GSNC

Subchapter 10. Local Option County Taxes.

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.

History

(1939, c. 158, ss. A, B; 1941, c. 50, s. 1; 1983 (Reg. Sess., 1984), c. 1097, s. 1.)

Cross References. - As to the Department of Revenue, see G.S. 143B-217 through 143B-220.

Editor's Note. - Session Laws 2016-23, s. 2(a), provides: "Taxes. - The following provisions apply to taxes affected by boundary certification:

"(1) Neither the State nor a subdivision of the State may assess a tax on a person for activities occurring prior to the date of certification where the basis of the assessment is the certification.

"(2) The State and its subdivisions may assess a tax for activities occurring on or after the date of certification subject to the following conditions:

"a. For taxes imposed for a taxable period, the tax may not be imposed for a period beginning prior to the date of certification.

"b. For sales and use taxes for an item that is provided and billed on a monthly or other periodic basis, the tax may not be assessed for periods beginning prior to the date of certification.

"c. For a person subject to taxes levied under Article 2A of Chapter 105 of the General Statutes who, on the date of the certification, has on hand any tobacco products, the person must file a complete inventory of the tobacco products within 20 days after date of certification and must pay an additional tax to the Secretary of Revenue when filing the inventory. The amount of the tax due is the amount due based on the current tax rate less any tax paid on the inventory to another state.

"d. For installments and carryforwards of tax benefits allowed by this State at the time of boundary certification for activities with a situs in South Carolina, a person may claim remaining installments and carryforwards against State tax liability.

"e. For land that is classified under G.S. 105-277.3 at the time of boundary certification and that fails to meet the size requirements of G.S. 105-277.3 solely because of boundary certification, (i) no deferred taxes are due as a result of boundary certification, (ii) the deferred taxes remain a lien on the land located in this State, and (iii) the deferred taxes for the land in this State are otherwise payable in accordance with G.S. 105-277.3. The tax benefit provided in this sub-subdivision is forfeited if any portion of the land located in this State is sold.

"f. For land receiving a property tax benefit other than classification under G.S. 105-277.3 at the time of boundary certification that fails to meet the requirements for the property tax benefit solely because of boundary certification, the land is not entitled to receive the property tax benefit after the time of boundary certification unless it meets the statutory requirements, but the lien on the land for the deferred taxes is extinguished as if it has been paid in full.

"(3) A person may not seek a refund for activities occurring prior to the date of certification where the basis of the refund is the certification."

Session Laws 2016-23, s. 12(a) is a severability clause.

Legal Periodicals. - For article discussing this Subchapter, see 15 N.C.L. Rev. 387 (1937).

For survey of 1980 constitutional law, see 59 N.C.L. Rev. 1116 (1981).

For note surveying tax relief enacted by the 1985 General Assembly, see 64 N.C.L. Rev. 1508 (1986).

For article, "Causation, Science and Taxation," see 10 Elon L. Rev. 1 (2018).

For article, "Crises and Tax," see 67 Duke L.J. 1155 (2018).

CASE NOTES

Taxing Power of General Assembly. - The General Assembly has an unlimited right to tax all persons domiciled within the State, and all property within the State, except so far as this right has been limited by the provisions of the Constitution, either expressly or by necessary implication. Pullen v. Commissioners of Wake County, 66 N.C. 361 (1872).

Uniformity Required. - Under N.C. Const., Art. V, § 2(1), (2) and (6), the same rule of uniformity applies to the taxing of "trades, professions, franchises and incomes" as to the other species of property therein named, and there must also be uniformity in the mode of assessment. Worth v. Petersburg R.R., 89 N.C. 301 (1883).

Uniformity, in its legal and proper sense, is inseparably incident to the power of taxation, whether applied to taxes on property or to those imposed on trades, professions, etc. State v. Moore, 113 N.C. 697, 18 S.E. 342 (1893), overruled on other grounds, State v. Hunt, 129 N.C. 686, 40 S.E. 216 (1901).

Statement of Object in Levying Taxes. - The N.C. Const., Art. V, § 5, requires that every act levying taxes shall state the objects to which they shall be appropriated. This provision, however, has no application to taxes levied by county authorities for county purposes. Parker v. Board of Comm'rs, 104 N.C. 166, 10 S.E. 137 (1889).

Abortion Funding as Necessary Use and Purpose. - The funding of elective abortions constitutes a "necessary use and purpose of government" within the meaning of this section, and the appropriation and expenditure of State tax moneys for elective abortions does not violate N.C. Const., Art. V, § 5. Stam v. State, 47 N.C. App. 209, 267 S.E.2d 335 (1980), aff'd, 302 N.C. 357, 275 S.E.2d 439 (1981).

Legislative Delegation of Power to Municipal Corporation. - The legislature may authorize a municipal corporation to lay taxes on the town property, the persons, and the subject of taxation incident to the persons, of those who have a business residence in town though they have a residence also out of town. Worth v. Commissioners of Fayetteville, 60 N.C. 617 (1864).

Applied in Great Am. Ins. Co. v. Gold, 254 N.C. 168, 118 S.E.2d 792 (1961).

Cited in Robert E. Harris Evangelistic Ass'n v. Board of Tax Supervision, 3 N.C. App. 479, 165 S.E.2d 67 (1969); In re Estate of Kapoor, 303 N.C. 102, 277 S.E.2d 403 (1981); County of Lenoir v. Moore, 114 N.C. App. 110, 441 S.E.2d 589 (1994), aff'd, 340 N.C. 104, 455 S.E.2d 158 (1995); County of Carteret v. Long, 128 N.C. App. 477, 495 S.E.2d 391 (1998); Midrex Techs. v. N.C. Dep't of Revenue, 369 N.C. 250, 794 S.E.2d 785 (2016).

§ 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.

History

(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 through 105-32.8: Repealed by Session Laws 2013-316, s. 7(a), effective January 1, 2013, and applicable to the estates of decedents dying on or after that date.

History

(§§ 105-32.1, 105-32.3 - 105-32.7: 1998-212, s. 29A.2(b); repealed by 2013-316, s. 7(a), effective January 1, 2013. § 105-32.2: 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); repealed by 2013-316, s. 7(a), effective January 1, 2013. § 105-32.8: 1998-212, s. 29A.2(b); 1999-337, s. 13; 2005-435, s. 24; 2006-18, s. 3; 2007-491, s. 6; repealed by 2013-316, s. 7(a), effective January 1, 2013.)

Editor's Note. - Former G.S. 105-32.1 pertained to definitions. Former G.S. 105-32.2 pertained to estate tax imposed in amount equal to federal state death tax credit. Former G.S. 105-32.3 pertained to liability for estate tax. Former G.S. 105-32.4 pertained to payment of estate tax. Former G.S. 105-32.5 pertained to making installment payments of tax due when federal estate tax is payable in installments. Former G.S. 105-32.6 pertained to estate tax is a lien on real property in the estate. Former G.S. 105-32.7 pertained to generation-skipping transfer tax. Former G.S. 105-32.8 pertained to federal determination that changes the amount of tax payable to the State.

ARTICLE 2. Privilege Taxes.

Sec.

§ 105-33. Taxes under this Article.

General. - Taxes in this Article are imposed for the privilege of carrying on the business, exercising the privilege, or doing the act named.
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.
Other Taxes. - The taxes imposed by this Article on a percentage basis or another basis are due as specified in this Article.
Repealed by Session Laws 1998-95, s. 2, effective July 1, 1999.
Repealed by Session Laws 1989, c. 584, s. 1.
, (g) Repealed by Session Laws 1998-95, s. 2, effective July 1, 1999.
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.
, (j) Repealed by Session Laws 1998-95, s. 2, effective July 1, 1999.
Repealed by Session Laws 1987, c. 190.

History

(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.)

Local Modification. - Town of Pittsboro: 1993, c. 358, s. 9(a).

Cross References. - As to power of county to levy license taxes as authorized by this Article, see G.S. 153A-152.

For deletion of Division I designation for G.S. 105-103 through 105-113 of this Article, see the Editor's note under G.S. 105-103.

Editor's Note. - Effective July 1, 1999, Session Laws 1998-95, s. 1 rewrote the catchline of this Article to read "Privilege Taxes."

Session Laws 1996, Second Extra Session, c. 13, s. 1, provides that this act shall be known as the William S. Lee Quality Jobs and Business Expansion Act.

Session Laws 1996, Second Extra Session, c. 13, s. 4.2, effective July 1, 1999, provided: "Effective July 1, 1999, Article 2B of Chapter 105 of the General Statutes, as amended by this act, is repealed. The Secretary shall retain from collections under Article 2 of Chapter 105 of the General Statutes the cost of refunding the taxes levied in Article 2B of Chapter 105 of the General Statutes."

Session Laws 1996, Second Extra Session, c. 13, s. 10.1, provides: "This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this act before its amendment or repeal; nor does it affect the right to any refund or credit of a tax that would otherwise have been available under the amended or repealed statute before its amendment or repeal."

Legal Periodicals. - For comment on 1943 amendment which made additions to the section, see 21 N.C.L. Rev. 368 (1943).

CASE NOTES

Several Occupations Conducted by Individual. - Where several occupations are conducted in a town by the same individual, a privilege tax on one does not prevent a similar tax on another. Guano Co. v. Town of Tarboro, 126 N.C. 68, 35 S.E. 231 (1900).

Goods Manufactured in Another State. - The right of a state to tax traders, professions and avocations within the borders of the state is unquestionable, though the goods dealt in are manufactured in another state. State v. Gorham, 115 N.C. 721, 20 S.E. 179 (1894).

Peddling. - A State license issued under G.S. 105-53 authorizes the licensee to engage in the business of peddling. State v. Byrd, 259 N.C. 141, 130 S.E.2d 55 (1963).

Applied in Eastern Carolina Tastee-Freez, Inc. v. City of Raleigh, 256 N.C. 208, 123 S.E.2d 632 (1962).

Cited in State v. Warren, 211 N.C. 75, 189 S.E. 108 (1937); Duke Power Co. v. Bowles, 229 N.C. 143, 48 S.E.2d 287 (1948); Northcutt v. Clayton, 269 N.C. 428, 152 S.E.2d 471 (1967); Greene v. City of Winston-Salem, 287 N.C. 66, 213 S.E.2d 231 (1975); Chrysler Fin. Co., L.L.C. v. Offerman, 138 N.C. App. 268, 531 S.E.2d 223 (2000).

§ 105-33.1. Definitions.

The following definitions apply in this Article:

City. - Defined in G.S. 105-228.90.
Code. - Defined in G.S. 105-228.90.
Repealed by Session Laws 1998-95, s. 3, effective July 1, 1999.
Person. - Defined in G.S. 105-228.90.
Secretary. - Defined in G.S. 105-228.90.

History

(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: Repealed by Session Laws 2013-316, s. 5(a), effective January 1, 2014, and applicable to gross receipts derived from an admission charge sold at retail on or after that date.

History

(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; repealed by 2013-316, s. 5(a), effective January 1, 2014.)

Local Modification. - Prior to the repeal of G.S. 105-37.1 by Session Laws 2013-316, s. 5(a), there were local modifications to this section in the following localities: Cabarrus: 1961, c. 1032; city of Greensboro: 1989, c. 383, s. 1; Forsyth-Guilford Metropolitan Baseball Park Authority: 1997-380, s. 1.

Editor's Note. - The historical citation for this section incorporates the history of repealed G.S. 105-38, which was combined into this section by Session Law 1999-337.

Session Laws 2013-316, s. 5(f), as amended by Session Laws 2014-3, s. 5.1(f), provides: "This section becomes effective January 1, 2014, and applies to gross receipts derived from an admission charge sold at retail on or after that date. For admissions to a live event, the tax applies to the initial sale or resale of tickets occurring on or after that date; gross receipts received on or after January 1, 2014, for admission to a live event, for which the initial sale of tickets occurred before that date, other than gross receipts received by a ticket reseller, are taxable under G.S. 105-37.1. Gross receipts derived from an admission charge sold at retail to a live event occurring on or after January 1, 2015, are taxable under G.S. 105-164.4G, regardless of when the initial sale of a ticket to the event occurred."

Former G.S. 105-37.1 pertained to live entertainment and ticket resales.

Effect of Amendments. - Session Laws 2010-31, s. 31.7(a), in the section heading, substituted "Live entertainment and ticket resales" for "Dances, athletic events, shows, exhibitions, and other entertainments"; in subsection (a), in the introductory language, deleted "gross receipts of a person who is engaged in any of the" preceding "following"; rewrote subdivision (a)(1), which formerly read: "Giving, offering, or managing a dance or an athletic contest for which an admission fee in excess of fifty cents (50 › ) is charged."; rewrote subdivision (a)(2), which formerly read: "Giving, offering, or managing a form of amusement or entertainment that is not taxed by another provision of this Article and for which an admission fee is charged."; in subsection (b), in the first sentence, substituted "tax imposed by this section is three percent (3%)" for "tax is three percent (3%) of the gross receipts from the activities described in subsection (a) of this section"; in subsection (c), in the first sentence, substituted "a live entertainment performance" for "a performance, show, or exhibition," and "performance" for "performance, show, or exhibition" in the first and last sentences; and rewrote subsection (d). For effective dates, see editor's note.

§§ 105-37.2 : Repealed pursuant to Session Law 1998-96, s. 3, effective July 1, 1999.

Editor's Note. - Session Laws 1998-96, s. 3, made this section, relating to tax exemptions for arts festivals and community festivals, effective August 14, 1998. Section 3 further stated that s. 1 of that act would be repealed effective July 1, 1999, only if Senate Bill 1252, An Act To Simplify And Modify Privilege And Excise Taxes And Related Permit Fees, was enacted by the 1998 General Assembly. Senate Bill 1252 was enacted as Session Laws 1998-95.

§ 105-38: Repealed by Session Laws 1999-337, s. 14(b), effective July 22, 1999.

§ 105-38.1: Repealed by Session Laws 2013-316, s. 5(a), effective January 1, 2014, and applicable to gross receipts derived from an admission charge sold at retail on or after that date.

History

(1998-95, s. 5.1; 1999-337, s. 15(a); repealed by 2013-316, s. 5(a), effective January 1, 2014.)

Editor's Note. - Session Laws 2013-316, s. 5(f), as amended by Session Laws 2014-3, s. 5.1(f), provides: "This section becomes effective January 1, 2014, and applies to gross receipts derived from an admission charge sold at retail on or after that date. For admissions to a live event, the tax applies to the initial sale or resale of tickets occurring on or after that date; gross receipts received on or after January 1, 2014, for admission to a live event, for which the initial sale of tickets occurred before that date, other than gross receipts received by a ticket reseller, are taxable under G.S. 105-37.1. Gross receipts derived from an admission charge sold at retail to a live event occurring on or after January 1, 2015, are taxable under G.S. 105-164.4G, regardless of when the initial sale of a ticket to the event occurred."

Former G.S. 105-38.1 pertained to motion picture shows.

§ 105-39: Repealed by Session Laws 1987 (Regular Session, 1988), c. 1082, s. 1.

§ 105-40: Repealed by Session Laws 2013-316, s. 5(a), effective January 1, 2014, and applicable to gross receipts derived from an admission charge sold at retail on or after that date.

History

(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; repealed by 2013-316, s. 5(a), effective January 1, 2014.)

Editor's Note. - The historical citation for this section incorporates the history of repealed G.S. 105-38.1(b), which was combined into this section by Session Laws 1999-337.

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

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. (Applicable to taxable years beginning before July 1, 2018) 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 funeral director, an embalmer, or a funeral service licensee 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.
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.
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.
Repealed by Session Laws 1998-95, s. 7, effective July 1, 1999.
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.
Repealed by Session Laws 1981, c. 17.
Repealed by Session Laws 1998-95, s. 7, effective July 1, 1999.
Counties and cities may not levy any license tax on the business or professions taxed under this section.
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.

(2) (Applicable to taxable years beginning on or after July 1, 2018) A physician, a veterinarian, a surgeon, an osteopath, a chiropractor, a chiropodist, a dentist, an ophthalmologist, an optician, an optometrist, a massage and bodywork therapist, or another person who practices a professional art of healing.

History

(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; 2017-39, s. 9; 2017-151, s. 4; 2018-5, s. 38.2(h).)

Subdivision (a)(2) Set Out Twice. - The first version of subdivision (a)(2) set out above is applicable to taxable years beginning before July 1, 2018. The second version of subdivision (a)(2) set out above is applicable to taxable years beginning on or after July 1, 2018.

Editor's Note. - Session Laws 2002-158, s. 15.1, provides that nothing in the act obligates the General Assembly to appropriate funds to implement the act now or in the future.

Session Laws 2008-206, s. 2, provides: "Notwithstanding G.S. 105-41(h), a city that imposed a license tax on a home inspector licensed under Article 9F of Chapter 143 of the General Statutes for fiscal year 2008-2009 may impose and collect that tax for fiscal year 2008-2009. A city may not levy a license tax on this business or profession for taxable years beginning on or after July 1, 2009."

Session Laws 2017-151, s. 6, made the amendment to subdivision (a)(2) by Session Laws 2017-151, s. 4, effective July 20, 2017, and applicable to taxable years beginning on or after July 1, 2018.

Session Laws 2018-5, s. 38.2(h), effective June 12, 2018, provides: "Section 4 of S.L. 2017-151 is reenacted." Session Laws 2017-151, s. 4, amended G.S. 105-41(a)(2).

Session Laws 2018-5, s. 38.2(j), provides, in part: "Subsection (h) of this section [which reenacted Session Laws 2017-151, s. 4] is effective when it becomes law and applies to taxable years beginning on or after July 1, 2018."

Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

Effect of Amendments. - Session Laws 2005-276, s. 23A.1(b), effective January 1, 2006, and applicable to the membership fees due for 2006, deleted the former last two sentences of subdivision (a)(1), which read: "In addition to the tax, whenever an attorney pays the tax, the Department must give that attorney an opportunity to make a contribution of fifty dollars ($50.00) to support the North Carolina Public Campaign Financing Fund established by G.S. 163-278.63. Payment of the contribution is not required and is not considered part of the tax owed."

Session Laws 2008-206, s. 1, effective August 9, 2008, and applicable to taxable years beginning on or after July 1, 2008, added subdivision (a)(12).

Session Laws 2009-445, s. 1, effective August 7, 2009, in subdivision (a)(12), substituted "An individual" for "A home inspector" and added "the Home Inspector Licensure Act."

Session Laws 2011-330, s. 6, effective June 27, 2011, throughout subdivisions (a)(8) and (a)(9), deleted "or a real estate salesman" following "broker."

Session Laws 2017-39, s. 9, effective June 21, 2017, substituted "funeral director, an embalmer, or a funeral service licensee" for "mortician or embalmer" in subdivision (a)(11).

Session Laws 2017-151, s. 4, as reenacted by Session Laws 2018-5, s. 38.2(h), inserted ", a massage and bodywork therapist," following "an optometrist" in subdivision (a)(2). For effective date and applicability, see editor's note.

Legal Periodicals. - For comment on the 1943 amendment which added the last sentence of subsection (e), see 21 N.C.L. Rev. 367 (1943).

For survey of 1976 case law on taxation, see 55 N.C.L. Rev. 1083 (1977).

CASE NOTES

A "professional" art is one requiring knowledge of advanced type in a given field of science or learning gained by a prolonged course of specialized instruction and study. Smith v. Keator, 21 N.C. App. 102, 203 S.E.2d 411, aff'd, 285 N.C. 530, 206 S.E.2d 203, appeal dismissed, 419 U.S. 1043, 95 S. Ct. 613, 42 L. Ed. 2d 636 (1974).

A "professional" act or service is one arising out of a vocation, calling, occupation, or employment involving specialized knowledge, labor, or skill, and the labor or skill involved is predominantly mental or intellectual, rather than physical or manual. Smith v. Keator, 21 N.C. App. 102, 203 S.E.2d 411, aff'd, 285 N.C. 530, 206 S.E.2d 203, appeal dismissed, 419 U.S. 1043, 95 S. Ct. 613, 42 L. Ed. 2d 636 (1974).

The word "healing" in this section is ordinarily understood to mean the curing of diseases or injuries. Smith v. Keator, 21 N.C. App. 102, 203 S.E.2d 411, aff'd, 285 N.C. 530, 206 S.E.2d 203, appeal dismissed, 419 U.S. 1043, 95 S. Ct. 613, 42 L. Ed. 2d 636 (1974).

Rulings by Secretary of Revenue Not Binding on Courts. - Rulings made by the Secretary of Revenue setting forth his interpretations of this section are not binding upon the courts. Smith v. Keator, 21 N.C. App. 102, 203 S.E.2d 411, aff'd, 285 N.C. 530, 206 S.E.2d 203, appeal dismissed, 419 U.S. 1043, 95 S. Ct. 613, 42 L. Ed. 2d 636 (1974).

Masseurs are not persons "practicing any professional art of healing" within the meaning of subsection (a). Smith v. Keator, 21 N.C. App. 102, 203 S.E.2d 411, aff'd, 285 N.C. 530, 206 S.E.2d 203, appeal dismissed, 419 U.S. 1043, 95 S. Ct. 613, 42 L. Ed. 2d 636 (1974).

Masseurs are not required to obtain a privilege license from the State, and they are subject to regulation by local governments. Smith v. Keator, 21 N.C. App. 102, 203 S.E.2d 411, aff'd, 285 N.C. 530, 206 S.E.2d 203, appeal dismissed, 419 U.S. 1043, 95 S. Ct. 613, 42 L. Ed. 2d 636 (1974).

Persons Making "Negatives" Are Photographers Subject to License Tax. - To solicit persons to have their photographs taken, arrange for the sitting and actually have the camera present and take what is popularly called a picture, but in fact is a "negative," which is the outline of the subject on glass is engaging within the State in the profession or business of photography within the meaning of this section. Lucas v. City of Charlotte, 14 F. Supp. 163 (W.D.N.C. 1936), aff'd, 86 F.2d 394 (4th Cir. 1936).

Although the "negatives" are sent to another state for development the assessment of the tax under this section on photographers does not constitute an interference with or burden upon interstate commerce. Lucas v. City of Charlotte, 14 F. Supp. 163 (W.D.N.C. 1936), aff'd, 86 F.2d 394 (4th Cir. 1936).

Discriminatory Statute Applying to Real Estate Brokers Is Unconstitutional. - Public-Local Laws of 1927, c. 241, requiring real estate brokers and salesmen in certain designated counties to be licensed by a real estate commission on the basis of moral character and proficiency in the public interest and requiring the payment of a license fee in addition to the license required by this section, was held unconstitutional as discriminatory. State v. Warren, 211 N.C. 75, 189 S.E. 108 (1937).

Cited in State v. Dixon, 215 N.C. 161, 1 S.E.2d 521 (1939); Northcutt v. Clayton, 269 N.C. 428, 152 S.E.2d 471 (1967).

Opinions of Attorney General

Faith healers are "persons practicing any professional art of healing for fee or reward" within the purview of this section. See opinion of Attorney General to Mr. John R. Parker, 42 N.C.A.G. 286 (1973).

Exemption Under Subsection (b) Does Not Revive the Right of a County to Levy a Tax. - See opinion of Attorney General to Mr. John R. Parker, 42 N.C.A.G. 286 (1973).

§§ 105-41.1 : Repealed by Session Laws 1975, c. 619, s. 2.

Cross References. - For present provisions as to license fees for professional bondsmen and runners, see G.S. 58-71-55, 58-71-75.

§ 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.

Cross References. - For present provisions as to license fees for auctioneers, see G.S. 85B-6.

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

§§ 105-45, 105-46: 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.

Cross References. - For provisions dealing with peddlers, itinerant merchants, and specialty markets, see G.S. 66-250 et seq.

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

§ 105-57: Repealed by Session Laws 1987 (Regular Session, 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, 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 Laws 1989, c. 584, s. 19.

§ 105-65: 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 (Reg. Sess., 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.

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.
Repealed by Session Laws 1998-95, s. 9, effective July 1, 1999.
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.
This section does not apply to corporations liable for the tax levied under G.S. 105-102.3 or to savings and loan associations.
Counties and cities shall not levy any license tax on the business taxed under this section.

History

(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).)

CASE NOTES

Constitutionality. - The imposition of taxes on installment paper dealers is not rendered discriminatory by the exemption from the tax of corporations organized under the State or national banking laws, even though banks, in addition to their regular banking business, carry on the identical business of discounting commercial paper, since the two businesses are distinct in fact, and the one is subject to regulations and controls which are not applicable to the other. Lenoir Fin. Co. v. Currie, 254 N.C. 129, 118 S.E.2d 543, appeal dismissed, 368 U.S. 289, 82 S. Ct. 375, 7 L. Ed. 336 (1961).

The defendant/finance corporation was not subject to tax assessment under this section for its wholesale installment paper business where the buying and selling of the installment paper took place entirely within a foreign state and its other activities were not incident to the buying and selling of the paper. The defendant's retail installment paper business in North Carolina had no relation to its wholesale installment paper business; and the record contained no evidence that the defendant engaged in the promotion or solicitation of the buying or selling of installment paper in North Carolina. Chrysler Fin. Co., L.L.C. v. Offerman, 138 N.C. App. 268, 531 S.E.2d 223 (2000).

Bank Distinguished from Installment Paper Dealer. - See Lenoir Fin. Co. v. Currie, 254 N.C. 129, 118 S.E.2d 543, appeal dismissed, 368 U.S. 289, 82 S. Ct. 375, 7 L. Ed. 336 (1961).

"Engaged in the Business." - The defendant/finance corporation was "engaged in the business of dealing in . . . installment paper" where it purchased credit sale agreements from another corporation although it did so in order to provide dealerships with financing under a wholesale finance plan and not for the purpose of making a profit. Chrysler Fin. Co., L.L.C. v. Offerman, 138 N.C. App. 268, 531 S.E.2d 223 (2000).

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

§§ 105-85, 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.

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 Part 1 of Article 45 of Chapter 66 of the General Statutes.
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.
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.
A loan made by a person who does not comply with this section is not collectible at law under G.S. 105-269.13.
Repealed by Session Laws 2014-3, s. 12.3(b), effective July 1, 2015. See note for applicability.

History

(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; 2012-46, s. 25; 2014-3, s. 12.3(b).)

Cross References. - For the Consumer Finance Act, see G.S. 53-164 through 53-191.

Editor's Note. - Session Laws 2012-46, s. 33, provides: "This act becomes effective October 1, 2012, and applies to offenses committed on or after that date. Prosecutions for offenses committed before the effective date of this act are not abated or affected by this act, and the statutes that would be applicable but for this act remain applicable to those prosecutions."

Session Laws 2014-3, s. 12.3(f), provides: "Except as otherwise provided, this section becomes effective July 1, 2015. This section [which, in s. 12.3(b), repealed subsection (e)] does not affect the rights or liabilities of a county or city, a taxpayer, or other person arising under a statute amended or repealed by this section before its amendment or repeal, nor does it affect the right to any refund or credit of a tax that would otherwise have been available under the amended or repealed statute before its amendment or repeal."

Effect of Amendments. - Session Laws 2012-46, s. 25, substituted "Part 1 of Article 45 of Chapter 66" for "Chapter 91A" in subdivision (a)(3). For effective date and applicability, see editor's note.

Session Laws 2014-3, s. 12.3(b), repealed subsection (e). For effective date and applicability, see Editor's note.

CASE NOTES

Purpose of Section Is to Raise Revenue. - The tax imposed on loan agencies or brokers by this section is merely one of the Section B license taxes imposed by this Article for the privilege of carrying on a particular business, and its purpose is to raise revenue. Northcutt v. Clayton, 269 N.C. 428, 152 S.E.2d 471 (1967).

This Section Applies to Loan Agencies Irrespective of the Amounts Loaned. - All loan agencies subject to the provisions of this section are not subject to the provisions of the Consumer Finance Act, G.S. 53-164 et seq. This section applies to all the loan agencies specified therein, irrespective of the amounts which they loan or the interest they charge. Northcutt v. Clayton, 269 N.C. 428, 152 S.E.2d 471 (1967).

Cited in Lenoir Fin. Co. v. Currie, 254 N.C. 129, 118 S.E.2d 543 (1961).

§§ 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: Repealed by Session Laws 2015-241, s. 32.13(g), as amended by Session Laws 2015-268, s. 10.1(h), effective June 30, 2016.

History

(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); repealed by 2015-241, s. 32.13(g); 2015-268, s. 10.1(h), effective June 30, 2016.)

Editor's Note. - Former G.S. 105-102.3 pertained to banks.

§§ 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: Repealed by Session Laws 2015-286, s. 4.11(a), effective October 22, 2015.

History

(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; repealed by 2015-286, s. 4.11(a), effective October 22, 2015.)

Editor's Note. - Former G.S. 105-102.6 pertained to publishers of newsprint publications.

§ 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.

History

(1939, c. 158, s. 181; 1998-98, s. 41.)

Editor's Note. - Session Laws 1998-98, s. 41, effective August 14, 1998, deleted the former Division I designation from G.S. 105-103 through 105-113, so that Article 2 now contains G.S. 105-33 through 105-113 without any subdivision into Parts.

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

Editor's Note. - Session Laws 2007-491, s. 47 provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 [repealed] before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

§ 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.

History

(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.

History

(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.

History

(1939, c. 158, s. 186.)

§ 105-109. Obtaining license and paying tax.

Repealed by Session Laws 1998-95, s. 13, effective July 1, 1999.
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.
Repealed by Session Laws 1998-212, s. 29A.14(a), effective January 1, 1999.
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.
Repealed by Session Laws 2014-3, s. 12.3(b), effective July 1, 2015. See note for applicability.

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.

History

(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; 2014-3, s. 12.3(b).)

Local Modification. - City of Charlotte: 1991, c. 64, s. 1.

Session Laws 2014-3, s. 12.3(f), provides: "Except as otherwise provided, this section [which, in s. 12.3(b), repealed subsection (e)] becomes effective July 1, 2015. This section does not affect the rights or liabilities of a county or city, a taxpayer, or other person arising under a statute amended or repealed by this section before its amendment or repeal, nor does it affect the right to any refund or credit of a tax that would otherwise have been available under the amended or repealed statute before its amendment or repeal."

Effect of Amendments. - Session Laws 2007-491, s. 7, effective January 1, 2008, rewrote subsection (b). For applicability, see Editor's note.

Session Laws 2014-3, s. 12.3(b), repealed subsection (e). For effective date and applicability, see Editor's note.

CASE NOTES

Privilege Tax on Cyber-Gambling Establishments Was Constitutional. - City's privilege license tax on cyber-gambling establishments did not violate N.C. Const., Art. V, § 2(2) because the tax uniformly applied to all persons engaged in the cyber-gambling business. IMT, Inc. v. City of Lumberton, 219 N.C. App. 36, 724 S.E.2d 588 (2012).

Privilege License Tax on "Electronic Gaming Operations" Presumed Valid. - City's privilege license tax on electronic gaming operations was presumed valid because, (1) under the current state of the law, the activity was legal, and (2) the city had the authority to enact an ordinance imposing the tax, pursuant to G.S. 105-109(e) and G.S. 160A-211. Smith v. City of Fayetteville, 220 N.C. App. 249, 725 S.E.2d 405 (2012).

Summary Judgment Properly Upheld Privilege License Tax on "Electronic Gaming Operations." - When businesses contested a city's imposition of a privilege license tax, it was not error to grant the city summary judgment as to some businesses because (1) the tax was presumed valid, since the activity taxed was legal and the city had the authority to enact an ordinance taxing the activity, and (2) the businesses did not present sufficient evidence to rebut that presumption, as the businesses presented no evidence besides non-specific, widespread assertions that the tax would prohibit the businesses' business, did not present specific evidence on how the tax affected those particular businesses' revenues. Smith v. City of Fayetteville, 220 N.C. App. 249, 725 S.E.2d 405 (2012).

Summary Judgment Improperly Upheld Privilege License Tax on "Electronic Gaming Operations." - When businesses contested a city's imposition of a privilege license tax, it was error to grant the city summary judgment as to some businesses because (1) the businesses rebutted a presumption that the tax was valid by submitting affidavits detailing the businesses' gross revenues and net profits and asserting the tax would require the businesses to close, being joined by over 15 similar businesses, and showing the tax was over 9,000 percent greater than a previously imposed tax, and (2) the city presented evidence that the tax was not unreasonable or prohibitory, creating a genuine issue of material fact. Smith v. City of Fayetteville, 220 N.C. App. 249, 725 S.E.2d 405 (2012).

City's license privilege tax adopted pursuant to G.S. 105-109(e) and G.S. 160A-211, which represented a 59,900 percent increase in taxation for cyber-gambling businesses, was unconstitutional under the Just and Equitable Tax Clause, N.C. Const., Art. V, § 2, and as a result, the lower courts erred in granting the city summary judgment. IMT, Inc. v. City of Lumberton, 366 N.C. 456, 738 S.E.2d 156 (2013).

§ 105-109.1: Repealed by Session Laws 1999-337, s. 16, effective July 22, 1999.

§ 105-110: Repealed by Session Laws 1998-212, s. 29A.14(b), effective January 1, 1999.

§ 105-111: Repealed by Session Laws 2001-414, s. 2, effective September 14, 2001.

§ 105-112: Repealed by Session Laws 1998-212, s. 29A.14(c), effective January 1, 1999.

§ 105-113: Repealed by Session Laws 1999-337, s. 17, effective July 22, 1999.

§ 105-113.1: Deleted.

Editor's Note. - This section, which related to privilege taxes payable in advance and provided for the reduction of taxes levied under certain sections, was derived from Session Laws 1943, c. 400, s. 2, and was amended by Session Laws 1945, c. 708, s. 2. As the section expired by limitation on June 1, 1947, it has been deleted.

ARTICLE 2A. Tobacco Products Tax.

Part 1. General Provisions.

Sec.

Part 2. Cigarette Tax.

Part 3. Tax on Other Tobacco Products.

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."

History

(1969, c. 1075, s. 2; 1991, c. 689, s. 266; 1998-98, s. 56.)

Editor's Note. - Session Laws 2015-262, s. 2, provides: "The Department of Revenue may enter into an agreement with the Eastern Band of Cherokee Indians in regards to the excise tax on tobacco products administered under Article 2A of Chapter 105 of the General Statutes. The agreement must be approved by the Tribal Council of the Eastern Band of Cherokee Indians and signed by the Principal Chief of the Eastern Band of Cherokee Indians on behalf of the Eastern Band of Cherokee Indians and must be signed by the Secretary of Revenue on behalf of the Department of Revenue. The agreement may be effective for a definite period of time or an indefinite period, as specified in the agreement."

Session Laws 2016-23, s. 2(a), provides: "Taxes. - The following provisions apply to taxes affected by boundary certification:

"(1) Neither the State nor a subdivision of the State may assess a tax on a person for activities occurring prior to the date of certification where the basis of the assessment is the certification.

"(2) The State and its subdivisions may assess a tax for activities occurring on or after the date of certification subject to the following conditions:

"a. For taxes imposed for a taxable period, the tax may not be imposed for a period beginning prior to the date of certification.

"b. For sales and use taxes for an item that is provided and billed on a monthly or other periodic basis, the tax may not be assessed for periods beginning prior to the date of certification.

"(3) A person may not seek a refund for activities occurring prior to the date of certification where the basis of the refund is the certification."

Session Laws 2016-23, s. 12(a) is a severability clause.

§ 105-113.3. Scope of tax; administration.

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.
Administration. - Article 9 of this Chapter applies to this Article.

