerce shall study the effectiveness of the tax incentives provided in this Article. This study shall include:

(1)        Studying the distribution of tax incentives across new and expanding businesses and industries.

(2)        Examining data on economic recruitment for the period from 2005 through the most recent year for which data are available by county, by industry type, by size of investment, and by number of jobs, and other relevant information to determine the pattern of business locations and expansions before and after the enactment of this Article.

(3)        Measuring the direct costs and benefits of the tax incentives.

(4)        Compiling available information on the current use of incentives by other states and whether that use is increasing or declining.

(d)       Report. – The Department of Commerce shall report the results of these studies and its recommendations to the General Assembly biennially with the first report due by June 1, 2009.  (2006‑252, s. 1.1; 2010‑147, s. 1.1.)

 

§ 105‑129.83.  (See note for repeal) Eligibility; forfeiture.

(a)        Eligible Business. – A taxpayer is eligible for a credit under this Article only with respect to activities occurring at an establishment whose primary activity is listed in this subsection. The primary activity of an establishment is determined based on the establishment's principal product or group of products produced or distributed, or services rendered.

(1)        Air courier services hub.

(2)        Aircraft maintenance and repair.

(3)        Company headquarters, but only if the additional eligibility requirements of subsection (b) of this section are satisfied.

(4)        Customer service call centers.

(5)        Electronic shopping and mail order houses.

(6)        Information technology and services.

(7)        Manufacturing.

(8)        Motorsports facility.

(9)        Motorsports racing team.

(10)      Research and development.

(11)      Warehousing.

(12)      Wholesale trade.

(b)        Company Headquarters Eligibility. – A taxpayer is eligible for a credit under this Article with respect to a company headquarters only if the taxpayer creates at least 75 new jobs at the company headquarters within a 24‑month period. A taxpayer that meets this job creation requirement is eligible for credits under this Article with respect to the company headquarters for three taxable years beginning with the year in which the job creation requirement is satisfied. A taxpayer that creates an additional 75 new jobs at the company headquarters in a 24‑month period during a three‑year eligibility period does not qualify for any extended eligibility period. However, a taxpayer that creates an additional 75 new jobs at the company headquarters in a 24‑month period after the completion of a three‑year eligibility period is eligible for credits with respect to the company headquarters for an additional three taxable years beginning in the year in which the additional job creation requirement is satisfied.

(c)        (Effective for taxable years beginning before January 1, 2013)  Wage Standard. – A taxpayer is eligible for a credit under this Article in a development tier two or three area only if the taxpayer satisfies a wage standard. The taxpayer is not required to satisfy a wage standard if the activity occurs in a development tier one area. Jobs that are located within an urban progress zone or an agrarian growth zone but not in a development tier one area satisfy the wage standard if they pay an average weekly wage that is at least equal to ninety percent (90%) of the lesser of the average wage for all insured private employers in the State and the average wage for all insured private employers in the county. All other jobs satisfy the wage standard if they pay an average weekly wage that is at least equal to the lesser of one hundred ten percent (110%) of the average wage for all insured private employers in the State and ninety percent (90%) of the average wage for all insured private employers in the county. The Department of Commerce shall annually publish the wage standard for each county.

In making the wage calculation, the taxpayer shall include any jobs that were filled for at least 1,600 hours during the calendar year the taxpayer engages in the activity that qualifies for the credit even if those jobs are not filled at the time the taxpayer claims the credit. For a taxpayer with a taxable year other than a calendar year, the taxpayer shall use the wage standard for the calendar year in which the taxable year begins. Only full‑time jobs are included when making the wage calculation.

(c)        (Effective for taxable years beginning on or after January 1, 2013)  Wage Standard. – A taxpayer is eligible for a credit under this Article in a development tier two or three area only if the taxpayer satisfies a wage standard. The taxpayer is not required to satisfy a wage standard if the activity occurs in a development tier one area. Jobs that are located within an urban progress zone, a port enhancement zone, or an agrarian growth zone but not in a development tier one area satisfy the wage standard if they pay an average weekly wage that is at least equal to ninety percent (90%) of the lesser of the average wage for all insured private employers in the State and the average wage for all insured private employers in the county. All other jobs satisfy the wage standard if they pay an average weekly wage that is at least equal to the lesser of one hundred ten percent (110%) of the average wage for all insured private employers in the State and ninety percent (90%) of the average wage for all insured private employers in the county. The Department of Commerce shall annually publish the wage standard for each county.

In making the wage calculation, the taxpayer shall include any jobs that were filled for at least 1,600 hours during the calendar year the taxpayer engages in the activity that qualifies for the credit even if those jobs are not filled at the time the taxpayer claims the credit. For a taxpayer with a taxable year other than a calendar year, the taxpayer shall use the wage standard for the calendar year in which the taxable year begins. Only full‑time jobs are included when making the wage calculation.

(d)       Health Insurance. – A taxpayer is eligible for a credit under this Article only if the taxpayer provides health insurance for all of the full‑time jobs at the establishment with respect to which the credit is claimed when the taxpayer engages in the activity that qualifies for the credit. For the purposes of this subsection, a taxpayer provides health insurance if it pays at least fifty percent (50%) of the premiums for health care coverage that equals or exceeds the minimum provisions of the basic health care plan of coverage recommended by the Small Employer Carrier Committee pursuant to G.S. 58‑50‑125.

Each year that a taxpayer claims a credit or carryforward of a credit allowed under this Article, the taxpayer shall provide with the tax return the taxpayer's certification that the taxpayer continues to provide health insurance for all the jobs at the establishment with respect to which the credit was claimed. If the taxpayer ceases to provide health insurance for the jobs during a taxable year, the credit expires, and the taxpayer may not take any remaining installment or carryforward of the credit.

(e)        Environmental Impact. – A taxpayer is eligible for a credit allowed under this Article only if the taxpayer certifies that, at the time the taxpayer claims the credit, there has not been a final determination unfavorable to the taxpayer with respect to an environmental disqualifying event. For the purposes of this section, a "final determination unfavorable to the taxpayer" occurs when there is no further opportunity for the taxpayer to seek administrative or judicial appeal, review, certiorari, or rehearing of the environmental disqualifying event and the disqualifying event has not been reversed or withdrawn. No later than January 31 of each year, the Secretary of Environment and Natural Resources shall provide an annual report to the Department listing all environmental disqualifying events for which a final determination unfavorable to the taxpayer was made in the prior calendar year and shall provide the name of the taxpayer involved and the date that the disqualifying event occurred.

(f)        Safety and Health Programs. – A taxpayer is eligible for a credit allowed under this Article only if the taxpayer certifies that, as of the time the taxpayer claims the credit, at the establishment with respect to which the credit is claimed, the taxpayer has no citations under the Occupational Safety and Health Act that have become a final order within the past three years for willful serious violations or for failing to abate serious violations. For the purposes of this subsection, "serious violation" has the same meaning as in G.S. 95‑127. The Commissioner of Labor shall notify the Department of Revenue annually of all employers who have had these citations become final orders within the past three years.

(g)        Overdue Tax Debts. – A taxpayer is not eligible for a credit allowed under this Article if, at the time the taxpayer claims the credit or an installment or carryforward of the credit, the taxpayer has received a notice of an overdue tax debt and that overdue tax debt has not been satisfied or otherwise resolved.

(h)        Expiration. – If, during the period that installments of a credit under this Article accrue, the taxpayer is no longer engaged in one of the types of business described in subsection (a) of this section at the establishment for which the credit was claimed, the credit expires. If, during the period that installments of a credit under this Article accrue, the number of jobs of an eligible company headquarters falls below the minimum number required under subsection (b) of this section, any credit associated with that company headquarters expires. When a credit expires, the taxpayer may not take any remaining installments of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.84. A change in the development tier designation of the location of an establishment does not result in expiration of a credit under this Article.

(i)         Forfeiture. – A taxpayer forfeits a credit allowed under this Article if the taxpayer was not eligible for the credit for the calendar year in which the taxpayer engaged in the activity for which the credit was claimed. A taxpayer forfeits a credit previously allowed under this Article if a final determination unfavorable to the taxpayer with respect to an environmental disqualifying event is made that is applicable to the year in which the activity occurred for which the credit was claimed. In addition, a taxpayer forfeits a credit for investment in real property under G.S. 105‑129.89 if the taxpayer fails to timely create the number of required new jobs or to timely make the required level of investment under G.S. 105‑129.89(b). A taxpayer that forfeits a credit under this Article is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited; a taxpayer that fails to pay the past taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236.

(j)         Change in Ownership of Business. – As used in this subsection, the term "business" means a taxpayer or an establishment. The sale, merger, consolidation, conversion, acquisition, or bankruptcy of a business, or any transaction by which an existing business reformulates itself as another business, does not create new eligibility in a succeeding business with respect to credits for which the predecessor was not eligible under this Article. A successor business may, however, take any credit or carried‑over portion of a credit that its predecessor could have taken if it had a tax liability. The acquisition of a business is a new investment that creates new eligibility in the acquiring taxpayer under this Article if any of the following conditions are met:

(1)        The business closed before it was acquired.

(2)        The business was required to file a notice of plant closing or mass layoff under the federal Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, before it was acquired.

(3)        The business was acquired by its employees directly or indirectly through an acquisition company under an employee stock option transaction or another similar mechanism. For the purpose of this subdivision, "acquired" means that as part of the initial purchase of a business by the employees, the purchase included an agreement for the employees through the employee stock option transaction or another similar mechanism to obtain one of the following:

a.         Ownership of more than fifty percent (50%) of the business.

b.         Ownership of not less than forty percent (40%) of the business within seven years if the business has tangible assets with a net book value in excess of one hundred million dollars ($100,000,000) and has the majority of its operations located in a development tier one area.

(k)        Advisory Ruling. – A taxpayer may request in writing from the Secretary of Revenue specific advice regarding eligibility for a credit under this Article. G.S. 105‑264 governs the effect of this advice. A taxpayer may not legally rely upon advice offered by any other State or local government official or employee acting in an official capacity regarding eligibility for a credit under this Article.

(l)         (Effective for taxable years beginning before January 1, 2013)  Planned Expansion. – A taxpayer that signs a letter of commitment with the Department of Commerce, after the Department has calculated the development tier designations for the next year but before the beginning of that year, to undertake specific activities at a specific site within the next two years may calculate the credit for which it qualifies based on the establishment's development tier designation and urban progress zone or agrarian growth zone designation in the year in which the letter of commitment was signed by the taxpayer. If the taxpayer does not engage in the activities within the two‑year period, the taxpayer does not qualify for the credit; however, if the taxpayer later engages in the activities, the taxpayer qualifies for the credit based on the development tier and urban progress zone or agrarian growth zone designations in effect at that time.

(l)         (Effective for taxable years beginning on or after January 1, 2013)  Planned Expansion. – A taxpayer that signs a letter of commitment with the Department of Commerce, after the Department has calculated the development tier designations for the next year but before the beginning of that year, to undertake specific activities at a specific site within the next two years may calculate the credit for which it qualifies based on the establishment's development tier designation and urban progress zone, port enhancement zone, or agrarian growth zone designation in the year in which the letter of commitment was signed by the taxpayer. If the taxpayer does not engage in the activities within the two‑year period, the taxpayer does not qualify for the credit; however, if the taxpayer later engages in the activities, the taxpayer qualifies for the credit based on the development tier and urban progress zone, port enhancement zone, or agrarian growth zone designations in effect at that time.

(m)       (Effective for taxable years beginning on or after January 1, 2010)  Qualified Capital Intensive Corporations. – A corporation that is a qualified capital intensive corporation under G.S. 105‑130.4(s1) is not eligible for any credit under this Article with respect to the facility that satisfies the condition of subdivision (2) of that subsection.  (2006‑252, s. 1.1; 2007‑491, s. 44(1)a; 2009‑54, s. 3; 2010‑147, s. 1.4; 2011‑302, s. 7.)

 

§ 105‑129.84.  (See note for repeal) Tax election; cap; carryforwards; limitations.

(a)        Tax Election. – The credits provided in this Article are allowed against the franchise tax levied in Article 3 of this Chapter, the income taxes levied in Article 4 of this Chapter, and the gross premiums tax levied in Article 8B of this Chapter. The taxpayer may divide a credit between the taxes against which it is allowed. Carryforwards of a credit may be divided between the taxes against which it is allowed without regard to the original election regarding the division of the credit.

(b)        Cap. – The credits allowed under this Article may not exceed fifty percent (50%) of the cumulative amount of taxes against which they may be claimed for the taxable year, reduced by the sum of all other credits allowed against those taxes, except tax payments made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of credit, including carryforwards, claimed by the taxpayer under this Article for the taxable year.

(c)        Carryforward. – Unless a longer carryforward period applies, any unused portion of a credit allowed under G.S. 105‑129.87 or G.S. 105‑129.88 may be carried forward for the succeeding five years, and any unused portion of a credit allowed under G.S. 105‑129.89 may be carried forward for the succeeding 15 years. If the Secretary of Commerce makes a written determination that the taxpayer is expected to purchase or lease, and place in service in connection with an eligible business within a two‑year period, at least one hundred fifty million dollars ($150,000,000) worth of business and real property, any unused portion of a credit under this Article with respect to the establishment that satisfies that condition may be carried forward for the succeeding 20 years. If the taxpayer does not make the required level of investment, the taxpayer shall apply the five‑year carryforward period rather than the 20‑year carryforward period.

(d)       Statute of Limitations. – Notwithstanding Article 9 of this Chapter, a taxpayer shall claim a credit under this Article within six months after the date set by statute for the filing of the return, including any extensions of that date.

(e)        (Effective for taxable years beginning on or after January 1, 2011)  Credit Treated as Tax Payment. – The owner of a pass‑through entity that claims a credit under this Article may treat some or all of the credit claimed as a tax payment made by or on behalf of the taxpayer. A credit claimed that is treated as a tax payment is subject to all provisions of this section. A credit claimed that is treated as a tax payment does not accrue interest under G.S. 105‑241.21 if the payment is determined to be an overpayment. A taxpayer that elects to have a credit claimed under this Article treated as a tax payment must make this election when the return is filed.  (2006‑252, s. 1.1; 2011‑297, s. 4.)

 

§ 105‑129.85.  (See notes) Fees and reports.

(a)        Fee. – When filing a return for a taxable year in which the taxpayer engaged in activity for which the taxpayer is eligible for a credit under this Article, the taxpayer shall pay the Department of Revenue a fee of five hundred dollars ($500.00) for each type of credit the taxpayer claims or intends to claim with respect to an establishment. The fee is due at the time the return is due for the taxable year in which the taxpayer engaged in the activity for which the taxpayer is eligible for a credit. No credit is allowed under this Article for a taxable year until all outstanding fees have been paid. Fees collected under this section shall be credited to the General Fund.

(b)        Report. – The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by credit and by taxpayer:

(1)        The number and amount of credits generated and taken for each credit allowed in this Article.

(2)        The number and development tier area of new jobs with respect to which credits were generated and to which credits were taken.

(3)        The cost and development tier area of business property with respect to which credits were generated and to which credits were taken.

(4)        The cost and development tier area of real property investment with respect to which credits were generated and to which credits were taken.  (2006‑252, s. 1.1; 2010‑166, s. 1.9.)

 

§ 105‑129.86.  (See notes) Substantiation.

(a)        Records. – To claim a credit allowed by this Article, the taxpayer shall provide any information required by the Secretary of Revenue. Every taxpayer claiming a credit under this Article shall maintain and make available for inspection by the Secretary of Revenue any records the Secretary considers necessary to determine and verify the amount of the credit to which the taxpayer is entitled. The burden of proving eligibility for the credit and the amount of the credit shall rest upon the taxpayer, and no credit shall be allowed to a taxpayer that fails to maintain adequate records or to make them available for inspection.

(b)        Documentation. – Each taxpayer shall provide with the tax return qualifying information for each credit claimed under this Article. The qualifying information shall be in the form prescribed by the Secretary and shall be signed and affirmed by the individual who signs the taxpayer's tax return. The information required by this subsection is information demonstrating that the taxpayer has met the conditions for qualifying for a credit and any carryforwards and includes the following:

(1)        The physical location of the jobs and investment with respect to which the credit is claimed, including the street address and the development tier designation of the establishment.

(2)        The type of business with respect to which the credit is claimed and the average weekly wage at the establishment with respect to which the credit is claimed.

(3)        Any other qualifying information related to a specific credit allowed under this Article. (2006‑252, s. 1.1.)

 

§ 105‑129.87.  (Effective for taxable years beginning before January 1, 2013 ─ See notes) Credit for creating jobs.

(a)        Credit. – A taxpayer that meets the eligibility requirements set out in G.S. 105‑129.83 and satisfies the threshold requirement for new job creation in this State under subsection (b) of this section during the taxable year is allowed a credit for creating jobs. The amount of the credit for each new job created is set out in the table below and is based on the development tier designation of the county in which the job is located. If the job is located in an urban progress zone or an agrarian growth zone, the amount of the credit is increased by one thousand dollars ($1,000) per job. In addition, if a job located in an urban progress zone or an agrarian growth zone is filled by a resident of that zone or by a long‑term unemployed worker, the amount of the credit is increased by an additional two thousand dollars ($2,000) per job.

Area Development Tier                  Amount of Credit

Tier One                                             $12,500

Tier Two                                                5,000

Tier Three                                                  750

(b)        Threshold. – The applicable threshold is the appropriate amount set out in the following table based on the development tier designation of the county where the new jobs are created during the taxable year. If the taxpayer creates new jobs at more than one eligible establishment in a county during the taxable year, the threshold applies to the aggregate number of new jobs created at all eligible establishments within the county during that year. If the taxpayer creates new jobs at eligible establishments in different counties during the taxable year, the threshold applies separately to the aggregate number of new jobs created at eligible establishments in each county. If the taxpayer creates new jobs in an urban progress zone or an agrarian growth zone, the applicable threshold is the one for a development tier one area. New jobs created in an urban progress zone or an agrarian growth zone are not aggregated with jobs created at any other eligible establishments regardless of county.

Area Development Tier                              Threshold

Tier One                                                        5

Tier Two                                                     10

Tier Three                                                    15

(c)        Calculation. – A job is located in a county, an urban progress zone, or an agrarian growth zone if more than fifty percent (50%) of the employee's duties are performed in the county or the zone. The number of new jobs a taxpayer creates during the taxable year is determined by subtracting the average number of full‑time employees the taxpayer had in this State during the 12‑month period preceding the beginning of the taxable year from the average number of full‑time employees the taxpayer has in this State during the taxable year.

(d)       Installments. – The credit may not be taken in the taxable year in which the new jobs are created. Instead, the credit shall be taken in equal installments over the four years following the taxable year in which the new jobs were created and is conditional upon the continued maintenance of those jobs by the taxpayer. If, in one of the four years in which the installment of a credit accrues, a job is no longer filled, the credit with respect to that job expires, and the taxpayer may not take any remaining installment of the credit with respect to that job. If, in one of the years in which the installment of a credit accrues, the number of the taxpayer's full‑time employees falls below the sum of the applicable threshold and the number of full‑time employees the taxpayer had in the year before the year in which the taxpayer qualified for the credit, the credits with respect to all of the new jobs expire, and the taxpayer may not take any remaining installments of the credits. When a credit expires under this subsection, the taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.84.

(e)        Transferred Jobs. – Jobs transferred from one area in the State to another area in the State are not considered new jobs for purposes of this section. Jobs that were located in this State and that are transferred to the taxpayer from a related member of the taxpayer are not considered new jobs for purposes of this section. If, in one of the four years in which the installment of a credit accrues, the job with respect to which the credit was claimed is moved to an area in a higher‑numbered development tier or out of an urban progress zone or an agrarian growth zone, the remaining installments of the credit are allowed only to the extent they would have been allowed if the job was initially created in the area to which it was moved. If, in one of the years in which the installment of a credit accrues, the job with respect to which the credit was claimed is moved to an area in a lower‑numbered development tier or an urban progress zone or an agrarian growth zone, the remaining installments of the credit shall be calculated as if the job had been created initially in the area to which it was moved.