History

(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:

Affiliate. - A person who directly or indirectly controls, is controlled by, or is under common control with another person.
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.
Cigar. - A roll of tobacco wrapped in a substance that contains tobacco, other than a cigarette.
Cigarette. - Any of the following:
1. A roll of tobacco wrapped in paper or in a substance that does not contain tobacco.
2. 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.
Consumable product. - Any nicotine liquid solution or other material containing nicotine that is depleted as a vapor product is used.
Consumer. - An individual who purchases, receives, or possesses tobacco products for personal consumption and not for resale.
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.
Delivery sale. - A sale of tobacco products to a consumer in this State in which either of the following apply:
1. The consumer submits the order for the sale by telephone, mail, the Internet or other online service or application, or when the seller is otherwise not in the physical presence of the consumer when the consumer submits the order.
2. The tobacco products are delivered via mail or a delivery service.
Delivery seller. - A person that makes a delivery sale.
Delivery service. - A person engaged in the commercial delivery of letters, packages, or other containers.
Distributor. - Either of the following:
1. 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.
2. A manufacturer of cigarettes.
Repealed by Session Laws 1991, c. 689, s. 267.
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.
Licensed distributor. - A distributor licensed under Part 2 of this Article.
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.
Package. - The individual packet, can, box, or other container used to contain and to convey tobacco products to the consumer.
Person. - Defined in G.S. 105-228.90.
Retail dealer. - A person who sells a tobacco product to the ultimate consumer of the product.
Sale. - A transfer of possession, transfer of ownership, a trade, an exchange, or a barter, in any manner or by any means, with or without consideration.
Secretary. - The Secretary of Revenue.
Repealed by Session Laws 1993, c. 442, s. 1, effective January 1, 1994.
Tobacco product. - A cigarette, a cigar, or any other product that contains tobacco and is intended for inhalation or oral use. The term includes a vapor product.
Repealed by Session Laws 1993, c. 442, s. 1, effective January 1, 1994.
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.
Vapor product. - Any nonlighted, noncombustible product that employs a mechanical heating element, battery, or electronic circuit regardless of shape or size and that can be used to produce vapor from nicotine in a solution. The term includes any vapor cartridge or other container of nicotine in a solution or other form that is intended to be used with or in an electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device. The term does not include any product regulated by the United States Food and Drug Administration under Chapter V of the federal Food, Drug, and Cosmetic Act.
Wholesale dealer. - Either of the following:
1. A person who acquires tobacco products other than cigarettes for sale to another wholesale dealer or to a retail dealer.
2. A manufacturer of tobacco products other than cigarettes.

History

(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); 2014-3, s. 15.1(a); 2019-169, s. 4.7(a); 2020-58, s. 2.1.)

Editor's Note. - Session Laws 2014-3, s. 15.1(f), provides: "Nothing in this section shall be construed as circumventing future United States Food and Drug Administration regulation of tobacco products, other tobacco products, or vapor products."

Session Laws 2019-169, s. 4.7(c) made subdivisions (1n), (2d), (2e), and (2f) as added by Session Laws 2019-169, s. 4.7(a) effective October 1, 2019, and applicable to delivery sales occurring on or after that date.

Effect of Amendments. - Session Laws 2007-435, s. 2, effective October 1, 2007, added subdivision (4a).

Session Laws 2009-559, s. 1, effective September 1, 2009, rewrote subdivision (3)b.; deleted "is the only person to whom the manufacturer sells its products" following "other than cigarettes" in subdivision (4a); and, rewrote subdivisions (6) and (14).

Session Laws 2011-330, s. 2(a), effective June 27, 2011, added subdivisions (1) and (1a); redesignated former subdivisions (1) and (1a) as present subdivisions (1b) and (1c); and deleted the last sentence in subdivision (4a), which read: "An 'affiliate' is a person who directly or indirectly controls, is controlled by, or is under common control with another person."

Session Laws 2014-3, s. 15.1(a), effective June 1, 2015, added subdivision (1k); added the last sentence in subdivision (11a); and added subdivision (13a).

Session Laws 2019-169, s. 4.7(a), added subdivisions (1n) and (2d) through (2f). For effective date and applicability, see editor's note.

Session Laws 2020-58, s. 2.1, effective June 30, 2020, substituted "A transfer of possession, transfer of ownership" for "A transfer" in subdivision (10).

§ 105-113.4A. Licenses.

General. - To obtain or renew a license required by this Article, an applicant must file an application with the Secretary on a form provided by the Secretary and pay the tax due for the license. An application must include the applicant's name, address, federal employer identification number, and any other information required by the Secretary. A license is not transferable or assignable and must be displayed in a conspicuous place at each place of business for which it is issued.
Requirements. - An applicant for a license must meet the following requirements:
1. If the applicant is a corporation, the applicant must either be incorporated in this State or be authorized to transact business in this State.
2. If the applicant for a license is a limited liability company, the applicant must either be organized in this State or be authorized to transact business in this State.
3. If the applicant for a license is a limited partnership, the applicant must either be formed in this State or be authorized to transact business in this State.
4. If the applicant for a license is an individual or a general partnership, the applicant must designate an agent for service of process and give the agent's name and address.
Denial. - The Secretary may investigate an applicant for a license required under this Article to determine if the information the applicant submits with the application is accurate and if the applicant is eligible to be licensed under this Article. The Secretary may refuse to issue or renew a license to an applicant that has done any of the following:
1. Submitted false or misleading information on its application.
2. Had a license issued under this Article revoked by the Secretary.
3. Had a tobacco products license or registration issued by another state revoked.
4. Been convicted of fraud or misrepresentation.
5. Been convicted of any other offense that indicates the applicant may not comply with this Article if issued a license.
6. Failed to remit payment for a tax debt under this Chapter. The term "tax debt" has the same meaning as defined in G.S. 105-243.1.
7. Failed to file a return due under this Chapter.
8. Failed to meet the requirements set out in subsection (b) of this section.
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 licensee cancels a license or the Secretary revokes a license.
Duplicate or Amended License. - Upon application to the Secretary, a licensee may obtain without charge a duplicate or amended license as provided in this subsection. A duplicate or amended license must state that it is a duplicate or amended license, as appropriate:
1. A duplicate license, if the licensee establishes that the original license has been lost, destroyed, or defaced.
2. An amended license, if the licensee establishes that the location of the place of business for which the license was issued has changed.
Information on License. - The Secretary must include the following information on each license required by this Article:
1. The legal name of the licensee.
2. The name under which the licensee conducts business.
3. The physical address of the place of business of the licensee.
4. The account number assigned to the license by the Department.
Records. - The Secretary must keep a record of the following:
1. Applicants for a license under this Article.
2. Persons to whom a license has been issued under this Article.
3. Persons that hold a current license issued under this Article, by license category.
Lists. - The Secretary must make available the list required under subdivision (3) of subsection (g) of this section upon request of a manufacturer that is a licensee under this Article. The list must state the name, account number, and business address of each licensee on the list.

History

(1991 (Reg. Sess., 1992), c. 955, s. 3; 2013-414, s. 22(a); 2017-204, s. 4.3(a); 2019-169, ss. 4.1(a), 4.2(a); 2020-58, s. 2.2(a).)

Editor's Note. - Session Laws 2017-204, s. 4.9, provides, in part: "The remainder of this part is effective when it becomes law [August 11, 2017] and applies to requests for review filed on or after that date and to requests for review pending on that date for which the Department reissues a request for additional information, allows the taxpayer time to respond by the requested response date, and provides notification to the taxpayer that failure to timely respond to the request will result in the request for review being subject to the provisions of G.S. 105-241.13A."

Session Laws 2017-204, s. 7.1, is a severability clause.

Session Laws 2019-169, s. 4.2(e), provides: "This section becomes effective January 1, 2020. Any license issued under Article 2A of Chapter 105 of the General Statutes on or before January 1, 2020, shall expire on June 30, 2020. As soon as practicable after the effective date of this section, the Department of Revenue shall notify each licensee that he or she must renew the license by filing an application with the Secretary in accordance with G.S. 105-113.4A before June 30, 2020."

Effect of Amendments. - Session Laws 2013-414, s. 22(a), effective September 1, 2013, in subsection (a), substituted "file an application with the Secretary on a form provided by the Secretary" for "apply to the Secretary," and added the second sentence; redesignated former subsections (b) and (c) as present subsections (d) and (e); added subsections (b), (c), (f), (g), and (h); and, in subsection (e), substituted "a duplicate or amended license as provided in this subsection" for "one of the following," added the second sentence, and deleted the second paragraph, which formerly read "A duplicate or amended license shall state that it is a duplicate or amended license, as appropriate."

Session Laws 2017-204, s. 4.3(a), effective August 11, 2017, substituted "licensee" for "license holder" throughout subsections (e) through (h); substituted "revoked by the Secretary" for "cancelled by the Secretary for cause" in subdivision (c)(2); and substituted "revoked" for "cancelled for cause" in subdivision (c)(3). For applicability, see editor's note.

Session Laws 2019-169, s. 4.1(a), effective July 26, 2019, substituted "cancels" for "surrenders" in subsection (d); and inserted "subdivision (3) of" in subsection (h).

Session Laws 2019-169, s. 4.2(a), inserted "or renew" in the first sentence of subsection (a) and in the second sentence of the introductory paragraph of subsection (c); and added subdivision (c)(8). For effective date and applicability, see editor's note.

Session Laws 2020-58, s. 2.2(a), effective June 30, 2020, substituted "in a conspicuous place at each place" for "the place" in the last sentence of subsection (a); and substituted "must make available" for "must provide" in the first sentence of subsection (h).

§ 105-113.4B. Cancellation or revocation of license.

Cancellation. - The Secretary may cancel a license issued under this Article upon the written request of the licensee. The licensee's request must include a proposed effective date of cancellation. The licensee must return the license to the Secretary on or before the proposed effective date. If the licensee's request does not include a proposed effective date of cancellation, the license is cancelled 15 days after the Department receives the written request. If the license is unable to be returned, the licensee must include a written statement of the reasons, satisfactory to the Secretary, why the license cannot be returned. The Secretary shall notify the licensee when the license is cancelled.
Revocation. - The Secretary may summarily revoke a license issued under this Article when the Secretary finds that the licensee 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 revoke the license of a licensee that commits one or more of the following acts after holding a hearing on whether the license should be revoked:
1. Fails to obtain a license in a timely manner or for all places of business as required by this Article.
2. Willfully fails to file a return required by this Article.
3. Willfully fails to pay a tax when due under this Article.
4. Makes a false statement in an application or return required under this Article.
5. Fails to keep records as required by this Article.
6. Refuses to allow the Secretary or a representative of the Secretary to examine the person's books, accounts, and records concerning tobacco product.
7. Fails to disclose the correct amount of tobacco product taxable in this State.
8. Fails to file a replacement bond or an additional bond if required by the Secretary under this Article.
9. Violates G.S. 14-401.18.
10. Fails to meet or maintain the requirements set out in G.S. 105-113.4A(b).
Procedure. - The Secretary must send a person whose license is summarily revoked a notice of the revocation and must give the person an opportunity to have a hearing on the revocation within 10 days after the revocation. The Secretary must give a person whose license may be revoked after a hearing at least 10 days' written notice of the date, time, and place of the hearing. A notice of a summary license revocation and a notice of hearing must be sent by certified mail to the last known address of the licensee. If the person whose license may be revoked fails to attend the noticed hearing, the license revocation is effective 15 days after the noticed hearing.
Release of Bond. - When the Secretary cancels or revokes a license and the licensee has paid all taxes and penalties due under this Article, the Secretary must take one of the following actions concerning a bond or an irrevocable letter of credit filed by the licensee:
1. Return an irrevocable letter of credit to the licensee.
2. Return a bond to the licensee or notify the person liable on the bond and the licensee that the person is released from liability on the bond.

History

(1999-333, s. 6; 2013-414, s. 22(b); 2017-204, s. 4.3(b); 2019-169, ss. 4.1(b), 4.2(b); 2020-58, s. 2.3(a).)

Editor's Note. - Session Laws 2017-204, s. 4.9, provides in part: "The remainder of this part is effective when it becomes law [August 11, 2017] and applies to requests for review filed on or after that date and to requests for review pending on that date for which the Department reissues a request for additional information, allows the taxpayer time to respond by the requested response date, and provides notification to the taxpayer that failure to timely respond to the request will result in the request for review being subject to the provisions of G.S. 105-241.13A."

Session Laws 2017-204, s. 7.1, is a severability clause.

Effect of Amendments. - Session Laws 2013-414, s. 22(b), effective September 1, 2013, rewrote subdivision (a)(1), which formerly read "A violation of this Article"; redesignated former subdivision (a)(2) as present (a)(9), and substituted "Violates" for "A violation of"; added subdivisions (a)(2) through (a)(8); and added subsection (c).

Session Laws 2017-204, s. 4.3(b), effective August 11, 2017, rewrote the section heading; substituted "licensee" for "license holder" and "revoked" for "cancelled" and similar language throughout the section; and, in subsection (a), substituted "issued under this Article" for "of a license holder" in the introductory language, and inserted "in a timely manner or for all places of business as" in subdivision (a)(1). For applicability, see editor's note.

Session Laws 2019-169, s. 4.1(b), effective July 26, 2019, inserted "and the immediate return of the license to the Secretary" following "licensee" in the first sentence of the introductory paragraph of subsection (a); and substituted "certified" for "registered" in the third sentence of subsection (b).

Session Laws 2019-169, s. 4.2(b), added subdivision (a)(10). For effective date and applicability, see editor's note.

Session Laws 2020-58, s. 2.3(a), effective June 30, 2020, designated the existing provisions of subsection (a) as subsections (a) and (a1); rewrote subsection (a); added the heading in subsection (a1); and added the last sentence in subsection (b).

§ 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 G.S. 143-710, 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:

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.
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.
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).
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.

History

(1999-311, s. 2; 2020-78, s. 6.2(c).)

Editor's Note. - The number of this section was assigned by the Revisor of Statutes, the number in Session Laws 1999-311, s. 2 having been G.S. 105-113.4B.

Session Laws 2020-78, s. 22.1, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2019-2021 fiscal biennium, the textual provisions of this act apply only to the 2019-2021 fiscal biennium."

Session Laws 2020-78, s. 22.3, is a severability clause.

Effect of Amendments. - Session Laws 2020-78, s. 6.2(c), effective July 1, 2020, substituted "G.S. 143-710" for "S.L. 1999-2" in the first sentence.

CASE NOTES

Procedures And Standards of Review Not Limited. - Because the General Assembly did not intend, in passing G.S. 105-113.4C, to retroactively limit the procedures and standard for review governing the question of diligent enforcement, a business court's order compelling arbitration did not violate the separation of powers doctrine in N.C. Const., Art. I, § 6 and Art. II, §§ 1 and 20. State v. Philip Morris USA, Inc., 193 N.C. App. 1, 666 S.E.2d 783 (2008), review denied, stay denied, 363 N.C. 136, 676 S.E.2d 54 (2009).

Arbitration. - Order compelling the State to arbitrate a dispute under a master settlement agreement was not barred by sovereign immunity. No provision of G.S. 105-113.4C could have been viewed as supplying a definition for "diligently enforced," as specifying the forum for determination of the issue of diligent enforcement, or as incorporating some unspecified standard of review for the exercise of prosecutorial discretion, and G.S. 105-113.4C did not preclude an order compelling arbitration to determine whether North Carolina diligently enforced its escrow statute. State v. Philip Morris USA, Inc., 193 N.C. App. 1, 666 S.E.2d 783 (2008), review denied, stay denied, 363 N.C. 136, 676 S.E.2d 54 (2009).

§ 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.

History

(1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991, c. 689, s. 263; 2009-451, s. 27A.5(b).)

Editor's Note. - This section was formerly G.S. 105-113.7. It was recodified in Part 1 of Article 2A as G.S. 105-113.4D and amended by Session Laws 2009-451, s. 27A.5(b), effective September 1, 2009.

Effect of Amendments. - Session Laws 2009-451, s. 27A.5(b), effective September 1, 2009, recodified former G.S. 105-113.7 as this section; and, in the first sentence, substituted "person" for "distributor" near the beginning, "tobacco products must" for "cigarettes shall" and "tobacco products" for "cigarettes" near the middle, and "must pay" for "shall pay" near the end.

§ 105-113.4E. Modified risk tobacco products.

Definition. - The term "modified risk tobacco product" means a tobacco product that is sold or distributed for use to reduce harm or the risk of tobacco-related disease associated with commercially marketed tobacco products.
Tax Rate Reduction. - The tax imposed under this Article is reduced by the following:
1. Fifty percent (50%) for a modified risk tobacco product issued a risk modification order by the United States Food and Drug Administration under 21 U.S.C. § 387k(g)(1).
2. Twenty-five percent (25%) for a modified risk tobacco product issued an exposure modification order by the United States Food and Drug Administration under 21 U.S.C. § 387k(g)(2).
Substantiation. - Generally, tobacco products are subject to the tax imposed under this Article, unless a manufacturer substantiates that a product qualifies as a modified risk tobacco product and is subject to a reduced rate of tax in accordance with subsection (b) of this section. A manufacturer may substantiate that a product qualifies as a modified risk tobacco product by providing the Department a copy of the order issued by the United States Food and Drug Administration verifying the product as a modified risk tobacco product. Once the manufacturer provides the order to the Department, the Department must reduce the tax due as required under subsection (b) of this section effective on the first day of the next calendar month. If the order indicating a product qualifies as a modified risk tobacco product is renewed, the manufacturer must provide the order renewing the product to the Department within 14 days of receipt.
Forfeiture. - If the product no longer qualifies as a modified risk tobacco product, the rate reduction under subsection (b) of this section is forfeited. A product no longer qualifies when the order qualifying the product as a modified risk tobacco product expires and is not renewed or the order is withdrawn by the United States Food and Drug Administration. The manufacturer must provide notice of such expiration or withdrawal to the Department within 14 days of receipt. Upon determination by the Department that the product no longer qualifies as a modified risk tobacco product, the Department must determine if the taxpayer paid a reduced rate after the order expired or was withdrawn. If the taxpayer did avoid taxes, the taxpayer is liable for all past taxes avoided as a result of the product no longer qualifying plus interest at the rate established under G.S. 105-241.21, computed from the date the taxes would have been due if the rate reduction had not been allowed. The past taxes and interest are due 30 days after the date the rate reduction 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.

History

(2018-5, s. 38.7(a); 2020-58, s. 2.4.)

Editor's Note. - Session Laws 2018-5, s. 38.7(b), made this section effective June 12, 2018.

Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

Effect of Amendments. - Session Laws 2020-58, s. 2.4, effective June 30, 2020, in subsection (c), substituted "manufacturer" for "taxpayer" throughout, and in the last sentence, added "the manufacturer must provide" and deleted "must be provided" following "the product"; and added the subsection (d) designation and heading, and substituted "manufacturer" for "taxpayer" in the third sentence.

§ 105-113.4F. Delivery sales of certain tobacco products; age verification.

Scope. - This section applies to delivery sales of tobacco products, other than cigars, to consumers in this State regardless of whether the delivery seller is located inside or outside this State. For purposes of this section, the term "tobacco product" is as defined in G.S. 105-113.4, except that it does not include cigars.
Delivery Seller Requirements. - A delivery seller shall do all of the following with respect to a delivery sale:
1. Obtain a license from the Secretary pursuant to the requirements of this Article before accepting an order.
2. Comply with the age verification requirements in G.S. 14-313(b2).
3. Report, collect, and remit to the Secretary all taxes levied on tobacco products as set out in this Article and Article 5 of this Chapter.
Filing Requirement. - A delivery seller who has made a delivery sale, or shipped or delivered tobacco products in connection with a delivery sale, during the previous month shall, not later than the tenth day of each month, file with the Secretary a memorandum or a copy of the invoice for every delivery sale made during the previous month. A delivery seller who complies with 15 U.S.C. § 376 with respect to tobacco products covered by that section is considered to have complied with this subsection. The memorandum or invoice shall contain the following information:
1. The name, address, telephone number, and e-mail address of the consumer.
2. The type and the brand, or brands, of tobacco products that were sold.
3. The quantity of tobacco products that were sold.
Penalties. - A person who violates this section is subject to the following penalties:
1. For the first violation, a penalty of one thousand dollars ($1,000).
2. For a subsequent violation, a penalty not to exceed five thousand dollars ($5,000), as determined by the Secretary.
Exception. - This section does not apply to sales of tobacco products by a retail dealer who purchased the tobacco products from a licensed distributor or wholesale dealer.
State Laws Apply. - All State laws that apply to tobacco product retailers in this State shall apply to delivery sellers that sell tobacco products into this State.

History

(2019-169, s. 4.7(b).)

Editor's Note. - Session Laws 2019-169, s. 4.7(c) made this section effective October 1, 2019, and applicable to delivery sales occurring on or after that date.

§ 105-113.4G. 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 purchases, inventories, sales, shipments, and deliveries of tobacco products, and other information as required under this Article. The records shall be in the form prescribed by the Secretary and shall be open at all times for inspection by the Secretary or an authorized representative of 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.

History

(2020-58, s. 2.5(a).)

Editor's Note. - Session Laws 2020-58, s. 10, made this section effective June 30, 2020.

PART 2. CIGARETTE TAX.

§ 105-113.5. Tax on cigarettes.

Rate. - A tax is levied on the sale or possession for sale in this State, by a licensed distributor, of all cigarettes at the rate of two and one-fourth cents (2.25›) per individual cigarette.
Primary Liability. - The licensed distributor who first acquires or otherwise handles cigarettes subject to the tax imposed by this section is liable for the tax imposed by this section. A licensed distributor who brings into this State cigarettes made outside the State is the first person to handle the cigarettes in this State. A licensed distributor who is the original consignee of cigarettes made outside the State and is shipped into the State is the first person to handle the cigarettes in this State.

History

(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); 2019-169, s. 4.1(e).)

Effect of Amendments. - Session Laws 2004-170, s. 5, effective August 2, 2004, rewrote the section.

Session Laws 2005-276, s. 34.1(a), effective September 1, 2005, substituted "one and one-half cents (1.50 › )" for "two and one-half mills."

Session Laws 2005-276, s. 34.1(b), effective July 1, 2006, substituted "one and three-fourths cents (1.75 › )" for "one and one-half cents (1.50 › )."

Session Laws 2009-451, s. 27A.5(a), effective September 1, 2009, substituted "two and one-fourth cents (2.25 › )" for "one and three-fourths cents (1.75 › )."

Session Laws 2019-169, s. 4.1(e), effective July 26, 2019, designated the first paragraph as subsection (a); in subsection (a), added the subsection heading, and inserted "licensed"; and added subsection (b).

§ 105-113.6. Use tax levied.

A tax is levied upon the sale or possession for sale by a person other than a licensed 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.

History

(1969, c. 1075, s. 2; 1993, c. 442, s. 2; 2019-6, s. 4.1.)

Effect of Amendments. - Session Laws 2019-6, s. 4.1, effective March 20, 2019, inserted "licensed" in the first sentence.

§ 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.

History

(1969, c. 1075, s. 2.)

§ 105-113.9. Out-of-state shipments.

Any licensed 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 licensed 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:

The sale of cigarettes to a nonresident where the cigarettes are delivered by the licensed distributor to the business location of the nonresident purchaser in another state.
The sale of cigarettes to a nonresident purchaser 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 licensed distributor who is also licensed as a distributor under the laws of the state of the nonresident purchaser.

History

(1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1977, c. 874; 1993, c. 442, s. 3; 2018-5, s. 38.6(a); 2019-6, s. 4.2.)

Editor's Note. - Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

Effect of Amendments. - Session Laws 2018-5, s. 38.6(a), effective June 12, 2018, substituted "purchaser" for "wholesaler or retailer registered through the Secretary" near the beginning of subdivision (2).

Session Laws 2019-6, s. 4.2, effective March 20, 2019, inserted "licensed" preceding "distributor" twice in the opening paragraph, once in subdivision (1), and once in subdivision (2); and made minor stylistic changes.

§ 105-113.10. Manufacturers exempt from paying tax.

Shipping to Other Licensed Distributors. - A licensed 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, but is not relieved from filing a report as required by this Part.
Shipping to Retailers. - 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.
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, but is not relieved from filing a report as required by this Part.

History

(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); 2019-169, s. 4.1(d).)

Effect of Amendments. - Session Laws 2011-330, s. 2(b), effective June 27, 2011, rewrote the section catchline, which formerly read: "Manufacturers shipping to distributors exempt"; added the subsection (a) designation and catchline; and added subsection (b).

Session Laws 2019-169, s. 4.1(d), effective July 26, 2019, inserted "but is not relieved from filing a report as required by this Part" at the end of subsections (a) and (b); in subsection (a), added "Licensed" in the heading and substituted "A licensed" for "Any" near the beginning; and added the subsection (a1) designator and heading.

§ 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.

History

(1969, c. 1075, s. 2; 1973, c. 476, s. 193.)

§ 105-113.12. Distributor must obtain license.

A distributor shall obtain for each place of business a distributor's license and shall pay a tax of twenty-five dollars ($25.00) for the license. A license is in effect until June 30 of the year following the second calendar year after the date of issuance or renewal. A license for each place of business is renewable upon signed application with no renewal license tax, unless applied for after the June 30 expiration date.
For the purposes of this section, a "place of business" is a place where a distributor receives or stores non-tax-paid cigarettes.
An out-of-state distributor may obtain a distributor's license upon compliance with the provisions of G.S. 105-113.4A and G.S. 105-113.24 and payment of a tax of twenty-five dollars ($25.00).

History

(1969, c. 1075, s. 2; 1991 (Reg. Sess., 1992), c. 955, s. 4; 1993, c. 442, s. 5; 2019-169, s. 4.2(c).)

Editor's Note. - Session Laws 2019-169, s. 4.2(e), provides: "This section becomes effective January 1, 2020. Any license issued under Article 2A of Chapter 105 of the General Statutes on or before January 1, 2020, shall expire on June 30, 2020. As soon as practicable after the effective date of this section, the Department of Revenue shall notify each licensee that he or she must renew the license by filing an application with the Secretary in accordance with G.S. 105-113.4A before June 30, 2020."

Effect of Amendments. - Session Laws 2019-169, s. 4.2(c), in subsection (a), deleted "continuing" preceding "distributor's" in the first sentence and added the second and third sentences; and inserted "G.S. 105-113.4A and" in subsection (c). For effective date and applicability, see editor's note.

§ 105-113.13. Secretary may require a bond or irrevocable letter of credit.

Repealed by Session Laws 2013-414, s. 22(c), effective September 1, 2013.
The Secretary may require a licensed distributor to furnish a bond in an amount that adequately protects the State from a licensed distributor's failure to pay taxes due under this Part. A bond must be conditioned on compliance with this Part, payable to the State, and in the form required by the Secretary. The amount of the bond is two times the licensed distributor's average expected monthly tax liability under this Article, as determined by the Secretary, provided the amount of the bond may not be less than two thousand dollars ($2,000) and may not be more than two million dollars ($2,000,000). The Secretary should periodically review the sufficiency of bonds required of the licensed distributor and increase the required bond amount if the amount no longer covers the anticipated tax liability of the licensed distributor and decrease the amount if the Secretary finds that a lower bond amount will protect the State adequately from loss.

For purposes of this section, a licensed distributor may substitute an irrevocable letter of credit for the secured bond required by this section. The letter of credit must be issued by a commercial bank acceptable to the Secretary and available to the State as a beneficiary. The letter of credit must be in a form acceptable to the Secretary, conditioned upon compliance with this Article, and in the amounts stipulated in this section.

History

(1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991 (Reg. Sess., 1992), c. 955, s. 5; 1993, c. 442, s. 6; 2013-414, s. 22(c); 2014-3, s. 9.1(a); 2016-5, s. 4.1(a); 2019-6, s. 4.3; 2020-58, s. 2.6(a).)

Effect of Amendments. - Session Laws 2013-414, s. 22(c), effective September 1, 2013, rewrote the section heading, which formerly read "Secretary may investigate applicant for distributor's license and require a bond"; deleted subsection (a); and, in subsection (b), deleted the subsection heading, and added the last sentence.

Session Laws 2014-3, s. 9.1(a), effective May 29, 2014, rewrote subsection (b).

Session Laws 2016-5, s. 4.1(a), effective May 11, 2016, in subsection (b), deleted the former third sentence, which read "The Secretary must set the bond amount based on the anticipated tax liability of the distributor," and added the present third sentence.

Session Laws 2019-6, s. 4.3, effective March 20, 2019, inserted "licensed" preceding "distributor" throughout subsection (b).

Session Laws 2020-58, s. 2.6(a), effective June 30, 2020, substituted "a licensed distributor's failure" for "loss if the licensed distributor fails" in the first sentence of subsection (b).

§§ 105-113.14 through 105-113.15: Repealed by Session Laws 1991 (Regular Session, 1992), c. 955, § 6.

§ 105-113.16: Repealed by Session Laws 1999-333, s. 7, effective December 1, 1999.

§ 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.

History

(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:

Distributor's Report. - A licensed distributor shall file a monthly report in the form prescribed by the Secretary. The report covers cigarettes sold, shipped, delivered, or otherwise disposed of in this State in a calendar month and is due within 20 days after the end of the month covered by the report. The report shall show the quantity of all cigarettes transported or caused to be transported into the State by the licensed distributor or licensed manufacturer in the State for sales in this State and state the amount of tax due and shall identify any transactions to which the tax does not apply.
Repealed by Session Laws 2019-169, s. 4.3(a), effective July 26, 2019.
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.
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.
Repealed by Session Laws 1981 (Regular Session, 1982), c. 1209, s. 1.

History

(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; 2019-169, s. 4.3(a).)

Effect of Amendments. - Session Laws 2019-169, s. 4.3(a), effective July 26, 2019, in subdivision (1), inserted "licensed" in the first sentence, substituted "cigarettes sold, shipped, delivered, or otherwise disposed of in this State" for "sales and other activities occurring" in the second sentence, and inserted "show the quantity of all cigarettes transported or caused to be transported into the State by the licensed distributor or licensed manufacturer in the State for sales in this State and" in the last sentence; and deleted subdivision (1a), regarding "Report of Free Cigarettes".

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

§ 105-113.21. Discount; refund.

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

History

(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); 2019-169, s. 4.1(c).)

Effect of Amendments. - Session Laws 2003-284, s. 45A.1.(a), effective for reporting periods beginning on or after August 1, 2003, deleted "Discount" in the section heading; repealed subsection (a); and in subsection (b), deleted "less the discount allowed, to the applicant" following "paid on the unsalable cigarettes."

Session Laws 2004-84, s. 2.(a), effective for reporting periods beginning on or after August 1, 2004, added subsection (a1); and inserted "less the discount allowed" in the last sentence of subsection (b).

Session Laws 2011-330, s. 2(c), effective June 27, 2011, in subsection (b), inserted "as provided in this subsection" in the first sentence, and added the last sentence.

Session Laws 2019-169, s. 4.1(c), effective July 26, 2019, inserted "licensed" preceding "distributor" in the first sentence of subsection (a) and in the first and last sentences in subsection (b).

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

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

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.
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.
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.
Any nonresident distributor who shall comply with the provisions of this section may be licensed as a distributor.

History

(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: Repealed by Session Laws 2020-58, s. 2.5(b), effective June 30, 2020.

History

(1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1993, c. 442, s. 10; 2019-169, s. 4.4(a); repealed by 2020-58, s. 2.5(b), effective June 30, 2020.)

Editor's Note. - Former G.S. 105-113.26 pertained to the records to be kept.

Effect of Amendments. - Session Laws 2019-169, s. 4.4(a), effective July 26, 2019, in the first paragraph, substituted "purchases, inventories, sales, shipments, deliveries" for "sales" in the first sentence and inserted "and shall be open at all times for inspection by the Secretary or an authorized representative of the Secretary" at the end of the second sentence.

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

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.
Except as otherwise provided in this Article, no person shall sell or offer for sale non-tax-paid cigarettes.
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.

History

(1969, c. 1075, s. 2; 1993, c. 442, s. 11; 1999-337, s. 18; 2020-58, s. 2.7.)

Effect of Amendments. - Session Laws 2020-58, s. 2.7, effective June 30, 2020, added the exception at the beginning of subsection (b).

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

§ 105-113.29. (Effective until December 1, 2020) 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 engage in the business of selling or offering for sale cigarettes or other tobacco products without first obtaining such licenses.

History

(1969, c. 1075, s. 2; 2017-39, s. 10.)

Section Set Out Twice. - The section above is effective until December 1, 2020. For the section as amended December 1, 2020, see the following section, also numbered G.S. 105-113.29.

Effect of Amendments. - Session Laws 2017-39, s. 10, effective June 21, 2017, inserted "or other tobacco products" and made a stylistic change.

§ 105-113.29. (Effective December 1, 2020) Unlicensed place of business.

It is unlawful for a person to maintain a place of business within this State required by this Article to be licensed to engage in the business of selling, offering for sale, or possessing with the intent to sell cigarettes or other tobacco products without first obtaining the licenses.

History

(1969, c. 1075, s. 2; 2017-39, s. 10; 2019-169, s. 4.14(a).)

Section Set Out Twice. - The section above is effective December 1, 2020. For the section as in effect until December 1, 2020, see the preceding section, also numbered G.S. 105-113.29.

Editor's Note. - Session Laws 2019-169, s. 4.14(b) made this section effective December 1, 2020, and applicable to offenses committed on or after that date.

Effect of Amendments. - Session Laws 2017-39, s. 10, effective June 21, 2017, inserted "or other tobacco products" and made a stylistic change.

Session Laws 2019-169, s. 4.14(a), rewrote the section. For effective date and applicability, see editor's note.

§ 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.

History

(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.

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.
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. (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.

History

(1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1993, c. 442, s. 12.)

CASE NOTES

Cited in Lynn v. West, 134 F.3d 582 (4th Cir. 1998), cert. denied, 525 U.S. 813, 119 S. Ct. 47, 142 L. Ed. 2d 36 (1998) (But see Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330 (1999)).

§ 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.

History

(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.

History

(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.

Tax on Tobacco Products. - An excise tax is levied on tobacco products at the rate of twelve and eight-tenths percent (12.8%) of the cost price of the products. The tax rate does not apply to the following:
1. Cigarettes subject to the tax in G.S. 105-113.5.
2. Vapor products subject to the tax in subsection (a1) of this section.
Tax on Vapor Products. - An excise tax is levied on vapor products at the rate of five cents (5›) per fluid milliliter of consumable product. All invoices for vapor products issued by manufacturers must state the amount of consumable product in milliliters.
Limitation. - The taxes imposed under this section do 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, other than cigarettes, distributed without charge. A sample tobacco product, other than cigarettes, may only be distributed in a "qualified adult-only facility" as that term is defined in 21 C.F.R. § 1140.16(d)(2).
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.
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.
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. A manufacturer who is not a retail dealer and who ships vapor products 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 vapor products shipped to either a wholesale dealer or retail dealer. Once granted permission, a manufacturer may choose not to pay the tax until otherwise notified by the Secretary but is not relieved from filing a report as required by this Part. To be relieved of payment of the tax imposed by this section, a manufacturer must comply with the requirements set by the Secretary.
Limitation. - Except as otherwise provided in this Article, a licensed wholesale dealer may not sell, borrow, loan, or exchange non-tax-paid tobacco products other than cigarettes to, from, or with another licensed wholesale dealer, and an integrated wholesale dealer may not sell, borrow, loan, or exchange non-tax-paid tobacco products other than cigarettes to, from, or with another integrated wholesale dealer.
Repealed by Session Laws 2009-451, s. 27A.5(c), effective September 1, 2009.

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.

History

(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; 2014-3, s. 15.1(b); 2015-6, s. 2.5(a); 2016-5, s. 4.2; 2019-169, s. 4.5.)

Editor's Note. - Session Laws 2007-323, s. 6.23(d), provides, in part, that: "A wholesale dealer or retail dealer of tobacco products other than cigarettes who has an inventory of these products on hand on the effective date of the tax increase made by subsection (a) of this section must file a report of the inventory with the Secretary and pay an additional tax on the inventory. The report must be filed within 20 days after the effective date of the tax increase. The amount of the additional tax is the difference between the amount of tax payable at the former tax rate and the increased tax rate."

Session Laws 2007-323, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2007'."

Session Laws 2007-323, s. 32.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2007-2009 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2007-2009 fiscal biennium."

Session Laws 2007-323, s. 32.5 is a severability clause.

Session Laws 2014-3, s. 15.1(f), provides: "Nothing in this section shall be construed as circumventing future United States Food and Drug Administration regulation of tobacco products, other tobacco products, or vapor products."

Effect of Amendments. - Session Laws 2003-284, s. 45A.1.(b), effective for reporting periods beginning on or after August 1, 2003, deleted the former last sentence in subsection (c), which read "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."

Session Laws 2004-84, s. 2(b), effective for reporting periods beginning on or after August 1, 2004, added the last sentence to subsection (c).

Session Laws 2005-276, s. 34.1(c), effective September 1, 2005, substituted "three percent (3%)" for "two percent (2%)" in subdivision (a).

Session Laws 2007-323, s. 6.23(a), effective October 1, 2007, and applicable to products acquired on or after October 1, 2007, and taxes paid on or after October 1, 2007, added "use of proceeds " in the section heading; substituted "ten percent (10%) " for "three percent (3%) " in subsection (a); and added subsection (e).