(f)        Wage Standard. – For the purposes of this section, a taxpayer satisfies the wage standard requirement of G.S. 105‑129.83 only if the taxpayer satisfies the requirement with respect to both the new jobs, considered collectively, for which a credit is claimed and all of the jobs at the establishment, considered collectively, with respect to which a credit is claimed.

(g)        No Double Credit. – A taxpayer may not claim a credit under this section with respect to jobs for which a taxpayer claims a credit under G.S. 105‑129.8. (2006‑252, s. 1.1; 2007‑527, s. 6.)

 

§ 105‑129.87.  (Effective for taxable years beginning on or after January 1, 2013 – See notes for repeal) Credit for creating jobs.

(a)        Credit. – A taxpayer that meets the eligibility requirements set out in G.S. 105‑129.83 and satisfies the threshold requirement for new job creation in this State under subsection (b) of this section during the taxable year is allowed a credit for creating jobs. The amount of the credit for each new job created is set out in the table below and is based on the development tier designation of the county in which the job is located. If the job is located in an urban progress zone, a port enhancement zone, or an agrarian growth zone, the amount of the credit is increased by one thousand dollars ($1,000) per job. In addition, if a job located in an urban progress zone, a port enhancement zone, or an agrarian growth zone is filled by a resident of that zone or by a long‑term unemployed worker, the amount of the credit is increased by an additional two thousand dollars ($2,000) per job.

Area Development Tier                  Amount of Credit

Tier One                                             $12,500

Tier Two                                                5,000

Tier Three                                                  750

(b)        Threshold. – The applicable threshold is the appropriate amount set out in the following table based on the development tier designation of the county where the new jobs are created during the taxable year. If the taxpayer creates new jobs at more than one eligible establishment in a county during the taxable year, the threshold applies to the aggregate number of new jobs created at all eligible establishments within the county during that year. If the taxpayer creates new jobs at eligible establishments in different counties during the taxable year, the threshold applies separately to the aggregate number of new jobs created at eligible establishments in each county. If the taxpayer creates new jobs in an urban progress zone, a port enhancement zone, or an agrarian growth zone, the applicable threshold is the one for a development tier one area. New jobs created in an urban progress zone, a port enhancement zone, or an agrarian growth zone are not aggregated with jobs created at any other eligible establishments regardless of county.

Area Development Tier                         Threshold

Tier One                                                  5

Tier Two                                               10

Tier Three                                              15

(c)        Calculation. – A job is located in a county, an urban progress zone, a port enhancement zone, or an agrarian growth zone if more than fifty percent (50%) of the employee's duties are performed in the county or the zone. The number of new jobs a taxpayer creates during the taxable year is determined by subtracting the average number of full‑time employees the taxpayer had in this State during the 12‑month period preceding the beginning of the taxable year from the average number of full‑time employees the taxpayer has in this State during the taxable year.

(d)       Installments. – The credit may not be taken in the taxable year in which the new jobs are created. Instead, the credit shall be taken in equal installments over the four years following the taxable year in which the new jobs were created and is conditional upon the continued maintenance of those jobs by the taxpayer. If, in one of the four years in which the installment of a credit accrues, a job is no longer filled, the credit with respect to that job expires, and the taxpayer may not take any remaining installment of the credit with respect to that job. If, in one of the years in which the installment of a credit accrues, the number of the taxpayer's full‑time employees falls below the sum of the applicable threshold and the number of full‑time employees the taxpayer had in the year before the year in which the taxpayer qualified for the credit, the credits with respect to all of the new jobs expire, and the taxpayer may not take any remaining installments of the credits. When a credit expires under this subsection, the taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.84.

(e)        Transferred Jobs. – Jobs transferred from one area in the State to another area in the State are not considered new jobs for purposes of this section. Jobs that were located in this State and that are transferred to the taxpayer from a related member of the taxpayer are not considered new jobs for purposes of this section. If, in one of the four years in which the installment of a credit accrues, the job with respect to which the credit was claimed is moved to an area in a higher‑numbered development tier or out of an urban progress zone, a port enhancement zone, or an agrarian growth zone, the remaining installments of the credit are allowed only to the extent they would have been allowed if the job was initially created in the area to which it was moved. If, in one of the years in which the installment of a credit accrues, the job with respect to which the credit was claimed is moved to an area in a lower‑numbered development tier or an urban progress zone, a port enhancement zone, or an agrarian growth zone, the remaining installments of the credit shall be calculated as if the job had been created initially in the area to which it was moved.

(f)        Wage Standard. – For the purposes of this section, a taxpayer satisfies the wage standard requirement of G.S. 105‑129.83 only if the taxpayer satisfies the requirement with respect to both the new jobs, considered collectively, for which a credit is claimed and all of the jobs at the establishment, considered collectively, with respect to which a credit is claimed.

(g)        No Double Credit. – A taxpayer may not claim a credit under this section with respect to jobs for which a taxpayer claims a credit under G.S. 105‑129.8.  (2006‑252, s. 1.1; 2007‑527, s. 6; 2011‑302, s. 8.)

 

§ 105‑129.88.  (Effective for taxable years beginning before January 1, 2013 ─  See notes) Credit for investing in business property.

(a)        General Credit. – A taxpayer that meets the eligibility requirements set out in G.S. 105‑129.83 and that has purchased or leased business property and placed it in service in this State during the taxable year and that has satisfied the threshold requirements of subsection (c) of this section is allowed a credit equal to the applicable percentage of the excess of the eligible investment amount over the applicable threshold. If the taxpayer places business property in service in an urban progress zone or an agrarian growth zone, the applicable percentage is the one for a development tier one area. Business property is eligible if it is not leased to another party. The credit may not be taken for the taxable year in which the business property is placed in service but shall be taken in equal installments over the four years following the taxable year in which it is placed in service. The applicable percentage is as follows:

Area Development Tier               Applicable Percentage

Tier One                                                        7%

Tier Two                                                       5%

Tier Three                                                      3.5%

(b)        Eligible Investment Amount. – The eligible investment amount is the lesser of (i) the cost of the eligible business property and (ii) the amount by which the cost of all of the taxpayer's eligible business property that is in service in this State on the last day of the taxable year exceeds the cost of all of the taxpayer's eligible business property that was in service in this State on the last day of the base year. The base year is that year, of the three immediately preceding taxable years, in which the taxpayer had the most eligible business property in service in this State.

(c)        Threshold. – The applicable threshold is the appropriate amount set out in the following table based on the development tier where the eligible business property is placed in service during the taxable year. If the taxpayer places business property in service in an urban progress zone or an agrarian growth zone, the applicable threshold is the one for a development tier one area. Business property placed in service in an urban progress zone or an agrarian growth zone is not aggregated with business property placed in service at any other eligible establishments regardless of county. If the taxpayer places eligible business property in service at more than one establishment in a county during the taxable year, the threshold applies to the aggregate amount of eligible business property placed in service during the taxable year at all establishments in the county. If the taxpayer places eligible business property in service at establishments in different counties, the threshold applies separately to the aggregate amount of eligible business property placed in service in each county. If the taxpayer places eligible business property in service at an establishment over the course of a two‑year period, the applicable threshold for the second taxable year is reduced by the eligible investment amount for the previous taxable year.

Area Development Tier                         Threshold

Tier One                                      $               -0-

Tier Two                                         1,000,000

Tier Three                                        2,000,000

(d)       Expiration. – As used in this subsection, the term "disposed of" means disposed of, taken out of service, or moved out of State. If, in one of the four years in which the installment of a credit accrues, the business property with respect to which the credit was claimed is disposed of, the credit expires, and the taxpayer may not take any remaining installment of the credit for that business property unless the cost of that business property is offset in the same taxable year by the taxpayer's new investment in eligible business property placed in service in the same county, as provided in this subsection. If, during the taxable year, the taxpayer disposed of the business property for which installments remain, there has been a net reduction in the cost of all the taxpayer's eligible business property that are in service in the same county as the business property that was disposed of, and the amount of this reduction is greater than twenty percent (20%) of the cost of the business property that was disposed of, then the credit for the business property that was disposed of expires. If the amount of the net reduction is equal to twenty percent (20%) or less of the cost of the business property that was disposed of, or if there is no net reduction, then the credit does not expire. In determining the amount of any net reduction during the taxable year, the cost of business property the taxpayer placed in service during the taxable year and for which the taxpayer claims a credit under Article 3A or Article 3B of this Chapter may not be included in the cost of all the taxpayer's eligible business property that is in service. If in a single taxable year business property with respect to two or more credits in the same county are disposed of, the net reduction in the cost of all the taxpayer's eligible business property that is in service in the same county is compared to the total cost of all the business property for which credits expired in order to determine whether the remaining installments of the credits are forfeited.

The expiration of a credit does not prevent the taxpayer from taking the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.84.

(e)        Transferred Property. – If, in one of the four years in which the installment of a credit accrues, the business property with respect to which the credit was claimed is moved to a county in a higher‑numbered development tier or out of an urban progress zone or an agrarian growth zone, the remaining installments of the credit are allowed only to the extent they would have been allowed if the business property had been placed in service initially in the area to which it was moved. If, in one of the four years in which the installment of a credit accrues, the business property with respect to which a credit was claimed is moved to a county in a lower‑numbered development tier or an urban progress zone or an agrarian growth zone, the remaining installments of the credit shall be calculated as if the business property had been placed in service initially in the area to which it was moved.

(f)        Wage Standard. – For the purposes of this section, a taxpayer satisfies the wage standard requirement of G.S. 105‑129.83 only if the taxpayer satisfies the requirement with respect to all of the jobs at the establishment, considered collectively, with respect to which a credit is claimed.

(g)        No Double Credit. – A taxpayer may not claim a credit under this section with respect to business property for which the taxpayer claims a credit under G.S. 105‑129.9 or G.S. 105‑129.9A. (2006‑252, s. 1.1; 2007‑527, ss. 7, 8.)

 

§ 105‑129.88.  (Effective for taxable years beginning on or after January 1, 2013 – See notes for repeal) Credit for investing in business property.

(a)        General Credit. – A taxpayer that meets the eligibility requirements set out in G.S. 105‑129.83 and that has purchased or leased business property and placed it in service in this State during the taxable year and that has satisfied the threshold requirements of subsection (c) of this section is allowed a credit equal to the applicable percentage of the excess of the eligible investment amount over the applicable threshold. If the taxpayer places business property in service in an urban progress zone, a port enhancement zone, or an agrarian growth zone, the applicable percentage is the one for a development tier one area. Business property is eligible if it is not leased to another party. The credit may not be taken for the taxable year in which the business property is placed in service but shall be taken in equal installments over the four years following the taxable year in which it is placed in service. The applicable percentage is as follows:

Area Development Tier               Applicable Percentage

Tier One                                                        7%

Tier Two                                                       5%

Tier Three                                                      3.5%

(b)        Eligible Investment Amount. – The eligible investment amount is the lesser of (i) the cost of the eligible business property and (ii) the amount by which the cost of all of the taxpayer's eligible business property that is in service in this State on the last day of the taxable year exceeds the cost of all of the taxpayer's eligible business property that was in service in this State on the last day of the base year. The base year is that year, of the three immediately preceding taxable years, in which the taxpayer had the most eligible business property in service in this State.

(c)        Threshold. – The applicable threshold is the appropriate amount set out in the following table based on the development tier where the eligible business property is placed in service during the taxable year. If the taxpayer places business property in service in an urban progress zone, a port enhancement zone, or an agrarian growth zone, the applicable threshold is the one for a development tier one area. Business property placed in service in an urban progress zone, a port enhancement zone, or an agrarian growth zone is not aggregated with business property placed in service at any other eligible establishments regardless of county. If the taxpayer places eligible business property in service at more than one establishment in a county during the taxable year, the threshold applies to the aggregate amount of eligible business property placed in service during the taxable year at all establishments in the county. If the taxpayer places eligible business property in service at establishments in different counties, the threshold applies separately to the aggregate amount of eligible business property placed in service in each county. If the taxpayer places eligible business property in service at an establishment over the course of a two‑year period, the applicable threshold for the second taxable year is reduced by the eligible investment amount for the previous taxable year.

Area Development Tier                         Threshold

Tier One                                      $               -0-

Tier Two                                         1,000,000

Tier Three                                        2,000,000

(d)       Expiration. – As used in this subsection, the term "disposed of" means disposed of, taken out of service, or moved out of State. If, in one of the four years in which the installment of a credit accrues, the business property with respect to which the credit was claimed is disposed of, the credit expires, and the taxpayer may not take any remaining installment of the credit for that business property unless the cost of that business property is offset in the same taxable year by the taxpayer's new investment in eligible business property placed in service in the same county, as provided in this subsection. If, during the taxable year, the taxpayer disposed of the business property for which installments remain, there has been a net reduction in the cost of all the taxpayer's eligible business property that are in service in the same county as the business property that was disposed of, and the amount of this reduction is greater than twenty percent (20%) of the cost of the business property that was disposed of, then the credit for the business property that was disposed of expires. If the amount of the net reduction is equal to twenty percent (20%) or less of the cost of the business property that was disposed of, or if there is no net reduction, then the credit does not expire. In determining the amount of any net reduction during the taxable year, the cost of business property the taxpayer placed in service during the taxable year and for which the taxpayer claims a credit under Article 3A or Article 3B of this Chapter may not be included in the cost of all the taxpayer's eligible business property that is in service. If in a single taxable year business property with respect to two or more credits in the same county are disposed of, the net reduction in the cost of all the taxpayer's eligible business property that is in service in the same county is compared to the total cost of all the business property for which credits expired in order to determine whether the remaining installments of the credits are forfeited.

The expiration of a credit does not prevent the taxpayer from taking the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.84.

(e)        Transferred Property. – If, in one of the four years in which the installment of a credit accrues, the business property with respect to which the credit was claimed is moved to a county in a higher‑numbered development tier or out of an urban progress zone, a port enhancement zone, or an agrarian growth zone, the remaining installments of the credit are allowed only to the extent they would have been allowed if the business property had been placed in service initially in the area to which it was moved. If, in one of the four years in which the installment of a credit accrues, the business property with respect to which a credit was claimed is moved to a county in a lower‑numbered development tier or an urban progress zone, a port enhancement zone, or an agrarian growth zone, the remaining installments of the credit shall be calculated as if the business property had been placed in service initially in the area to which it was moved.

(f)        Wage Standard. – For the purposes of this section, a taxpayer satisfies the wage standard requirement of G.S. 105‑129.83 only if the taxpayer satisfies the requirement with respect to all of the jobs at the establishment, considered collectively, with respect to which a credit is claimed.

(g)        No Double Credit. – A taxpayer may not claim a credit under this section with respect to business property for which the taxpayer claims a credit under G.S. 105‑129.9 or G.S. 105‑129.9A.  (2006‑252, s. 1.1; 2007‑527, ss. 7, 8; 2011‑302, s. 9.)

 

§ 105‑129.89.  (See notes) Credit for investment in real property.

(a)        Credit. – If a taxpayer that has purchased or leased real property in a development tier one area begins to use the property in an eligible business during the taxable year, the taxpayer is allowed a credit equal to thirty percent (30%) of the eligible investment amount if all of the eligibility requirements of G.S. 105‑129.83 and of subsection (b) of this section are met. For the purposes of this section, property is located in a development tier one area if the area the property is located in was a development tier one area at the time the taxpayer made a written application for the determination required under subsection (b) of this section. The eligible investment amount is the lesser of (i) the cost of the property and (ii) the amount by which the cost of all of the real property the taxpayer is using in this State in an eligible business on the last day of the taxable year exceeds the cost of all of the real property the taxpayer was using in this State in an eligible business on the last day of the base year. The base year is that year, of the three immediately preceding taxable years, in which the taxpayer was using the most real property in this State in an eligible business. In the case of property that is leased, the cost of the property is not determined as provided in G.S. 105‑129.81 but is considered to be the taxpayer's lease payments over a seven‑year period, plus any expenditures made by the taxpayer to improve the property before it is used by the taxpayer if the expenditures are not reimbursed or credited by the lessor. The entire credit may not be taken for the taxable year in which the property is first used in an eligible business but shall be taken in equal installments over the seven years following the taxable year in which the property is first used in an eligible business. When part of the property is first used in an eligible business in one year and part is first used in an eligible business in a later year, separate credits may be claimed for the amount of property first used in an eligible business in each year. The basis in any real property for which a credit is allowed under this section shall be reduced by the amount of credit allowable.

(b)        Determination by the Secretary of Commerce. – A taxpayer is eligible for the credit allowed under this section with respect to an establishment only if the Secretary of Commerce makes a written determination that the taxpayer is expected to purchase or lease and use in an eligible business at that establishment within a three‑year period at least ten million dollars ($10,000,000) of real property and that the establishment that is the subject of the credit will create at least 200 new jobs within two years of the time that the property is first used in an eligible business. If the taxpayer fails to timely make the required level of investment or fails to timely create the required number of new jobs, the taxpayer forfeits the credit as provided in G.S. 105‑129.83.

(c)        Mixed Use Property. – If the taxpayer uses only part of the property in an eligible business, the amount of the credit allowed under this section is reduced by multiplying it by a fraction, the numerator of which is the square footage of the property used in an eligible business and the denominator of which is the total square footage of the property.

(d)       Expiration. – If, in one of the seven years in which the installment of a credit accrues, the property with respect to which the credit was claimed is no longer used in an eligible business, the credit expires, and the taxpayer may not take any remaining installment of the credit. If, in one of the seven years in which the installment of a credit accrues, part of the property with respect to which the credit was claimed is no longer used in an eligible business, the remaining installments of the credit shall be reduced by multiplying it by the fraction described in subsection (c) of this section. If, in one of the years in which the installment of a credit accrues and by which the taxpayer is required to have created 200 new jobs at the property, the total number of employees the taxpayer employs at the property with respect to which the credit is claimed is less than 200, the credit expires, and the taxpayer may not take any remaining installment of the credit.

In each of these cases, the taxpayer may nonetheless take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.84.

(e)        No Double Credit. – A taxpayer may not claim a credit under this section with respect to real property for which a credit is claimed under G.S. 105‑129.12 or G.S. 105‑129.12A. (2006‑252, s. 1.1.)

 

§ 105‑129.90.  Reserved for future codification purposes.

 

§ 105‑129.91.  Reserved for future codification purposes.

 

§ 105‑129.92.  Reserved for future codification purposes.

 

§ 105‑129.93.  Reserved for future codification purposes.

 

§ 105‑129.94.  Reserved for future codification purposes.

 

Article 3K.

Tax Incentives for Railroad Intermodal Facilities.

(Repealed for taxable years beginning on or after January 1, 2038. See G.S. 105-129.99.)

§ 105‑129.95.  (Repealed for taxable years beginning on or after January 1, 2038 – see note) Definitions.

The following definitions apply in this Article:

(1)        Costs of construction. – The costs of acquiring and improving land, constructing buildings and other structures, equipping the facility, and constructing and equipping rail tracks to the railroad intermodal facility that are necessary to access and support facility operations. In the case of property owned or leased by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code.

(2)        Eligible railroad intermodal facility. – A railroad intermodal facility whose costs of construction exceed thirty million dollars ($30,000,000).

(3)        Intermodal facility. – A facility where freight is transferred from one mode of transportation to another.

(4)        Railroad intermodal facility. – An intermodal facility whose primary purpose is to transfer freight between a railroad and another mode of transportation. (2007‑323, s. 31.23(a); 2007‑345, s. 14.7(a).)

 

§ 105‑129.96.  (Repealed for taxable years beginning on or after January 1, 2038 – see note) Credit for constructing a railroad intermodal facility.

(a)        Credit. – A taxpayer that constructs or leases an eligible railroad intermodal facility in this State and places it in service during the taxable year is allowed a tax credit equal to fifty percent (50%) of all amounts payable by the taxpayer towards the costs of construction or under the lease.

(b)        Taxes Credited. – The credit provided in this section is allowed against the franchise tax levied in Article 3 of this Chapter or the income taxes levied in Article 4 of this Chapter. The taxpayer must elect the tax against which a credit will be claimed when filing the return on which the first installment of the credit is claimed. This election is binding. The credit may not exceed fifty percent (50%) of the tax against which it is applied. Any unused portion of a credit may be carried forward for the succeeding 10 years. Any carryforwards of a credit must be claimed against the same tax. (2007‑323, s. 31.23(a).)