Session Laws 2007-435, s. 3, effective October 1, 2007, added the second and third paragraphs in subsection (d).

Session Laws 2009-451, s. 27A.5(c), effective September 1, 2009, deleted "use of proceeds" from the end of the section heading; in the introductory language of subsection (a), substituted "twelve and eight-tenths percent (12.8%)" for "ten percent (10%)"; and deleted subsection (e).

Session Laws 2009-559, s. 2, effective September 1, 2009, added subsection (d1).

Session Laws 2014-3, s. 15.1(b), effective June 1, 2015, rewrote subsection (a); and added subsections (a1) and (a2).

Session Laws 2015-6, s. 2.5(a), effective June 1, 2015, inserted the present second sentence in the first paragraph of subsection (d).

Session Laws 2016-5, s. 4.2, effective May 11, 2016, in subsection (a), deleted "other than cigarettes and vapor products" following "on tobacco products" near the beginning, added the last sentence, and added subdivisions (a)(1) and (2).

Session Laws 2019-169, s. 4.5, effective July 26, 2019, rewrote subdivision (a2)(3), which formerly read: "A sample tobacco product distributed without charge."; in the first paragraph of subsection (d), inserted "is not a retail dealer and who" in the second sentence, and inserted "but is not relieved from filing a report as required by this Part" in the penultimate sentence; and rewrote subsection (d1), which formerly read: "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."

§ 105-113.35A. (Effective for taxable years beginning on or after January 1, 2019) Use tax levied.

A tax is levied upon the sale or possession for sale by a person other than a licensed wholesale dealer or licensed retail dealer and upon the use, consumption, and possession for use or consumption of tobacco products other than cigarettes within this State at the rate set in G.S. 105-113.35. This tax does not apply to tobacco products other than cigarettes upon which the tax levied in G.S. 105-113.35 has been paid.

History

(2019-169, s. 4.6(a).)

Editor's Note. - Session Laws 2019-169, s. 4.6(b) made this section effective for taxable years beginning on or after January 1, 2019.

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

Required Licenses. - The entities listed in this subsection shall obtain for each place of business a tobacco products license and shall pay a license tax in the amounts listed. As used in this section, a "place of business" is a place where a wholesale dealer makes tobacco products other than cigarettes or where a wholesale dealer or a retail dealer receives or stores non-tax-paid tobacco products other than cigarettes. The entities and license tax amounts are as follows:
1. Wholesale dealer $25.00 (2) Retail dealer $10.00.
Term of License. - A license is in effect until June 30 of the year following the second calendar year after the date of issuance or renewal, unless cancelled or revoked prior to expiration. A license for each place of business is renewable upon signed application with no renewal license tax, unless applied for after the June 30 expiration date.
Out-of-State Wholesale Dealers. - An out-of-state wholesale dealer of tobacco products other than cigarettes may obtain a wholesale dealer's license upon compliance with the provisions of G.S. 105-113.4A and payment of a tax of twenty-five dollars ($25.00).

History

(1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991, c. 689, s. 270; 1991 (Reg. Sess., 1992), c. 955, s. 11; 2018-5, s. 38.6(b); 2019-169, s. 4.2(d).)

Editor's Note. - Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

Effect of Amendments. - Session Laws 2018-5, s. 38.6(b), effective June 12, 2018, deleted "or where a retail dealer" preceding "makes tobacco products" near the middle of the last sentence.

Session Laws 2019-169, s. 4.2(d), rewrote the section, which formerly read: "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 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." For effective date and applicability, see editor's note.

§ 105-113.37. Payment of tax.

Monthly Report. - 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 tobacco products sold, shipped, delivered, or otherwise disposed of in this State 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.
Repealed by Session Laws 2019-169, s. 4.3(b), effective July 26, 2019.
Repealed by Session Laws 1991 (Regular Session, 1992), c. 955, s. 12.
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.

History

(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; 2014-3, s. 15.1(c); 2019-169, s. 4.3(b).)

Effect of Amendments. - Session Laws 2009-559, s. 3, effective September 1, 2009, added subsection (d).

Session Laws 2014-3, s. 15.1(c), effective June 1, 2015, substituted "G.S. 105-113.35(a2)(1) or G.S. 105-113.35(a2)(2)" for "G.S. 105-113.35(a)(1) or (2)" throughout subsection (b).

Session Laws 2019-169, s. 4.3(b), effective July 26, 2019, in subsection (a), substituted "Taxes levied" for "Except for tax on a designated sale under subsection (b), the taxes levied" in the first sentence and substituted "tobacco products sold, shipped, delivered, or otherwise disposed of in this State" for "sales and other activities" in the second sentence; and deleted subsection (b), regarding "Designation of Exempt Sale."

§ 105-113.38. Bond or irrevocable letter of credit.

The Secretary may require a wholesale dealer or a retail dealer to furnish a bond in an amount that adequately protects the State from a wholesale dealer's or a retail dealer's failure to pay taxes due under this Part. A bond must be conditioned on compliance with this Part, payable to the State, and in the form required by the Secretary. The amount of the bond is two times the wholesale or retail dealer's average expected monthly tax liability under this Article, as determined by the Secretary, provided the amount of the bond may not be less than two thousand dollars ($2,000) and may not be more than two million dollars ($2,000,000). The Secretary should periodically review the sufficiency of bonds required of dealers, and 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 and decrease the amount when the Secretary determines that a smaller bond amount will adequately protect the State from loss.

For purposes of this section, a wholesale dealer or a retail dealer may substitute an irrevocable letter of credit for the secured bond required by this section. The letter of credit must be issued by a commercial bank acceptable to the Secretary and available to the State as a beneficiary. The letter of credit must be in a form acceptable to the Secretary, conditioned upon compliance with this Article, and in the amounts stipulated in this section.

History

(1969, c. 1075, s. 2; 1991, c. 689, s. 272; 2012-79, s. 2.1; 2014-3, s. 9.1(b); 2016-5, s. 4.1(b); 2020-58, s. 2.6(b).)

Effect of Amendments. - Session Laws 2012-79, s. 2.1, effective June 26, 2012, rewrote the section catchline, which formerly read: "Bond"; and added the last sentence.

Session Laws 2014-3, s. 9.1(b), effective May 29, 2014, rewrote the section.

Session Laws 2016-5, s. 4.1(b), effective May 11, 2016, in the first paragraph, deleted the former third sentence, which read "The bond amount must be proportionate to the anticipated tax liability of the wholesale dealer or retail dealer," and added the present third sentence.

Session Laws 2020-58, s. 2.6(b), effective June 30, 2020, substituted "a wholesale dealer's or a retail dealer's failure" for "loss if the dealer fails" in the first sentence of the first paragraph.

§ 105-113.39. Discount; refund.

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 on tobacco products but not including vapor products, 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.
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 a written certificate signed under penalty of perjury or 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.

History

(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; 2014-3, ss. 9.2, 15.1(d).)

Editor's Note. - Session Laws 2003-284, s. 48.1, provides: "Parts 32 through 47 of this act do not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by those parts before the effective date of its amendment or repeal; nor do they affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal."

This section was repealed by Session Laws 2003-284, s. 45A.1(c), effective for reporting periods beginning on or after August 1, 2003. Session Laws 2004-84, s. 2(c), reenacted and amended the section, effective for reporting periods beginning on or after August 1, 2004.

Effect of Amendments. - Session Laws 2004-84, s. 2(c), effective for reporting periods beginning on or after August 1, 2004, reenacted and amended the section by substituting "two percent (2%)" for "four percent (4%)."

Session Laws 2005-406, s. 2, effective September 1, 2005, added "refund" to the section heading; inserted the subsection (a) designation and "Discount" as the heading; added subsection (b); and made a minor punctuation change.

Session Laws 2008-207, s. 4, effective October 1, 2008, and applicable to products returned on or after that date, in the second sentence of subsection (a), deleted "losses due to damage to tobacco products " following "this discount covers " and made a minor stylistic change; and in subsection (b), in the first sentence, substituted "G.S. 105-113.35(b) " for "G.S. 150-113.35(b), " in the second sentence, substituted "tobacco products " for "cigars " twice, and substituted "listing the tobacco products " for "stating the number of cigars, " and in the third sentence, substituted "listed products " for "unsalable cigars."

Session Laws 2014-3, s. 9.2, effective May 29, 2014, inserted "a written certificate signed under penalty of perjury or" in the second sentence of subsection (b).

Session Laws 2014-3, s. 15.1(d), effective June 1, 2015, inserted "on tobacco products but not including vapor products" following "Part" in the first sentence of subsection (a).

§ 105-113.40: Repealed by Session Laws 2020-58, s. 2.5(b), effective June 30, 2020.

History

(1969, c. 1075, s. 2; 1973, c. 476, s. 193; 1991, c. 689, s. 274; 2019-169, s. 4.4(b); repealed by 2020-58, s. 2.5(b), effective June 30, 2020.)

Editor's Note. - G.S. 105-113.40 pertained to records of sales, inventories, and purchases to be kept.

Effect of Amendments. - Session Laws 2019-169, s. 4.4(b), effective July 26, 2019, rewrote the section, which formerly read: "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."

§ 105-113.40A. Use of tax proceeds.

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

An amount equal to three percent (3%) of the cost price of the products to the General Fund.
An amount equal to the revenue generated by the tax on vapor products under G.S. 105-113.35(a1) to the General Fund.
The remainder to the University Cancer Research Fund established under G.S. 116-29.1.

History

(2009-451, s. 27A.5(d); 2010-95, s. 1; 2014-3, s. 15.1(e).)

Effect of Amendments. - Session Laws 2010-95, s. 1, effective July 17, 2010, substituted "this Part" for "this Article" in the introductory language.

Session Laws 2014-3, s. 15.1(e), effective June 1, 2015, added subdivision (1a).

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.

Editor's Note. - Session Laws 1996, Second Extra Session, c. 13, s. 4.2, effective July 1, 1999, provides: "Effective July 1, 1999, Article 2B of Chapter 105 of the General Statutes, as amended by this act, is repealed. The Secretary shall retain from collections under Article 2 of Chapter 105 of the General Statutes the cost of refunding the taxes levied in Article 2B of Chapter 105 of the General Statutes."

Session Laws 1996, Second Extra Session, c. 13, s. 1, provides that this act shall be known as the William S. Lee Quality Jobs and Business Expansion Act.

Repealed G.S. 105-113.43, 105-113.48, 105-113.49, 105-113.54 to 105-113.56C, 105-113.59 to 105-113.62, 105-113.66 and 105-113.67 had been repealed by Session Laws 1991, c. 689, s. 286. Repealed G.S. 105-113.65 had been repealed by Session Laws 1983 (Reg. Sess., 1984), c. 1004, s. 1.

ARTICLE 2C. Alcoholic Beverage License and Excise Taxes.

Part 1. General Provisions.

Sec.

Part 2. State Licenses.

Part 3. Local Licenses.

Part 4. Excise Taxes, Distribution of Tax Revenue.

Part 5. Administration.

PART 1. GENERAL PROVISIONS.

§ 105-113.68. Definitions; scope.

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. Antique spirituous liquor. - Defined in G.S. 18B-101.
6. Distillery permittee. - A distillery that holds a distillery permit issued by the ABC Commission under G.S. 18B-1105.
7. Fortified wine. - Defined in G.S. 18B-101.
8. 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.
9. Malt beverage. - Defined in G.S. 18B-101.
10. Person. - Defined in G.S. 105-228.90.
11. Sale. - Defined in G.S. 18B-101.
12. Secretary. - The Secretary of Revenue.
13. Spirituous liquor or liquor. - Defined in G.S. 18B-101.
14. Unfortified wine. - Defined in G.S. 18B-101.
15. Wholesaler or importer. - When used with reference to a wholesaler or an importer of wine or malt beverages, the term includes a resident winery and a wine producer that sells its wines, or wine produced for the permittee under contract, at wholesale to a retailer or at retail and a resident brewery that sells its malt beverages, or malt beverages produced for the permittee under contract, at wholesale to a retailer or at retail. This subdivision applies to a person that holds any of the following permits issued by the ABC Commission:
  1. Unfortified winery permit under G.S. 18B-1101.
  2. Fortified winery permit under G.S. 18B-1102.
  3. Brewery permit under G.S. 18B-1104.
  4. Wine importer permit under G.S. 18B-1106.
  5. Wine wholesaler permit under G.S. 18B-1107.
  6. Malt beverages importer permit under G.S. 18B-1108.
  7. Malt beverages wholesaler permit under G.S. 18B-1109.
  8. Wine producer permit under G.S. 18B-1114.3.
16. Wine. - Unfortified and fortified wine.
17. Wine shipper permittee. - A winery that holds a wine shipper permit issued by the ABC Commission under G.S. 18B-1001.1.
Scope. - All alcoholic beverages shall be taxed as provided in this Article regardless whether they meet all criteria of these definitions.

History

(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); 2015-98, ss. 1(g), 4(b); 2019-169, s. 4.8.)

Editor's Note. - Session Laws 1971, c. 872, s. 2 added this Article, which contains revenue provisions similar to those formerly appearing in repealed Chapter 18.

Session Laws 1981, c. 747, ss. 1-32, extensively amended this Article so as to bring it into conformity with the revision of the laws governing alcoholic beverages, contained in Chapter 18B, as enacted by Session Laws 1981, c. 412.

Session Laws 1985, c. 114, s. 1, again extensively amended this Article. The historical citations to sections of this Article as it read prior to its 1985 amendment have been added where appropriate to corresponding sections of the Article as amended.

Session Laws 2013-414, s. 53(a), provides: "The Department of Revenue allocates and distributes to cities and counties the local sales and use taxes under Subchapter VIII of Chapter 105 of the General Statutes and a portion of various State taxes under Chapter 105 of the General Statutes, such as the excise tax on beer and wine, the franchise tax on electric power companies, the sales tax on video programming and telecommunications, and the excise tax on piped natural gas. If the Department is unable to accurately identify and calculate the amount of tax proceeds allocable and distributable to a county or city for any one or more of these taxes for one or more of the distributional periods because of implementation issues with the Tax Information Management System (TIMS), the Department must allocate and distribute to a county and city an amount for that period that is equal to the average of the applicable tax proceeds allocated and distributed to it for the same distributional period in the preceding three fiscal years."

Session Laws 2015-98, s. 1(i), provides: "No later than September 1, 2015, the ABC Commission shall establish and adopt temporary rules to implement the provisions of this section."

Session Laws 2015-98, s. 1(j), made subdivision (4a), as added by Session Laws 2015-98, s. 1(g), effective upon adoption of rules pursuant to Session Laws 2015-98, s. 1(i). The Revisor of Statutes has been informed that these temporary rules have been adopted.

Subdivision (a)(4a) as added by Session Laws 2015-98, s. 4(b), was redesignated as subdivision (a)(4b) by the Revisor of Statutes.

Session Laws 2015-98, s. 4(h), provides: "No later than October 1, 2015, the ABC Commission shall establish and adopt temporary rules to implement the provisions of this section."

Session Laws 2015-98, s. 4(i), made subdivision (a)(4b), as added by Session Laws 2015-98, s. 4(b), effective upon adoption of rules pursuant to Session Laws 2015-98, s. 4(h). The Revisor of Statutes has been informed that these temporary rules have been adopted.

Effect of Amendments. - Session Laws 2003-402, s. 8, effective October 1, 2003, added subdivision (15).

Session Laws 2004-135, s. 3, effective October 1, 2004, rewrote subdivision (a)(5), which read: "'Fortified wine' means a wine made by fermentation from grapes, fruits, berries, rice, or honey, to which nothing has been added other than pure brandy made from the same type of grape, fruit, berry, rice, or honey that is contained in the base wine, and which has an alcoholic content of not more than twenty-four percent (24%) alcohol by volume"; and rewrote subdivision (a)(12), which read: "'Unfortified wine' means wine that has an alcoholic content produced only by natural fermentation or by the addition of pure cane, beet, or dextrose sugar."

Session Laws 2004-170, s. 6, effective August 2, 2004, repealed subdivision (a)(2).

Session Laws 2015-98, ss. 1(g) and 4(b), added subdivisions (a)(4a) and (4b). For effective dates, see editor's note.

Session Laws 2019-169, s. 4.8, effective July 26, 2019, rewrote subdivision (a)(13), which formerly read: "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."

§ 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.

History

(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.

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. No documentation shall be required of the applicant except as provided in this section. Issuance of a local license is mandatory if the applicant holds the corresponding ABC permit and provides all of the following: (i) a copy of the most recently completed State application form for an ABC permit exclusive of any attachments, (ii) the ABC permit for visual inspection, and (iii) payment of the prescribed tax. 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.
Duration. - All licenses issued under this section are annual licenses for the period from May 1 to April 30.
Transfer. - A license may not be transferred from one person to another or from one location to another.
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.

History

(1985, c. 114, s. 1; 1998-95, s. 16; 2017-87, s. 17.)

Editor's Note. - Session Laws 2017-87, s. 19(a), (b), provides: "(a) Except as otherwise provided, the Alcoholic Beverage Control (ABC) Commission shall adopt temporary rules to implement the provisions of this act. Temporary rules adopted in accordance with this section shall remain in effect until permanent rules that replace the temporary rules become effective.

"(b) Any rule or policy adopted by the ABC Commission that does not comply with the provisions of this act shall be null, void, and without effect."

Effect of Amendments. - Session Laws 2017-87, s. 17, effective June 30, 2017, in subsection (a), deleted the second sentence, which read: "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." and added the second and third sentences.

CASE NOTES

Commission Decision Granting Permit Preempts Zoning Ordinance. - In case in which petitioner, without objection by respondent board, argued that the decision of the ABC Commission to grant him a permit preempted respondent's denial of his special exception use permit request since the zoning ordinance, upon which respondent's denial was based, attempted to regulate the sale of alcoholic beverages, which is a violation of State law, the trial court did not err in concluding that petitioner, as the holder of a valid ABC permit issued by the State Alcoholic Beverage Control Commission, was entitled to be issued a city beer license, and in ordering the tax collector of the city to issue any city license. Melkonian v. Board of Adjustment, 85 N.C. App. 351, 355 S.E.2d 503, cert. denied, 320 N.C. 631, 360 S.E.2d 91 (1987).

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

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.
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.

History

(1985, c. 114, s. 1.)

§ 105-113.72: Repealed by Session Laws 1998-95, s. 17, effective May 1, 1999.

§ 105-113.73. Misdemeanor.

Except as otherwise expressly provided, violation of a provision of this Article is a Class 1 misdemeanor.

History

(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.)

Effect of Amendments. - Session Laws 2003-402, s. 9, effective October 1, 2003, substituted "this Article" for "the ABC law."

PART 2. STATE LICENSES.

§ 105-113.74: Repealed by Session Laws 1998-95, s. 18, effective May 1, 1999.

Editor's Note. - A former G.S. 105-113.74 was repealed by Session Laws 1981, c. 747, s. 8, effective January 1, 1982.

§ 105-113.75: Repealed by Session Laws 1998-95, s. 19, effective May 1, 1999.

§ 105-113.76: Repealed by Session Laws 1998-95, s. 20, effective May 1, 1999.

PART 3. LOCAL LICENSES.

§ 105-113.77. City malt beverage and wine retail licenses.

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.
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.

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

History

(1985, c. 114, s. 1; 2019-6, s. 4.4.)

Editor's Note. - A former G.S. 105-113.77 was repealed by Session Laws 1981, c. 747, s. 11, effective January 1, 1982.

Effect of Amendments. - Session Laws 2019-6, s. 4.4, effective March 20, 2019, substituted "malt beverage" for "beer" in the section heading.

§ 105-113.78. County malt beverage 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

History

(1985, c. 114, s. 1; 2019-6, s. 4.5.)

Editor's Note. - A former G.S. 105-113.78 was repealed by Session Laws 1981, c. 747, s. 11, effective January 1, 1982.

Effect of Amendments. - Session Laws 2019-6, s. 4.5, effective March 20, 2019, substituted "malt beverage" for "beer" in the section heading.

§ 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.

History

(1985, c. 114, s. 1; 1998-95, s. 21.)

PART 4. EXCISE TAXES, DISTRIBUTION OF TAX REVENUE.

§ 105-113.80. Excise taxes on malt beverages, wine, and liquor.

Malt Beverage. -. An excise tax of sixty-one and seventy-one hundredths cents (61.71›) per gallon is levied on the sale of malt beverages.
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.
Liquor. - An excise tax of thirty percent (30%) is levied on spirituous liquor and antique spirituous liquor sold in ABC stores and in permitted distilleries. Pursuant to G.S. 18B-804(b), the price of liquor on which this tax is computed is the spirituous liquor or antique spirituous liquor seller's price plus (i) the State ABC warehouse freight and bailment charges and (ii) a markup for local ABC boards, unless otherwise specified by law.

History

(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); 2015-98, ss. 1(f), 4(c); 2019-6, s. 4.7.)

Editor's Note. - Session Laws 2009-451, s. 27A.4(a), which substituted "sixty-one and seventy-one hundredths cents (61.71 › )" for "fifty-three and one hundred seventy-seven one thousandths cents (53.177 › )" in subsection (a), substituted "twenty-six and thirty-four hundredths cents (26.34 › )" for "twenty-one cents (21 › )" and "twenty-nine and thirty-four hundredths cents (29.34 › )" for "twenty-four cents (24 › )" in subsection (b), and, substituted "thirty percent (30%)" for "twenty-five percent (25%)" in subsection (c), was applicable to malt beverages and wine first sold or otherwise disposed of on or after September 1, 2009, and to liquor sold on or after September 1, 2009.

Session Laws 2009-451, s. 27A.4(c), provides: "Notwithstanding G.S. 105-113.82, the percentages of the net amount of excise taxes distributable to a county or city under G.S. 105-113.82 for the taxes collected during the 12-month period ending March 31, 2010, are as follows:

"(1) Of the tax on malt beverages levied under G.S. 105-113.80(a), seven and twenty-four hundredths percent (7.24%).

"(2) Of the tax on unfortified wine levied under G.S. 105-113.80(b), eighteen percent (18%).

"(3) Of the tax on fortified wine levied under G.S. 105-113.80(b), six and forty-nine hundredths percent (6.49%)."

Session Laws 2009-451, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2009'."

Session Laws 2009-451, s. 28.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2009-2011 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2009-2011 fiscal biennium."

Session Laws 2009-451, s. 28.5 is a severability clause.

Session Laws 2015-98, s. 1(i), provides: "No later than September 1, 2015, the ABC Commission shall establish and adopt temporary rules to implement the provisions of this section."

Session Laws 2015-98, s. 1(j), made the amendment to subsection (c) by Session Laws 2015-98, s. 1(f), effective upon adoption of rules pursuant to Session Laws 2015-98, s. 1(i). The Revisor of Statutes has been informed that these temporary rules have been adopted.

Session Laws 2015-98, s. 4(h), provides: "No later than October 1, 2015, the ABC Commission shall establish and adopt temporary rules to implement the provisions of this section."

Session Laws 2015-98, s. 4(i), made the amendment to subsection (c) of this section by Session Laws 2015-98, s. 4(c), effective upon adoption of rules pursuant to Session Laws 2015-98, s. 4(h). The Revisor of Statutes has been informed that these temporary rules have been adopted.

Effect of Amendments. - Session Laws 2009-451, s. 27A.4(a), effective September 1, 2009, and applicable to malt beverages and wine first sold or otherwise disposed of on or after that date and to liquor sold on or after that date, substituted "sixty-one and seventy-one hundredths cents (61.71 › )" for "fifty-three and one hundred seventy-seven one thousandths cents (53.177 › )" in subsection (a); substituted "twenty-six and thirty-four hundredths cents (26.34 › )" for "twenty-one cents (21 › )" and "twenty-nine and thirty-four hundredths cents (29.34 › )" for "twenty-four cents (24 › )" in subsection (b); and, substituted "thirty percent (30%)" for "twenty-five percent (25%)" in subsection (c).

Session Laws 2015-98, ss. 1(f) and 4(c), in subsection (c), in the first sentence, substituted "spirituous liquor and antique spirituous liquor" for "liquor" and inserted "and in permitted distilleries", and in the second sentence, inserted "or the antique spirituous liquor seller's" and made a minor punctuation change. For effective dates, see editor's note.

Session Laws 2019-6, s. 4.7, substituted "malt beverages" for "beer" in the section heading; substituted "Malt Beverage" for "Beer" in the heading for subsection (a); and, in subsection (c), in the second sentence, substituted "spirituous liquor or" for "distiller's or the" near the middle, and added "unless otherwise specified by law" at the end.

Legal Periodicals. - For article, "A History of Liquor-by-the-Drink Legislation in North Carolina," see 1 Campbell L. Rev. 61 (1979).

Opinions of Attorney General

Computation of "Net Profit." - Taxes payable under former G.S. 18-85 were not deductible in computing "net profit" for purposes of determining the tax ceiling. See opinion of Attorney General to Honorable I.L. Clayton, Commissioner of Revenue of N.C. and Mr. W.C. Pickett, Jr., Director, Privilege License Beverage and Cigarette Tax Division, 41 N.C.A.G. 144 (1970), rendered under former G.S. 18-85.

§ 105-113.81. Exemptions.

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.
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.
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.
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.
Tasting. - Resident breweries, wineries, and distilleries are not required to remit excise taxes on malt beverages, wine, or spirituous liquor given free of charge to customers, visitors, and employees on the manufacturer's licensed premises for consumption on those premises.

History

(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; 2015-98, s. 4(d).)

Editor's Note. - Session Laws 2015-98, s. 4(h), provides: "No later than October 1, 2015, the ABC Commission shall establish and adopt temporary rules to implement the provisions of this section."

Session Laws 2015-98, s. 4(i), made the amendment to subsection (e) of this section by Session Laws 2015-98, s. 4(d), effective upon adoption of rules pursuant to Session Laws 2015-98, s. 4(h). The Revisor of Statutes has been informed that these temporary rules have been adopted.

Effect of Amendments. - Session Laws 2011-183, s. 71, effective June 20, 2011, in subsection (c), in the catchline and second sentence, substituted "Armed Forces of the United States" for "Armed Forces," and in the first sentence, substituted "Armed Forces of the United States" for "United States Armed Forces."

Session Laws 2015-98, s. 4(d), in subsection (e), substituted "breweries, wineries, and distilleries" for "breweries and wineries" and "beverages, wine, or spirituous liquor" for "beverages and wine." For effective date, see editor's note.

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

§ 105-113.82. Distribution of part of malt beverage and wine taxes.

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%).
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.
Repealed by Session Laws 2000, c. 173, s. 3, effective August 2, 2000.
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.
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.
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.
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.
Use of Funds. - Funds distributed to a county or city under this section may be used for any public purpose.
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.

History

(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; 2019-6, s. 4.6.)

Local Modification. - Community of Gray's Creek: 1999-458, s. 13 (contingent on petition filed before July 1, 2002); Community of Union Cross: 1999-458, s. 13 (contingent on petition filed before July 1, 2002).

Editor's Note. - Session Laws 2009-451, s. 27A.4(b), which amended subsections (a), (a1), and (c), was effective September 1, 2009, and applicable to malt beverages and wine first sold or otherwise disposed of on or after that date and to liquor sold on or after that date.

"(1) Of the tax on malt beverages levied under G.S. 105-113.80(a), seven and twenty-four hundredths percent (7.24%).

"(2) Of the tax on unfortified wine levied under G.S. 105-113.80(b), eighteen percent (18%).

"(3) Of the tax on fortified wine levied under G.S. 105-113.80(b), six and forty-nine hundredths percent (6.49%)."

Session Laws 2009-451, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2009'."

Session Laws 2009-451, s. 28.5 is a severability clause.

Effect of Amendments. - Session Laws 2004-203, s. 5(d), effective August 17, 2004, substituted "Budget Officer" for "Planning Officer" in subsection (e).

Session Laws 2005-435, s. 34(a), effective September 27, 2005, made a minor stylistic change in the next-to-last sentence of subsection (h).

Session Laws 2006-162, s. 1, effective July 24, 2006, substituted "Department of Commerce" for "Department of Agriculture and Consumer Services" near the middle of subsection (a).

Session Laws 2007-527, s. 4, effective August 31, 2007, in subsection (a), deleted "less the amount of the net proceeds credited to the Department of Commerce under G.S. 105-113.81A" following "March 31," substituted "counties or cities" for "counties and cities," and added the first sentence of the last paragraph.

Session Laws 2009-451, s. 27A.4(b), effective September 1, 2009, and applicable to malt beverages and wine first sold or otherwise disposed of on or after that date and to liquor sold on or after that date, in subsection (a), deleted "Method" from the subsection heading, in the introductory language, substituted "must distribute annually a percentage" for "shall distribute annually the following percentages" near the beginning, and "or city. For purposes of this subsection, the term 'net amount' means gross collections less refunds and amounts credited to the Department of Commerce under G.S. 105-113.81A. The percentages to be distributed are as follows:" for "or city:" at the end; in subdivision (a)(1), substituted "twenty and forty-seven hundredths percent (20.47%)" for "twenty-three and three-fourths percent (23 3/4%)"; in subdivision (a)(2), substituted "forty-nine and forty-four hundredths percent (49.44%)." for "sixty-two percent (62%); and"; in subdivision (a)(3), substituted "eighteen percent (18%)" for "twenty-two percent (22%)"; designated the former second paragraph of subsection (a), as subsection (a1); in subsection (a1), added "Method" as the subsection heading, deleted the former first sentence, which read: "For purposes of this subsection, 'net amount' means gross collections less refunds and amounts credited to the Department of Commerce under G.S. 105-113.81A.", deleted "shall" preceding "receive a portion" in the first sentence, substituted "receives" for "shall receive" in the second sentence, and substituted "distributable under subsection (a) of this section must" for "distributed under subdivisions (1), (2), and (3) shall" in the last sentence; and, in subsection (c), substituted "subsections (a) and (a1) of this section" for "subsection (a)" near the beginning.

Session Laws 2011-330, s. 7, effective June 27, 2011, deleted the former second sentence in the introductory paragraph of subsection (a), which read: "For purposes of this subsection, the term 'net amount' means gross collections less refunds and amounts credited to the Department of Commerce under G.S. 105-113.81A."

Session Laws 2019-6, s. 4.6, effective March 20, 2019, substituted "malt beverage" for "beer" in the section heading.

PART 5. ADMINISTRATION.

§ 105-113.83. Payment of excise taxes.

Liquor. - The excise tax on liquor levied under G.S. 105-113.80(c) is payable monthly by the local ABC board and by a distillery permittee 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.
Malt Beverage 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. Unless otherwise provided, 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 or importer. When excise taxes are paid on wine or malt beverages, the wholesaler or importer 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. A wine shipper permittee shall submit verified reports once a year on forms provided by the Secretary detailing sales records for the year the taxes are paid. The verified report is due on or before the fifteenth day of the first month of the following calendar year.
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.

History

(1985, c. 114, s. 1; 1998-95, s. 23; 2003-402, s. 10; 2004-170, s. 7; 2005-435, s. 26; 2015-98, s. 4(e); 2016-5, s. 4.3; 2019-6, s. 4.8.)

Session Laws 2015-98, s. 4(i), made the amendment to subsection (a) of this section by Session Laws 2015-98, s. 4(e), effective upon adoption of rules pursuant to Session Laws 2015-98, s. 4(h). The Revisor of Statutes has been informed that these temporary rules have been adopted.

Effect of Amendments. - Session Laws 2003-402, s. 10, effective October 1, 2003, in subsection (b), inserted the second sentence, inserted "or wine shipper permittee" following "wholesaler, importer" in the fourth and fifth sentences, and made minor stylistic and punctuation changes throughout.

Session Laws 2004-170, s. 7, effective August 2, 2004, in subsection (b), deleted "on wine" preceding "levied under," and inserted "on wine" preceding "shipped directly" in the second sentence.

Session Laws 2005-435, s. 26, effective September 27, 2005, in subsection (b), inserted "in this State" following "consumers" in the second sentence, substituted "are payable" for "shall be paid" and "is due" for "shall be paid" in the third and fourth sentences, and substituted "must" for "shall" in the last two sentences.

Session Laws 2015-98, s. 4(e), inserted "and by a distillery permittee" in subsection (a). For effective date, see editor's note.

Session Laws 2016-5, s. 4.3, effective May 11, 2016, in subsection (b), substituted "Unless otherwise provided, the tax" for "The tax" in the fourth sentence, substituted "wholesaler or importer" for "wholesaler, importer, or wine shipper permittee" in the fifth sentence, and added the last two sentences.

Session Laws 2019-6, s. 4.8, effective March 20, 2019, in subsection (b), substituted "Malt Beverage" for "Beer" in the subsection heading, and substituted "wholesaler or importer" for "wholesaler, importer, or wine shipper permittee" at the end of the fourth sentence.

CASE NOTES

Constitutionality - Provisions of North Carolina's alcoholic beverage code, which prohibited out-of-state wineries from selling wine directly to North Carolina residents but allowed North Carolina wineries to make direct sales, violated the Commerce Clause of the U.S. Constitution, and federal district court enjoined State officials from enforcing those provisions. Beskind v. Easley, 197 F. Supp. 2d 464 (W.D.N.C. 2002).

Cited in Beskind v. Easley, 325 F.3d 506 (4th Cir. 2003).

§ 105-113.83A. Registration and discontinuance requirements; penalties.

Registration Required. - A person who holds a wine shipper permit issued under G.S. 18B-1001.1 or one or more of the following ABC permits issued under Article 11 of Chapter 18B of the General Statutes must register with the Secretary:
1. Unfortified winery.
2. Fortified winery.
3. Brewery.
4. Distillery.
5. Wine importer.
6. Wine wholesaler.
7. Malt beverages importer.
8. Malt beverages wholesaler.
9. Nonresident malt beverage vendor.
10. Nonresident wine vendor.
11. Wine Producer.
Registration Form. - Registration must be in a form required by the Secretary and include all information requested. If a permittee fails to register, the Secretary must notify the ABC Commission of the violation.
Discontinuance of Authorized Activities. - A permittee required to be registered, who changes ownership or stops engaging in the activities authorized by an issued ABC permit, must notify the Secretary in writing of the change. The permittee is responsible for maintaining a bond or irrevocable letter of credit as required by G.S. 105-113.86 and submitting all returns and the payment of all taxes for which the permittee is liable under this Article while the issued ABC permit is active.
Penalty. - The Secretary must notify the ABC Commission when a permittee required to register is not eligible to hold an ABC permit for failure to satisfy G.S. 18B-900(a)(8). Upon notification, the ABC Commission must impose any penalty permitted under G.S. 18B-104.

History

(2018-5, s. 38.6(c).)

Editor's Note. - Session Laws 2018-5, s. 38.6(m), made this section effective July 1, 2018, and further provides that "permittees must register in accordance with subsection (c) of this section [which enacted this section] on or before December 1, 2018."

Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

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

A resident brewery, resident winery, resident wine producer, and nonresident vendor must file a monthly informational report with the Secretary.
A wine shipper permittee must file an annual report with the Secretary.
The report required by this section must list the amount of beverages sold, delivered, or shipped to North Carolina wholesalers, importers, and purchasers under G.S. 18B-1001.1 during the period covered by the report. The report is due by the 15th day of the month following the period covered by the report, unless otherwise provided. The report must be filed on a form approved by the Secretary and must contain the information required by the Secretary.

History

(1985, c. 114, s. 1; 1998-95, s. 24; 2000-173, s. 4; 2003-402, s. 11; 2016-5, s. 4.12; 2019-169, s. 4.9.)

Effect of Amendments. - Session Laws 2003-402, s. 11, effective October 1, 2003, added "or wine shipper permittee" in the section heading; in the first sentence, inserted "wine shipper permittee" following "nonresident vendor, and"; in the second sentence, inserted "and purchasers under G.S. 18B-1001.1" following "wholesalers, importers," and made minor stylistic and punctuation changes throughout the section.

Session Laws 2016-5, s. 4.12, effective May 11, 2016, rewrote the section.

Session Laws 2019-169, s. 4.9, effective July 26, 2019, inserted "resident wine producer" in the section heading; in subsection (a), inserted "resident wine producer" near the middle and "informational" near the end; and, in subsection (c), substituted "sold, delivered, or shipped" for "delivered" in the first sentence, and added "unless otherwise provided" at the end of the second sentence.

§ 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.