 

§ 105‑129.97.  (Repealed for taxable years beginning on or after January 1, 2038 – see note) Substantiation.

To claim a credit allowed by this Article, the taxpayer must provide any information required by the Secretary. Each taxpayer claiming a credit under this Article must maintain and make available for inspection by the Secretary any records the Secretary considers necessary to determine and verify the amount of the credit to which the taxpayer is entitled. The burden of proving eligibility for a credit and the amount of the credit rests upon the taxpayer, and no credit may be allowed to a taxpayer that fails to maintain adequate records or to make them available for inspection. (2007‑323, s. 31.23(a).)

 

§ 105‑129.98.  (Repealed for taxable years beginning on or after January 1, 2038 – see note) Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers that claimed a credit allowed in this Article.

(2)        The amount of each credit claimed and the taxes against which it was applied.

(3)        The total cost to the General Fund of the credits claimed.  (2007‑323, s. 31.23(a); 2010‑166, s. 1.10.)

 

§ 105‑129.99.  Sunset.

This Article is repealed effective for taxable years beginning on or after January 1, 2038. (2007‑323, s. 31.23(a).)

 

Article 4.

Income Tax.

Part 1.  Corporation Income Tax.

§ 105‑130.  Short title.

This Part of the income tax Article shall be known and may be cited as the Corporation Income Tax Act. (1939, c. 158, s. 300; 1967, c. 1110, s. 3; 1998‑98, ss. 42, 61, 68.)

 

§ 105‑130.1.  Purpose.

The general purpose of this Part is to impose a tax for the use of the State government upon the net income of every domestic corporation and of every foreign corporation doing business in this State.

The tax imposed upon the net income of corporations in this Part is in addition to all other taxes imposed under this Subchapter. (1939, c. 158, s. 301; 1967, c. 1110, s. 3; 1998‑98, s. 69.)

 

§ 105‑130.2.  Definitions.

The following definitions apply in this Part:

(1)        Code. – Defined in G.S. 105‑228.90.

(1a)      Corporation. – A joint‑stock company or association, an insurance company, a domestic corporation, a foreign corporation, or a limited liability company.

(1b)      C Corporation. – A corporation that is not an S Corporation.

(1c)      Department. – The Department of Revenue.

(2)        Domestic corporation. – A corporation organized under the laws of this State.

(3)        Fiscal year. – An income year, ending on the last day of any month other than December. A corporation that pursuant to the provisions of the Code has elected to compute its federal income tax liability on the basis of an annual period varying from 52 to 53 weeks shall compute its taxable income under this Part on the basis of the same period used by the corporation in computing its federal income tax liability for the income year.

(4)        Foreign corporation. – Any corporation other than a domestic corporation.

(4a)      Gross income. – Defined in section 61 of the Code.

(4b)      Income year. – The calendar year or the fiscal year upon the basis of which the net income is computed under this Part. If no fiscal year has been established, the income year is the calendar year. In the case of a return made for a fractional part of a year under the provisions of this Part or under rules adopted by the Secretary, the income year is the period for which the return is made.

(5)        Limited liability company. – Either a domestic limited liability company organized under Chapter 57C of the General Statutes or a foreign limited liability company authorized by that Chapter to transact business in this State that is classified for federal income tax purposes as a corporation. As applied to a limited liability company that is a corporation under this Part, the term "shareholder" means a member of the limited liability company and the term "corporate officer" means a member or manager of the limited liability company.

(5a)      S Corporation. – Defined in G.S. 105‑131(b).

(5b)      Secretary. – The Secretary of Revenue.

(5c)      State net income. – The taxpayer's federal taxable income as determined under the Code, adjusted as provided in G.S. 105‑130.5 and, in the case of a corporation that has income from business activity that is taxable both within and without this State, allocated and apportioned to this State as provided in G.S. 105‑130.4.

(5d)     Taxable year. – Income year.

(6)        Taxpayer. – A corporation subject to the tax imposed by this Part. (1939, c. 158, s. 302; 1941, c. 50, s. 5; 1955, c. 1331, s. 2; 1957, c. 1340, s. 4; 1963, c. 1169, s. 2; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1983, c. 713, ss. 68, 82; 1985, c. 656, s. 7; 1985 (Reg. Sess., 1986), c. 853, s. 1; 1987, c. 778, s. 1; 1987 (Reg. Sess., 1988), c. 1015, s. 3; 1989, c. 36, s. 3; 1989 (Reg. Sess., 1990), c. 981, s. 3; 1991, c. 689, s. 257; 1991 (Reg. Sess., 1992), c. 922, s. 4; 1993, c. 12, s. 5; c. 354, s. 12; 1995, c. 17, s. 3; 1998‑98, s. 69; 2006‑162, s. 3(a).)

 

§ 105‑130.3.  Corporations.

A tax is imposed on the State net income of every C Corporation doing business in this State. An S Corporation is not subject to the tax levied in this section. The tax is a percentage of the taxpayer's State net income computed as follows:

Income Years Beginning        Tax

In 1997            7.5%

In 1998            7.25%

In 1999            7%

After 1999      6.9%.

 (1939, c. 158, s. 311; 1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c. 752, s. 3; 1953, c. 1302, s. 4; 1955, c. 1350, s. 18; 1957, c. 1340, s. 4; 1959, c. 1259, s. 4; 1963, c. 1169, s. 2; c. 1186; 1967, c. 1110, s. 3; 1973, c. 1287, s. 4; 1975, c. 275, s. 4; 1977, c. 657, s. 4; 1979, c. 179, s. 2; 1981, c. 15; 1983, c. 713, s. 69; 1987, c. 622, s. 8; 1987 (Reg. Sess., 1988), c. 1089, s. 5; 1989, c. 728, s. 1.33; 1991, c. 689, s. 258; 1996, 2nd Ex. Sess., c. 13, s. 2.1.)

 

§ 105‑130.3A:  Expired.

 

§ 105‑130.3B.  (Effective for taxable years beginning on or after January 1, 2009, and expiring for taxable years beginning on or after January 1, 2011) Income tax surtax.

(a)        Surtax. – An income tax surtax is imposed on a taxpayer equal to three percent (3%) of the tax payable by the taxpayer under G.S. 105‑130.3 for the taxable year. This tax is in addition to the tax imposed by G.S. 105‑130.3 and is due at the time prescribed in G.S. 105‑130.17 for filing a corporate income tax return.

(b)        Sunset. – This section expires for taxable years beginning on or after January 1, 2011.  (2009‑451, s. 27A.1(a).)

 

§ 105‑130.4.  Allocation and apportionment of income for corporations.

(a)        As used in this section, unless the context otherwise requires:

(1)        "Apportionable income" means all income that is apportionable under the United States Constitution.

(2)        "Commercial domicile" means the principal place from which the trade or business of the taxpayer is directed or managed.

(3)        "Compensation" means wages, salaries, commissions and any other form of remuneration paid to employees for personal services.

(4)        "Excluded corporation" means any corporation engaged in business as a building or construction contractor, a securities dealer, or a loan company or a corporation that receives more than fifty percent (50%) of its ordinary gross income from intangible property.

(5)        "Nonapportionable income" means all income other than apportionable income.

(6)        "Public utility" means any corporation that is subject to control of one or more of the following entities: the North Carolina Utilities Commission, the Federal Communications Commission, the Interstate Commerce Commission, the Federal Energy Regulatory Commission, or the Federal Aviation Agency; and that owns or operates for public use any plant, equipment, property, franchise, or license for the transmission of communications, the transportation of goods or persons, or the production, storage, transmission, sale, delivery or furnishing of electricity, water, steam, oil, oil products, or gas. The term also includes a motor carrier of property whose principal business activity is transporting property by motor vehicle for hire over the public highways of this State.

(7)        "Sales" means all gross receipts of the corporation except for the following receipts:

a.         Receipts from a casual sale of property.

b.         Receipts allocated under subsections (c) through (h) of this section.

c.         Receipts exempt from taxation.

d.         The portion of receipts realized from the sale or maturity of securities or other obligations that represents a return of principal.

(8)        "Casual sale of property" means the sale of any property which was not purchased, produced or acquired primarily for sale in the corporation's regular trade or business.

(9)        "State" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.

(b)        A corporation having income from business activity which is taxable both within and without this State shall allocate and apportion its net income or net loss as provided in this section. For purposes of allocation and apportionment, a corporation is taxable in another state if (i) the corporation's business activity in that state subjects it to a net income tax or a tax measured by net income, or (ii) that state has jurisdiction based on the corporation's business activity in that state to subject the corporation to a tax measured by net income regardless whether that state exercises its jurisdiction. For purposes of this section, "business activity" includes any activity by a corporation that would establish a taxable nexus pursuant to 15 United States Code section 381.

(c)        Rents and royalties from real or tangible personal property, gains and losses, interest, dividends, patent and copyright royalties and other kinds of income, to the extent that they constitute nonapportionable income, less related expenses shall be allocated as provided in subsections (d) through (h) of this section.

(d)       (1)        Net rents and royalties from real property located in this State are allocable to this State.

(2)        Net rents and royalties from tangible personal property are allocable to this State:

a.         If and to the extent that the property is utilized in this State, or

b.         In their entirety if the corporation's commercial domicile is in this State and the corporation is not organized under the laws of, or is not taxable in, the state in which the property is utilized.

(3)        The extent of utilization of tangible personal property in a state is determined by multiplying the rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the income year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the income year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the corporation, tangible personal property is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession.

(e)       (1)        Gains and losses from sales or other disposition of real property located in this State are allocable to this State.

(2)        Gains and losses from sales or other disposition of tangible personal property are allocable to this State if

a.         The property had a situs in this State at the time of the sale, or

b.         The corporation's commercial domicile is in this State and the corporation is not taxable in the state in which the property has a situs.

(3)        Gains and losses from sales or other disposition of intangible personal property are allocable to this State if the corporation's commercial domicile is in this State.

(f)        Interest and net dividends are allocable to this State if the corporation's commercial domicile is in this State. For purposes of this section, the term "net dividends" means gross dividend income received less related expenses.

(g)       (1)        Royalties or similar income received from the use of patents, copyrights, secret processes and other similar intangible property are allocable to this State:

a.         If and to the extent that the patent, copyright, secret process or other similar intangible property is utilized in this State, or

b.         If and to the extent that the patent, copyright, secret process or other similar intangible property is utilized in a state in which the taxpayer is not taxable and the taxpayer's commercial domicile is in this State.

(2)        A patent, secret process or other similar intangible property is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, processing, or other use in the state or to the extent that a patented product is produced in the state. If the basis of receipts from such intangible property does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the intangible property is utilized in the state in which the taxpayer's commercial domicile is located.

(3)        A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the taxpayer's commercial domicile is located.

(h)        The income less related expenses from any other activities producing nonapportionable income or investments not otherwise specified in this section is allocable to this State if the business situs of the activities or investments is located in this State.

(i)         All apportionable income of corporations other than public utilities, excluded corporations, and qualified capital intensive corporations shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus twice the sales factor, and the denominator of which is four. If the sales factor does not exist, the denominator of the fraction is the number of existing factors and if the sales factor exists but the payroll factor or the property factor does not exist, the denominator of the fraction is the number of existing factors plus one.

(j)        (1)        The property factor is a fraction, the numerator of which is the average value of the corporation's real and tangible personal property owned or rented and used in this State during the income year and the denominator of which is the average value of all the corporation's real and tangible personal property owned or rented and used during the income year.

(2)        Property owned by the corporation is valued at its original cost. Property rented by the corporation is valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the corporation less any annual rental rate received by the corporation from subrentals except that subrentals shall not be deducted when they constitute apportionable income. Any property under construction and any property the income from which constitutes nonapportionable income shall be excluded in the computation of the property factor.

(3)        The average value of property shall be determined by averaging the values at the beginning and end of the income year, but in all cases the Secretary of Revenue may require the averaging of monthly or other periodic values during the income year if reasonably required to reflect properly the average value of the corporation's property. A corporation that ceases its operations in this State before the end of its income year because of its intention to dissolve or to relinquish its certificate of authority, or because of a merger, conversion, or consolidation, or for any other reason whatsoever shall use the real estate and tangible personal property values as of the first day of the income year and the last day of its operations in this State in determining the average value of property, but the Secretary may require averaging of monthly or other periodic values during the income year if reasonably required to reflect properly the average value of the corporation's property.

(k)       (1)        The payroll factor is a fraction, the numerator of which is the total amount paid in this State during the income year by the corporation as compensation, and the denominator of which is the total compensation paid everywhere during the income year. All compensation paid to general executive officers and all compensation paid in connection with nonapportionable income shall be excluded in computing the payroll factor. General executive officers shall include the chairman of the board, president, vice‑presidents, secretary, treasurer, comptroller, and any other officers serving in similar capacities.

(2)        Compensation is paid in this State if:

a.         The individual's service is performed entirely within the State; or

b.         The individual's service is performed both within and without the State, but the service performed without the State is incidental to the individual's service within the State; or

c.         Some of the service is performed in this State and (i) the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in this State, or (ii) the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual's residence is in this State.

(l)        (1)        The sales factor is a fraction, the numerator of which is the total sales of the corporation in this State during the income year, and the denominator of which is the total sales of the corporation everywhere during the income year. Notwithstanding any other provision under this Part, the receipts from any casual sale of property shall be excluded from both the numerator and the denominator of the sales factor. Where a corporation is not taxable in another state on its apportionable income but is taxable in another state only because of nonapportionable income, all sales shall be treated as having been made in this State.

(2)        Sales of tangible personal property are in this State if the property is received in this State by the purchaser. In the case of delivery of goods by common carrier or by other means of transportation, including transportation by the purchaser, the place at which the goods are ultimately received after all transportation has been completed shall be considered as the place at which the goods are received by the purchaser. Direct delivery into this State by the taxpayer to a person or firm designated by a purchaser from within or without the State shall constitute delivery to the purchaser in this State.

(3)        Other sales are in this State if:

a.         The receipts are from real or tangible personal property located in this State; or

b.         The receipts are from intangible property and are received from sources within this State; or

c.         The receipts are from services and the income‑producing activities are in this State.

(m)       All apportionable income of a railroad company shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the "railway operating revenue" from business done within this State and the denominator of which is the "total railway operating revenue" from all business done by the company as shown by its records kept in accordance with the standard classification of accounts prescribed by the Interstate Commerce Commission.

"Railway operating revenue" from business done within this State shall mean "railway operating revenue" from business wholly within this State, plus the equal mileage proportion within this State of each item of "railway operating revenue" received from the interstate business of the company. "Equal mileage proportion" shall mean the proportion which the distance of movement of property and passengers over lines in this State bears to the total distance of movement of property and passengers over lines of the company receiving such revenue. "Interstate business" shall mean "railway operating revenue" from the interstate transportation of persons or property into, out of, or through this State. If the Secretary of Revenue finds, with respect to any particular company, that its accounting records are not kept so as to reflect with exact accuracy such division of revenue by State lines as to each transaction involving interstate revenue, the Secretary of Revenue may adopt such regulations, based upon averages, as will approximate with reasonable accuracy the proportion of interstate revenue actually earned upon lines in this State. Provided, that where a railroad is being operated by a partnership which is treated as a corporation for income tax purposes and pays a net income tax to this State, or if located in another state would be so treated and so pay as if located in this State, each partner's share of the net profits shall be considered as dividends paid by a corporation for purposes of this Part and shall be so treated for inclusion in gross income, deductibility, and separate allocation of dividend income.

(n)        All apportionable income of a telephone company shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is gross operating revenue from local service in this State plus gross operating revenue from toll services performed wholly within this State plus the proportion of revenue from interstate toll services attributable to this State as shown by the records of the company plus the gross operating revenue in North Carolina from other service less the uncollectible revenue in this State, and the denominator of which is the total gross operating revenue from all business done by the company everywhere less total uncollectible revenue. Provided, that where a telephone company is required to keep its records in accordance with the standard classification of accounts prescribed by the Federal Communications Commission the amounts in such accounts shall be used in computing the apportionment fraction as provided in this subsection.

(o)        All apportionable income of a motor carrier of property shall be apportioned by multiplying the income by a fraction, the numerator of which is the number of vehicle miles in this State and the denominator of which is the total number of vehicle miles of the company everywhere. The words "vehicle miles" shall mean miles traveled by vehicles owned or operated by the company hauling property for a charge or traveling on a scheduled route.

(p)        All apportionable income of a motor carrier of passengers shall be apportioned by multiplying the income by a fraction, the numerator of which is the number of vehicle miles in this State and the denominator of which is the total number of vehicle miles of the company everywhere. The words "vehicle miles" shall mean miles traveled by vehicles owned or operated by the company carrying passengers for a fare or traveling on a scheduled route.

(q)        All apportionable income of a telegraph company shall be apportioned by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor and the denominator of which is three.

The property factor shall be as defined in subsection (j) of this section, the payroll factor shall be as defined in subsection (k) of this section, and the sales factor shall be as defined in subsection (l) of this section.

(r)        All apportionable income of an excluded corporation and of all other public utilities shall be apportioned by multiplying the income by the sales factor as determined under subsection (l) of this section.

(s)        All apportionable income of an air or water transportation corporation shall be apportioned by a fraction, the numerator of which is the corporation's revenue ton miles in this State and the denominator of which is the corporation's revenue ton miles everywhere. The term "revenue ton mile" means one ton of passengers, freight, mail, or other cargo carried one mile. In making this computation, a passenger is considered to weigh two hundred pounds.

(s1)      (Effective for taxable years beginning on or after January 1, 2010; see Editor's note for contingent repeal) All apportionable income of a qualified capital intensive corporation shall be apportioned by multiplying the income by the sales factor as determined under subsection (l) of this section. A "qualified capital intensive corporation" is a corporation that satisfies all of the conditions of this subsection. A corporation that is subject to this subsection must list on its return the property, payroll, and sales factors it used in determining whether it is a qualified capital intensive corporation. If the corporation fails to invest one billion dollars ($1,000,000,000) in private funds within nine years as required by subdivision (2) of this subsection, the benefit of this subsection expires and the corporation must apportion income as it would otherwise be required to do under this section absent this subsection. The conditions are:

(1)        The corporation's property factor as a percentage of the sum of the factors in the formula set out in subsection (i) of this section, including the doubling of the sales factor, exceeds seventy‑five percent (75%) or the corporation's average property factor for the preceding three years as a percentage of the average sum of the factors in the formula set out in subsection (i) of this section, including the doubling of the sales factors, for the preceding three years exceeds seventy‑five percent (75%).

(2)        The Secretary of Commerce makes a written determination that the corporation has invested or is expected to invest at least one billion dollars ($1,000,000,000) in private funds to construct a facility in this State within nine years after the time that construction begins. For the purposes of this subsection, costs of construction include costs of acquiring and improving land for the facility, costs for renovations or repairs to existing buildings, and costs of equipping or reequipping the facility.

(3)        The corporation maintains the average number of employees it has at the facility during the first two years after the facility is placed in service for the remainder of time in which the corporation must complete the investment required under subdivision (2) of this subsection.

(4)        The facility that satisfies the condition of subdivision (2) of this subsection is located in a county that was designated as a development tier one or two area at the time construction of the facility began.

(5)        The corporation satisfies a wage standard at the facility that satisfies the condition of subdivision (2) of this subsection. For the purposes of this subdivision, the wage standard that must be satisfied is the one established under G.S. 105‑129.83(c).

(6)        The corporation provides health insurance for all of its full‑time employees at the facility that satisfies the condition of subdivision (2) of this subsection. For the purposes of this subdivision, a company provides health insurance if it satisfies the provisions of G.S. 105‑129.83(d).

(t)        Repealed by Session Laws 2007‑491, s. 2, effective January 1, 2008. For applicability, see Editor's note.

(t1)      Alternative Apportionment Method. – A corporation that believes the statutory apportionment method that otherwise applies to it under this section subjects a greater portion of its income to tax than is attributable to its business in this State may make a written request to the Secretary for permission to use an alternative method. The request must set out the reasons for the corporation's belief and propose an alternative method.

The statutory apportionment method that otherwise applies to a corporation under this section is presumed to be the best method of determining the portion of the corporation's income that is attributable to its business in this State. A corporation has the burden of establishing by clear, cogent, and convincing proof that the proposed alternative method is a better method of determining the amount of the corporation's income attributable to the corporation's business in this State.