History

(1985, c. 114, s. 1; 2000-173, s. 5; 2001-414, s. 5; 2003-284, s. 45A.2(a); 2004-84, s. 2(d).)

This section was repealed by Session Laws 2003-284, s. 45A.2(a), effective for reporting periods beginning on or after August 1, 2003. Session Laws 2004-84, s. 2(d), reenacted and amended the section, effective for reporting periods beginning on or after August 1, 2004.

Effect of Amendments. - Session Laws 2004-84, s. 2.(d), effective for reporting periods beginning on or after August 1, 2004, reenacted and amended the section by substituting "two percent (2%)" for "four percent (4%)."

§ 105-113.86. Bond or irrevocable letter of credit.

Wholesalers and Importers. - A wholesaler or importer must file with the Secretary a bond in an amount of not less than five thousand dollars ($5,000). The amount of the bond must be proportionate to the anticipated tax liability of the wholesaler or importer. The Secretary should periodically review the sufficiency of the bonds required under this section. The Secretary may increase the proportionate amount required, not to exceed fifty thousand dollars ($50,000), if the bond furnished no longer covers the taxpayer's anticipated tax liability. The Secretary may decrease the proportionate amount required when the Secretary determines that a smaller bond amount will adequately protect the State from loss. The bond must be conditioned on compliance with this Article, payable to the State, in a form acceptable to the Secretary, and secured by a corporate surety.
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 must be conditioned on compliance with this Article, payable to the State in a form acceptable to the Secretary, and secured by a corporate surety.
Letter of Credit. - For purposes of this section, a wholesaler or importer or a nonresident vendor may substitute an irrevocable letter of credit for the secured bond required by this section. The letter of credit must be issued by a commercial bank acceptable to the Secretary and available to the State as a beneficiary. The letter of credit must be in a form acceptable to the Secretary, conditioned upon compliance with this Article, and in the amounts stipulated in this section.

History

(1985, c. 114, s. 1; 1987, c. 18; 1998-95, s. 25; 2014-3, s. 9.1(c); 2018-5, s. 38.6(d).)

Editor's Note. - Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

Effect of Amendments. - Session Laws 2014-3, s. 9.1(c), effective May 29, 2014, rewrote the section heading, which formerly read "Bonds."; rewrote subsection (a); and added subsection (c).

Session Laws 2018-5, s. 38.6(d), effective June 12, 2018, substituted "bond must be conditioned on compliance with this Article, payable to the State in a form acceptable to the Secretary, and secured by a corporate surety" for "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" in the last sentence of subsection (b).

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

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.
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.
Repealed by Session Laws 1998-212, s. 29A.14(e), effective January 1, 1999.

History

(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.

History

(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.

History

(1985, c. 114, s. 1; 1998-95, s. 26.)

CASE NOTES

Cited in N.C. Sch. Bds. Ass'n v. Moore, 359 N.C. 474, 614 S.E.2d 504 (2005).

§§ 105-113.90, 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.

Cross References. - As to excise taxes on beer, wine and liquor, see now G.S. 105-113.80.

§ 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.

Cross References. - For general provisions dealing with alcoholic beverage license and excise taxes, see now G.S. 105-113.68 et seq.

As to local licenses, see now G.S. 105-113.77 et seq.

As to excise taxes and distribution of tax revenue, see now G.S. 105-113.80 et seq.

For administrative provisions, see now G.S. 105-113.83 et seq.

ARTICLE 2D. Unauthorized Substances Taxes.

Sec.

§ 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.

History

(1989, c. 772, s. 1; 1995, c. 340, s. 1; 1997-292, s. 1; 1998-98, s. 59.)

Legal Periodicals. - For article, "Law Between the Lines," 25 Campbell L. Rev. 151 (2003).

CASE NOTES

Federal court's view of this section as a criminal penalty prevented the defendant's subsequent drug conviction from being enhanced with a mandatory life sentence. The court found that such enhancement would be unconstitutional where the state had previously assessed and collected a portion of its drug tax against him with respect to the very drugs at issue in the conviction and where the defendant had not waived his double jeopardy claim because it would have been futile for him to have raised it in state court where the drug tax was not considered a criminal penalty. United States v. Anderson, - F.3d - (4th Cir. May 15, 2000).

Did Not Result in the Issuance of a Writ of Habeas Corpus. - Because the tax outlined in this section is neither contingent upon arrest, nor assessed on property that has necessarily been confiscated or destroyed and because it allows for anonymous reporting and payment, the state court's finding that this section was not a criminal penalty and its consequent refusal to dismiss the defendant's sentence of imprisonment for trafficking in cocaine, based in part on the same drugs upon which the Drug Tax was assessed, as multiple punishment in violation of the Double Jeopardy clause of the Fifth Amendment did not warrant a writ of habeas corpus although a federal court deciding the issue on direct appeal might have come to a different conclusion. Vick v. Williams, 233 F.3d 213 (4th Cir. 2000), cert denied, 533 U.S. 952, 121 S. Ct. 2596, 150 L. Ed. 2d 754 (2001).

Double Jeopardy. - A judgment entered for unpaid taxes on seized drugs did not preclude, under double jeopardy principles, the defendant's prosecution for controlled substances violations. State v. Adams, 132 N.C. App. 819, 513 S.E.2d 588 (1999), cert. denied, 350 N.C. 836, 538 S.E.2d 570, cert. denied, 528 U.S. 1022, 120 S. Ct. 534, 145 L. Ed. 2d 414 (1999).

The North Carolina Controlled Substance Tax, G.S. 105-113.105 through 105-113.113, did not violate the double jeopardy clause as it did not have fundamentally punitive characteristics to render it violative. State v. Crenshaw, 144 N.C. App. 574, 551 S.E.2d 147 (2001).

Because the Department of Revenue's collection of unpaid taxes on seized drugs pursuant to this section did not constitute criminal punishment, subsequent marijuana charges were not barred by double jeopardy. State v. Woods, 136 N.C. App. 386, 524 S.E.2d 363 (2000), cert. denied, 351 N.C. 370, 543 S.E.2d 147 (2000).

Tax Not Punishment. - Assessment and collection of the North Carolina Controlled Substance Tax does not constitute punishment so as to bar subsequent prosecution and punishment for criminal possession of the same drugs. State v. Ballenger, 123 N.C. App. 179, 472 S.E.2d 572 (1996), aff'd, 345 N.C. 626, 481 S.E.2d 84, cert. denied, 522 U.S. 817, 118 S. Ct. 68, 139 L. Ed. 2d 29 (1997).

The Controlled Substance Tax Is Not a Criminal Penalty. - Whether challenged in a criminal proceeding or a civil proceeding, the drug tax is not a criminal penalty, and the plaintiff was, therefore, not entitled to the procedural safeguards required for criminal proceedings. (But see Lynn v. West, 134 F.3d 582 (4th Cir. 1998).) Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330 (1999), cert. denied, 531 U.S. 819, 121 S. Ct. 60, 148 L. Ed. 2d 26 (2000).

The controlled substance tax is a criminal penalty, given its high rate of taxation and its deterrent purpose, and thus the state's enforcement scheme must provide the constitutional safeguards that attach to criminal prosecutions. Lynn v. West, 134 F.3d 582 (4th Cir. 1998), cert. denied, 525 U.S. 813, 119 S. Ct. 47, 142 L. Ed. 2d 36 (1998) (But see Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330 (1999)).

Monies Received for Excise Tax Versus Penalties and Interest Payments. - Excise tax on unauthorized substances is not a penalty subject to the provisions of N.C. Const., Art. IX, § 7 and is, therefore, not payable to public schools; however, the penalties and interest payments collected by the Department of Revenue for enforcement of the excise tax are classified as penalties to be disbursed to public school systems, pursuant to N.C. Const., Art. IX, § 7. N.C. Sch. Bds. Ass'n v. Moore, 359 N.C. 474, 614 S.E.2d 504 (2005).

The Tax Injunction Act did not apply to bar the district court from exercising subject matter jurisdiction over the plaintiffs' claims for declaratory and injunctive relief with regard to the controlled substances tax because the tax is in reality a criminal penalty. Lynn v. West, 134 F.3d 582 (4th Cir. 1998), cert. denied, 525 U.S. 813, 119 S. Ct. 47, 142 L. Ed. 2d 36 (1998) (But see Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330 (1999)).

Purpose is to levy an excise tax to generate revenue for state and local law enforcement agencies and for the General Fund, which is a remedial purpose; payments collected under G.S. 105-113.105 thus are not subject to N.C. Const. IX, § 7. N.C. Sch. Bds. Ass'n v. Moore, 160 N.C. App. 253, 585 S.E.2d 418 (2003).

Cited in Nivens v. Gilchrist, 319 F.3d 151 (4th Cir. 2003), cert. denied, 539 U.S. 915, 123 S. Ct. 2279, 156 L. Ed. 2d 131 (2003); State v. Harris, 157 N.C. App. 647, 580 S.E.2d 63 (2003).

Opinions of Attorney General

If money or property is not seized as evidence of a controlled substance law violation, agents of the Department of Revenue may seize it for satisfaction of controlled substance excise taxes without an order from the court having jurisdiction over the criminal offense and without the district attorney's consent provided the seizure otherwise is made in compliance with law. See opinion of Attorney General to Secretary Janice H. Faulkner, - N.C.A.G. - (July 19, 1994).

§ 105-113.106. Definitions.

The following definitions apply in this Article:

Controlled Substance. - Defined in G.S. 90-87.
Repealed by Session Laws 1995, c. 340, s. 1.
Dealer. - Any of the following:
1. 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.
2. A person who in violation of Chapter 18B of the General Statutes possesses illicit spirituous liquor for sale.
3. A person who in violation of Chapter 18B of the General Statutes possesses mash.
4. A person who in violation of Chapter 18B of the General Statutes possesses an illicit mixed beverage for sale.
Repealed by Session Laws 1995, c. 340, s. 1.
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.
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".
Local law enforcement agency. - A municipal police department, a county police department, or a sheriff's office.
Low-street-value drug. - Any of the following controlled substances:
1. An anabolic steroid as defined in G.S. 90-91(k).
2. A depressant described in G.S. 90-89(4), 90-90(4), 90-91(b), or 90-92(a).
3. A hallucinogenic substance described in G.S. 90-89(3) or G.S. 90-90(5).
4. A stimulant described in G.S. 90-89(5), 90-90(3), 90-91(j), 90-92(a)(3), or 90-93(a)(3).
5. 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.
Repealed by Session Laws 1995, c. 340, s. 1.
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.
Mash. - The fermentable starchy mixture from which spirituous liquor can be distilled.
Person. - Defined in G.S. 105-228.90.
Secretary. - Defined in G.S. 105-228.90.
State law enforcement agency. - Any State agency, force, department, or unit responsible for enforcing criminal laws.
Unauthorized substance. - A controlled substance, an illicit mixed beverage, illicit spirituous liquor, or mash.

History

(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.)

CASE NOTES

Seizure by Filing Certificate of Tax Liability. - Filing a certificate of tax liability following assessment of a controlled substance tax constituted a meaningful interference with possessory interests and thus was a fourth amendment seizure. Andrews v. Crump, 984 F. Supp. 393 (W.D.N.C. 1996).

No Probable Cause. - Agents did not have probable cause to believe that plaintiff was a dealer or that he possessed the marijuana forming the basis of the controlled substance tax assessment, and thus they did not have probable cause to seize his property by way of tax assessment and lien. Andrews v. Crump, 984 F. Supp. 393 (W.D.N.C. 1996).

Cited in Vick v. Williams, 233 F.3d 213 (4th Cir. 2000), cert denied, 533 U.S. 952, 121 S. Ct. 2596, 150 L. Ed. 2d 754 (2001); Nivens v. Gilchrist, 319 F.3d 151 (4th Cir. 2003), cert. denied, 539 U.S. 915, 123 S. Ct. 2279, 156 L. Ed. 2d 131 (2003).

§ 105-113.107. Excise tax on unauthorized substances.

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.
2. 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 [sub]section, or synthetic cannabinoids.
3. At the rate of fifty dollars ($50.00) for each gram, or fraction thereof, of cocaine.
4. At the rate of fifty dollars ($50.00) for each gram, or fraction thereof, of any low-street-value drug that is sold by weight.
5. 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.
6. 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.
7. 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.
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.
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.
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.
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.

History

(1989, c. 772, s. 1; 1995, c. 340, s. 1; 1997-292, s. 1; 1998-218, s. 1; 2012-79, s. 2.2(a); 2014-3, s. 14.25.)

Editor's Note. - The bracketed "[sub]" was added preceding the word "section" in subdivision (a)(1a) at the direction of the Revisor of Statutes.

Effect of Amendments. - Session Laws 2012-79, s. 2.2(a), added "or synthetic cannabinoids" at the end of subdivision (a)(1a). For effective date, see editor's note.

Session Laws 2014-3, s. 14.25, effective May 29, 2014, added subdivision (a)(1c).

CASE NOTES

Failure to Pay Excise Tax. - Convictions for trafficking in cocaine by possession and for failure to pay excise tax on the controlled substance did not constitute double jeopardy, nor did the punishments imposed upon those convictions violate the prohibition against multiple punishments for the same offense, where the State sought to collect the drug excise tax from defendant in the same prosecution, and where neither of the crimes in question was a lesser included offense of the other. State v. Morgan, 118 N.C. App. 461, 455 S.E.2d 490 (1995).

When a North Carolina Department of Revenue agent uses a jeopardy assessment to collect the excise tax on controlled substances possessed by dealers pursuant to G.S. 105-113.107 of the North Carolina's Unauthorized Substances Tax Act, G.S. 105-113 et seq., the Department was required by former G.S. 105-241.1(a), (c), and (g) (repealed January 1, 2008) to provide the dealer with written notice no later than 30 days after the jeopardy assessment that the dealer may request a hearing on the jeopardy assessment following the procedure described in the notice. Thus, while the statute may not technically require that the Revenue Officer provide written notice to a dealer that he may halt the seizure of property by posting a bond, it does require that officer to provide written notice of the right to request a hearing either at the time of the assessment or, in the case of a jeopardy assessment, within 30 days after the seizure, and the officer thus must serve the taxpayer with the assessment, a warrant and written notice of procedures. Ervin v. Hammond, - F. Supp. 2d - (W.D.N.C. Mar. 31, 2008).

Magistrate judge's recommendation against the dismissal of certain claims asserted by a plaintiff pursuant to 42 U.S.C.S. § 1983 and 42 U.S.C.S. § 1985 for damages based on the conduct of defendant officials in allegedly entering his home without a warrant, seizing his property to satisfy the "drug dealer excise tax" imposed in G.S. 105-113.107 by North Carolina's Unauthorized Substances Tax Act, G.S. 105-113 et seq., and otherwise violating his constitutional rights was sustained in part because plaintiff's claims against certain of the officers in their individual capacities stated a claim under federal law for violation of such rights. Ervin v. Hammond, - F. Supp. 2d - (W.D.N.C. Mar. 31, 2008).

Subpoena in Criminal Case. - In defendant's marijuana trafficking prosecution, it was not an abuse of discretion to quash defendant's subpoena for a Department of Revenue employee to testify about an unauthorized substance tax case against defendant because such testimony was statutorily barred in a criminal case whether or not the substance of the testimony could be disclosed under G.S. 105-129. State v. Stimson, 246 N.C. App. 708, 783 S.E.2d 749 (2016).

Cited in Lynn v. West, 134 F.3d 582 (4th Cir. 1998), cert. denied, 525 U.S. 813, 119 S. Ct. 47, 142 L. Ed. 2d 36 (1998) (But see Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330 (1999)); Vick v. Williams, 233 F.3d 213 (4th Cir. 2000), cert denied, 533 U.S. 952, 121 S. Ct. 2596, 150 L. Ed. 2d 754 (2001); Nivens v. Gilchrist, 319 F.3d 151 (4th Cir. 2003), cert. denied, 539 U.S. 915, 123 S. Ct. 2279, 156 L. Ed. 2d 131 (2003).

§ 105-113.107A. Exemptions.

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.
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.

History

(1995, c. 340, s. 1; 1997-292, s. 1.)

CASE NOTES

§ 105-113.108. Reports; revenue stamps.

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.
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.

History

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

Effect of Amendments. - Session Laws 2004-170, s. 8, effective August 2, 2004, in subsection (a), substituted "return" for "form," inserted "Notwithstanding any other provision of law," at the beginning of the second sentence, and substituted "return, and the return is not required to be verified by oath or affirmation" for "form" at the end of the second sentence.

CASE NOTES

Deprivation of Rights Claims. - United States Supreme Court had declined to hold that a former version of the Unauthorized Substances Tax (UST), (now G.S. 105-113.108(b) and related sections), created a criminal or punitive penalty for purposes of constitutional safeguards and defendants (an arresting deputy and a state tax official), in their official capacities, were immune from liability pursuant to the Eleventh Amendment; further, taxpayers were barred by principles of comity from asserting 42 U.S.C.S. § 1983 actions against the validity of state tax systems in federal courts. Leon-Sanchez v. Tolson, - F. Supp. 2d - (W.D.N.C. Aug. 5, 2004).

Cited in Lynn v. West, 134 F.3d 582 (4th Cir. 1998), cert. denied, 525 U.S. 813, 119 S. Ct. 47, 142 L. Ed. 2d 36 (1998) (But see Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330 (1999)); Vick v. Williams, 233 F.3d 213 (4th Cir. 2000), cert denied, 533 U.S. 952, 121 S. Ct. 2596, 150 L. Ed. 2d 754 (2001); State v. Stimson, 246 N.C. App. 708, 783 S.E.2d 749 (2016).

§ 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.

History

(1989, c. 772, s. 1; 1995, c. 340, s. 1; 1997-292, s. 1.)

CASE NOTES

Cited in Vick v. Williams, 233 F.3d 213 (4th Cir. 2000), cert denied, 533 U.S. 952, 121 S. Ct. 2596, 150 L. Ed. 2d 754 (2001).

§ 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.

History

(1989 (Reg. Sess., 1990), c. 814, s. 7; 1995, c. 340, s. 1; 1997, c. 292, s. 1; 1998-218, s. 2.)

CASE NOTES

§ 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.

History

(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.)

Editor's Note. - Session Laws 2007-491, s. 47, provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 [repealed] before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Effect of Amendments. - Session Laws 2007-491, s. 8, effective January 1, 2008, in the fifth sentence, substituted "jeopardy collection procedures in G.S. 105-241.23 or the general collection procedures in G.S. 105-242" for "procedure set forth in G.S. 105-241.1(g) for jeopardy assessments or the procedure set forth in G.S. 105-242." For applicability, see Editor's note.

CASE NOTES

Cited in Salas v. McGee, 125 N.C. App. 255, 480 S.E.2d 714 (1997); Lynn v. West, 134 F.3d 582 (4th Cir. 1998), cert. denied, 525 U.S. 813, 119 S. Ct. 47, 142 L. Ed. 2d 36 (1998) (But see Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330 (1999)); Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330 (1999), cert. denied, 531 U.S. 819, 121 S. Ct. 60, 148 L. Ed. 2d 26 (2000); Vick v. Williams, 233 F.3d 213 (4th Cir. 2000), cert denied, 533 U.S. 952, 121 S. Ct. 2596, 150 L. Ed. 2d 754 (2001); Andrews v. Crump, 144 N.C. App. 68, 547 S.E.2d 117 (2001).

§ 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 provisions of G.S. 105-259.
Information obtained by the Department from the taxpayer 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, may not be used as evidence, as defined in G.S. 15A-971, by a prosecutor in a criminal prosecution of the taxpayer for an offense related to the manufacturing, possession, transportation, distribution, or sale of the unauthorized substance. Under this prohibition, no officer, employee, or agent of the Department may testify about this information in a criminal prosecution of the taxpayer for an offense related to the manufacturing, possession, transportation, distribution, or sale of the unauthorized substance. This subsection 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. 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.

History

(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); 2013-414, s. 21.)

Effect of Amendments. - Session Laws 2005-435, s. 26, effective September 27, 2005, rewrote the section.

Session Laws 2008-134, s. 68(a), effective December 1, 2008, and applicable to offenses committed on or after that date, added the fifth sentence in subdivision (2).

Session Laws 2013-414, s. 21, effective August 23, 2013, rewrote the section.

CASE NOTES

§ 105-113.113. Use of tax proceeds.

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.
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.
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.

History

(1991 (Reg. Sess., 1992), c. 900, s. 20(c); 1995, c. 340, s. 1; 1997-292, s. 1; 2007-491, s. 9.)

Editor's Note. - Session Laws 2006-66, s. 19.4(a), provides: "Notwithstanding G.S. 143-18, the Department of Revenue may expend up to two million four hundred thirty-four thousand two hundred seventy dollars and seventy-one cents ($2,434,270.71) of unencumbered maintenance appropriations as of June 30, 2006, for the purpose of paying the Civil Penalty and Forfeiture Fund. The amount to be expended represents Unauthorized Substance Tax penalty collections that were paid to local law enforcement agencies for the period of July 1, 2005, through December 31, 2005. The source of the unencumbered funds shall come entirely from the Department of Revenue. If unencumbered funds are not sufficient on June 30, 2006, the Department shall use anticipated unencumbered funds as of July 1, 2006."

Session Laws 2006-66, s. 19.4(b), provides: "Through the 2008-2009 fiscal year, the Department of Revenue shall reduce succeeding distributions to a law enforcement agency under G.S. 105-113.113 to offset the amount that was improperly distributed to that agency, as described in subsection (a) of this section, and the Department shall deposit the funds collected into a reserve account which shall revert at the end of each fiscal year."

Session Laws 2006-66, s. 1.2, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2006'."

Session Laws 2006-66, s. 28.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2006-2007 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2006-2007 fiscal year."

Session Laws 2006-66, s. 28.6 is a severability clause.

Session Laws 2007-491, s. 47, provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 [repealed] before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Effect of Amendments. - Session Laws 2007-491, s. 9, effective January 1, 2008, rewrote subsection (a); in subsection (b), added the first two sentences, in the third sentence, substituted "distribute" for "remit," deleted "part of the" preceding "unencumbered tax proceeds" and inserted "in the Account" thereafter; and made minor stylistic changes throughout. For applicability, see Editor's note.

CASE NOTES

ARTICLE 3. Franchise Tax.

Sec.

§ 105-114. Nature of taxes; definitions.

Repealed by Session Laws 2017-204, s. 1.1, effective August 11, 2017.
Scope. - The tax levied in this Article upon corporations is a privilege tax 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.
Condition for Doing Business. - If the corporation is organized under the laws of this State, the payment of the tax 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 this tax is a condition precedent to the right to continue to engage in doing business in this State.
Tax Year. - The tax levied in this Article is for the income year of the corporation in which the taxes become due.
No Double Taxation. - G.S. 105-122 does not apply to holding companies taxed under G.S. 105-120.2.
Definitions. - The following definitions apply in this Article:
1. City. - Defined in G.S. 105-228.90.
2. Code. - Defined in G.S. 105-228.90.
3. 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 or a partnership that elects to be taxed as a corporation under the Code, but does not otherwise include a limited liability company or a partnership.
4. 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.
5. Income year. - Defined in G.S. 105-130.2(10).
6. (Effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return) Total assets. - The sum of all cash, investments, furniture, fixtures, equipment, receivables, intangibles, and any other items of value owned by a person or a business entity.
Recodified as G.S. 105-114.1 by Session Laws 2002-126, s. 30G.2(b), effective January 1, 2003.
Critical Infrastructure Disaster Relief. - A nonresident business that solely performs disaster-related work in this State during a disaster response period at the request of a critical infrastructure company is not considered to be doing business in this State for purposes of this Article. The definitions and provisions in G.S. 166A-19.70A apply in this subsection.

History

(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); 2014-3, ss. 14.1, 14.26; 2015-6, s. 2.3; 2015-241, s. 32.15(a); 2016-5, s. 1.7(a); 2017-204, s. 1.1; 2018-5, s. 38.2(a); 2019-187, s. 1(e).)

Editor's Note. - Session Laws 1998-98, s. 1(i) provides: "This section repeals any law that would otherwise exempt savings and loan associations, as defined in G.S. 54B-4, from the franchise tax imposed in Article 3 of Chapter 105 of the General Statutes."

The subdivision designation (b)(1) was assigned by the Revisor of Statutes, the designation in Session Laws 1997-118, s. 4, having been (b)(01); former subdivision (b)(1) was renumbered as (b)(1a) at the direction of the Revisor of Statutes.

The definition of "Income year," referred to in subdivision (b)(4) of this section, is found at G.S. 105-130.2(4a). Session Laws 1993, c. 354, s. 12 originally enacted the definition of "Income year" as subdivision (5); however, this definition was redesignated as subdivision (4a) at the direction of the Revisor of Statutes.

Session Laws 2001-327, s. 2(a), as amended by Session Laws 2002-126, s. 30G.2(a), provides: "The General Assembly finds that most corporations engaged in business in this State comply with the State franchise tax on corporate assets. Some taxpayers, however, take advantage of an unintended loophole in the law and avoid franchise tax by transferring their assets to a controlled limited liability company. This tax avoidance creates an unfair burden on corporate citizens that pay the franchise tax on their assets. It is the intent of this section to apply the franchise tax equally to assets held by corporations and assets held by corporate-affiliated limited liability companies. It is also the intent of this section to provide that a criminal penalty applies to taxpayers who fraudulently evade the tax.

"The General Assembly further finds that, after this loophole was closed in 2001, some taxpayers continue to avoid franchise tax by manipulating ownership of assets. One method is to interpose a controlled partnership between the corporation and the controlled limited liability company. This tax avoidance creates an unfair burden on corporate citizens that pay the franchise tax on all their assets. It is the intent of the General Assembly to apply the franchise tax equally to assets held by corporations and assets held by corporate-controlled entities."

Session Laws 2015-241, s. 32.15(g), as amended by Session Laws 2016-5, s. 1.7(a), made subdivision (b)(5), as added by Session Laws 2015-241, s. 32.15(a), applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Session Laws 2018-5, s. 38.2(j), made the amendment of subdivision (b)(2) of this section by Session Laws 2018-5, s. 38.2(a), effective beginning on or after January 1, 2019, and applicable to the calculation of franchise tax reported on the 2018 and later corporate income tax return.

Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

Session Laws 2019-187, s. 3, made subsection (d), as added by Session Laws 2019-187, s. 1(e), effective August 1, 2019, and applicable to disaster declarations on or after that date.

Effect of Amendments. - Session Laws 2005-435, s. 59.2(a), as amended by Session Laws 2006-162, s. 22, effective July 24, 2006, in subsection (a4), deleted "on the corporation" following "exceed the taxes levied" and added the language beginning "on the corporation or on a limited liability company" at the end.

Session Laws 2006-66, s. 24A.2(a), effective for taxable years beginning on or after January 1, 2007, rewrote the last sentence in subdivision (b)(2).

Session Laws 2006-162, s. 3(b), effective July 24, 2006, substituted "G.S. 105-130.2(4b)" for "G.S. 105-130.2(5)" in subdivision (b)(4).

Session Laws 2008-107, s. 28.7(a), effective for taxable years beginning on or after January 1, 2009, substituted "corporation" for "C Corporation" in the last sentence of subdivision (b)(2).

Session Laws 2014-3, ss. 14.1 and 14.26, effective May 29, 2014, made identical changes, substituting "G.S. 105-130.2(10)" for "G.S. 105-130.2(4b)" in subdivision (b)(4). Session Laws 2015-6, s. 2.3, effective April 9, 2015, repealed Session Laws 2014-3, s. 14.26.

Session Laws 2015-241, s. 32.15(a), as amended by Session Laws 2016-5, s. 1.7(a), effective for taxable years beginning on or after January 1, 2017, added subdivision (b)(5). See editor's note for applicability.

Session Laws 2017-204, s. 1.1, effective August 11, 2017, deleted former subsection (a), which defined "Nature of Taxes"; in subsection (a1), substituted "tax" for "taxes" near the beginning and substituted "is a privilege tax levied" for "are privilege or excise taxes levied" near the end; deleted "fiscal year of the State in which the taxes become due, except that the taxes levied in G.S. 105-122 are for the" preceding "income year" in subsection (a3); deleted the former last sentence in subsection (a4), which read: "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"; and made stylistic changes.

Session Laws 2018-5, s. 38.2(a), added "or a partnership" twice in the last sentence of subdivision (b)(2). For effective date and applicability, see editor's note.

Session Laws 2019-187, s. 1(e), added subsection (d). For effective date and applicability, see editor's note.

CASE NOTES

Constitutionality. - Assessment of tax under this section against a business trust did not violate the uniformity requirement of N.C. Const., Art. V, § 2, on grounds that it was similar to a limited partnership, which is not subject to the franchise tax. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).

What Organizations Are Taxable Under This Section. - This section levies a franchise tax only upon organizations which are (1) corporations as defined within that section, and (2) doing business within North Carolina. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).

Corporation. - Under the terms of this section, an organization is properly classified as a corporation for franchise tax purposes when it satisfies three criteria: (1) It is a corporation, association, joint-stock company or any other form of organization for pecuniary gain; (2) it has capital stock represented by shares; and (3) it has privileges not possessed by individuals or partnerships. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).

"Capital stock" must be read to encompass ownership interests in all the different types of business organizations potentially subject to the franchise tax. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).

Despite the fact that plaintiff was organized as a business trust rather than as an ordinary business corporation, and that its shares of capital stock were designated as "shares of beneficial interest," plaintiff's shares were the functional equivalent of capital stock for purposes of this section. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).

Franchise Tax Not Ordinarily Included in Term "Privilege Tax". - While the term "privilege tax" includes franchise taxes as well as license taxes, a franchise is a special kind of privilege constituting a property right, which is ordinarily transferable and exclusive, and involves the use of public facilities. The word "privilege" is too broad, per se, as a classification for taxation, but is usually particularized into licenses and franchises in classifying businesses for taxation, and as used in our taxing statutes, the term "privilege tax" does not ordinarily include franchise taxes. Duke Power Co. v. Bowles, 229 N.C. 143, 48 S.E.2d 287 (1948).

Privileges Not Possessed by Individuals or Partnerships. - By establishing for its trustees and shareholders limited liability for trust obligations, the plaintiff obtained a privilege not possessed by individuals or partnerships for purposes of this section. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).

Tax Due to Royalty Payments Paid to Out-of-State Trademark Holder. - North Carolina Secretary of Revenue did not exceed his authority in imposing franchise and income taxes on out-of-state trademark holding companies that entered into licensing agreements with related retail companies that operated in North Carolina, whereby the retail companies paid the holding companies royalties for the use of the trademarks in North Carolina; the holding companies were doing business in North Carolina, and the Secretary's attempt to assess the taxes did not offend the Commerce Clause of the United States Constitution. A&F Trademark, Inc. v. Tolson, 167 N.C. App. 150, 605 S.E.2d 187 (2004), appeal dismissed, 359 N.C. 320, - S.E.2d - (2005), cert. denied, - U.S. - , 126 S. Ct. 353, 163 L. Ed. 2d 62 (2005).

Tax Measured by Amount of Business Transacted. - Whenever a tax is imposed upon a corporation directly by the legislature and is not assessed by assessors, and the amount depends on the amount of business transacted by the corporation, and the extent to which it has exercised the privileges granted in its charter, without reference to the value of its property or the nature of the investments made of it, it is a franchise tax. Worth v. Petersburg R.R., 89 N.C. 301 (1883).

Franchise taxes are imposed for the privilege of engaging in business in this State. The amount of the tax varies with the nature and magnitude of the privilege taxed, the relative financial returns to be expected of the business or activities under franchise, and the burden put on government in regulating, protecting and fostering the enterprise. Southern Bell Tel. & Tel. Co. v. Clayton, 266 N.C. 687, 147 S.E.2d 195 (1966).

Uniformity Required. - The rule of uniformity laid down in N.C. Const., Art. V, § 2, was intended to apply to taxes on franchises. Worth v. Petersburg R.R., 89 N.C. 301 (1883).

Legislature May Make Tax by State Exclusive. - The General Assembly may require a corporation to pay a license tax for the privilege of carrying on its business, and forbid counties or other municipalities to exact any other license tax or fee. Charlotte Bldg. & Loan Ass'n v. Commissioners of Mecklenburg County, 115 N.C. 410, 20 S.E. 526 (1894).

Cited in Standard Fertilizer Co. v. Gill, 225 N.C. 426, 35 S.E.2d 275 (1945); Secretary of Revenue v. Carolina Tel. & Tel. Co., 81 N.C. App. 240, 344 S.E.2d 46 (1986); Four County Elec. Membership Corp. v. Powers, 96 N.C. App. 417, 386 S.E.2d 107 (1989).

§ 105-114.1. Limited liability companies.

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. - The law under which a limited liability company is organized.
5. Noncorporate limited liability company. - A limited liability company that does not elect to be taxed as a corporation under the Code.
(Effective for taxable years beginning before January 1, 2017) 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.
(Effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return) 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 net worth; (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.
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).
(Effective for taxable years beginning before January 1, 2017) 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).
(Effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return) 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 net worth base under G.S. 105-122(b).
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.
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.
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.
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).

History

(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); 2013-157, s. 25; 2015-241, s. 32.15(e); 2016-5, s. 1.7(a).)

Subsections (b) and (d) Set Out Twice. - The first versions of subsections (b) and (d) set out above are effective for taxable years beginning before January 1, 2017. The second versions of subsections (b) and (d) set out above are effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.

Editor's Note. - Session Laws 2002-126, s. 30G.2(a), provides: "The General Assembly finds that most corporations engaged in business in this State comply with the State franchise tax on corporate assets. Some taxpayers, however, take advantage of an unintended loophole in the law and avoid franchise tax by transferring their assets to a controlled limited liability company. This tax avoidance creates an unfair burden on corporate citizens that pay the franchise tax on their assets. It is the intent of this section to apply the franchise tax equally to assets held by corporations and assets held by corporate-affiliated limited liability companies. It is also the intent of this section to provide that a criminal penalty applies to taxpayers who fraudulently evade the tax.

"The General Assembly further finds that, after this loophole was closed in 2001, some taxpayers continue to avoid franchise tax by manipulating ownership of assets. One method is to interpose a controlled partnership between the corporation and the controlled limited liability company. This tax avoidance creates an unfair burden on corporate citizens that pay the franchise tax on their assets. It is the intent of the General Assembly to apply the franchise tax equally to assets held by corporations and assets held by corporate-controlled entities."

Session Laws 2015-241, s. 32.15(g), as amended by Session Laws 2016-5, s. 1.7(a), made the amendments to subsections (b) and (d) by Session Laws 2015-241, s. 32.15(e), applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Effect of Amendments. - Session Laws 2004-74, s. 1, effective January 1, 2003, and applicable to taxes due on or after that date, rewrote the section.

Session Laws 2004-74, s. 2, effective January 1, 2005, and applicable to taxes due on or after that date, substituted "more than fifty percent (50%)" for "seventy percent (70%) or more" in subsection (b).

Session Laws 2004-170, s. 8.1, effective August 2, 2004, in subsection (b), substituted "pursuant to G.S. 105-122" for "under this Article," and substituted "(i) the limited liability company's capital stock, surplus, and undivided profits; (ii) fifty-five percent (55%) of the limited liability company's appraised ad valorem tax value of property; and (iii) the limited liability company's actual investment in tangible property in this State, as appropriate" for "the limited liability company's net assets."

Session Laws 2006-66, s. 24A.2(b), effective for taxable years beginning on or after January 1, 2007, added subdivision (a)(5); and inserted "noncorporate" preceding "limited liability" throughout the section.

Session Laws 2008-107, s. 28.7(b), effective for taxable years beginning on or after January 1, 2009, substituted "corporation" for "C Corporation" in subdivision (a)(5).

Session Laws 2013-157, s. 25, effective January 1, 2014, rewrote subdivision (a)(4), which formerly read "A limited liability company's governing law is determined under G.S. 57C-6-05 or G.S. 57C-7-01, as applicable."

Session Laws 2015-241, s. 32.15(e), as amended by Session Laws 2016-5, s. 1.7(a), effective for taxable years beginning on or after January 1, 2017, substituted "net worth" for "capital stock, surplus, and undivided profits" in subsection (b); and substituted "net worth" for "capital stock" in subsection (d). See editor's note for applicability.

§ 105-115: Repealed by Session Laws 1989 (Regular Session, 1990), c. 1002, s. 1.