The Secretary must issue a written decision on a corporation's request for an alternative apportionment method. If the decision grants the request, it must describe the alternative method the corporation is authorized to use and state the tax years to which the alternative method applies. A decision may apply to no more than three tax years, unless the provisions of subsection (t2) of this section apply. A corporation may renew a request to use an alternative apportionment method by following the procedure in this subsection. A decision of the Secretary on a request for an alternative apportionment method is final and is not subject to administrative or judicial review. A corporation authorized to use an alternative method may apportion its income in accordance with the alternative method or the statutory method. A corporation may not use an alternative apportionment method except upon written order of the Secretary, and any return in which any alternative apportionment method, other than the method prescribed by statute, is used without permission of the Secretary is not a lawful return.

(t2)      Repealed by Session Laws 2011‑330, s. 5, effective June 27, 2011.  (1939, c. 158, s. 311; 1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c. 752, s. 3; 1953, c. 1302, s. 4; 1955, c. 1350, s. 18; 1957, c. 1340, s. 4; 1959, c. 1259, s. 4; 1963, c. 1169, s. 2; c. 1186; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; c. 1287, s. 4; 1981 (Reg. Sess., 1982), c. 1212; 1987, c. 804, s. 2; 1987 (Reg. Sess., 1988), c. 994, s. 1; 1993, c. 532, s. 12; 1995, c. 350, s. 3; 1996, 2nd Ex. Sess., c. 14, s. 5; 1998‑98, s. 69; 1999‑369, s. 5.4; 2000‑126, s. 5; 2001‑327, s. 1(c); 2002‑126, s. 30G.1(a); 2003‑349, ss. 1.2, 1.3; 2003‑416, ss. 5(a)‑5(h); 2004‑170, s. 15; 2005‑435, s. 53; 2007‑491, ss. 2, 12; 2009‑54, ss. 1, 2, 6; 2009‑445, ss. 4, 5; 2010‑89, s. 2(a), (b); 2011‑330, s. 5.)

 

§ 105‑130.5.  Adjustments to federal taxable income in determining State net income.

(a)        The following additions to federal taxable income shall be made in determining State net income:

(1)        Taxes based on or measured by net income by whatever name called and excess profits taxes.

(2)        Interest paid in connection with income exempt from taxation under this Part.

(3)        The contributions deduction allowed by the Code.

(4)        Interest income earned on bonds and other obligations of other states or their political subdivisions, less allowable amortization on any bond acquired on or after January 1, 1963.

(5)        The amount by which gains have been offset by the capital loss carryover allowed under the Code. All gains recognized on the sale or other disposition of assets must be included in determining State net income or loss in the year of disposition.

(6)        Any amount allowed as a net operating loss deduction under the Code.

(7)        Repealed by Session Laws 2001‑327, s. 3(a), effective for taxable years beginning on or after January 1, 2001.

(8)        Repealed by Session Laws 1987, c. 778, s. 2.

(9)        Payments to or charges by a parent, subsidiary or affiliated corporation in excess of fair compensation in all intercompany transactions of any kind whatsoever pursuant to the Revenue Laws of this State.

(10)      (Effective for taxable years beginning before January 1, 2011) The total amounts allowed under this Chapter during the taxable year as a credit against the taxpayer's income tax. A corporation that apportions part of its income to this State shall make the addition required by this subdivision after it determines the amount of its income that is apportioned and allocated to this State and shall not apply to a credit taken under this Chapter the apportionment factor used by it in determining the amount of its apportioned income.

(10)      (Effective for taxable years beginning on or after January 1, 2011) The total amounts allowed under this Chapter during the taxable year as a credit against the taxpayer's income tax. This subdivision does not apply to a credit allowed under G.S. 105‑130.47. A corporation that apportions part of its income to this State shall make the addition required by this subdivision after it determines the amount of its income that is apportioned and allocated to this State and shall not apply to a credit taken under this Chapter the apportionment factor used by it in determining the amount of its apportioned income.

(11)      The amount by which the percentage depletion allowance allowed by sections 613 and 613A of the Code for mines, oil and gas wells, and other natural deposits exceeds the cost depletion allowance for these items under the Code, except as otherwise provided herein. This subdivision does not apply to depletion deductions for clay, gravel, phosphate rock, lime, shells, stone, sand, feldspar, gemstones, mica, talc, lithium compounds, tungsten, coal, peat, olivine, pyrophyllite, and other solid minerals or rare earths extracted from the soil or waters of this State. Corporations required to apportion income to North Carolina shall first add to federal taxable income the amount of all percentage depletion in excess of cost depletion that was subtracted from the corporation's gross income in computing its federal income taxes and shall then subtract from the taxable income apportioned to North Carolina the amount by which the percentage depletion allowance allowed by sections 613 and 613A of the Code for solid minerals or rare earths extracted from the soil or waters of this State exceeds the cost depletion allowance for these items.

(12)      The amount allowed under the Code for depreciation or as an expense in lieu of depreciation for a utility plant acquired by a natural gas local distribution company, to the extent the plant is included in the company's rate base at zero cost in accordance with G.S. 62‑158.

(13)      Repealed by Session Laws 2001‑427, s. 4(b), effective for taxable years beginning on or after January 1, 2002.

(14)      Royalty payments required to be added by G.S. 105‑130.7A, to the extent deducted in calculating federal taxable income.

(15)      For taxable years 2002‑2005, the applicable percentage of the amount allowed as a special accelerated depreciation deduction under section 168(k) or section 1400L of the Code, as set out in the table below. In addition, a taxpayer who was allowed a special accelerated depreciation deduction under section 168(k) or section 1400L of the Code in a taxable year beginning before January 1, 2002, and whose North Carolina taxable income in that earlier year reflected that accelerated depreciation deduction must add to federal taxable income in the taxpayer's first taxable year beginning on or after January 1, 2002, an amount equal to the amount of the deduction allowed in the earlier taxable year. These adjustments do not result in a difference in basis of the affected assets for State and federal income tax purposes. The applicable percentage is as follows:

Taxable Year                                       Percentage

2002                                                   100%

2003                                                     70%

2004                                                     70%

2005                                                       0%

(15a)    The applicable percentage of the amount allowed as a special accelerated depreciation deduction under section 168(k) or 168(n) of the Code for property placed in service after December 31, 2007, but before January 1, 2010. The applicable percentage under this subdivision is eighty‑five percent (85%).

In addition, a taxpayer who was allowed a special accelerated depreciation deduction in taxable year 2007 or 2008 for property placed in service during that year, and whose North Carolina taxable income for that year reflected that accelerated depreciation deduction must make the adjustments set out below. These adjustments do not result in a difference in basis of the affected assets for State and federal income tax purposes.

a.         A taxpayer must add to federal taxable income in the taxpayer's 2008 taxable year an amount equal to the applicable percentage of the accelerated depreciation deduction reflected in the taxpayer's 2007 North Carolina taxable income.

b.         A taxpayer must add to federal taxable income in the taxpayer's 2009 taxable year an amount equal to the applicable percentage of the accelerated depreciation deduction reflected in the taxpayer's 2008 North Carolina taxable income.

(15b)    For taxable years 2010 through 2012, eighty‑five percent (85%) of the amount allowed as a special accelerated depreciation deduction under section 168(k) or 168(n) of the Code for property placed in service during the taxable year. In addition, for taxable year 2010, a taxpayer who placed property in service during the 2009 taxable year and whose North Carolina taxable income for the 2009 taxable year reflected a special accelerated depreciation deduction allowed for the property under section 168(k) of the Code must add eighty‑five percent (85%) of the amount of the special accelerated depreciation deduction. These adjustments do not result in a difference in basis of the affected assets for State and federal income tax purposes.

(16)      The amount excluded from gross income under Subchapter R of Chapter 1 of the Code.

(17)      The amount excluded from gross income under section 199 of the Code.

(18)      Repealed by Session Laws 2006‑220, s. 1, effective for taxable years beginning on and after January 1, 2007.

(19)      The dividend paid deduction allowed under the Code to a captive REIT, as defined in G.S. 105‑130.12.

(20)      The amount of a donation made to a nonprofit organization or a unit of State or local government for which a credit is claimed under G.S. 105‑129.16H.

(21)      The amount of income deferred under section 108(i)(1) of the Code from the discharge of indebtedness in connection with a reacquisition of an applicable debt instrument.

(22)      The amount allowed as a deduction under section 163(e)(5)(F) of the Code for an original issue discount on an applicable high yield discount obligation.

(23)      For taxable years 2010 and 2011, eighty‑five percent (85%) of the amount by which the taxpayer's expense deduction under section 179 of the Code for property placed in service in taxable year 2010 or 2011 exceeds the amount that would have been allowed for the respective taxable year under section 179 of the Code as of May 1, 2010. For purposes of this subdivision, the definition of section 179 property has the same meaning as under section 179 of the Code as of January 1, 2011. These adjustments do not result in a difference in basis of the affected assets for State and federal income tax purposes.

(b)        The following deductions from federal taxable income shall be made in determining State net income:

(1)        Interest upon the obligations of the United States or its possessions, to the extent included in federal taxable income: Provided, interest upon the obligations of the United States shall not be an allowable deduction unless interest upon obligations of the State of North Carolina or any of its political subdivisions is exempt from income taxes imposed by the United States.

(1a)      Interest upon the obligations of any of the following, net of related expenses, to the extent included in federal taxable income:

a.         This State, a political subdivision of this State, or a commission, an authority, or another agency of this State or of a political subdivision of this State.

b.         A nonprofit educational institution organized or chartered under the laws of this State.

(2)        Payments received from a parent, subsidiary or affiliated corporation in excess of fair compensation in intercompany transactions which in the determination of the net income or net loss of such corporation were not allowed as a deduction under the Revenue Laws of this State.

(3)        Repealed by Session Laws 2003‑349, s. 1.1, effective January 1, 2003.

(3a)      Dividends treated as received from sources outside the United States as determined under section 862 of the Code, net of related expenses, to the extent included in federal taxable income. Notwithstanding the proviso in subdivision (c)(3) of this section, the netting of related expenses shall be calculated in accordance with subdivision (c)(3) of this section and G.S. 105‑130.6A.