§ 105-116: Repealed by Session Laws 2013-316, s. 4.1(a), effective July 1, 2014, and applicable to gross receipts billed on or after that date.

History

(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; 2013-414, s. 1(a); repealed by 2013-316, s. 4.1(a), effective July 1, 2014.)

Editor's Note. - Former G.S. 105-116 pertained to franchise or privilege tax on electric power, water, and sewerage companies.

Session Laws 2013-316, s. 4.2(a), as amended by Session Laws 2015-6, s. 2.4(b), provides: "The Utilities Commission must adjust the rate set for the following utilities:

"(1) Electricity to reflect the repeal of G.S. 105-116 and the resulting liability of electric power companies for the tax imposed under G.S. 105-122, the increase in the rate of tax imposed on sales of electricity under G.S. 105-164.4, and the reduction in the corporate income tax rate imposed under G.S. 105-130.3.

"(2) Piped natural gas to reflect the repeal of Article 5E of Chapter 105 of the General Statutes, the repeal of the credit formerly allowed under G.S. 105-122(d1), the resulting liability of companies for the tax imposed on sales of piped natural gas under G.S. 105-164.4, and the reduction in the corporate income tax rate imposed under G.S. 105-130.3.

"(3) Public water and wastewater companies to reflect the repeal of G.S. 105-116 and the resulting liability of public water and wastewater companies under G.S. 105-122, and the reduction in the corporate income tax rate imposed under G.S. 105-130.3."

Session Laws 2014-3, s. 14.13(a)-(d), expiring July 1, 2018, provides: "All amended returns under G.S. 105-116 must be filed within three years from the due date of the original return. The Department must process amended returns under G.S. 105-116 within six months of receipt of the return. When the Department processes an amended franchise tax return under G.S. 105-116 that changes the taxable gross receipts of electricity derived within a city so that the amount that should have been distributed to that city under G.S. 105-116.1 for distributions made on or before September 30, 2014, is greater than or less than the amount actually distributed to that city, the Department of Revenue must adjust the next quarterly distribution under G.S. 105-164.44K by the applicable amount and redetermine the franchise tax share for that city based upon the amended return in accordance with subsection (b) of this section. The Department of Revenue must draw the funds needed to make an increased distribution from sales and use tax collections under Article 5 of Chapter 105 of the General Statutes.

"(b) The Department of Revenue must determine the quarterly franchise tax share a city is eligible to receive under G.S. 105-164.44K(b) for each quarter of the fiscal year on or before September 15 for the fiscal year that began the preceding July 1. The Department must include all amended franchise tax returns under G.S. 105-116 processed by the Department by the preceding July 31 in the franchise tax share determination. The determination made by the Department with respect to the city's franchise tax share for that fiscal year is final. The distributions are payable as provided in G.S. 105-164.44K.

"(c) All amended returns under G.S. 105-187.41 must be filed within three years from the due date of the original return. The Department must process amended returns under G.S. 105-187.41 within six months of receipt of the return. When the Department processes an amended excise tax return under G.S. 105-187.41 that changes the amount of the tax attributable to a city so that the amount that should have been distributed to that city under G.S. 105-187.44 for distributions made on or before September 30, 2014, is greater than or less than the amount actually distributed to that city, the Department of Revenue must adjust the next quarterly distribution under G.S. 105-164.44L for the city by the applicable amount and redetermine the excise tax share for that city based upon the amended return in accordance with subsection (b) of this section. The Department of Revenue must draw the funds needed to make an increased distribution from sales and use tax collections under Article 5 of Chapter 105 of the General Statutes.

"(d) The Department of Revenue must determine the quarterly excise tax share a city is eligible to receive under G.S. 105-164.44L(b) for each quarter of the fiscal year on or before September 15 for the fiscal year that began the preceding July 1. The Department must include all amended excise tax returns under G.S. 105-187.41 processed by the Department by the preceding July 31 in the excise tax share determination. The determination made by the Department with respect to the city's franchise tax share for that fiscal year is final. The distributions are payable as provided in G.S. 105-164.44L."

Session Laws 2015-6, s. 2.4(a), provides: "The purpose of this section is to clarify the intent of the 2013 Session of the General Assembly that the Utilities Commission must adjust the rate for sales of electricity, piped natural gas, and water and wastewater services to reflect all of the tax changes as enacted in S.L. 2013-316."

Session Laws 2015-6, s. 2.4(c), provides: "The Utilities Commission must order a utility to add interest to money refunded to its customers for refunds resulting from the reduction of the corporate income tax rate effective for taxable years beginning on or after January 1, 2014. Refunds subject to interest shall not include any amounts to be refunded arising from excess deferred income taxes due to the reduction in the corporate income tax rate effective for taxable years beginning on or after January 1, 2014. The interest rate applied to the refund must be set in accordance with G.S. 62-130."

§ 105-116.1: Repealed by Session Laws 2013-316, s. 4.1(a), effective July 1, 2014, and applicable to gross receipts billed on or after that date.

History

(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); repealed by 2013-316, s. 4.1(a), effective July 1, 2014.)

Editor's Note. - Former G.S. 105-116.1 pertained to distribution of gross receipts taxes to cities.

Session Laws 2014-3, s. 14.13(a)-(d), expiring July 1, 2018, provides: "(a) All amended returns under G.S. 105-116 must be filed within three years from the due date of the original return. The Department must process amended returns under G.S. 105-116 within six months of receipt of the return. When the Department processes an amended franchise tax return under G.S. 105-116 that changes the taxable gross receipts of electricity derived within a city so that the amount that should have been distributed to that city under G.S. 105-116.1 for distributions made on or before September 30, 2014, is greater than or less than the amount actually distributed to that city, the Department of Revenue must adjust the next quarterly distribution under G.S. 105-164.44K by the applicable amount and redetermine the franchise tax share for that city based upon the amended return in accordance with subsection (b) of this section. The Department of Revenue must draw the funds needed to make an increased distribution from sales and use tax collections under Article 5 of Chapter 105 of the General Statutes.

Session Laws 2015-6, s. 2.19(a), provides: "The Department of Revenue may draw the funds needed to make the following distributions from the sales and use tax collections under Article 5 of Chapter 105 of the General Statutes:

"(1) The September 15, 2014, distribution of the franchise tax to cities under G.S. 105-116.1 for the calendar quarter that begins April 1, 2014.

"(2) The September 15, 2014, distribution of the excise tax to cities under G.S. 105-187.44 for the calendar quarter that begins April 1, 2014."

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

§ 105-119: Repealed by Session Laws 2000-173, s. 7, effective August 2, 2000.

§ 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.

Cross References. - As to tax on telecommunications, see G.S. 105-164.4B.

As to distribution of part of telecommunications taxes to cities, see G.S. 105-164.44F.

Editor's Note. - Session Laws 2001-487, s. 118(a), effective December 16, 2001, repealed the amendment to this section by Session Laws 2001-427, s. 6(e). The amendment by Session Laws 2001-427 would have been effective January 1, 2002, and therefore never went into effect.

Session Laws 2001-430, s. 18, as amended by Session Laws 2001-487, s. 119, provides: "Pursuant to G.S. 62-31 and G.S. 62-32, the Utilities Commission must lower the rates set for telecommunications services to reflect the repeal of G.S. 105-120 and the resulting liability of local telecommunications companies for the tax imposed under G.S. 105-122."

§ 105-120.1: Repealed by Session Laws 2000-173, s. 7, effective August 2, 2000.

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

(Effective for taxable years beginning before January 1, 2017) Every corporation, domestic and foreign, incorporated or, by an act, domesticated under the laws of this State or doing business in this State that, 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, do all of the following:
1. File a return.
2. Determine the total amount of its issued and outstanding capital stock, surplus and undivided profits.
3. Apportion such outstanding capital stock, surplus and undivided profits to this State.

(Effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return) Every corporation, domestic and foreign, incorporated or, by an act, domesticated under the laws of this State or doing business in this State that, 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, do all of the following:
1. File a return.
2. Determine the total amount of its net worth.
3. Apportion its net worth to this State.
1. (Effective for taxable years beginning before January 1, 2017) Every corporation taxed under this section shall annually pay to the Secretary of Revenue, at the time the return is 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 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). (b) (1) (Effective for taxable years beginning before January 1, 2017) Every corporation taxed under this section shall annually pay to the Secretary of Revenue, at the time the return is 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 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 is levied at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) on the greater of the following:
  1. 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).
  2. The total actual investment in tangible property in this State of such corporation as computed under G.S. 105-122(d).
(Effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return) Tax Rate. - Every corporation taxed under this section shall annually pay to the Secretary of Revenue, at the time the return is due, the greater of the following:
1. A franchise or privilege tax 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 one hundred fifty thousand dollars ($150,000) nor less than two hundred dollars ($200.00).
2. If the tax calculated under this subdivision exceeds the tax calculated under subdivision (1) of this subsection, then the tax is levied at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) on the greater of the following:
  1. 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).
  2. The total actual investment in tangible property in this State of such corporation as computed under G.S. 105-122(d).
(Effective for taxable years beginning before January 1, 2020) For purposes of this section, a "holding company" is a corporation that satisfies at least one of the following conditions:
1. It has no assets other than ownership interests in corporations in which it owns, directly or indirectly, more than fifty percent (50%) of the outstanding voting stock or voting capital interests.
2. It 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, voting capital interests, or ownership interests.
(Effective for taxable years beginning on or after January 1, 2020) For purposes of this section, a "holding company" is a corporation that satisfies at least one of the following conditions:
1. It has no assets other than ownership interests in corporations in which it owns, directly or indirectly, more than fifty percent (50%) of the outstanding voting stock or voting capital interests.
2. It 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, voting capital interests, or ownership interests.
3. It owns copyrights, patents, or trademarks that represent more than eighty percent (80%) of its total assets, or receives royalties and license fees that represent more than eighty percent (80%) of its gross income, and it is one hundred percent (100%) directly owned by a corporation that meets all of the following conditions:
  1. Is a manufacturer, as defined by NAICS codes 31 through 33.
  2. Generates revenues in excess of five billion dollars ($5,000,000,000) for income tax purposes from goods that it manufactures.
  3. Includes in its net worth, as determined under G.S. 105-122(b), an investment in a subsidiary that owns copyrights, patents, or trademarks.
Repealed by Session Laws 1985, c. 656, s. 39.
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.
Repealed by Session Laws 2011-330, s. 3, effective June 27, 2011.

History

(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; 2012-79, s. 2.3; 2013-414, s. 1(b); 2015-241, s. 32.15(b); 2016-5, s. 1.7(a); 2017-204, s. 1.2; 2019-246, s. 2(a).)

Subsections (a) and (b) Set Out Twice. - The first versions of subsections (a) and (b) set out above are effective for taxable years beginning before January 1, 2017. The second versions of subsections (a) and (b) set out above are effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.

Subsection (c) Set Out Twice. - The first version of subsection (c) set out above is effective for taxable years beginning before January 1, 2020. The second version of subsection (c) set out above is effective for taxable years beginning on or after January 1, 2020, and applicable to the calculation of franchise tax reported on the 2019 and later corporate income tax returns.

Editor's Note. - Session Laws 2006-196, s. 13, provides: "The Revenue Laws Study Committee shall study the following issues:

"(1) The simplification of the additional tax imposed on insurance contracts on property coverage, as enacted in Section 3 of this act, and the distribution of the revenue generated by the tax. The study of this issue may include a recommendation on the percentage of revenue to be distributed to the firemen's local relief funds and the formula for making this distribution. The study may also consider the increasing difference between the amount of revenue available in the Volunteer Fire Department Fund for matching grants to purchase equipment and make capital improvements and the amount of grant requests received.

"(2) The authority of the Secretary of Revenue to require taxpayers to file consolidated returns. The study of this issue may include consideration of whether the State should require some corporations or all corporations to file a consolidated return.

"(3) The feasibility of replacing the State's current corporate income and franchise tax laws with a commercial activity tax based upon business gross receipts.

"(4) The administrative process for the review of disputed tax matters."

Session Laws 2015-241, s. 32.15(g), as amended by Session Laws 2016-5, s. 1.7(a), made the amendments to subsections (a) and (b) by Session Laws 2015-241, s. 32.15(b), applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Session Laws 2019-246, s. 2(b), made subdivision (c)(3), as added by Session Laws 2019-246, s. 2(a), effective for taxable years beginning on or after January 1, 2020, and applicable to the calculation of franchise tax reported on the 2019 and later corporate income tax returns.

Effect of Amendments. - Session Laws 2006-196, s. 9, effective January 1, 2007, and applicable for taxable years beginning on or after that date, in subsection (c), substituted "a corporation that" for "any corporation which" near the middle and added "or voting capital interests" at the end.

Session Laws 2011-330, s. 3, effective June 27, 2011, repealed subsection (f), which read: "In determining the total tax payable by any holding company under this section, there shall be allowed as a credit on such tax the amount of the credit authorized under Part 5 of Article 4 of this Chapter."

Session Laws 2012-79, s. 2.3, effective June 26, 2012, rewrote subsection (c), which formerly read: "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."

Session Laws 2013-414, s. 1(b), effective August 23, 2013, in the introductory language of subsection (a), substituted "State that" for "State which" and added "do all of the following"; rewrote subdivision (a)(1), which formerly read "Make a report and statement, and"; in subdivision (b)(1), substituted "return is" for "report and statement are," and deleted "which is hereby levied" following "privilege tax"; in subdivision (b)(2), substituted "is levied" for "shall be levied" near the middle and "greater of the following" for "greater of the amounts of" at the end; and made minor stylistic and punctuation changes throughout subsections (a) and (b).

Session Laws 2015-241, s. 32.15(b), as amended by Session Laws 2016-5, s. 1.7(a), effective for taxable years beginning on or after January 1, 2017, in subsection (a), substituted "net worth" for "issued and outstanding capital stock, surplus and undivided profits" in subdivision (2) and "its net worth" for "such outstanding capital stock, surplus and undivided profits" in subdivision (3); and rewrote subsection (b). See editor's note for applicability.

Session Laws 2017-204, s. 1.2, effective August 11, 2017, substituted "stock, voting capital interests, or ownership interests" for "stock or voting capital interests" in subdivision (c)(2).

Session Laws 2019-246, s. 2(a), added subdivision (c)(3). For effective date and applicability, see editor's note.

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

Cross References. - The repealed section related to franchise or privilege taxes on insurance companies. For present law relating to taxes thereon, see G.S. 105-228.3 through 105-228.10.

§ 105-121.1. (Repealed effective for taxes due on or after April 1, 2017) 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

History

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

Section Repealed Effective for Taxes Due on or After April 1, 2017. - This section is repealed effective for taxes due on or after April 1, 2017, by Session Laws 2016-5, s. 1.1(a).

§ 105-122. (Effective for taxable years beginning before January 1, 2017) Franchise or privilege tax on domestic and foreign corporations.

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.
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.
2. Billings in excess of costs that are considered a deferred liability under the percentage of completion method of revenue recognition.
3. Taxes accrued, dividends declared, and reserves for depreciation of tangible assets and for amortization of intangible assets as permitted for income tax purposes.
4. 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).
5. 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 Environmental Quality 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 Commis- sion 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.
6. Reserves for the cost of purchasing and installing equipment or constructing facilities for the purpose of recycling or resource recov- ering 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 Environmental Quality certifying that the Department of Environmental Quality has found as a fact that the equipment or facility has actually been purchased, installed or con- structed, that it is in conformance with all rules and regulations of the Department of Environmental Quality, and the recycling or resource recovering is the primary purpose of the facility or equipment.
7. 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.
8. The cost of treasury stock.
9. 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 interna- tional 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.
Definitions. - The following definitions apply in subsection (b) of this section:
1. Affiliate. - The same meaning as specified in G.S. 105-130.2.
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. 105-130.2.
4. Subsidiary. - The same meaning as specified in G.S. 105-130.2.
Repealed by Session Laws 2007-491, s. 2, effective January 1, 2008.
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. - 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 busi- ness in this State.
3. Repealed by Session Laws 2011-330, s. 5, effective June 27, 2011.
After determining the proportion of its total capital stock, surplus and undivided profits as set out in subsection (c1) 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 return is 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 is 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" a corporation may deduct 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 Environmental Quality 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 applies only with respect to pollution abatement plants or equipment constructed or installed on or after January 1, 1955.
Credits. - Acorporation 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.
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.
The return and tax required by this section are in addition to all other reports required or taxes levied and assessed in this State.
Counties, cities and towns shall not levy a franchise tax on corporations taxed under this section.
Repealed by Session Laws 1981 (Regular Session, 1982), c. 1211, s. 5.

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.

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. 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.

History

(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. 2 1 / 2 ; 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; 2012-79, s. 1.14(a); 2013-414, ss. 1(c), 2(a); 2015-241, s. 14.30(u).)

Section set out twice. - The section above is effective for taxable years beginning before January 1, 2017. For the section as amended for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return, see the following section, also numbered G.S. 105-122.

Effect of Amendments. - Session Laws 2015-241, s. 14.30(u), effective July 1, 2015, substituted "Department of Environmental Quality" for "Department of Environment and Natural Resources" in subdivisions (b)(4) and (5) and subsection (d).

§ 105-122. (Effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return) Franchise or privilege tax on domestic and foreign corporations.

Tax Imposed. - An annual franchise or privilege tax is imposed on a corporation doing business in this State for the privilege of doing business in this State and for the continuance of articles of incorporation or domestication of each corporation in this State. 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.
Determination of Net Worth. - A corporation taxed under this section shall determine the total amount of its net worth on the basis of the books and records of the corporation as of the close of its income year. The net worth of a corporation is its total assets without regard to the deduction for accumulated depreciation, depletion, or amortization less its total liabilities, computed in accordance with generally accepted accounting principles as of the end of the corporation's taxable year. If the corporation does not maintain its books and records in accordance with generally accepted accounting principles, then its net worth is computed in accordance with the accounting method used by the entity for federal tax purposes. A corporation's net worth is subject to the following adjustments:
1. A deduction for accumulated depreciation, depletion, and amortization as determined in accordance with the method used for federal tax purposes.
2. Repealed by Session Laws 2015-241, s. 32.15(d), effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.
3. Assets for which a deduction is allowed under subdivision (1) of this subsection are valued in accordance with the method used in computing depreciation, depletion, and amortization for federal income tax purposes.
4. (Effective for taxable years beginning before January 1, 2021) An addition for indebtedness the corporation owes to a parent, a subsidiary, an affiliate, or a noncorporate entity in which the corporation or an affiliated group of corporations owns directly or indirectly more than fifty percent (50%) of the capital interests of the noncorporate entity. The amount added back to the corporation's net worth may be further adjusted if part of the capital of the creditor is capital borrowed from a source other than a parent, a subsidiary, or an affiliate. The debtor corporation may deduct a proportionate part of the indebtedness based on the ratio of the borrowed capital of the creditor to the total assets of the creditor. For purposes of this subdivision, borrowed capital does not include indebtedness incurred by a bank arising out of the receipt of a deposit and evidenced by a certificate of deposit, a passbook, a cashier's check, a certified check, or other similar document.
5. If the creditor corporation is taxable under this Article, the creditor corporation may deduct the amount of indebtedness owed to it by a parent, subsidiary, or affiliated corporation to the extent that such indebtedness has been added by the debtor corporation.
6. Repealed by Session Laws 2018-5, s. 38.2(b), effective beginning on or after January 1, 2019, and applicable to the calculation of franchise tax reported on the 2018 and later corporate income tax return.
7. through (8) Repealed by Session Laws 2015-241, s. 32.15(c), effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.
Definitions. - The following definitions apply in subsection (b) of this section:
1. Affiliate. - A corporation is an affiliate of another corporation when both are directly or indirectly controlled by the same parent corporation or by the same or associated financial interests by stock ownership, interlocking directors, or by any other means whatsoever, whether the control is direct or through one or more subsidiary, affiliated, or controlled corporations.
2. Affiliated group. - The same meaning as defined in G.S. 105-114.1.
3. Capital interest. - The right under an entity's governing law to receive a percentage of the entity's assets upon dissolution after payments to creditors.
4. Governing law. - The law under which the noncorporate entity is organized.
5. Indebtedness. - All loans, credits, goods, supplies, or other capital of whatsoever nature furnished by a parent, a subsidiary, an affiliate, or a noncorporate entity in which the corporation or an affiliated group of corporations owns directly or indirectly more than fifty percent (50%) of the capital interests of the noncorporate entity, other than indebtedness endorsed, guaranteed, or otherwise supported by one of these corporations.
6. Noncorporate entity. - A person that is neither a human being nor a corporation.
7. Parent. - A corporation is a parent of another corporation when, directly or indirectly, it controls the other corporation by stock ownership, interlocking directors, or by any other means whatsoever exercised by the same or associated financial interests, whether the control is direct or through one or more subsidiary, affiliated, or controlled corporations.
8. Subsidiary. - A corporation is a subsidiary of another corporation when, directly or indirectly, it is subject to control by the other corporation by stock ownership, interlocking directors, or by any other means whatsoever exercised by the same or associated financial interest, whether the control is direct or through one or more subsidiary, affiliated, or controlled corporations.
Repealed by Session Laws 2007-491, s. 2, effective January 1, 2008.
(Effective for taxable years beginning before January 1, 2020) Apportionment. - A corporation that is doing business in this State and in one or more other states must apportion its net worth 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 net worth determined by applying the appropriate apportionment method is considered the amount of net worth 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 net worth 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 net worth 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 net worth 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 net worth 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 net worth 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 net worth attributable to the corporation's business in this State.
3. Repealed by Session Laws 2011-330, s. 5, effective June 27, 2011.
(Effective for taxable years beginning on or after January 1, 2020) Apportionment. - A corporation that is doing business in this State and in one or more other states must apportion its net worth 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. A taxpayer that has made an election under G.S. 105-130.4(t3) must use the apportionment method set out in subdivision (1) of this subsection as if the election had not been made, unless the Department has authorized a different method under subdivision (2) of this subsection. The portion of a corporation's net worth determined by applying the appropriate apportionment method is considered the amount of net worth 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 net worth 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 net worth 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 net worth 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 net worth 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 net worth 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 net worth attributable to the corporation's business in this State.
3. Repealed by Session Laws 2011-330, s. 5, effective June 27, 2011.
Tax Base. - A corporation's tax base is the greatest of the following:
1. The proportion of its net worth as set out in subsection (c1) of this section.
2. Fifty-five percent (55%) of the corporation's appraised value as determined for ad valorem taxation of all the real and tangible personal property in this State. For purposes of this subdivision, the 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.
3. (Effective for taxable years beginning before January 1, 2020) The corporation's total actual investment in tangible property in this State. For purposes of this subdivision, the total actual investment in tangible property in this State is 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.
Repealed by Session Laws 2015-241, s. 32.15(c), effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.
(Effective for taxable years beginning before January 1, 2019) Tax Rate. - The tax rate is one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of the corporation's tax base as determined under subsection (d) of this section. The tax imposed in this section shall not be less than two hundred dollars ($200.00).
(Effective for taxable years beginning on or after January 1, 2019, and applicable to the calculation of franchise tax reported on the 2018 and later corporate income tax returns) Tax Rate. - For a C Corporation, as defined in G.S. 105-130.2, [the] tax rate is one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of the corporation's tax base as determined under subsection (d) of this section. For an S Corporation, as defined in G.S. 105-130.2, the tax rate is two hundred dollars ($200.00) for the first one million dollars ($1,000,000) of the corporation's tax base as determined under subsection (d) of this section and one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of its tax base that exceeds one million dollars ($1,000,000). In no event may the tax imposed by this section be less than two hundred dollars ($200.00).
Short Period. - 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.
Return and Tax. - The return and tax required by this section are in addition to all other reports required or taxes levied and assessed in this State.
Local Prohibition. - Counties, cities and towns shall not levy a franchise tax on corporations taxed under this section.
Repealed by Session Laws 1981 (Regular Session, 1982), c. 1211, s. 5.

(2) (Effective for taxable years beginning on or after January 1, 2021) An addition for the amount of indebtedness the corporation owes that creates net interest expense, as defined in G.S. 105-130.7B(b)(3), but does not create qualified interest expense, as defined in G.S. 105-130.7B(b)(4).

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. 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 net worth in accordance with the alternative method or the statutory method.

(3) (Effective for taxable years beginning on or after January 1, 2020, and applicable to the calculation of franchise tax reported on the 2019 and later corporate income tax returns) The corporation's total actual investment in tangible property in this State. For purposes of this subdivision, the total actual investment in tangible property in this State is 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 (i) reserve for depreciation as permitted for income tax purposes and (ii) any indebtedness specifically incurred and existing solely for and as the result of the purchase of any real estate and any permanent improvements made on the real estate.

History

Section set out twice. - The section above is effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return. For the section as in effect for taxable years beginning before January 1, 2017, see the preceding section, also numbered G.S. 105-122.

Subdivision (b)(2) Set Out Twice. - The first version of subdivision (b)(2) set out above is effective until January 1, 2021. The second version of subsection (b)(2) set out above is effective January 1, 2021.

Subsection (c1) Set Out Twice. - The first version of subsection (c) set out above is effective for taxable years beginning before January 1, 2020. The second version of subsection (c) set out above is effective for taxable years beginning on or after January 1, 2020.

Subdivision (d)(3) Set Out Twice. - The first version of subdivision (d)(3) set out above is effective for taxable years beginning before January 1, 2020. The second version of subdivision (d)(3) set out above is effective for taxable years beginning on or after January 1, 2020, and applicable to the calculation of franchise tax reported on the 2019 and later corporate income tax returns.

Subsection (d2) Set Out Twice. - The first version of subsection (d2) set out above is effective for taxable years beginning before January 1, 2019. The second version of subsection (d2) set out above is effective for taxable years beginning on or after January 1, 2019, and applicable to the calculation of franchise tax reported on the 2018 and later corporate income tax returns.

Editor's Note. - The bracketed word "[the]" was inserted in the first sentence of subsection (d2) at the direction of the Revisor of Statutes.

Session Laws 1998-98, s. 1(i) provides: "This section repeals any law that would otherwise exempt savings and loan associations, as defined in G.S. 54B-4, from the franchise tax imposed in Article 3 of Chapter 105 of the General Statutes."

Session Laws 2007-491, s. 47 provide: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 [repealed] before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Session Laws 2007-491, s. 10, which rewrote subsection (a), was repealed by Session Laws 2008-134, s. 3(a), effective January 1, 2008.

Session Laws 2010-31, s. 31.9(b), provides: "A taxpayer that paid franchise tax in taxable years 2007, 2008, or 2009 and that included billings in excess of costs in its capital base may apply to the Department of Revenue for a refund of any excess tax paid to the extent the refund is the result of the change in the law enacted by this section. A request for a refund must be made on or before January 1, 2011. A request for refund received after that date is barred."

Session Laws 2010-31, s. 1.1, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2010'."

Session Laws 2010-31, s. 32.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2010-2011 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2010-2011 fiscal year."

Session Laws 2010-31, s. 32.6 is a severability clause.

Session Laws 2013-316, s. 4.2(a), as amended by Session Laws 2015-6, s. 2.4(b), provides: "The Utilities Commission must adjust the rate set for the following utilities:

Session Laws 2015-241, ss. 14.30(u) and 32.15(c) both amended this section in the coded bill drafting format provided by G.S. 120-20.1. Section 32.15(c) deleted language in subdivisions (b)(4) and (5) and subsection (d) without accounting for the substitution made by s. 14.30(u). Pursuant to the conforming authority provided in Session Laws 2015-241, s. 14.30(c), the word "Quality" has been deleted in subdivisions (b)(4) and (5) and subsection (d) at the direction of the Revisor of Statutes.

Session Laws 2015-241, s. 32.15(g), as amended by Session Laws 2016-5, s. 1.7(a), made the rewriting of this section by Session Laws 2015-241, s. 32.15(a), applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Session Laws 2015-268, s. 10.1(i), as amended by Session Laws 2016-5, s. 1.7(b), made the amendments to subdivision (b)(1), by Session Laws 2015-268, s. 10.1(a), applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.

Session Laws 2017-57, s. 38.6(b), made the rewriting of subsection (d2) by Session Laws 2017-57, s. 38.6(a), as amended by Session Laws 2017-204, s. 1.3(c), effective for taxable years beginning on or after January 1, 2019, and applicable to the calculation of franchise tax reported on the 2018 and later corporate income tax returns.

Session Laws 2017-57, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2017.'"

Session Laws 2017-57, s. 39.6, is a severability clause.

Session Laws 2017-204, s. 1.3(d), made the amendment to subdivision (d)(3) by Session Laws 2017-204, s. 1.3(b), effective for taxable years beginning on or after January 1, 2020, and applicable to the calculation of franchise tax reported on the 2019 and later corporate income tax returns.

Session Laws 2017-204, s. 7.1, is a severability clause.

Session Laws 2018-5, s. 38.2(j), made the amendment of subsection (b) of this section by Session Laws 2018-5, s. 38.2(b), effective beginning on or after January 1, 2019, and applicable to the calculation of franchise tax reported on the 2018 and later corporate income tax return.

Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

Session Laws 2020-58, s. 5.1(b), made the rewriting of subdivision (b)(2) by Session Laws 2020-58, s. 5.1(a), effective for taxable years beginning on or after January 1, 2021, and applicable to the calculation of franchise tax reported on the 2020 and later corporate income tax returns.

Effect of Amendments. - Session Laws 2003-416, s. 5.(j), effective August 14, 2003, in the first sentence of the first paragraph of subdivision (c)(1), substituted "its capital stock" for "said capital stock," "apportionable" for "business," and "that Article" for "said Article"; in the second paragraph, substituted "Notwithstanding the foregoing, if" for "Provided, that although," "apportionable" for "business," and "this alternative formula" for "such alternative formula"; and in the last paragraph, deleted "Provided, further, that" preceding "a corporation."

Session Laws 2006-95, s. 1.1, effective for taxable years beginning on or after January 1, 2007, rewrote subsection (b).

Session Laws 2006-162, s. 2, effective July 24, 2006, rewrote subsection (d).

Session Laws 2007-491, ss. 2, 10 and 11, effective January 1, 2008, rewrote subsection (a), repealed subsection (c) and added subsection (c1). For applicability, see Editor's note.

Session Laws 2008-134, s. 3(b), effective for taxable years beginning on or after January 1, 2009, rewrote subsection (a).

Session Laws 2009-422, s. 1, as amended by Session Laws 2010-31, s. 31.9(a), effective retroactively for taxable years beginning on or after January 1, 2007, added subdivision (b)(1a).

Session Laws 2009-445, s. 2, effective August 7, 2009, designated the former last paragraph of subsection (b) as subsection (b1); and in subsection (b1), added the subsection heading, and substituted "subsection (b) of this section" for "this subsection" in the introductory language.

Session Laws 2010-89, s. 2(c), effective July 11, 2010, and applicable to requests for alternative apportionment formulas filed on or after that date, in the last paragraph in subdivision (c1)(2), added "unless the provisions of subdivision (3) of this subsection applies" at the end of the third sentence; and added subdivision (c1)(3).

Session Laws 2011-145, s. 31A.2(a), effective for taxable years beginning on or after January 1, 2007, inserted "and for amortization of intangible assets" in subdivision (b)(2).

Session Laws 2011-330, s. 5, effective June 27, 2011, repealed subdivision (c1)(3), which pertained to a 15-Year Alternative method of apportionment.

Session Laws 2012-79, s. 1.14(a), effective June 26, 2012, substituted "G.S. 105-130.2" for "G.S. 105-130.6" in subdivisions (b1)(1), (b1)(3), and (b1)(4).

Session Laws 2013-414, ss. 1(c) and 2(a), effective August 23, 2013, deleted "unless the provisions of subdivision (3) of this subsection applies" following "years" at the end of the third sentence in the second paragraph of subdivision (c1)(2); in subsection (d), substituted "subsection (c1)" for "subsection (c)," and "return is" for "report and statement are" in the first sentence, substituted "is for the privilege" for "shall be for the privilege" in the second sentence, substituted "a corporation may deduct" for "there shall also be deducted" in the fifth sentence, and substituted "section applies" for "section shall apply" in the last sentence; and, in subsection (f), substituted "return and tax required by this section are" for "report, statement and tax required by this section shall be".

Session Laws 2015-241, s. 14.30(u), effective July 1, 2015, substituted "Department of Environmental Quality" for "Department of Environment and Natural Resources" in subdivisions (b)(4) and (5) and subsection (d).

Session Laws 2015-241, s. 32.15(c), (d), as amended by Session Laws 2016-5, s. 1.7(a), effective for taxable years beginning on or after January 1, 2017, rewrote the section. See editor's note for applicability.

Session Laws 2015-268, s. 10.1(a), as amended by Session Laws 2016-5, s. 1.7(b), effective for taxable years beginning on or after January 1, 2017, substituted "amortization as determined" for "amortization is determined" in subdivision (b)(1). See editor's note for applicability.

Session Laws 2017-39, s. 2, effective June 21, 2017, deleted the former second sentence of subsection (a), which read "The tax is determined on the basis of the books and records of the corporation as of the close of its income year"; and added "on the basis of the books and records of the corporation as the close of its income year" at the end of the first sentence of the introductory paragraph of subsection (b).

Session Laws 2017-57, s. 38.6(a), as amended by Session Laws 2017-204, s. 1.3(c), rewrote subsection (d2). For effective date and applicability, see editor's note.

Session Laws 2017-204, s. 1.3(a), effective August 11, 2017, added "for the privilege of doing business in this State and for the continuance of articles of incorporation or domestication of each corporation in this State" at the end of the first sentence of subsection (a); rewrote subsection (d); and added subsection (d2).

Session Laws 2017-204, s. 1.3(b), in subdivision (d)(3), inserted the clause (i) designation and added clause (ii). For effective date and applicability, see editor's note.

Session Laws 2018-5, s. 38.2(b), in subsection (b), in the introductory paragraph, deleted "so long as the method fairly reflects the corporation's net worth for purposes of the tax levied by this section" following "federal tax purposes" in third sentence; added subdivision (b)(1b); and deleted subdivision (b)(3), which read: "A corporation may deduct the cost of treasury stock." For effective date and applicability, see editor's note.

Session Laws 2019-246, s. 3(d), effective November 8, 2019, in subsection (c1), added the third sentence in the introductory language, and added the third sentence in subdivision (c1)(1).

Session Laws 2020-58, s. 5.1(a), rewrote subdivision (b)(2). For effective date and applicability, see editor's note.

Session Laws 2020-58, s. 5.2(b), effective for taxable years beginning on or after January 1, 2020, deleted the former third sentence of subdivision (c1)(1), as added by Session Laws 2019-246, s. 3(d), which read: "The apportionment fraction for a wholesale content distributor, as that term is defined in G.S. 105-130.4A, shall not be less than two percent (2%)."

Legal Periodicals. - For brief comment on the 1953 amendment, see 31 N.C.L. Rev. 435, 441 (1953).

CASE NOTES

Purpose of Section. - The purpose of this section is to levy a tax upon going corporations for the privilege of doing business in this State. Broadwell Realty Corp. v. Coble, 30 N.C. App. 261, 226 S.E.2d 869 (1976), rev'd on other grounds, 291 N.C. 608, 231 S.E.2d 656 (1977).

Power of Legislature. - It is within the legislative power of taxation, in respect to corporations, to levy any two or more of the following taxes simultaneously: (1) on the franchise (including corporate dividends); (2) on the capital stock; (3) on the tangible property of the corporation; and (4) on the shares of the capital stock in the hands of the stockholders. The tax on the two subjects last named is imperative. Board of Comm'rs v. Blackwell Durham Tobacco Co., 116 N.C. 441, 21 S.E. 423 (1895).

Foreign corporations do business here by comity of the State, and the latter may impose a license tax as a condition upon which such corporations may do business here under the protection of our laws, where such is not an interference with interstate commerce, or the tax is not otherwise invalid. Pittsburgh Life & Trust Co. v. Young, 172 N.C. 470, 90 S.E. 568 (1916).

Tax Is on Privilege of Existence. - By the express terms of Laws 1931, c. 427, s. 210, which was superseded by this section, the corporation was liable for the annual franchise tax for each year during which it enjoyed the privilege of the continuance of its charter. It was immaterial whether or not the corporation exercised its privilege of doing or carrying on the business authorized by its charter or certificate of incorporation; it was liable so long as it enjoyed the privilege granted by the State of "being" a corporation. Stagg v. George E. Nissen Co., 208 N.C. 285, 180 S.E. 658 (1935).

Manner of Assessment of Tax by Secretary. - This section does not require that the Secretary use generally accepted accounting principles in making his determination of the franchise tax. Broadwell Realty Corp. v. Coble, 291 N.C. 608, 231 S.E.2d 656 (1977).

The portion of this section in subsection (a) which states that the tax shall be computed from the "books and records of the corporation" is not a requirement that the Secretary follow the categorizations placed upon the information contained in the books and records. Rather, this section authorizes the Secretary to require such facts and information as is deemed necessary to comply with his duty to assess the franchise tax in accordance with the statute. Broadwell Realty Corp. v. Coble, 291 N.C. 608, 231 S.E.2d 656 (1977).

Subsection (b) clearly does not permit a deduction for future income taxes from the franchise tax base. Broadwell Realty Corp. v. Coble, 291 N.C. 608, 231 S.E.2d 656 (1977)(Decided prior to 2006 amendments).

The plaintiff corporation, having voluntarily elected the installment method of accounting for income tax purposes, may not deduct deferred, potential State and federal income tax liabilities from its franchise tax base under subsection (b) as either "definite and accrued legal liabilities" or "accrued taxes." Broadwell Realty Corp. v. Coble, 291 N.C. 608, 231 S.E.2d 656 (1977)(Decided prior to 2006 amendments).

Corporation Not Relieved of License Tax on Carrying on of Particular Business. - The franchise tax imposed upon every corporation doing business in the State is a tax upon the privilege of being a corporation, and its payment does not relieve it, or its lessee, from the payment of a tax imposed upon the privilege of carrying on the particular kind of business for which the corporation was chartered. Cobb v. Commissioners of Durham County, 122 N.C. 307, 30 S.E. 338 (1898).

Effect of Business Corporation Act (now North Carolina Business Corporation Act) on Section. - It is illogical to assume that the legislature intended by the Business Corporation Act (now North Carolina Business Corporation Act), Chapter 55, to void regulations permitting computation of taxes on the cash receipt basis and thereby outlaw that method of accounting, or to invalidate an accepted method of determining capital and surplus for franchise tax returns required by this section. Watson v. Watson Seed Farms, Inc., 253 N.C. 238, 116 S.E.2d 716 (1961)(Decided prior to 2006 amendments).

Textile finishing plant engaged in processing by mechanical and chemical means, for a fee on a contractual basis, unfinished textile goods owned by others into finished textile goods with qualities and characteristics different from those of the unfinished material is engaged in manufacturing within the purview of this section for the purpose of computing its franchise tax liability. Sayles Biltmore Bleacheries, Inc. v. Johnson, 266 N.C. 692, 147 S.E.2d 177 (1966).

Tax on Royalty Payments Paid to Out-of-State Trademark Holder. - North Carolina Secretary of Revenue did not exceed his authority in imposing franchise and income taxes on out-of-state trademark holding companies that entered into licensing agreements with related retail companies that operated in North Carolina, whereby the retail companies paid the holding companies royalties for the use of the trademarks in North Carolina; the holding companies were doing business in North Carolina, and the Secretary's attempt to assess the taxes did not offend the Commerce Clause of the United States Constitution. A&F Trademark, Inc. v. Tolson, 167 N.C. App. 150, 605 S.E.2d 187 (2004), appeal dismissed, 359 N.C. 320, - S.E.2d - (2005), cert. denied, - U.S. - , 126 S. Ct. 353, 163 L. Ed. 2d 62 (2005).

Cited in Duke Power Co. v. Bowles, 229 N.C. 143, 48 S.E.2d 287 (1948); In re Vanderbilt Univ., 252 N.C. 743, 114 S.E.2d 655 (1960); Southern Bell Tel. & Tel. Co. v. Clayton, 266 N.C. 687, 147 S.E.2d 195 (1966); Four County Elec. Membership Corp. v. Powers, 96 N.C. App. 417, 386 S.E.2d 107 (1989); In re Cent. Tel. Co., 167 N.C. App. 14, 604 S.E.2d 680 (2004), appeal dismissed, cert. denied, 359 N.C. 281, 610 S.E.2d 203 (2005); Midrex Techs. v. N.C. Dep't of Revenue, 369 N.C. 250, 794 S.E.2d 785 (2016).

Opinions of Attorney General

Equity Capital of Wholly-Owned Subsidiary Not "Indebtedness" That Parent Corporation May Deduct from Franchise Tax Base. - See opinion of Attorney General to Mr. W.B. Matthews, North Carolina Revenue Department, 41 N.C.A.G. 332 (1971).

§ 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. 57D-1-22. 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.

History

(2006-66, s. 24A.2(c); 2007-323, s. 30.6(b); 2013-157, s. 26.)

Editor's Note. - Session Laws 2006-66, s. 1.2, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2006'."

Session Laws 2006-66, s. 28.6 is a severability clause.

Session Laws 2006-66, s. 24A.2(d), makes this section effective for taxable years beginning on or after January 1, 2007.

Effect of Amendments. - Session Laws 2007-323, s. 30.6(b), effective July 1, 2007, and effective for taxable years beginning on or after January 1, 2007, inserted "(a)(23)" following "G.S. 55-1-22" in the middle of the first sentence.

Session Laws 2013-157, s. 26, effective January 1, 2014, substituted "G.S. 57D-1-22" for "G.S. 57C-1-22(a)" at the end of the first sentence.

§ 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.

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.
(Effective for taxable years beginning before January 1, 2017) 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.
(Effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return) Certain Investment Companies. - A corporation doing business in North Carolina that meets one or more of the following conditions may, in determining its net worth 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.

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.

History

(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; 2015-241, s. 32.15(f); 2016-5, s. 1.7(a).)

Subsection (b) Set Out Twice. - The first version of subsection (b) set out above is effective for taxable years beginning before January 1, 2017. The second version of subsection (b) set out above is effective for taxable years beginning on or after January 1, 2017, and applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.

Editor's Note. - Session Laws 1993, c. 494, s. 1, added the proviso at the end of subsection (a). The amendment, however, was made to the version of the section in effect before its complete revision by Session Laws 1993, c. 485, s. 4. This section has been set out in the form above at the direction of the Revisor of Statutes.

Session Laws 2015-241, s. 32.15(g), as amended by Session Laws 2016-5, s. 1.7(a), made the amendments to subsection (b) by Session Laws 2015-241, s. 32.15(f), applicable to the calculation of franchise tax reported on the 2016 and later corporate income tax return.

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Effect of Amendments. - Session Laws 2008-107, s. 28.7(c), effective for taxable years beginning on or after January 1, 2009, rewrote subsection (b).

Session Laws 2011-330, s. 8, effective June 27, 2011, substituted "determining its capital stock, surplus, and undivided profits base for franchise tax" for "determining its basis for franchise tax" in the introductory paragraph of subsection (b).

Session Laws 2015-241, s. 32.15(f), as amended by Session Laws 2016-5, s. 1.7(a), effective for taxable years beginning on or after January 1, 2017, substituted "net worth base" for "capital stock, surplus, and undivided profits base" in the introductory paragraph of subsection (b). See editor's note for applicability.

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

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

Every corporation, domestic or foreign, that is required to file a return with the Secretary shall, unless otherwise provided, pay annually the franchise tax as required by G.S. 105-122.
Repealed by Session Laws 1998-98, s. 78, effective August 14, 1998.
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.
, (e) Repealed by Session Laws 2002-72, s. 11, effective August 12, 2002.
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.

History

(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; 2013-414, s. 1(d).)

Effect of Amendments. - Session Laws 2011-330, s. 9, effective June 27, 2011, inserted "Part 1 of" in subsection (f).

Session Laws 2013-414, s. 1(d), effective August 23, 2013, rewrote subsection (a), which formerly read "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."

§ 105-128: Recodified as G.S. 105-258.3 by Session Laws 2019-169, s. 6.6(a).

Editor's Note. - This section was recodified as G.S. 105-258.3 by Session Laws 2019-169, s. 6.6(a).

§ 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.

History

(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.)

CASE NOTES

Cited in State v. Stimson, 246 N.C. App. 708, 783 S.E.2d 749 (2016).

§ 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.

History

(§ 105-129.2: 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, s. 1; 1998-55, s. 1; 1999-360, ss. 1, 2; 2000-56, ss. 5(a), 5(b); 2000-173, s. 1(a); 2001-476, s. 1(a), (b); 2002-172, s. 1.5; 2003-416, s. 2; 2003-435, 2nd Ex. Sess., s. 3.1; 2004-170, s. 9; 2006-66, s. 24.16(b); 2010-166, s. 3.2; repealed effective for business activities occurring on or after January 1, 2007. § 105-129.2A: 1997-277, s. 4; 1999-360, s. 18.1; 2000-173, ss. 1(b), 1(c); 2001-476, s. 2(a); 2002-146, s. 2; 2003-435, 2nd Ex. Sess., s. 3.2; 2005-241, ss. 1(a), 1(b); 2006-168, s. 2.1; 2006-252, s. 1.3; 2007-515, ss. 4, 5; 2008-134, s. 69; repealed effective for business activities occurring on or after January 1, 2007. § 105-129.3: 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, s. 1; 1998-55, s. 1; 1999-360, ss. 1, 2; 1999-456, s. 64; 2000-73, s. 1; 2001-94, s. 1; 2001-476, s. 3(a); 2004-202, s. 10; 2004-203, s. 5(e); 2005-241, ss. 4, 6; 2005-406, s. 1; repealed effective for business activities occurring on or after January 1, 2007. § 105-129.3A: 1998-55, s. 1; 1999-360, ss. 1, 2; 2001-414, s. 6; 2001-476, s. 4(a); 2002-172, s. 1.4; 2003-416, s. 2; 2004-203, s. 5(f); 2006-66, s. 24.5(a); repealed effective for business activities occurring on or after January 1, 2007. § 105-129.3B: 2006-66, s. 24.16(a); repealed effective for business activities occurring on or after January 1, 2007. § 105-129.4: 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, ss. 1, 2; 1998-55, s. 1; 1999-305, s. 3; 1999-360, ss. 1, 2; 1999-369, s. 5.2; 2000-56, ss. 5(c), 6, 8(c); 2000-140, ss. 92.A(a),(b); 2001-414, s. 7; 2001-476, ss. 5(a), 6(a); 2002-72, s. 12; 2002-146, ss. 3, 4; 2002-172, ss. 1.2, 1.3(b); 2003-349, s. 8.1; 2003-416, s. 2; 2003-435, 2nd Ex. Sess., ss. 3.3, 3.4; 2004-170, ss. 10, 11; 2004-204, 1st Ex. Sess., s. 2; 2005-241, s. 2; 2006-66, s. 24.14(a); 2007-491, s. 44(1)a; repealed effective for business activities occurring on or after January 1, 2007. § 105-129.5: 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, s. 1; 1998-55, s. 1; 1999-305, s. 4; 1999-360, ss. 1, 2; 2000-56, s. 2; 2001-476, s. 7(b); 2002-146, s. 5; 2003-435, 2nd Ex. Sess., s. 3.5; repealed effective for business activities occurring on or after January 1, 2007. § 105-129.6: 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, s. 1; 1998-55, s. 1; 1999-360, ss. 1, 2; 2000-56, s. 1(a); 2001-476, s. 8(a); 2001-487, s. 123; 2004-170, s. 12; 2004-203, s. 40; 2005-429, s. 2.2; 2006-66, s. 24.16(c); 2010-166, s. 1.1; repealed effective for business activities occurring on or after January 1, 2007. § 105-129.7: 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, s. 1; 1999-360, ss. 1, 2; 2000-56, s. 5(d); 2001-476, s. 9(a); 2006-66, s. 24.16(d); repealed effective for business activities occurring on or after January 1, 2007. § 105-129.8: 1987, c. 568, ss. 1, 2; 1989, c. 111, ss. 1, 2; c. 751, ss. 7(6), 7(7), 8(10), 8(11); c. 753, s. 4.1(a)-(d); 1989 (Reg. Sess., 1990), c. 814, s. 14; 1991, c. 517, ss. 1-3; 1991 (Reg. Sess., 1992), c. 959, ss. 20, 21; 1993, c. 45, ss. 1, 2; c. 485, ss. 7, 11; 1995, c. 370, ss. 5, 6; 1996, 2nd Ex. Sess., c. 13, ss. 3.2-3.4; 1997-277, s. 1; 1998-55, s. 1; 1999-360, s. 1; 2000-56, s. 8(a); 2000-140, s. 92.A(b); 2001-414, s. 8; 2002-146, s. 6; 2003-435, 2nd Ex. Sess., s. 3.6; 2004-170, s. 43(a); 2005-435, s. 28; 2006-66, s. 24.16(e); repealed effective for business activities occurring on or after January 1, 2007. § 105-129.9: 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, s. 1; 1998-55, s. 1; 1999-305, s. 1; 1999-360, ss. 1, 2; 2000-56, s. 8(b); 2000-140, s. 92.A(b); 2000-173, s. 1(a); 2001-476, s. 10(a); 2002-146, s. 7; 2002-172, s. 1.1; 2003-416, s. 2; 2003-435, 2nd Ex. Sess., s. 3.7; 2004-170, s. 13; 2006-66, s. 24.16(f); repealed effective for business activities occurring on or after January 1, 2007. § 105-129.9A: 1999-305, s. 2; 2001-476, s. 11(a); repealed effective for business activities occurring on or after January 1, 2007. § 105-129.10: 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, § 1; 1998-55, s. 1; 1999-360, ss. 1, 2; 2000-173, s. 1(a); 2004-124, s. 32D.1; repealed effective for business activities occurring on or after January 1, 2007. § 105-129.11: 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, s. 1; 1998-55, s. 1; 1999-360, s. 1; 2000-173, s. 1(a); repealed effective for business activities occurring on or after January 1, 2007. § 105-129.12: 1997-277, s. 1; 1998-55, s. 1; 1999-360, s. 1; 2000-56, s. 5(e); 2001-476, s. 12(a); repealed effective for business activities occurring on or after January 1, 2007. § 105-129.12A: 2001-476, s. 13(a); 2002-72, s. 13; repealed effective for business activities occurring on or after January 1, 2007. § 105-129.13: 1999-360, ss. 1, 2; 2000-56, s. 1(b); 2001-414, s. 9; 2001-476, s. 14(a).)

Editor's Note. - Former G.S. 105-129.2 pertained to definitions for this Article relating to tax incentives for new and expanding businesses. Former G.S. 105-129.2A pertained to the sunset provisions and studies. Former G.S. 105-129.3 pertained to enterprise tier designation. Former G.S. 105-129.3A pertained to development zone designation. Former G.S. 105-129.3B pertained to agrarian growth zone designation. Former G.S. 105-129.4 pertained to eligibility and forfeiture. Former G.S. 105-129.5 pertained to tax election, cap, carryforwards, and limitations. Former G.S. 105-129.6 pertained to fees and reports. Former G.S. 105-129.7 pertained to substantiation. Former G.S. 105-129.8 pertained to credit for creating jobs. Former G.S. 105-129.9 pertained to credit for investing in machinery and equipment. Former G.S. 105-129.9A pertained to technology commercialization credit. Former G.S. 105-129.10 pertained to credit for research and development. Former G.S. 105-129.11 pertained to credit for worker training. Former G.S. 105-129.12 pertained to credit for investing in central office or aircraft facility property. Former G.S. 105-129.12A pertained to credit for substantial investment in other property. Former G.S. 105-129.13 pertained to credit for development zone projects.

Session Laws 2011-302, s. 11, effective for taxable years beginning on or after January 1, 2009, amended former G.S. 105-129.12A in the first paragraph of subsection (c), in the last sentence, by deleting "If " from the beginning, and inserting "if (i)" and "and (ii) the taxpayer has failed to maintain at least 125 employees at the property and, within two years of the date the employment fell below 200, to invest at the property the greater of five million dollars ($5,000,000) or at least twice the value of the remaining installments of the credit." However, due to the repeal of this Article pursuant to the sunset provision in former G.S. 105-129.2A(a), effective for business activities occurring on or after January 1, 2007, the amendment has not been given effect.

Session Laws 2011-401, s. 3.8, effective November 1, 2011, amended former G.S. 105-129.4 by substituting "Division of Employment Security" for "Employment Security Commission" in the last paragraph of subsection (b). However, due to the repeal of this Article pursuant to the sunset provision in former G.S. 105-129.2A(a), effective for business activities occurring on or after January 1, 2007, the amendment has not been given effect.

§ 105-129.14: Reserved for future codification purposes.

ARTICLE 3B. Business and Energy Tax Credits.

Sec.

§ 105-129.15. Definitions.

The following definitions apply in this Article:

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.
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.
Recodified as G.S. 105-129.15(5).
Hydroelectric generator. - A machine that produces electricity by water power or by the friction of water or steam.
Repealed by Session Laws 2002-87, s. 3, effective August 22, 2002.
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.
Purchase. - Defined in section 179 of the Code.
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.
Renewable energy property. - Any of the following machinery and equipment or real property:
1. 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.
2. Combined heat and power system property. - Defined in section 48 of the Code.
3. 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.
4. 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.
5. 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.
6. 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.
Renewable fuel. - Either of the following:
1. Biodiesel, as defined in G.S. 105-449.60.
2. Ethanol either unmixed or in mixtures with gasoline that are seventy percent (70%) or more ethanol by volume.

History

(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).)

Editor's Note. - Session Laws 2000-173, s. 1(a) amended Session Laws 1996, Second Extra Session, c. 13, s. 10.2(3), as amended by Session Laws 1999-360, s. 1, to provide for repeal of this Article as provided within the Article. G.S. 105-129.15A, the sunset provision for Article 3B of Chapter 105, was subsequently repealed by Session Laws 2005-413, s. 6.

Session Laws 1999-342, s. 2 amended the heading of Article 3B to read "Business and Energy Tax Credits." Session Laws 1999-360, s. 10 amended the heading to read "Business Tax Credits." The article heading is set out as amended by Session Laws 1999-342, s. 2 at the direction of the Revisor of Statutes.

Subdivisions (4) to (7) were designated as such by the Revisor of Statutes, the designation in Session Laws 1999-342, s. 2 having been subdivisions (3) to (6).

Effect of Amendments. - Session Laws 2004-153, s. 1, effective for taxable years beginning on or after January 1, 2005, added subdivision (8).

Session Laws 2005-413, s. 4, as amended by Session Laws 2006-162, s. 23, effective for taxable years beginning on or after January 1, 2006, inserted "spent pulping liquor" preceding "landfill wastes" in subdivision (6); and deleted "from renewable energy crops or wood waste materials" from the end of the first sentence in subdivision (7)a.

Session Laws 2009-548, s. 1, effective for taxable years beginning on or after January 1, 2009, added subdivisions (7)e. and f.

Session Laws 2010-167, s. 2(a), effective for taxable years beginning on or after January 1, 2010, in subdivision (2), in the second sentence, added "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" at the end, and added the last sentence; added subdivision (4b); added sub-subdivisions (7)b. and (7)c., and redesignated former sub-subdivisions (7)b. through (7)d. as sub-subdivisions (7)d. through (7)f., respectively; in sub-subdivision (7)f., added "or relaying the electricity by cable from the turbine motor to the power grid" at the end; and deleted former sub-subdivisions (7)e. and (7)f., which pertained to geothermal heat pumps and equipment.

CASE NOTES

Solar Heating System. - In a taxation dispute, an argument that a taxpayer's solar heating system did not qualify as such because it created hot water for industrial processes and did not provide heating or cooling for a facility's employees or officers in bathrooms, kitchens, or other interior areas of the facility was rejected. The North Carolina's Tax Code took an expansive view of what constituted a solar heating or cooling system. In re Appeal of: FLS Owner II, LLC, 244 N.C. App. 611, 781 S.E.2d 300 (2016).

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

§ 105-129.16A. (See subsections (e) through (h) for sunset provisions) Credit for investing in renewable energy property.

Credit. - A taxpayer that has constructed, purchased, or leased renewable energy property is allowed a credit equal to thirty-five percent (35%) of the cost of the property if the property is placed in service in this State during the taxable year. 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.
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.
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:
  1. One thousand four hundred dollars ($1,400) per dwelling unit for solar energy equipment for domestic water heating, including pool heating.
  2. 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.
  3. Eight thousand four hundred dollars ($8,400) for each installation of geothermal equipment.
  4. Ten thousand five hundred dollars ($10,500) for each installation of any other renewable energy property.
3. 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.
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.
Sunset. - Except for taxpayers covered by subsection (f) of this section, this section is repealed effective for renewable energy property placed into service on or after January 1, 2016.
Delayed Sunset. - This section is repealed effective for renewable energy property placed in service on or after January 1, 2017, except as provided in subsection (g) of this section.
Alternate Delayed Sunset. - This section is repealed effective for renewable energy property utilizing renewable biomass resources placed in service on or after May 5, 2017.
Delayed Sunset Conditions. - A taxpayer is eligible for the delayed sunset provided by subsection (f) or (g) of this section if the taxpayer makes a timely application for the extension, pays the application fee, and meets both of the following conditions on or before January 1, 2016: (i) incurred at least the minimum percentage of costs of the project and (ii) completed at least the minimum percentage of the physical construction of the project. For a project with a total size of less than 65 megawatts of direct current capacity, the minimum percentage of incurred costs and partial construction is at least eighty percent (80%). For a project with a total size of 65 megawatts or more of direct current capacity, the minimum percentage of incurred costs and partial construction is at least fifty percent (50%).
1. A written certification signed by the taxpayer that, prior to January 1, 2016, at least the minimum percentage of the physical construction of the project was completed and that at least the minimum percentage of the total cost of the project was incurred.
2. A notarized copy of a written report prepared by an independent engineer duly licensed in the State of North Carolina with expertise in the design and construction of installations of renewable energy property stating that at least the minimum percentage of the physical construction of the project was completed prior to January 1, 2016.
3. A notarized copy of a written report prepared by a certified public accountant duly licensed to practice in the State of North Carolina with expertise in accounting for and taxation of renewable energy property and that was prepared in accordance with AT Section 201 of the American Institute of Certified Public Accountants Standards for Agreed-Upon Procedures Engagements stating that the minimum percentage of the total cost of the project was paid or incurred as determined under Section 461 and other relevant sections of the Code prior to January 1, 2016.

An application and payment must be filed with the Secretary on or before October 1, 2015. The application must include the location of the project, an estimate of the total cost of the project, the total anticipated credit to be claimed, and the total size in megawatt capacity of each project proposed or under construction. The nonrefundable fee to be paid with the application is one thousand dollars ($1,000) per megawatt of capacity, with a minimum fee of five thousand dollars ($5,000).

A taxpayer must provide the documentation required under this subsection to the Department on or before March 1, 2016, to verify that the taxpayer meets the minimum percentage of incurred costs and partial construction required to be eligible for the sunset extension:

History

(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); 2015-6, s. 2.6; 2015-11, s. 1; 2015-264, s. 54.3; 2017-57, s. 38.13.)

Editor's Note. - Subsections (f1) and (g), as designated by Session Laws 2017-57, s. 38.13, were redesignated as subsections (g) and (h), respectively, at the direction of the Revisor of Statutes. In conformity with this change, "subsection (g)" was substituted for "subsection (f1)" in subsection (f) and "subsection (f) or (g)" was substituted for "subsection (f) or (f1)" near the beginning of subsection (h).

Session Laws 2017-57, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2017.'"

Session Laws 2017-57, s. 39.6, is a severability clause.

Effect of Amendments. - Session Laws 2005-413, s. 5, effective for taxable years beginning on or after January 1, 2006, substituted "two million five hundred thousand dollars ($2,500,000)" for "two hundred fifty thousand dollars ($250,000)" in subdivision (c)(1); added "including pool heating" to the end of subdivision (c)(2)a.; added subsection (e); and made a minor punctuation change.

Session Laws 2009-548, s. 2, effective for taxable years beginning on or after January 1, 2009, added subdivision (c)(2)d.; and substituted "January 1, 2016" for "January 1, 2011" at the end of subsection (e).

Session Laws 2010-4, s. 1, effective January 1, 2009, and applicable to renewable energy property placed into service on that date, added the last two sentences of subsection (a); and deleted the former last sentence of subsection (b), which read: "No credit is allowed under this section to the extent the cost of the renewable energy property was provided by public funds."

Session Laws 2010-147, s. 5.4, effective for taxable years beginning on or after January 1, 2011, added subdivision (c)(3).

Session Laws 2010-167, s. 2(b), effective for taxable years beginning on or after January 1, 2010, in subsection (a), in the second sentence, substituted "that serves a nonbusiness purpose" for "that serves a single-family dwelling," and added the fourth sentence; and rewrote subsection (c), which formerly pertained to nonresidential and residential property.

Session Laws 2015-6, s. 2.6, effective April 9, 2015, in subsection (a), rewrote the first sentence, which formerly read: "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."

Session Laws 2015-11, s. 1, effective April 30, 2015, substituted "Except for taxpayers covered by subsection (f) of this section" for "This section" at the beginning of subsection (e); and added subsection (f).

Session Laws 2015-264, s. 54.3, effective October 1, 2015, substituted "physical construction of the project was completed" for "project was constructed and installed" in subdivision (f)(2).

Session Laws 2017-57, s. 38.13, effective July 1, 2017, subdivided subsection (f) into subsections (f), (f1), and (g), and added headings to subsections (f1) and (g); added "except as provided in subsection (f1) of this section." at the end of subsection (f) and made a stylistic change; and substituted "subsection (f) or (f1) of this section" for "this subsection" in the first sentence of the first paragraph of subsection (g). See editor's note for subsection redesignations.

§ 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.

Editor's Note. - This section was repealed pursuant to the terms of the sunset provision in former subsection (d), 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, 2014) Credit for constructing renewable fuel facilities.

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.
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.
1. Signs a letter of commitment with the Department of Commerce on or before September 1, 2013, stating the taxpayer's intent to construct and place into service in this State a commercial facility for processing renewable fuel.
2. Begins construction of the facility on or before December 31, 2013.
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.
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.
Sunset. - This section is repealed effective for facilities placed in service on or after January 1, 2014.

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.

Notwithstanding subsection (d) of this section, this section is repealed effective for facilities placed in service on or after January 1, 2020, in the case of a taxpayer that meets both of the following conditions:

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.

History

(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); 2012-36, s. 2; 2013-363, s. 11.3(a); 2016-113, s. 10.)

Effect of Amendments. - Session Laws 2006-66, s. 24.7(a), effective for taxable years beginning on or after January 1, 2006, added subsection (b1); added the first sentence in subsection (c); and substituted "January 1, 2011" for "January 1, 2008" in subsection (d).

Session Laws 2006-259, s. 19.5(a), effective for taxable years beginning on or after January 1, 2006, in the last sentence of subsection (b1), deleted "(a)" following "105-129.17" and added "only and the taxpayer may carry forward unused portions of the credit allowed under this subsection for the succeeding 10 years."

Session Laws 2007-323, s. 31.9(a), effective July 1, 2007, and effective for taxable years beginning on or after January 1, 2007, in subsection (b1), in the first paragraph, in the third sentence, deleted "not" preceding "take" and added "only to the extent allowed under subsection (b) of this section," deleted the former fifth sentence which read: "If a credit allowed under this subsection expires, a taxpayer is not eligible for a credit under subsection (b) of this section with respect to the same property." and deleted "a taxpayer may claim the credit allowed under this subsection against the income tax imposed under Article 4 of this Chapter only and the" preceding "taxpayer may carry" in the last sentence, and added the second paragraph.

Session Laws 2010-95, s. 2, effective July 17, 2010, in subsection (b1), substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the second sentence of the last paragraph.

Session Laws 2010-167, s. 1(a), effective August 2, 2010, substituted "January 1, 2013" for "January 1, 2011" in subsection (d).

Session Laws 2012-36, s. 2, effective June 20, 2012, substituted "January 1, 2014 " for "January 1, 2013" in subsection (d).

Session Laws 2013-363, s. 11.3(a), effective July 29, 2013, added the second paragraph in subsection (b).

Session Laws 2016-113, s. 10, effective July 26, 2016, substituted "January 1, 2020" for "January 1, 2017" in the second paragraph of subsection (b).

§ 105-129.16E: Expired effective January 1, 2010, pursuant to the terms of former subsection (d) of this section.

History

(2006-66, s. 24.4(a); 2007-527, s. 5; 2008-107, s. 28.9A(a).)

Editor's Note. - Former G.S. 105-129.16E pertained to credit for small business employee health benefits.

§ 105-129.16F: Repealed by Session Laws 2012-36, s. 3, effective for taxable years beginning on or after January 1, 2014.

History

(2006-66, s. 24.8(a); 2010-167, s. 1(b); repealed by 2012-36, s. 3, effective January 1, 2014.)

Editor's Note. - Former G.S. 105-129.16F pertained to credit for biodiesel producers.

§ 105-129.16G: Expired by Session Laws 2012-36, s. 4, effective for taxable years beginning on or after January 1, 2014.

History

(2007-323, s. 31.21(a); 2008-134, s. 2(a); 2012-36, s. 4; 2013-10, s. 4; expired by 2012-36, s. 4, effective January 1, 2014.)

Editor's Note. - Former G.S. 105-129.16G pertained to the work opportunity tax credit.

§ 105-129.16H. (For contingent repeal, see subsection (d)) 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.

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.
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.
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.
Sunset. - This section is repealed as of the date that G.S. 105-129.16A is repealed. The repeal applies to donations made for renewable energy property placed in service on or after the date the section is repealed.

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.

History

(2007-397, s. 13(a); 2008-107, s. 28.25(a); 2008-134, s. 70; 2013-414, s. 32.)

Editor's Note. - Session Laws 2007-397, s. 13(e), made this section effective for taxable years beginning on or after January 1, 2008.

Session Laws 2007-397, s. 13(a), enacted this section as G.S. 105-129.16G. It has been renumbered as G.S. 105-129.16H at the direction of the Revisor of Statutes.

Session Laws 2007-397, s. 15, contains a severability clause.

Effect of Amendments. - Session Laws 2008-107, s. 28.25(a), effective for taxable years beginning on or after January 1, 2008, inserted "or unit of State or local government" and "or unit" throughout the section; and in the first sentence of subsection (a), substituted "donation is used" for "nonprofit organization uses the donation."

Session Laws 2008-134, s. 70, effective July 28, 2008, substituted "for the taxable year" for "in the year" in the third sentence of the second paragraph of subsection (a).

Session Laws 2013-414, s. 32, effective August 23, 2013, added subsection (d).

§ 105-129.16I. (Repealed effective for a renewable energy property facility placed in service on or after January 1, 2014) Credit for a renewable energy property facility.

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.
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.
Sunset. - This section is repealed effective for a renewable energy property facility placed in service on or after January 1, 2014.

History

(2010-167, s. 3(a).)

Editor's Note. - Session Laws 2010-167, s. 3(b), made this section effective for taxable years beginning on or after January 1, 2011.

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

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).
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.
Applicability. - This section applies only to taxable years 2010 and 2011.

History

(2010-31, s. 31.1A(a).)

Editor's Note. - Session Laws 2010-31, s. 31.1A(b), provides: "This act is effective for taxes imposed for taxable years beginning on or after January 1, 2010."

Session Laws 2010-31, s. 1.1, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2010'."

Session Laws 2010-31, s. 32.6 is a severability clause.

§ 105-129.17. Tax election; cap.

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.
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.

History

(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.)

Effect of Amendments. - Session Laws 2009-548, s. 3, effective for taxable years beginning on or after January 1, 2009, in subsection (a), added the present first sentence of the subsection and substituted "All other credits" for "The credits" at the beginning of the present second sentence.

§ 105-129.18. 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.

History

(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:

The number of taxpayers that took the credits allowed in this Article.
The cost of renewable energy property with respect to which credits were taken.
Repealed by Session Laws 2002-87, s. 6, effective August 22, 2002.
The total cost to the General Fund of the credits taken.

History

(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.)

Editor's Note. - Session Laws 2010-166, s. 4, provides in part, "The first claim for refund by a taxpayer whose sales tax refund period is changed by this act is due within six months after July 1, 2010, and applies to purchases during the time period not covered by the taxpayer's last claim for refund."

Effect of Amendments. - Session Laws 2005-429, s. 2.3, effective January 1, 2007, rewrote the introductory paragraph and made minor stylistic changes throughout.

Session Laws 2010-166, s. 1.2, effective July 1, 2010, in the section catchline, substituted "Report" for "Reports"; rewrote the introductory paragraph, which formerly read: "The Department of Revenue must publish by May 1 of each year the following information for the 12-month period ending the preceding December 31"; and deleted "business property and" preceding "renewable energy" in subdivision (2).

§§ 105-129.20 through 105-129.24: Reserved for future codification purposes.

ARTICLE 3C. Tax Incentives for Recycling Facilities.

Sec.

§ 105-129.25. Definitions.

The following definitions apply in this Article:

Reserved.
Reserved.
Repealed by Session Laws 2010-166, s. 2.1, effective July 1, 2010.
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.
Major recycling facility. - A recycling facility that qualifies under G.S. 105-129.26(a).
Owner. - A person who owns or leases a recycling facility.
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.
Purchase. - Defined in section 179 of the Code.
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.

History

(1998-55, s. 12; 2010-166, s. 2.1.)

Effect of Amendments. - Session Laws 2010-166, s. 2.1, effective July 1, 2010, deleted subdivision (3), which was the definition for "large recycling facility."

§ 105-129.26. Qualification; forfeiture.

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 a development tier one area as defined in G.S. 143B-437.08.
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. Repealed by Session Laws 2014-3, s. 14.2, effective May 29, 2014.
Repealed by Session Laws 2010-166, s. 2.1, effective July 1, 2010.
Forfeiture. - If the owner of a 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.
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.
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.

History

(1998-55, s. 12; 2005-429, s. 2.4; 2007-491, s. 44(1)a; 2010-166, ss. 1.3, 2.1; 2013-414, s. 33; 2014-3, s. 14.2.)

Editor's Note. - Session Laws 2007-491, s. 47 provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Session Laws 2010-166, s. 4, provides in part, "The first claim for refund by a taxpayer whose sales tax refund period is changed by this act is due within six months after July 1, 2010, and applies to purchases during the time period not covered by the taxpayer's last claim for refund."

Effect of Amendments. - Session Laws 2005-429, s. 2.4, effective January 1, 2007, rewrote subsection (e) and subdivision (e)(4).

Session Laws 2007-491, s. 44(1)a, effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the third sentence of subsection (c). For applicability, see Editor's note.

Session Laws 2010-166, ss. 1.3 and 2.1, effective July 1, 2010, deleted subsection (b), which was the definition for "large recycling facility"; rewrote the introductory paragraph of subsection (e), which formerly read: "Reports. - The Department of Commerce and the Department of Revenue shall jointly publish by May 1 of each year the following information itemized by taxpayer for the 12-month period ending the preceding December 31:"; and, in subdivision (e)(1), deleted "large and" preceding "major recycling facilities."

Session Laws 2013-414, s. 33, effective August 23, 2013, deleted "large or" preceding "major recycling" near the beginning of subsection (c).

Session Laws 2014-3, s. 14.2, effective May 29, 2014, in subsection (a), substituted "a development tier one area as defined in G.S. 143B-437.08" for "an enterprise tier one area pursuant to G.S. 105-129.3" in subdivision (a)(1), and deleted former subdivision (a)(3), which read: "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."

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

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.
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.
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.
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.
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.
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.

History

(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.)

Editor's Note. - Session Laws 2007-491, s. 47, provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Effect of Amendments. - Session Laws 2007-491, s. 44(1)a, effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the second sentence of subsection (e). For applicability, see Editor's note.

Session Laws 2009-445, s. 3(a), effective for taxable years beginning on or after January 1, 2007, substituted "G.S. 105-129.9 or G.S. 105-129.88" for "G.S. 105-129.9" in subsection (f).

Session Laws 2010-166, s. 2.1, effective July 1, 2010, in the section heading, deleted "large or" preceding "major"; and, in subsection (a), deleted the last sentence, which read: "An owner that purchases or leases machinery and equipment for a large recycling facility in this State during the taxable year is allowed a credit equal to twenty percent (20%) of the amount payable by the owner during the taxable year to purchase or lease the machinery and equipment."

Legal Periodicals. - See legislative survey, 21 Campbell L. Rev. 323 (1999).