(3b)      Any amount included in federal taxable income under section 78 or section 951 of the Code, net of related expenses.

(4)        Losses in the nature of net economic losses sustained by the corporation in any or all of the 15 preceding years pursuant to the provisions of G.S. 105‑130.8. A corporation required to allocate and apportion its net income under the provisions of G.S. 105‑130.4 shall deduct its allocable net economic loss only from total income allocable to this State pursuant to the provisions of G.S. 105‑130.8.

(5)        Contributions or gifts made by any corporation within the income year to the extent provided under G.S. 105‑130.9.

(6)        Amortization in excess of depreciation allowed under the Code on the cost of any sewage or waste treatment plant, and facilities or equipment used for purposes of recycling or resource recovery of or from solid waste, or for purposes of reducing the volume of hazardous waste generated as provided in G.S. 105‑130.10.

(7)        Depreciation of emergency facilities acquired prior to January 1, 1955. Any corporation shall be permitted to depreciate any emergency facility, as such is defined in section 168 of the Code, over its useful life, provided such facility was acquired prior to January 1, 1955, and no amortization has been claimed on such facility for State income tax purposes.

(8)        The amount of losses realized on the sale or other disposition of assets not allowed under section 1211(a) of the Code. All losses recognized on the sale or other disposition of assets must be included in determining State net income or loss in the year of disposition.

(9)        With respect to a shareholder of a regulated investment company, the portion of undistributed capital gains of such regulated investment company included in such shareholder's federal taxable income and on which the federal tax paid by the regulated investment company is allowed as a credit or refund to the shareholder under section 852 of the Code.

(10)      Repealed by Session Laws 1987, c. 778, s. 2.

(11)      If a deduction for an ordinary and necessary business expense was required to be reduced or was not allowed under the Code because the corporation claimed a federal tax credit against its federal income tax liability for the income year in lieu of a deduction, the amount by which the deduction was reduced and the amount of the deduction that was disallowed. This deduction is allowed only to the extent that a similar credit is not allowed by this Chapter for the amount.

(12)      Reasonable expenses, in excess of deductions allowed under the Code, paid for reforestation and cultivation of commercially grown trees; provided, that this deduction shall be allowed only to those corporations in which the real owners of all the shares of such corporation are natural persons actively engaged in the commercial growing of trees, or the spouse, siblings, or parents of such persons. Provided, further, that in no case shall a corporation be allowed a deduction for the same reforestation or cultivation expenditure more than once.

(13)      The eligible income of an international banking facility to the extent included in determining federal taxable income, determined as follows:

a.         "International banking facility" shall have the same meaning as is set forth in the laws of the United States or regulations of the board of governors of the federal reserve system.

b.         The eligible income of an international banking facility for the taxable year shall be an amount obtained by multiplying State taxable income as determined under G.S. 105‑130.3 (determined without regard to eligible income of an international banking facility and allocation and apportionment, if applicable) for such year by a fraction, the denominator of which shall be the gross receipts for such year derived by the bank from all sources, and the numerator of which shall be the adjusted gross receipts for such year derived by the international banking facility from:

1.         Making, arranging for, placing or servicing loans to foreign persons substantially all the proceeds of which are for use outside the United States;

2.         Making or placing deposits with foreign persons which are banks or foreign branches of banks (including foreign subsidiaries or foreign branches of the taxpayer) or with other international banking facilities; or

3.         Entering into foreign exchange trading or hedging transactions related to any of the transactions described in this paragraph.

c.         The adjusted gross receipts shall be determined by multiplying the gross receipts of the international banking facility by a fraction the numerator of which is the average amount for the taxable year of all assets of the international banking facility which are employed outside the United States and the denominator of which is the average amount for the taxable year of all assets of the international banking facility.

d.         For the purposes of this subsection the term "foreign person" means:

1.         An individual who is not a resident of the United States;

2.         A foreign corporation, a foreign partnership or a foreign trust, as defined in section 7701 of the Code, other than a domestic branch thereof;

3.         A foreign branch of a domestic corporation (including the taxpayer);

4.         A foreign government or an international organization or an agency of either, or

5.         An international banking facility.

For purposes of this paragraph, the terms "foreign" and "domestic" shall have the same meaning as set forth in section 7701 of the Code.

(14)      The amount by which the basis of a depreciable asset is required to be reduced under the Code for federal tax purposes because of a tax credit allowed against the corporation's federal income tax liability. This deduction may be claimed only in the year in which the Code requires that the asset's basis be reduced. In computing gain or loss on the asset's disposition, this deduction shall be considered as depreciation.

(15)      The amount paid during the income year, pursuant to 7 U.S.C. § 1445‑2, as marketing assessments on tobacco grown by the corporation in North Carolina.

(16)      The amount of natural gas expansion surcharges collected by a natural gas local distribution company under G.S. 62‑158.

(17)      To the extent included in federal taxable income, 911 charges imposed under G.S. 62A‑43 and remitted to the 911 Fund under that section.

(18)      Interest, investment earnings, and gains of a trust, the settlors of which are two or more manufacturers that signed a settlement agreement with this State to settle existing and potential claims of the State against the manufacturers for damages attributable to a product of the manufacturers, if the trust meets all of the following conditions:

a.         The purpose of the trust is to address adverse economic consequences resulting from a decline in demand of the manufactured product potentially expected to occur because of market restrictions and other provisions in the settlement agreement.

b.         A court of this State approves and retains jurisdiction over the trust.

c.         Certain portions of the distributions from the trust are made in accordance with certifications that meet the criteria in the agreement creating the trust and are provided by a nonprofit entity, the governing board of which includes State officials.

(19)      To the extent included in federal taxable income, the amount paid to the taxpayer during the taxable year from the Hurricane Floyd Reserve Fund in the Office of State Budget and Management for hurricane relief or assistance, but not including payments for goods or services provided by the taxpayer.

(20)      Royalty payments received from a related member who added the payments to income under G.S. 105‑130.7A for the same taxable year.

(21)      In each of the taxpayer's first five taxable years beginning on or after January 1, 2005, an amount equal to twenty percent (20%) of the amount added to taxable income in a previous year as accelerated depreciation under subdivision (a)(15) of this section.

(21a)    An amount equal to twenty percent (20%) of the amount added to federal taxable income as accelerated depreciation under subdivision (a)(15a) of this section. For a taxpayer who made the addition for accelerated depreciation in the 2008 taxable year, the deduction allowed by this subdivision applies to the first five taxable years beginning on or after January 1, 2009. For a taxpayer who made the addition for accelerated depreciation in the 2009 taxable year, the deduction allowed by this subdivision applies to the first five taxable years beginning on or after January 1, 2010.

(21b)    An amount equal to twenty percent (20%) of the amount added to federal taxable income as accelerated depreciation under subdivision (a)(15b) of this section. For the amount added to taxable income in the 2010 taxable year, the deduction allowed by this subdivision applies to the first five taxable years beginning on or after January 1, 2011. For the amount added to taxable income in the 2011 taxable year, the deduction allowed by this subdivision applies to the first five taxable years beginning on or after January 1, 2012. For the amount added to taxable income in the 2012 taxable year, the deduction allowed by this subdivision applies to the first five taxable years beginning on or after January 1, 2013.

(22)      To the extent included in federal taxable income, the amount paid to the taxpayer during the taxable year from the Disaster Relief Reserve Fund in the Office of State Budget and Management for hurricane relief or assistance, but not including payments for goods or services provided by the taxpayer.

(23)      A dividend received from a captive REIT, as defined in G.S. 105‑130.12.

(24)      (Effective for taxable years beginning on or after January 1, 2008, and expiring for taxable years beginning on or after January 1, 2015) Five percent (5%) of the gross purchase price of a qualified sale of a manufactured home community. A qualified sale is a transfer of land comprising a manufactured home community in a single purchase to a group composed of a majority of the manufactured home community leaseholders or to a nonprofit organization that represents such a group. To be eligible for this deduction, a taxpayer must give notice of the sale to the North Carolina Housing Finance Agency under G.S. 42‑14.3.

(25)      The amount added to federal taxable income as deferred income under section 108(i)(1) of the Code. This deduction applies to taxable years beginning on or after January 1, 2014.

(26)      An amount equal to twenty percent (20%) of the amount added to federal taxable income under subdivision (a)(23) of this section. For the amount added to taxable income in the 2010 taxable year, the deduction allowed by this subdivision applies to the first five taxable years beginning on or after January 1, 2011. For the amount added to taxable income in the 2011 taxable year, the deduction allowed by this subdivision applies to the first five taxable years beginning on or after January 1, 2012.

(c)        The following other adjustments to federal taxable income shall be made in determining State net income:

(1)        In determining State net income, no deduction shall be allowed for annual amortization of bond premiums applicable to any bond acquired prior to January 1, 1963. The amount of premium paid on any such bond shall be deductible only in the year of sale or other disposition.

(2)        Federal taxable income must be increased or decreased to account for any difference in the amount of depreciation, amortization, or gains or losses applicable to property which has been depreciated or amortized by use of a different basis or rate for State income tax purposes than used for federal income tax purposes prior to the effective date of this Part.

(3)        No deduction is allowed for any direct or indirect expenses related to income not taxed under this Part; provided, no adjustment shall be made under this subsection for adjustments addressed in G.S. 105‑130.5(a) and (b). G.S. 105‑130.6A applies to the adjustment for expenses related to dividends received that are not taxed under this Part.

(4)        The taxpayer shall add to federal taxable income the amount of any recovery during the taxable year not included in federal taxable income, to the extent the taxpayer's deduction of the recovered amount in a prior taxable year reduced the taxpayer's tax imposed by this Part but, due to differences between the Code and this Part, did not reduce the amount of the taxpayer's tax imposed by the Code. The taxpayer may deduct from federal taxable income the amount of any recovery during the taxable year included in federal taxable income under section 111 of the Code, to the extent the taxpayer's deduction of the recovered amount in a prior taxable year reduced the taxpayer's tax imposed by the Code but, due to differences between the Code and this Part, did not reduce the amount of the taxpayer's tax imposed by this Part.

(5)        A savings and loan association may deduct interest earned on deposits at the Federal Home Loan Bank of Atlanta, or its successor, to the extent included in fed