§ 105-129.28: Repealed by Session Laws 1998-55, s. 19, effective for taxable years beginning on or after January 1, 2008.

History

(1998-55, s. 12; repealed by 1998-55, s. 19, effective for taxable years beginning on or after January 1, 2008.)

Editor's Note. - Former G.S. 105-129.28 pertained to credit for reinvestment.

§§ 105-129.29 through 105-129.34: Reserved for future codification purposes.

ARTICLE 3D. Historic Rehabilitation Tax Credits.

(See G.S. 105-129.39 for repeal of this Article.)

Sec.

§ 105-129.35. (See note for repeal) Credit for rehabilitating income-producing historic structure.

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.
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.
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.

History

(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.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.39.

Editor's note. - Session Laws 1999-389, s. 6, provides that Article 3D of Chapter 105 of the General Statutes, as amended by this act, incorporates both G.S. 105-130.42 and G.S. 105-151.23.

Session Laws 1999-389, s. 9, as amended by Session Laws 2001-476, s. 19(a), and as amended by Session Laws 2003-415, s. 1, provides that G.S. 105-129.35(b), as amended by Session Laws 1999-389, is repealed effective January 1, 2008, for property placed in service on or after that date. Session Laws 2007-461, s. 1, effective August 28, 2007, removed the sunset provision applicable to subsection (b).

Effect of Amendments. - Session Laws 2003-284, s. 35A.1, effective July 15, 2003, added the last sentence in subsection (a); and added subdivision (c)(4).

Session Laws 2003-415, s. 2, effective for taxable years beginning on or after January 1, 2003, in the first sentence of subsection (b), deleted "the amount of credit allocated to an owner does not exceed" following "discretion as long as," substituted "an owner's" for "the owner's," and inserted "is at least forty percent (40%) of the amount of credit allocated to that owner" following "is placed in service."

Session Laws 2003-416, s. 4.(c), effective August 14, 2003, rewrote subdivision (c)(2).

Session Laws 2004-170, s. 14, effective August 2, 2004, substituted "105-129.36" for "105-129.6" in subdivision (c)(4).

Session Laws 2006-40, s. 2, effective for taxable years beginning on or after January 1, 2006, and applicable to eligible sites placed into service on or after July 1, 2006, added the second sentence in subsection (a).

§ 105-129.36. (See note for repeal) Credit for rehabilitating nonincome-producing historic structure.

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.
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.
Recodified as G.S. 105-129.36A by Session Laws 2003-284, s. 35A.2, effective July 15, 2003.

History

(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.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.39.

Editor's note. - Session Laws 1999-389, s. 6, provides that Article 3D of Chapter 105 of the General Statutes, as amended by this act, incorporates both G.S. 105-130.42 and G.S. 105-151.23.

Subdivisions (b)(1) to (b)(3) were designated as such by the Revisor of Statutes, the designations in Session Laws 1999-389, s. 5 having been subdivisions (b)(2), (b)(3), and (b)(3a).

Effect of Amendments. - Session Laws 2003-284, ss. 35A.2 and 35A.3, effective July 15, 2003, in the third sentence of subsection (a), substituted "provide" for "attach to the return"; and recodified and rewrote former subsection (c) as present G.S. 105-129.36A.

Session Laws 2006-40, ss. 3 and 4, effective for taxable years beginning on or after January 1, 2006, and applicable to eligible sites placed into service on or after July 1, 2006, added the second sentence in subsection (a) and substituted "Officer" for "Officer prior to the commencement of the work" in subdivision (b)(1).

§ 105-129.36A. (See note for repeal) Rules; fees.

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.
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 Natural and 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 Natural and Cultural Resources and must be used for performing its duties under this Article.

History

(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; 2015-241, s. 14.30(s).)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.39.

Editor's note. - Session Laws 1999-389, s. 6, provides that Article 3D of Chapter 105 of the General Statutes, as amended by this act, incorporates both G.S. 105-130.42 and G.S. 105-151.23.

Session Laws 2003-284, s. 48.1, provides: "Parts 32 through 47 of this act do not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by those parts before the effective date of its amendment or repeal; nor do they affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal."

Session Laws 2003-284, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2003'."

Session Laws 2003-284, s. 49.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2003-2005 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2003-2005 fiscal biennium."

Session Laws 2003-284, s. 49.5 is a severability clause.

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Effect of Amendments. - Session Laws 2003-284, s. 35A.2, effective July 15, 2003, recodified and rewrote former G.S. 105-129.36(c) as present G.S. 105-129.36A.

Session Laws 2015-241, s. 14.30(s), effective July 1, 2015, substituted "Department of Natural and Cultural Resources" for "Department of Cultural Resources" twice in subsection (b).

§ 105-129.37. (See note for repeal) Tax credited; credit limitations.

Tax Credited. - The credits provided in this Article are allowed against the income taxes levied in Article 4 of this Chapter.
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.
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.
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.
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.
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.

History

(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.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.39.

Editor's note. - Session Laws 1999-389, s. 6, provides that Article 3D of Chapter 105 of the General Statutes, as amended by this act, incorporates both G.S. 105-130.42 and G.S. 105-151.23.

Session Laws 2007-491, s. 47 provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Effect of Amendments. - Session Laws 2007-491, s. 44(1)a, effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the first sentence of subsection (f). For applicability, see Editor's note.

§ 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:

The number of taxpayers that took the credits allowed in this Article.
The amount of rehabilitation expenses and qualified rehabilitation expenditures with respect to which credits were taken.
The total cost to the General Fund of the credits taken.

History

(2005-429, s. 2.5; 2010-166, s. 1.4.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.39.

Editor's Note. - Session Laws 2005-429, s. 4, made this section effective January 1, 2007.

Effect of Amendments. - Session Laws 2010-166, s. 1.4, effective July 1, 2010, in the section catchline, substituted "Report" for "Reports"; and rewrote the introductory paragraph, which formerly read: "The Department of Revenue must publish by May 1 of each year the following information for the 12-month period ending the preceding December 31."

§ 105-129.39. Sunset.

This Article expires for qualified rehabilitation expenditures and rehabilitation expenses incurred on or after January 1, 2015. For qualified rehabilitation expenditures and rehabilitation expenses incurred prior to January 1, 2015, this Article expires for property not placed in service by January 1, 2023.

History

(2010-166, s. 1.5; 2012-36, s. 12(a); 2018-5, s. 38.10(j).)

Editor's Note. - Session Laws 2010-166, s. 4, made this section effective July 1, 2010.

Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

Effect of Amendments. - Session Laws 2012-36, s. 12(a), effective June 20, 2012, substituted "January 1, 2015" for "January 1, 2014".

Session Laws 2018-5, s. 38.10(j), effective June 12, 2018, added the second sentence.

CASE NOTES

Bankruptcy. - Debtor was not entitled to modify her confirmed plan to afford her additional time to market and sell certain encumbered real estate because the "change" was prospective discontinuation of tax credits impacting property and that change was neither substantial nor unforeseeable, particularly since parties were on notice that tax credit statute was set to expire. In re Gardner, 522 B.R. 137 (Bankr. W.D.N.C. 2014).

ARTICLE 3E. Low-Income Housing Tax Credits.

(See note for repeal of this Article.)

Sec.

§ 105-129.40. (See note for repeal) Scope and definitions.

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.
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.

History

(2002-87, s. 1; 2003-416, s. 3.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.45.

Effect of Amendments. - Session Laws 2003-416, s. 3, effective August 14, 2003, rewrote the section.

§ 105-129.41. (See note for repeal) Credit for low-income housing awarded a federal credit allocation before January 1, 2003.

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%).
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.
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.
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.
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.
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.
2. Expired pursuant to Session Laws 2000-56, s. 10(f), effective January 1, 2005.
3. 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.
4. 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.
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.
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.
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.
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.

History

(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.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.45.

Editor's Note. - The number of this section was assigned by the Revisor of Statutes, the number in Session Laws 1999-360, s. 11 having been G.S. 105-129.16A.

Session Laws 2000-56, s. 10(f), as amended by Session Laws 2002-126, s. 30H, makes the amendment to subsection (d) by s. 7 of the act effective for taxable years beginning on or after January 1, 2000, and makes the amendment to subsection (a) and the addition of subdivision (c)(1a) effective for taxable years beginning on or after January 1, 2001, and applicable to buildings to which federal credits are allocated on or after January 1, 2000. Session Laws 2000-56, s. 10(f) had provided for the expiration of the amendment to subsection (a) by that act, and for the expiration of subdivision (c)(1a) on January 1, 2005. However, Session Laws 2002-87, s. 2 apparently superseded the sunset date as to subsection (a) by striking through the statutory language of the second version, but in subdivision (c)(1a) simply deleted the editorially inserted parenthetical reflecting the sunset date. At the direction of the Revisor of Statutes, subdivision (c)(1a) is now shown as having expired effective January 1, 2005.

Session Laws 2002-87, s. 1, which enacted Article 3E, G.S. 105-129.40 et seq., originally designated this section as "Reserved."

Session Laws 2007-491, s. 47, provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Effect of Amendments. - Session Laws 2000-56, s. 7, effective for taxable years beginning on or after January 1, 2001, and applicable to buildings to which federal credits are allocated on or after January 1, 2000, in the last sentence of subsection (a), inserted "or (c)(1a)" following "condition (c)(1)"; and added subdivision (c)(1a).

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, recodified former G.S. 105-129.16B as this section and in the section, added "awarded a federal credit allocation before January 1, 2003" in the catchline; deleted the version of subsection (a) that would have gone into effect on January 1, 2005; added subsections (a1) and (a2); at the end of the first sentence of subsection (b1), substituted "an owner's adjusted basis in the pass-through entity ... credit allocated to that owner" for "the amount of credit allocated to an owner does not exceed the 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"; substituted "Qualifying Buildings - As" for "Definitions - The definitions in section 42 of the Code apply to this section. In addition, as" at the beginning of subsection (c); deleted "(Expires January 1, 2005)" at the beginning of subdivision (c)(1a); in subsection (e), inserted "must report the recapture event to the Secretary and to the Housing Finance Agency. The taxpayer" and inserted the last sentence; and in subsection (f), inserted "must report the change to the Secretary and to the Housing Finance Agency. The owner." See editor's note.

Session Laws 2007-491, s. 44(1)a, effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the first sentence of subsection (g). For applicability, see Editor's note.

§ 105-129.42. (See note for repeal) Credit for low-income housing awarded a federal credit allocation on or after January 1, 2003.

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.
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.
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.
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.
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.
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.
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.
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.
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.
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.

Type of Development Percentage of Basis for Which Credit Is Allowed Forty percent (40%) of the qualified residential units are affordable to households whose income is fifty percent (50%) or less of area median income and the units are in a Low-Income county or city. Thirty percent (30%) Fifty percent (50%) of the qualified residential units are affordable to households whose income is fifty percent (50%) or less of the area median income and the units are in a Moderate-Income county or city. Twenty percent (20%) Fifty percent (50%) of the qualified residential units are affordable to households whose income is forty percent (40%) or less of the area median income and the units are in a High-Income county or city. Ten percent (10%) Twenty-five percent (25%) of the qualified residential units are affordable to households whose income is thirty percent (30%) or less of the area median income and the units are in a High-Income county or city. Ten percent (10%)

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.

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:

History

(2002-87, s. 1; 2003-416, ss. 6-8; 2004-110, s. 4.2; 2007-491, s. 44(1)a.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.45.

Editor's Note. - Session Laws 2007-491, s. 47, provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Effect of Amendments. - Session Laws 2003-416, ss. 6, 7, and 8, effective August 14, 2003, in subdivision (a)(3), made minor stylistic changes; in subdivision (g)(2), inserted "date the" following "after the," and deleted "date" following "service"; in the second sentence of subsection (i), deleted "rate" following "interest."

Session Laws 2004-110, s. 4.2, effective July 17, 2004, substituted "qualified" for "eligible" throughout subsections (b) and (c) and once in subdivision (g)(1).

Session Laws 2007-491, s. 44(1)a, effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the first sentence of subsection (i). For applicability, see Editor's note.

Session Laws 2007-491, s. 44(1)a, effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the first sentence of subsection (g). For applicability, see Editor's note.

§ 105-129.43. (See 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.

History

(2002-87, s. 1.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.45.

§ 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:

The number of taxpayers that took the credit allowed in this Article.
The location of each qualified North Carolina low-income building or housing development for which a credit was taken.
The total cost to the General Fund of the credits taken.

History

(2002-87, s. 1; 2005-429, s. 2.6; 2010-166, s. 1.6.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.45.

Effect of Amendments. - Session Laws 2005-429, s. 2.6, effective January 1, 2007, rewrote the introductory language and made minor stylistic changes throughout.

Session Laws 2010-166, s. 1.6, effective July 1, 2010, rewrote the introductory paragraph, which formerly read: "The Department of Revenue must publish by May 1 of each year the following information for the 12-month period ending the preceding December 31."

§ 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.

History

(2002-87, s. 1; 2004-110, s. 4.1; 2008-107, s. 28.3(a).)

Effect of Amendments. - Session Laws 2004-110, s. 4.1, effective July 17, 2004, substituted "2010" for "2006" twice.

Session Laws 2008-107, s. 28.3(a), effective July 16, 2008, substituted "January 1, 2015" for "January 1, 2010" twice.

§§ 105-129.46 through 105-129.49: Reserved for future codification purposes.

ARTICLE 3F. Research and Development.

(See note for repeal of this Article.)

Sec.

§ 105-129.50. (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:

Development tier one area. - Defined in G.S. 143B-437.08.
Full-time job. - Defined in G.S. 105-129.81.
Reserved.
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.
Repealed by Session Laws 2013-316, s. 2.3(b), effective for taxable years beginning on or after January 1, 2014.
Period of measurement. - Defined in the Small Business Size Regulations of the federal Small Business Administration.
Qualified North Carolina research expenses. - Qualified research expenses, other than North Carolina university research expenses, for research performed in this State.
Receipts. - Defined in the Small Business Size Regulations of the federal Small Business Administration.
Related person. - Defined in G.S. 105-163.010.
Research university. - An institution of higher education that meets one or both of the following conditions:
1. 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.
2. It is a constituent institution of The University of North Carolina.
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).

History

(2004-124, s. 32D.2; 2010-147, s. 3.2; 2011-330, s. 4; 2013-316, s. 2.3(b).)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105- 129.51(b).

Editor's Note. - Session Laws 2010-147, s. 3.1, effective for taxable years beginning on or after January 1, 2011, rewrote the Article 3F heading, which formerly read "Research and Development."

Effect of Amendments. - Session Laws 2010-147, s. 3.2, effective for taxable years beginning on or after January 1, 2011, added subdivisions (2) and (3) and made a conforming change in subdivision (1); and added subdivision (4a).

Session Laws 2011-330, s. 4, effective June 27, 2011, added subdivision (1).

Session Laws 2013-316, s. 2.3(b), effective for taxable years beginning on or after January 1, 2014, deleted subdivision (4a).

§ 105-129.51. (See note for repeal) Taxpayer standards and sunset.

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.
This Article is repealed for taxable years beginning on or after January 1, 2016.
Repealed by Session Laws 2004-124, s. 32D.4, effective for taxable years beginning on or after January 1, 2006.

History

(2004-124, ss. 32D.2, s. 32D.4; 2006-252, s. 2.20; 2008-107, s. 28.2(a); 2010-147, s. 3.3; 2013-316, s. 2.3(c).)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.51(b).

Editor's Note. - Session Laws 2013-316, s. 9(a), provides: "This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this act before the effective date of its amendment or repeal; nor does it affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal."

Session Laws 2013-316, s. 2.3(c), which substituted "January 1, 2016" for "January 1, 2014" in subsection (b), was effective for taxable years beginning on or after January 1, 2014.

Effect of Amendments. - Session Laws 2004-124, s. 32D.4, effective for taxable years beginning on or after January 1, 2006, repealed subsection (c).

Session Laws 2006-252, s. 2.20, effective January 1, 2007, substituted "G.S. 105-129.83(c), (d), (e), and (f)" for "G.S. 105-129.4(b), (b2), (b3), and (b4)" in subsection (a).

Session Laws 2008-107, s. 28.2(a), effective July 16, 2008, substituted "January 1, 2014" for "January 1, 2009" in subsection (b).

Session Laws 2010-147, s. 3.3, effective for taxable years beginning on or after January 1, 2011, rewrote the section catchline, which formerly read: "Administration; sunset"; and in subsection (a), substituted "a credit" for "the credit," substituted "G.S. 105-129.83(c), (d), (e), (f), and (g)" for "G.S. 105-129.83(c), (d), (e), and (f)," inserted "and overdue tax debts," and made related grammatical changes.

Session Laws 2013-316, s. 2.3(c), effective for taxable years beginning on or after January 1, 2014, substituted "January 1, 2016" for "January 1, 2014" in subsection (b).

§ 105-129.52. (See note for repeal) Tax election; cap.

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.
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.

History

(2004-124, s. 32D.2; 2010-96, s. 40.3; 2010-147, s. 3.4.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3F, see G.S. 105-129.51(b).

Editor's Note. - Session Laws 2010-147, s. 3.4, stated in its prefatory language that "G.S. 150-129.52 reads as rewritten." The prefatory language was amended by Session Laws 2010-96, s. 40.3, to read "G.S. 105-129.52 reads as rewritten."

Session Laws 2010-96, s. 40.3 was contingent upon House Bill 1973, 2009 Regular Session, becoming law. House Bill 1973 was enacted as Session Laws 2010-147.

Effect of Amendments. - Session Laws 2010-147, s. 3.4, as amended by Session Laws 2010-96, s. 40.3, effective July 20, 2010, substituted "A credit" for "The credit" at the beginning of subsection (a).

§ 105-129.53. (See note for repeal) 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.

History

(2004-124, s. 32D.2.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3F, see G.S. 105-129.51(b).

Editor's Note. - Session Laws 2010-147, ss. 3.1 through 3.6 and 5.5, effective for taxable years beginning on or after January 1, 2011, rewrote the Article 3F heading, amended G.S. 105-129.50 through 105-129.52 and G.S. 105-129.54 through 105- 129.55, and enacted G.S. 105-129.56. G.S. 105- 129.53 was not amended by Session Laws 2010- 147.

§ 105-129.54. (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:

The number of taxpayers that took a credit allowed in this Article, itemized by the categories of small business, low-tier, university research, Eco-Industrial Park, and other.
The amount of each credit taken in each category.
The total cost to the General Fund of the credits taken.

History

(2004-124, s. 32D.2; 2005-429, s. 2.7; 2010- 147, s. 3.5; 2010-166, s. 1.7; 2013-316, s. 2.3(d).)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.51(b).

Session Laws 2013-316, s. 9(a), provides: "This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this act before the effective date of its amendment or repeal; nor does it affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal."

Effect of Amendments. - Session Laws 2005-429, s. 2.6, effective January 1, 2007, in the introductory language, substituted "publish" for "report to the Revenue Laws Study Committee and the Fiscal Research Division of the General Assembly" and "December 31" for "April 1"; substituted "took" for "claimed" in subdivision (1); and substituted "taken" for "claimed" in subdivisions (2) and (3).

Session Laws 2010-147, s. 3.5, effective for taxable years beginning on or after January 1, 2011, in the introductory language, inserted "credit and by"; and rewrote subdivision (1), which formerly read: "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."

Session Laws 2010-166, s. 1.7, effective July 1, 2010, in the section catchline, substituted "Report" for "Reports"; and rewrote the introductory paragraph, which formerly read: "The Department of Revenue must publish by May 1 of each year the following information itemized by taxpayer for the 12-month period ending the preceding December 31."

Session Laws 2013-316, s. 2.3(d), effective for taxable years beginning on or after January 1, 2014, in subdivision (1), substituted "Article," for "Article. The credit allowed under G.S. 105-129.55 must be" and deleted the former third sentence, which read "The credit allowed under G.S. 105-129.56 must be itemized by the categories of higher education collaboration and other."

§ 105-129.55. (See note for repeal) Credit for North Carolina research and development.

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%).
3. University research. - For North Carolina university research expenses, the applicable percentage is twenty percent (20%).
4. 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%).
5. 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:
Repealed by Session Laws 2010-147, s. 5.5, effective January 1, 2011.

Expenses Over Up To Rate -0- $50 million 1.25% $50 million $200 million 2.25% $200 million - 3.25%

History

(2004-124, s. 32D.2; 2006-252, s. 2.1; 2007-323, s. 31.8(a); 2010-147, s. 5.5.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3F, see G.S. 105-129.51(b).

Session Laws 2006-252, s. 2.1, effective January 1, 2007, substituted "a development tier one" for "an enterprise tier one, two, or three" in subdivision (a)(2).

Session Laws 2007-323, s. 31.8(a), effective for taxable years beginning on or after January 1, 2007, in subsection (a), substituted "three and one-quarter percents (3.25%)" for "three percent (3%)" at the end of subdivisions (a)(1) and (a)(2), and, in the table in subdivision (a)(3), substituted "(1.25%)" for "(1%)," "(2.25%)" for "(2%)," and "(3.25%)" for "(3%)"; and substituted "twenty percent (20%)" for "fifteen percent (15%)" in subsection (b).

Session Laws 2010-147, s. 5.5, effective for taxable years beginning on or after January 1, 2011, in the first paragraph substituted "section" for "subsection" throughout, and in the last sentence, substituted "under more than one subdivision of this section" for "under subdivision (2) of this subsection and the remainder qualifies under subdivision (3) of this subsection"; added subdivisions (2a) and (2b); in subdivision (3), substituted "under another subdivision of this section" for "under subdivision (1) or (2) of this subsection"; and deleted subsection (b), which pertained to North Carolina University Research expenses.

§ 105-129.56: Repealed by Session Laws 2013-316, s. 2.3(b), effective for taxable years beginning on or after January 1, 2014.

History

(2010-147, s. 3.6; repealed by 2013-316, s. 2.3(b), effective for taxable years beginning on or after January 1, 2014.)

Editor's Note. - Former G.S. 105-129.56 pertained to interactive digital media.

§§ 105-129.57 through 105-129.59: Reserved for future codification purposes.

ARTICLE 3G. Tax Incentives for Major Computer Manufacturing Facilities.

§§ 105-129.60 through 105-129.66: Repealed by Session Laws 2010-166, s. 2.2, effective July 1, 2010.

History

(§§ 105-129.60, 105-129.61: 2004-204, 1st Ex. Sess., s. 1, repealed by 2010-166, s. 2.2, effective July 1, 2010. § 105-129.62: 2004-204, 1st Ex. Sess., s. 1; 2005-435, s. 29(a), (b), (c). § 105-129.63: 2004-204, 1st Ex. Sess., s. 1; 2005-435, s. 29(d); 2007-491, s. 44(1)a., repealed by 2010-166, s. 2.2, effective July 1, 2010. §§ 105-129.64, 105-129.65: 2004-204, 1st Ex. Sess., s. 1, repealed by 2010-166, s. 2.2, effective July 1, 2010. § 105-129.6A5: 2005-429, s. 2.8, repealed by 2010-166, s. 2.2, effective July 1, 2010. § 105-129.66: 2004-204, 1st Ex. Sess., s. 1, repealed by 2010-166, s. 2.2, effective July 1, 2010.)

Editor's Note. - Former G.S. 105-129.60 pertained to legislative findings. Former G.S. 105-129.61 pertained to definitions. Former G.S. 105-129.62 pertained to eligibility. Former G.S. 105-129.63 pertained to determinations by the Secretary of Commerce. Former G.S. 105-129.64 pertained to credit for major computer manufacturing facilities. Former G.S. 105-129.65 pertained to allocation; cap; makeup; and carryforward. Former G.S. 105-129.65A pertained to reports. Former G.S. 105-129.66 was a sunset provision for Article 3G.

§§ 105-129.67 through 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.)

Sec.

§ 105-129.70. (See note for repeal) Definitions.

The following definitions apply in this Article:

Certified historic structure. - Defined in section 47 of the Code.
Certified rehabilitation. - Defined in G.S. 105-129.36.
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.
Development tier area. - Defined in G.S. 143B-437.08.
Eligibility certification. - The certification obtained from the State Historic Preservation Officer that the applicable facility comprises an eligible site.
Eligible site. - A site located in this State that satisfies all of the following conditions:
1. 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.
2. It is a certified historic structure or a State-certified historic structure.
3. 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.
4. Repealed by Session Laws 2008-107, s. 28.4(a), effective for taxable years beginning on or after January 1, 2008.
Repealed by Session Laws 2006-252, s. 2.22, effective January 1, 2007.
Pass-through entity. - Defined in G.S. 105-228.90.
Qualified rehabilitation expenditures. - Defined in section 47 of the Code.
Rehabilitation expenses. - Defined in G.S. 105-129.36.
State-certified historic structure. - Defined in G.S. 105-129.36.
State Historic Preservation Officer. - Defined in G.S. 105-129.36.

History

(2006-40, s. 1; 2006-252, s. 2.22; 2008-107, s. 28.4(a).)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.75.

Effect of Amendments. - Session Laws 2006-252, s. 2.22, effective January 1, 2007, added subdivision (3a) and deleted subdivision (6), which read: "Enterprise tier area. - Defined in G.S. 105-129.3."

Session Laws 2008-107, s. 28.4(a), effective for taxable years beginning on or after January 1, 2008, in subdivision (3), inserted "a certified rehabilitation of"; in subdivision (4), deleted "and that the rehabilitation is a certified rehabilitation" from the end; and deleted subdivision (5)d, which read: "The cost certification documents that the qualified rehabilitation expenditures for a site for which a taxpayer is allowed a credit under section 47 of the Code or the rehabilitation expenses for a site for which the taxpayer is not allowed a credit under section 47 of the Code exceed three million dollars ($3,000,000) for the site as a whole."

§ 105-129.71. (See note for repeal) Credit for income-producing rehabilitated mill property.

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.
Credit for Rehabilitated Railroad Station. - A taxpayer who is allowed a credit under section 47 of the Code for making qualified rehabilitation expenditures of at least ten million dollars ($10,000,000) with respect to a certified rehabilitation of an eligible railroad station is allowed a credit equal to a percentage of the expenditures that qualify for the federal credit. 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 equal to forty percent (40%) of the qualified rehabilitation expenditures. The credit cannot be claimed for a taxable year beginning prior to January 1, 2021. The tax credit must be taken in two equal installments on returns filed for taxable years 2021 and 2022. The sum of the two installments is equal to the credit amount allowed for qualified rehabilitation expenditures incurred in taxable years 2019, 2020, and 2021.
1. It was used as a manufacturing facility and either (i) was used as a railroad station or (ii) is located adjacent to a site that is or was used as a railroad station.
2. It is a certified historic structure or a State-certified historic structure.
3. 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.
4. It is a designated local landmark as certified by a city on or before June 30, 2019.
5. It is located in a development tier one or tier two area, determined as of the date of the eligibility certification.
6. It is located in a designated qualified opportunity zone under sections 1400Z-1 and 1400Z-2 of the Code, determined as of the date of the eligibility certification.
7. It is issued a certificate of occupancy on or before December 31, 2021.
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.
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.
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.
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.

For purposes of this subsection, the term "eligible railroad station" is a site located in this State that satisfies all of the following conditions:

History

(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); 2019-237, s. 3(b).)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3H, see G.S. 105-129.75.

Editor's Note. - Session Laws 2007-491, s. 47, provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Session Laws 2019-237, s. 9, provides: "If any provision of this act and G.S. 143C-5-4 are in conflict, the provisions of this act shall prevail."

Effect of Amendments. - Session Laws 2006-252, s. 2.23, as amended by Session Laws 2006-259, s. 47.5, effective January 1, 2007, substituted "a development tier one or two" for "an enterprise tier one, two, or three" in subdivision (a)(1) and "a development tier three" for "an enterprise tier four or five" in subdivision (a)(2).

Session Laws 2007-491, s. 44(1)a, effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the first sentence of subsection (e). For applicability, see Editor's note.

Session Laws 2008-107, s. 28.4(b), effective for taxable years beginning on or after January 1, 2008, in subsection (a), inserted "of at least three million dollars ($3,000,000)" and "a certified rehabilitation of" in the first sentence; and in subdivisions (a)(1) and (a)(2), inserted "the eligibility".

Session Laws 2019-237, s. 3(b), effective November 1, 2019, added subsection (a1).

§ 105-129.72. (See note for repeal) Credit for nonincome-producing rehabilitated mill property.

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.
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.
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.
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.
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.

History

(2006-40, s. 1; 2006-252, s. 2.24; 2007-491, s. 44(1)a; 2008-107, s. 28.4(c).)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3H, see G.S. 105-129.75.

Editor's Note. - Session Laws 2007-491, s. 47, provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1), as appropriate."

Effect of Amendments. - Session Laws 2006-252, s. 2.24, effective January 1, 2007, in subsection (a), substituted "a development tier one or two" for "an enterprise tier one, two, or three" in the next-to-last sentence and "a development tier three" for "an enterprise tier four or five" in the last sentence.

Session Laws 2007-491, s. 44(1)a, effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the first sentence of subsection (e). For applicability, see Editor's note.

Session Laws 2008-107, s. 28.4(c), effective for taxable years beginning on or after January 1, 2008, in subsection (a), in the first sentence, inserted "of at least three million dollars ($3,000,000)" and "a certified rehabilitation of," and in the next to last sentence, inserted "the eligibility."

§ 105-129.73. (See note for repeal) Tax credited; cap.

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.
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.

History

(2006-40, s. 1.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3H, see G.S. 105-129.75.

§ 105-129.74. Coordination with Historic Rehabilitation Tax Credit.

A taxpayer that claims a credit under this Article may not also claim a credit under Article 3D or 3L of this Chapter with respect to the same activity. The rules and fee schedule adopted under G.S. 105-129.36A or G.S. 105-129.107 apply to this Article.

History

(2006-40, s. 1; 2019-237, s. 3(c).)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3H, see G.S. 105-129.75.

Editor's Note. - Session Laws 2019-237, s. 9, provides: "If any provision of this act and G.S. 143C-5-4 are in conflict, the provisions of this act shall prevail."

Effect of Amendments. - Session Laws 2019-237, s. 3(c), effective November 1, 2019, substituted "Historic Rehabilitation Tax Credit" for "Article 3D of this Chapter" in the section heading; inserted "or 3L" in the first sentence; and inserted "or G.S. 105-129.107" in the second sentence.

§ 105-129.75. Sunset and applicable expenditures.

Sunset. - Except for credits allowed under G.S. 105-129.71(a1), this Article expires January 1, 2015, for rehabilitation projects for which an application for an eligibility certification is submitted on or after that date. Eligibility certifications under this Article expire January 1, 2023.
Delayed Sunset and Applicable Expenditures. - For credits allowed under G.S. 105-129.71(a1), the following applies:
1. The qualified rehabilitation expenditures must be incurred on or after January 1, 2019, and before January 1, 2022.
2. This Article expires, and a tax credit allowed under G.S. 105-127.71(a1) may not be claimed, for rehabilitation projects not completed and placed in service prior to January 1, 2022.

History

(2006-40, s. 1; 2008-107, s. 28.4(d); 2010-31, s. 31.5(a); 2012-36, s. 12(b); 2015-241, s. 32.3(b); 2019-237, s. 3(d).)

Editor's Note. - Session Laws 2019-237, s. 9, provides: "If any provision of this act and G.S. 143C-5-4 are in conflict, the provisions of this act shall prevail."

Effect of Amendments. - Session Laws 2008-107, s. 28.4(d), effective for taxable years beginning on or after January 1, 2008, substituted "January 1, 2011, for rehabilitation projects for which an application for an eligibility certification is submitted on or after that date" for "for qualified rehabilitation expenditures and rehabilitation expenses incurred on or after January 1, 2011."

Session Laws 2010-31, s. 31.5(a), effective June 30, 2010, substituted "January 1, 2014" for "January 1, 2011."

Session Laws 2012-36, s. 12(b), effective June 20, 2012, substituted "January 1, 2015" for "January 1, 2014".

Session Laws 2015-241, s. 32.3(b), effective September 18, 2015, added the last sentence.

Session Laws 2019-237, s. 3(d), effective November 1, 2019, added "and applicable expenditures" in the section heading; designated the existing provision as present subsection (a) and substituted "Sunset. - Except for credits allowed under G.S. 105-129.71(a1), this" for "This" at the beginning; and added subsection (b).

§ 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:

The number of taxpayers that took the credits allowed in this Article.
The amount of rehabilitation expenses and qualified rehabilitation expenditures with respect to which credits were taken.
The total cost to the General Fund of the credits taken.

History

(2010-166, s. 1.8.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.75.

ARTICLE 3I.

§§ 105-129.76 through 105-129.79: Reserved for future codification purposes.

ARTICLE 3J. Tax Credits for Growing Businesses.

(See G.S. 105-129.82(a) for repeal of Article.)

Sec.

§ 105-129.80. (See notes) Legislative findings.

The General Assembly finds that:

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.
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.
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.
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.
The purpose of this Article is to stimulate economic activity and to create new jobs within the State.
The State is in need of a focused tax credit program that encourages and facilitates economic growth and development within the State.
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.

History

(2006-252, s. 1.1.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.82(a).

Temporary 20-year Carryforward For Article 3J Tax Credits. - Session Laws 2012-74, s. 5(c), provides: "Notwithstanding the investment requirement of G.S. 105-129.84(c), 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 million dollars ($100,000,000) worth of business and real property in a development tier one area, any unused portion of a credit under Article 3J of Chapter 105 of the General Statutes 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. This section is effective for taxable years beginning on or after January 1, 2012, and expires for taxable years beginning on or after January 1, 2013."

Editor's Note. - Session Laws 2006-252, s. 1.5, made this Article effective for taxable years beginning on or after January 1, 2007.

Session Laws 2006-252, s. 1.4, provides: "The Department of Commerce shall, in consultation with the North Carolina Rural Center, Inc. and lower-tiered counties, develop additional strategies to enhance economic growth and development in economically distressed areas. The Department shall report on the results of this study to the Joint Legislation Economic Development Oversight Committee by January 1, 2007. For the purposes of this section, 'economically distressed areas' means enterprise tier one areas as defined in G.S. 105-129.3."

Session Laws 2008-134, s. 78, provides: "An employee of the State may provide tax information about tax credits claimed under former Article 3A or current Article 3J of Chapter 105 of the General Statutes to the University of North Carolina at Chapel Hill (University) to enable the University to compile statistical information to fulfill a contractual obligation between the University and the North Carolina General Assembly, on behalf of the Joint Select Committee on Economic Development Incentives established by the President Pro Tempore of the Senate and the Speaker of the House of Representatives on March 2, 2007. In lieu of extracting the needed information from these tax returns, the State may provide a copy of the returns to the University so the University can extract the information. The disclosure allowed by this section is an exception to G.S. 105-259. A person to whom a disclosure is made under this section is subject to the same confidentiality requirements as an employee of the State who has access to tax information."

Legal Periodicals. - For article, "Blinson V. State and the Continued Erosion of the Public Purpose Doctrine in North Carolina," see 87 N.C.L. Rev. 644 (2009).

§ 105-129.81. (See notes) Definitions.

The following definitions apply in this Article:

Agrarian growth zone. - Defined in G.S. 143B-437.010.
Air courier services. - Defined in G.S. 143B-437.01.
Aircraft maintenance and repair. - The provision of specialized maintenance or repair services for commercial aircraft or the rebuilding of commercial aircraft.
Business property. - Tangible personal property that is used in a business and capitalized by the taxpayer for tax purposes under the Code.
Company headquarters. - Defined in G.S. 143B-437.01.
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).
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.
Development tier. - The classification assigned to an area pursuant to G.S. 143B-437.08.
Electronic shopping and mail order houses. - An industry in electronic shopping and mail order houses industry group 4541 as defined by NAICS.
Environmental disqualifying event. - Any of the following occurrences:
1. 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 Environmental Quality 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.
2. 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 Environmental Quality 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 Environmental Quality.
3. 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 Environmental Quality.
Establishment. - Defined in 29 C.F.R. § 1904.46, as it existed on January 1, 2002.
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.
Hub. - Defined in G.S. 105-164.3.
Information technology and services. - Defined in G.S. 143B-437.01.
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.
Manufacturing. - Defined in G.S. 143B-437.01.
Motorsports facility. - A motorsports racetrack classified in the United States racetrack national industry 711212, as defined by NAICS.
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.
NAICS. - Defined in G.S. 105-228.90.
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.
Overdue tax debt. - Defined in G.S. 105-243.1.
Port enhancement zone. - Defined in G.S. 143B-437.013.
Purchase. - Defined in section 179 of the Code.
Related member. - Defined in G.S. 105-130.7A.
Research and development. - An industry in scientific research and development services industry group 5417 as defined by NAICS.
Urban progress zone. - The classification assigned to an area pursuant to G.S. 143B-437.09.
Warehousing. - Defined in G.S. 143B-437.01.
Wholesale trade. - Defined in G.S. 143B-437.01.

History

(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; 2012-79, s. 2.4; 2013-360, s. 15.18(b); 2015-241, s. 14.30(u).)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3J, see G.S. 105-129.82(a).

Editor's Note. - Session Laws 2006-252, s. 1.1, enacted subdivisions (2) and (3) as subdivisions (3) and (2), respectively. They were redesignated at the direction of the Revisor of Statutes to preserve alphabetical order.

Effect of Amendments. - Session Laws 2007-484, s. 33(a), effective July 1, 2007, substituted "G.S. 143B-437.010" for "G.S. 143B-437.10" in subdivision (1).

Session Laws 2010-147, s. 1.3, effective for credits claimed for taxable years beginning on or after January 1, 2007, added subdivision (9a).

Session Laws 2011-302, s. 6, effective for taxable years beginning on or after January 1, 2013, added subdivision (20a).

Session Laws 2011-330, s. 31(b), effective June 27, 2011, in the introductory paragraph of subdivision (13), added "as defined by NAICS"; rewrote subdivision (13)a., which formerly read: "Internet service providers, Web search portals, and data processing subsector 518 as defined by NAICS"; in subdivisions (13)b. and (13)c., deleted "as defined by NAICS" from the end; added subdivision (13)d.; and rewrote the last sentence of subdivision (18), which formerly read: "The North American Industry Classification System adopted by the United States Office of Management and Budget as of December 31, 2002."

§ 105-129.82. (See notes) Sunset; studies.

Sunset. - This Article is repealed effective for business activities that occur on or after January 1, 2014.
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.
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.
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.

History

(2006-252, s. 1.1; 2010-147, s. 1.1; 2012-36, s. 5.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3J, see G.S. 105-129.82(a).

Effect of Amendments. - Session Laws 2010-147, s. 1.1, effective July 22, 2010, substituted "January 1, 2013 " for "January 1, 2011 " in subsection (a).

Session Laws 2012-36, s. 5, effective June 20, 2012, substituted "January 1, 2014 " for "January 1, 2013 " in subsection (a).

§ 105-129.83. (See notes) Eligibility; forfeiture.

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.
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.
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.
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.
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 Environmental Quality 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.
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.
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.
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.
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.
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:
  1. Ownership of more than fifty percent (50%) of the business.
  2. 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.
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.
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.
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.

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.

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.

History

(2006-252, s. 1.1; 2007-491, s. 44(1)a; 2009-54, s. 3; 2010-147, s. 1.4; 2011-302, s. 7; 2015-241, s. 14.30(v).)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3J, see G.S. 105-129.82(a).

Editor's Note. - Session Laws 2006-252, s. 1.1, enacted subdivisions (a)(1) and (a)(2) as subdivisions (a)(2) and (a)(1), respectively. They were redesignated at the direction of the Revisor of Statutes to preserve alphabetical order.

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Effect of Amendments. - Session Laws 2007-491, s. 44(1)a, effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in the next to last sentence in subsection (i). For applicability, see Editor's note.

Session Laws 2010-147, s. 1.4, effective for credits claimed for taxable years beginning on or after January 1, 2007, rewrote subsection (e); and added the second sentence in subsection (i).

Session Laws 2011-302, s. 7, effective for taxable years beginning on or after January 1, 2013, in the first paragraph of subsection (c), inserted "a port enhancement zone" in the fourth sentence; and in subsection ( l ), twice inserted "port enhancement zone."

Session Laws 2015-241, s. 14.30(v), effective July 1, 2015, substituted "Secretary of Environmental Quality" for "Secretary of Environment and Natural Resources" in the last sentence in subsection (e).

§ 105-129.84. (See notes) Tax election; cap; carryforwards; limitations.

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.
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.
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 standard carryforward period rather than the 20-year carryforward period.
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.
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.

History

(2006-252, s. 1.1; 2011-297, s. 4; 2013-414, s. 4.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3J, see G.S. 105-129.82(a).

Effect of Amendments. - Session Laws 2011-297, s. 4, effective for taxable years beginning on or after January 1, 2011, added subsection (e).

Session Laws 2013-414, s. 4, effective August 23, 2013, substituted "standard carryforward" for "five-year carryforward" in the last sentence of subsection (c).

§ 105-129.85. (See notes) Fees and reports.

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.
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.

History

(2006-252, s. 1.1; 2010-166, s. 1.9.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3J, see G.S. 105-129.82(a).

Session Laws 2010-166, s. 1.9, effective July 1, 2010, rewrote the introductory paragraph in subsection (b), which formerly read: "Reports. - The Department of Revenue shall publish by May 1 of each year the following information itemized by credit and by taxpayer for the 12-month period ending the preceding December 31."

§ 105-129.86. (See notes) Substantiation.

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.
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.

History

(2006-252, s. 1.1.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3J, see G.S. 105-129.82(a).

§ 105-129.87. (See notes) Credit for creating jobs.

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.
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.
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.
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.
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.
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.
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.

Area Development Tier Amount of Credit Tier One $12,500 Tier Two 5,000 Tier Three 750

Area Development Tier Threshold Tier One 5 Tier Two 10 Tier Three 15

History

(2006-252, s. 1.1; 2007-527, s. 6; 2011-302, s. 8.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3J, see G.S. 105-129.82(a).

Effect of Amendments. - Session Laws 2007-527, s. 6, effective August 31, 2007, added the sentence preceding the table in subsection (b).

Session Laws 2011-302, s. 8, effective for taxable years beginning on or after January 1, 2013, inserted "a port enhancement zone" throughout the section.

§ 105-129.88. (See notes) Credit for investing in business property.

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:
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.
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.
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.
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.
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.
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.

Area Development Tier Applicable Percentage Tier One 7% Tier Two 5% Tier Three 3.5%

Area Development Tier Threshold Tier One $ -0- Tier Two 1,000,000 Tier Three 2,000,000

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.

History

(2006-252, s. 1.1; 2007-527, ss. 7, 8; 2011-302, s. 9.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3J, see G.S. 105-129.82(a).

Effect of Amendments. - Session Laws 2007-527, ss. 7 and 8, effective August 31, 2007, in subsection (c), added the third sentence, and substituted "business property" for "machinery and equipment" in the sentence preceding the table; and in subsection (e) substituted "out of an urban progress zone" for "to an urban progress zone" near the middle of the first sentence.

Session Laws 2011-302, s. 9, effective for taxable years beginning on or after January 1, 2013, in the third sentence of subsection (a) and twice in subsections (c) and (e), inserted "a port enhancement zone."

§ 105-129.89. (See notes) Credit for investment in real property.

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.
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.
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.
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.
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.

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.

History

(2006-252, s. 1.1.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3J, see G.S. 105-129.82(a).

§§ 105-129.90 through 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.)

Sec.

§ 105-129.95. (Repealed for taxable years beginning on or after January 1, 2038 - see note) Definitions.

The following definitions apply in this Article:

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.
Eligible railroad intermodal facility. - A railroad intermodal facility whose costs of construction exceed thirty million dollars ($30,000,000).
Intermodal facility. - A facility where freight is transferred from one mode of transportation to another.
Railroad intermodal facility. - An intermodal facility whose primary purpose is to transfer freight between a railroad and another mode of transportation.

History

(2007-323, s. 31.23(a); 2007-345, s. 14.7(a).)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3K, see G.S. 105-129.99.

Editor's Note. - Session Laws 2007-323, s. 31.23(e), made this Article effective for taxable years beginning on or after January 1, 2007, and applicable to eligible railroad intermodal facilities placed into service on or after January 1, 2007.

Session Laws 2007-323, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2007'."

Session Laws 2007-323, s. 32.5 is a severability clause.

Effect of Amendments. - Session Laws 2007-345, s. 14.7(a), effective for taxable years beginning on or after January 1, 2007, in subdivision (1), deleted "and" following "other structures" and inserted "and constructing and equipping rail tracks to the railroad intermodal facility that are necessary to access and support facility operations."

§ 105-129.96. (Repealed for taxable years beginning on or after January 1, 2038 - see note) Credit for constructing a railroad intermodal facility.

(Effective for taxable years beginning before January 1, 2017) 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.

(Effective for taxable years beginning on or after January 1, 2017) Credit. - A taxpayer that constructs or leases an eligible railroad intermodal facility in this State 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 if the facility is placed in service in this State during the taxable year. No credit is allowed under this section to the extent the cost of the eligible railroad intermodal facility was provided by public funds.
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.
(Effective for taxable years beginning on or after January 1, 2017) No Double Credit. - A taxpayer may not take the credit allowed in this section for an eligible railroad intermodal facility 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 facility.

History

(2007-323, s. 31.23(a); 2017-39, s. 3(a).)

Subsection (a) Set Out Twice. - The first version of subsection (a) set out above is effective for taxable years beginning before January 1, 2017. The second version of subsection (a) set out above is effective for taxable years beginning on and after January 1, 2017.

Article has a Delayed Repeal Date. - For delayed repeal of Article 3K, see G.S. 105-129.99.

Effect of Amendments. - Session Laws 2017-39, s. 3, effective for taxable years beginning on or after January 1, 2017, in subsection (a), deleted "and places it in service during the taxable year" preceding "is allowed a tax," inserted "if the facility is placed in the service in this State during the taxable year" at the end of the first sentence, and added the last sentence; and added subsection (c).

§ 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.

History

(2007-323, s. 31.23(a).)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3K, see G.S. 105-129.99.

§ 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:

The number of taxpayers that claimed a credit allowed in this Article.
The amount of each credit claimed and the taxes against which it was applied.
The total cost to the General Fund of the credits claimed.

History

(2007-323, s. 31.23(a); 2010-166, s. 1.10.)

Article has a Delayed Repeal Date. - For delayed repeal of Article 3K, see G.S. 105-129.99.

Effect of Amendments. - Session Laws 2010-166, s. 1.10, effective July 1, 2010, in the section catchline, substituted "Report" for "Reports"; and rewrote the introductory paragraph, which formerly read: "The Department of Revenue must publish by May 1 of each year the following information itemized by taxpayer for the 12-month period ending the preceding December 31."

§ 105-129.99. Sunset.

This Article is repealed effective for taxable years beginning on or after January 1, 2038.

History

(2007-323, s. 31.23(a).)

§§ 105-129.100 through 105-129.104: Reserved for future codification purposes.

ARTICLE 3L. Historic Rehabilitation Tax Credits Investment Program.

(See G.S. 105-129.110 for repeal of this Article.)

Sec.

§ 105-129.105. (See note for repeal) Credit for rehabilitating income-producing historic structure.

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 the sum of the following:
1. Base amount. - The percentage of qualified rehabilitation expenditures at the levels provided in the table below:
2. Development tier bonus. - An amount equal to five percent (5%) of qualified rehabilitation expenditures not exceeding twenty million dollars ($20,000,000) if the certified historic structure is located in a development tier one or two area.
3. Targeted investment bonus. - An amount equal to five percent (5%) of qualified rehabilitation expenditures not exceeding twenty million dollars ($20,000,000) if the certified historic structure is located on an eligible targeted investment site.
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 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.
Definitions. - The following definitions apply in this section:
1. Certified historic structure. - Defined in section 47 of the Code.
2. Development tier area. - Defined in G.S. 143B-437.08.
3. Eligibility certification. - A certification obtained from the State Historic Preservation Officer that the site comprises an eligible targeted investment site.
4. Eligible targeted investment site. - A site located in this State that satisfies all of the following conditions:
  1. 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.
  2. It is a certified historic structure.
  3. It has been at least sixty-five percent (65%) vacant for a period of at least two years immediately preceding the date the eligibility certification is made.
5. Pass-through entity. - Defined in G.S. 105-228.90.
6. Qualified rehabilitation expenditures. - Defined in section 47 of the Code.
7. State Historic Preservation Officer. - The Deputy Secretary of the Office of Archives and History of the North Carolina Department of Natural and Cultural Resources, or the Deputy Secretary's designee, who acts to administer the historic preservation programs within the State.
8. Targeted investment. - Qualified rehabilitation expenditures on a certified historic structure that is located on an eligible targeted investment site.
Limitations. - The amount of credit allowed under this section with respect to qualified rehabilitation expenditures for an income-producing certified historic structure may not exceed four million five hundred thousand dollars ($4,500,000).
2014 and 2015 Expenses. - A taxpayer is eligible for a credit under this section for taxable years beginning on or after January 1, 2016, for qualifying rehabilitation expenditures that were incurred in 2014 and 2015 if all of the following conditions are met:
1. The certified historic structure is located in a Tier 1 or a Tier 2 county.
2. The certified historic structure is owned by a city.
3. The qualifying rehabilitation activity commenced in 2014.
4. A certificate of occupancy is issued on or before December 31, 2015.
5. The taxpayer meets all of the other conditions in this section.

Expenses Up to Rate Over 0 $10 million 15.00% $10 million $20 million 10.00%

History

(2015-241, ss. 14.30(c), 32.3(a); 2015-264, s. 54.5(a), (b); 2017-102, s. 33.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.110.

Editor's Note. - Session Laws 2015-241, s. 32.3(c), as amended by Session Laws 2014-264, s. 54.5(b), as amended by Session Laws 2017-102, s. 33, provides, in part: "Subsection (a) of this section [which enacted this Article] becomes effective January 1, 2016, and applies to qualified rehabilitation expenditures and rehabilitation expenses incurred on or after that date, except as otherwise provided by law."

Session Laws 2015-241, s. 32.3(a), enacted this Article as G.S. 105-129.100 through 105-129.105. It has been redesignated as G.S. 105-129.105 through 105-129.110 at the direction of the Revisor of Statutes.

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Session Laws 2015-264, s. 54.5(b), provided: "Section 32.2(c) of S.L. 2015-241 reads as rewritten:" when, in fact, it is Session Laws 2015-241, s. 32.3(c) that is set out in the text of the amendment. At the direction of the Revisor of Statutes, the amendment was not given effect. If the amendment had taken effect, the provision would have read, in part: "Subsection (a) of this section becomes effective January 1, 2016, and applies to qualified rehabilitation expenditures and rehabilitation expenses incurred on or after that date, except as otherwise provided by law." Session Laws 2017-102, s. 33, effective July 12, 2017, corrected the reference by substituting "Section 32.3(c)" for "Section 32.2(c)" in the lead-in language of Session Laws 2015-264, s. 54.5(b).

Session Laws 2015-264, s. 54.5(c) made the amendment to this section by Session Laws 2015-264, s. 54.5(a), applicable to credits that may be claimed for taxable years beginning on or after January 1, 2016.

Session Laws 2015-264, s. 91.7 is a severability clause.

Effect of Amendments. - Session Laws 2015-241, s. 14.30(c), effective July 1, 2015, substituted "Department of Natural and Cultural Resources" for "Department of Cultural Resources" in subdivision (c)(7).

Session Laws 2015-264, s. 54.5(a), effective October 1, 2015, added subsection (e). For applicability, see Editor's note.

§ 105-129.106. (See note for repeal) Credit for rehabilitating non-income-producing historic structure.

Credit. - A taxpayer who is not allowed a federal income tax credit under section 47 of the Code and who has rehabilitation expenses of at least ten thousand dollars ($10,000) for a State-certified historic structure located in this State is allowed a credit equal to fifteen percent (15%) of the rehabilitation expenses.
(Effective for taxable years beginning before January 1, 2017) Limitations. - The amount of credit allowed under this section with respect to rehabilitation expenses for a non-income-producing certified historic structure may not exceed twenty-two thousand five hundred dollars ($22,500) per discrete property parcel. In the event that the taxpayer is the transferee of a State-certified historic structure for which rehabilitation expenses were made, the taxpayer as transferee is allowed a credit under this section only if the transfer takes place before the structure is placed in service. In this event, no other taxpayer may claim such credit. A taxpayer is allowed to claim a credit under this section no more than once in any five-year period, carryovers notwithstanding.
(Effective for taxable years beginning on or after January 1, 2017) Limitations. - The amount of credit allowed under this section with respect to rehabilitation expenses for a non-income-producing certified historic structure may not exceed twenty-two thousand five hundred dollars ($22,500) per discrete property parcel. In the event that the taxpayer is the transferee of a State-certified historic structure for which rehabilitation expenses were made, the taxpayer as transferee is allowed a credit under this section for the rehabilitation expenses made by the transferor only if the transfer takes place before the structure is placed in service. In this event, the transferor must provide the transferee with documentation detailing the amount of rehabilitation expenses and credit. No other taxpayer may claim such credit. A taxpayer is allowed to claim a credit under this section no more than once in any five-year period, carryovers notwithstanding.
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. Discrete property parcel. - A lot or tract described by metes and bounds, a deed or plat of which has been recorded in the deed records of the county in which the property is located, and on which a State-certified historic structure is located, or a single condominium unit in a State-certified historic structure.
3. Placed in service. - The later of the date on which the rehabilitation is completed or the date on which the property is used for its intended purpose.
4. Rehabilitation expenses. - Expenses incurred in the certified rehabilitation of a certified historic structure and added to the property's basis. The expenses must be incurred within any 24-month period per discrete property parcel. The term does not include the cost of acquiring the property, the cost attributable to the enlargement of an existing building, the cost of site work expenditures, or the cost of personal property.
5. 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.
6. State Historic Preservation Officer. - Defined in G.S. 105-129.105(c)(7).

History

(2015-241, s. 32.3(a); 2015-264, s. 54.5(b); 2017-102, s. 33; 2017-204, s. 1.4(a).)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.110.

Editor's Note. - Session Laws 2017-204, s. 7.1, is a severability clause.

Effect of Amendments. - Session Laws 2017-204, s. 1.4(a), effective for taxable years beginning on or after January 1, 2017, in subsection (b), inserted "for the rehabilitation expenses made by the transferor" in the first sentence, substituted "the transferor must provide the transferee with documentation detailing the amount of rehabilitation expenses and credit" for "no" in the second sentence, and added "No" at the beginning of the present third sentence.

§ 105-129.107. (See note for repeal) Rules; fees.

Rules. - The North Carolina Historical Commission, in consultation with the State Historic Preservation Officer, may adopt rules needed to administer any certification process required by this Article.
Fees. - The North Carolina Historical Commission, in consultation with the State Historic Preservation Officer, may adopt a schedule of fees for providing any certifications required by this Article, or Article 3D or 3H as they provided as of December 31, 2014. In establishing the fee schedule, the Commission shall consider the administrative and personnel costs incurred by the Department of Natural and 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 Natural and Cultural Resources and must be used for performing its duties under this Article.

History

(2015-241, ss. 14.30(c), 32.3(a); 2015-264, s. 54.5(b); 2017-102, s. 33.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.110.

§ 105-129.108. (See note for repeal) Tax credited; credit limitations.

Tax Credited. - The credits provided in this Article are allowed against the franchise tax imposed in Article 3 of this Chapter, the income taxes levied in Article 4 of this Chapter, or the gross premiums tax imposed in Article 8B of this Chapter. The taxpayer may take a credit 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, and this election is binding. Any carryforwards of a credit must be claimed against the same tax.
Return. - A taxpayer may claim a credit allowed by this Article on a return filed for the taxable year in which the certified historic structure was placed into service. When an income-producing certified historic structure as defined in G.S. 105-129.105 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.
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 payments 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.
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. 105-129.105 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.
Forfeiture for Change in Ownership. - If an owner of a pass-through entity that has qualified for the credit allowed under G.S. 105-129.105 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.
Exceptions to Forfeiture. - Forfeiture as provided in subsection (e) 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.
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.
Substantiation. - To claim a credit allowed by this Article, the taxpayer must provide any information required by the Secretary of Revenue, including a copy of the certification obtained from the State Historic Preservation Office verifying that the historic structure has been rehabilitated in accordance with the requirements set out in this Article, and a copy of the eligibility certification if the historic structure is located in an eligible targeted investment site and the targeted investment bonus is claimed. 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 the 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.
No Double Credit. - A taxpayer that claims a credit under this Article may not also claim a credit under Article 3D or Article 3H of this Chapter with respect to the same activity.

History

(2015-241, s. 32.3(a); 2015-264, s. 54.5(b); 2015-268, s. 10.1(b); 2017-102, s. 33.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.110.

Effect of Amendments. - Session Laws 2015-268, s. 10.1(b), effective for taxable years beginning on or after January 1, 2016, substituted "targeted investment bonus" for "target investment bonus" near the end of the first sentence of subsection (h).

§ 105-129.109. (See note for repeal) Report; tracking.

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.
The Department shall include in the economic incentives report required by G.S. 105-256 the following information:
1. The total amount of tax credits claimed and the total amount of tax credits taken against current taxes, by type of tax, during the relevant tax year.
2. The total amount of tax credits carried forward, by type of tax.

History

(2015-241, s. 32.3(a); 2015-264, s. 54.5(b); 2017-102, s. 33.)

Article has a Delayed Repeal Date. - For repeal of this Article, see G.S. 105-129.110.

§ 105-129.110. Sunset.

This Article expires for qualified rehabilitation expenditures and rehabilitation expenses incurred on or after January 1, 2024. For qualified rehabilitation expenditures and rehabilitation expenses incurred prior to January 1, 2024, this Article expires for property not placed in service by January 1, 2032.

History

(2015-241, s. 32.3(a); 2015-264, s. 54.5(b); 2017-102, s. 33; 2018-5, s. 38.10(k); 2019-237, s. 3(a).)

Editor's Note. - Session Laws 2018-5, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2018.'"

Session Laws 2018-5, s. 39.7, is a severability clause.

Session Laws 2019-237, s. 9, provides: "If any provision of this act and G.S. 143C-5-4 are in conflict, the provisions of this act shall prevail."

Effect of Amendments. - Session Laws 2018-5, s. 38.10(k), effective June 12, 2018, added the second sentence.

Session Laws 2019-237, s. 3(a), effective November 1, 2019, substituted "January 1, 2024" for "January 1, 2020" at the end of the first sentence; in the second sentence, substituted "January 1, 2024" for "January 1, 2020" near the middle and substituted "January 1, 2032" for "January 1, 2028" at the end.

ARTICLE 4. Income Tax.

Part 1. Corporation Income Tax.

Sec.

Part 1A. S Corporation Income Tax.

Part 2. Individual Income Tax.

Part 3. Income Tax - Estates, Trusts, and Beneficiaries.

Part 4. Income Tax Credits for Property Taxes.

Part 5. Tax Credits for Qualified Business Investments.

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.

History

(1939, c. 158, s. 300; 1967, c. 1110, s. 3; 1998-98, ss. 42, 61, 68.)

Editor's Note. - Session Laws 2003-415, s. 3, provides: "The Department of Revenue shall modify the tax credit form for income tax filers to provide separate lines for each of the tax credits currently aggregated in a single line, so that the Department may capture data about the fiscal impact of the specific credits."

Session Laws 2016-23, s. 2(a), provides: "Taxes. - The following provisions apply to taxes affected by boundary certification:

"(1) Neither the State nor a subdivision of the State may assess a tax on a person for activities occurring prior to the date of certification where the basis of the assessment is the certification.

"(2) The State and its subdivisions may assess a tax for activities occurring on or after the date of certification subject to the following conditions:

"a. For taxes imposed for a taxable period, the tax may not be imposed for a period beginning prior to the date of certification.

"b. For sales and use taxes for an item that is provided and billed on a monthly or other periodic basis, the tax may not be assessed for periods beginning prior to the date of certification.

"(3) A person may not seek a refund for activities occurring prior to the date of certification where the basis of the refund is the certification."

Session Laws 2016-23, s. 12(a) is a severability clause.

Legal Periodicals. - For discussion of changes made in this Article by the Session Laws of 1947 and 1949, respectively, see 25 N.C.L. Rev. 467 (1947); 27 N.C.L. Rev. 482 (1949).

For note, "A Matter of (Statutory) Interpretation: North Carolina Recognizes the Functional Test for Corporate Taxation in Polaroid Corp. v. Offerman," see 77 N.C. L. Rev. 2326 (1999).

§ 105-130.1. Purpose.

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.
Critical Infrastructure Disaster Relief. - A nonresident business that solely performs disaster-related work in this State during a disaster response period at the request of a critical infrastructure company is not considered to be doing business in this State for purposes of this Part. The definitions and provisions in G.S. 166A-19.70A apply in this subsection.

The tax imposed upon the net income of corporations in this Part is in addition to all other taxes imposed under this Subchapter.

History

(1939, c. 158, s. 301; 1967, c. 1110, s. 3; 1998-98, s. 69; 2019-187, s. 1(f).)

Editor's Note. - Session Laws 2019-187, s. 3, made the amendment of subsection (a) and the addition of subsection (b) by Session Laws 2019-187, s. 1(f), effective August 1, 2019, and applicable to disaster declarations on or after that date.

Effect of Amendments. - Session Laws 2019-187, s. 1(f), added "(a) Purpose. - " at the beginning of the previously existing provisions; and added subsection (b). For effective date and applicability, see editor's note.

§ 105-130.2. Definitions.

The following definitions apply in this Part:

Affiliate. - A corporation is an affiliate of another corporation when both are directly or indirectly controlled by the same parent corporation or by the same or associated financial interests by stock ownership, interlocking directors, or by any other means whatsoever, whether the control is direct or through one or more subsidiary, affiliated, or controlled corporations.
Code. - Defined in G.S. 105-228.90.
Corporation. - A joint-stock company or association, an insurance company, a domestic corporation, a foreign corporation, or a limited liability company.
C Corporation. - A corporation that is not an S Corporation.
Department. - The Department of Revenue.
Domestic corporation. - A corporation organized under the laws of this State.
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.
Foreign corporation. - Any corporation other than a domestic corporation.
Gross income. - Defined in section 61 of the Code.
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.
Limited liability company. - Either a domestic limited liability company organized under Chapter 57D 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.
Parent. - A corporation is a parent of another corporation when, directly or indirectly, it controls the other corporation by stock ownership, interlocking directors, or by any other means whatsoever exercised by the same or associated financial interests, whether the control is direct or through one or more subsidiary, affiliated, or controlled corporations.
S Corporation. - Defined in G.S. 105-131(b).
Secretary. - The Secretary of Revenue.
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.
Subsidiary. - A corporation is a subsidiary of another corporation when, directly or indirectly, it is subject to control by the other corporation by stock ownership, interlocking directors, or by any other means whatsoever exercised by the same or associated financial interest, whether the control is direct or through one or more subsidiary, affiliated, or controlled corporations.
Taxable year. - Income year.
Taxpayer. - A corporation subject to the tax imposed by this Part.

History

(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); 2012-79, s. 1.14(b); 2013-157, s. 27.)

Editor's Note. - Session Laws 1993, c. 354, s. 12 originally enacted subdivision (5) as subdivision (5a), and redesignated subdivisions (5a), (5b), and (5c) as (5b), (5c), and (5d), respectively. Subdivision (5) has been redesignated as (4a), subdivision (5a) as (5), and (5a), (5b), and (5c) have not been changed, at the direction of the Revisor of Statutes.

Effect of Amendments. - Session Laws 2006-162, s. 3(a), effective July 24, 2006, added subdivision (4a) and redesignated former subdivision (4a) as present subdivision (4b).

Session Laws 2012-79, s. 1.14(b), effective June 26, 2012, added present subdivision (1), renumbered former subdivisions (1), (1a), (1b), (1c), (2), (3), (4), (4a), (4b), and (5) as subdivisions (2) through (11), respectively; added subdivision (12), renumbered former subdivisions (5a), (5b) and (5c) as subdivisions (13) through (15), respectively; added subdivision (16); and renumbered former subdivisions (5d) and (6) as subdivisions (17) and (18), respectively.

Session Laws 2013-157, s. 27, effective January 1, 2014, substituted "Chapter 57D" for "Chapter 57C" in subsection (11).

CASE NOTES

Cited in Liebes v. Guilford County Dep't of Public Health (In re Civil Penalty), 213 N.C. App. 426, 724 S.E.2d 70, review denied, 718 S.E.2d 396, 2011 N.C. LEXIS 934 (2011).

§ 105-130.3. (Effective for taxable years beginning on or after January 1, 2017, and before January 1, 2019) Corporations.

A tax is imposed on the State net income of every C Corporation doing business in this State at the rate of three percent (3%). An S Corporation is not subject to the tax levied in this section.

History

(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; 2013-316, ss. 2.1(a), 2.2(a); 2015-241, s. 32.13(a); 2017-57, s. 38.5(a).)

Section Set Out Twice. - The section above is in effect for taxable years beginning on or after January 1, 2017 and before January 1, 2019. For this section as in effect for taxable years beginning on or after January 1, 2019, see the following section, also numbered G.S. 105-130.3.

Session Laws 2013-316, s. 4.2(a), as amended by Session Laws 2015-6, s. 2.4(b), provides: "The Utilities Commission must adjust the rate set for the following utilities:

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Session Laws 2017-57, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2017.'"

Session Laws 2017-57, s. 39.6, is a severability clause.

Effect of Amendments. - Session Laws 2013-316, s. 2.1(a), effective for taxable years beginning on or after January 1, 2014, added "at the rate of six percent (6%)" at the end of the first sentence and deleted the former third sentence, which read "The tax is a percentage of the taxpayer's State net income computed as follows" and the table thereafter.

Session Laws 2013-316, s. 2.2(a), effective for taxable years beginning on or after January 1, 2015, substituted "five percent (5%)" for "six percent (6%)" in the first sentence.

Session Laws 2015-241, s. 32.13(a), effective for taxable years beginning on or after January 1, 2016, substituted "four percent 4%" for "five percent (5%)" at the end of the first sentence.

Session Laws 2017-57, s. 38.5(a), effective for taxable years beginning on or after January 1, 2017, substituted "three percent (3%)" for "four percent (4%)" at the end of the first sentence.

Legal Periodicals. - For article, "Foreign Corporations in North Carolina: The 'Doing Business' Standards of Qualification, Taxation, and Jurisdiction," see 16 Wake Forest L. Rev. 711 (1980).

For article, "A Time for Action: Reforming the North Carolina Tax Code," see 88 N.C.L. Rev. 1A (2010).

CASE NOTES

Every corporation doing business in North Carolina is required to pay an annual income tax equivalent to 6% of its net taxable income. Gulf Oil Corp. v. Clayton, 267 N.C. 15, 147 S.E.2d 522 (1966), decided under G.S. 105-134 and G.S. 105-140 prior to the 1967 amendments thereto. G.S. 105-140 was repealed by S.L. 1989, c. 728, s. 1.3

"Taxable Income" Defined. - Under the Internal Revenue Code, "taxable income" means gross income minus specified allowable deductions. Mutual Sav. & Loan Ass'n v. Lanier, 279 N.C. 299, 182 S.E.2d 368 (1971).

Income Tax and Franchise Tax Distinguished. - A comparison of Article 3 of this Chapter, relating to franchise taxes, and Article 4, relating to income taxes, indicates a clear legislative intent to differentiate between these two types of taxes, for a clear distinction has been made by the General Assembly between an excise tax imposed on domestic and foreign corporations for the privilege of transacting business within the State, and an income tax on net corporate income, which is based on a past fact of earned net profits. The statutes under which these taxes were assessed in the instant case in precise words preclude a contention that it was the legislative intent that the taxes assessed and paid here were excise or privilege taxes. ET & WNC Transp. Co. v. Currie, 248 N.C. 560, 104 S.E.2d 403 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, rehearing denied, 359 U.S. 976, 79 S. Ct. 874, 3 L. Ed. 2d 843 (1959), construing § 105-134 prior to the 1967 amendment.

Foreign Corporation Taxed on Income Earned in State. - The incidence of the tax on a foreign corporation is that part of its net income earned within North Carolina by reason of its interstate business, and reasonably attributable to its interstate business done or performable within the borders of North Carolina, and not upon its franchise to engage in interstate business in North Carolina. ET & WNC Transp. Co. v. Currie, 248 N.C. 560, 104 S.E.2d 403 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, rehearing denied, 359 U.S. 976, 79 S. Ct. 874, 3 L. Ed. 2d 843 (1959), construing § 105-134 prior to the 1967 amendment.

North Carolina Secretary of Revenue did not exceed his authority in imposing franchise and income taxes on out-of-state trademark holding companies that entered into licensing agreements with related retail companies that operated in North Carolina, whereby the retail companies paid the holding companies royalties for the use of the trademarks in North Carolina; the holding companies were doing business in North Carolina, and the Secretary's attempt to assess the taxes did not offend the Commerce Clause of the United States Constitution. A&F Trademark, Inc. v. Tolson, 167 N.C. App. 150, 605 S.E.2d 187 (2004), appeal dismissed, 359 N.C. 320, - S.E.2d - (2005), cert. denied, - U.S. - , 126 S. Ct. 353, 163 L. Ed. 2d 62 (2005).

Cited in Fieldcrest Mills, Inc. v. Coble, 290 N.C. 586, 227 S.E.2d 562 (1976); Dunn v. State, 179 N.C. App. 753, 635 S.E.2d 604 (2006); Midrex Techs. v. N.C. Dep't of Revenue, 369 N.C. 250, 794 S.E.2d 785 (2016).

§ 105-130.3. (Effective for taxable years beginning on or after January 1, 2019) Corporations.

A tax is imposed on the State net income of every C Corporation doing business in this State at the rate of two and one-half percent (2.5%). An S Corporation is not subject to the tax levied in this section.

History

Section Set Out Twice. - The section above is in effect for taxable years beginning on or after January 1, 2019. For this section as in effect for taxable years beginning on or after January 1, 2017, and before January 1, 2019, see the preceding sections, also numbered G.S. 105-130.3.

Session Laws 2013-316, s. 4.2(a), as amended by Session Laws 2015-6, s. 2.4(b), provides: "The Utilities Commission must adjust the rate set for the following utilities:

Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'"

Session Laws 2015-241, s. 33.6, is a severability clause.

Session Laws 2017-57, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2017.'"

Session Laws 2017-57, s. 39.6, is a severability clause.

Session Laws 2013-316, s. 2.2(a), effective for taxable years beginning on or after January 1, 2015, substituted "five percent (5%)" for "six percent (6%)" in the first sentence.

Session Laws 2015-241, s. 32.13(a), effective for taxable years beginning on or after January 1, 2016, substituted "four percent 4%" for "five percent (5%)" at the end of the first sentence.

Session Laws 2017-57, s. 38.5(b), effective for taxable years beginning on or after January 1, 2019, substituted "two and one-half percent (2.5%)" for "three percent (3%)" at the end of the first sentence.

Legal Periodicals. - For article, "Foreign Corporations in North Carolina: The 'Doing Business' Standards of Qualification, Taxation, and Jurisdiction," see 16 Wake Forest L. Rev. 711 (1980).

For article, "A Time for Action: Reforming the North Carolina Tax Code," see 88 N.C.L. Rev. 1A (2010).

CASE NOTES

§ 105-130.3A. Expired.

Editor's Note. - This section expired for taxable years beginning on or after January 1, 1995, pursuant to Session Laws 1991, c. 689, s. 357(2).

§ 105-130.3B. Expired.

History

(2009-451, s. 27A.1(a); expired pursuant to its own terms effective for taxable years beginning on or after January 1, 2011.)

Editor's Note. - Former G.S. 105-130.3B pertained to income tax surtax.

§ 105-130.3C: Repealed by Session Laws 2017-57, s. 38.5(c), effective June 28, 2017.

History

(2013-316, s. 2.2(b); 2014-100, s. 37.1(a); 2015-241, s. 32.13(b); 2015-268, s. 10.1(f); repealed by 2017-57, s. 38.5(c), effective June 28, 2017.)

Editor's Note. - Former G.S. 105-130.3C pertained to rate reduction trigger.

Session Laws 2017-57, s. 1.1, provides: "This act shall be known as the 'Current Operations Appropriations Act of 2017.'"

Session Laws 2017-57, s. 39.6, is a severability clause.

§ 105-130.4. Allocation and apportionment of income for corporations.

Definitions. - The following definitions apply in this section:
1. Apportionable income. - All income that is apportionable under the United States Constitution, including income that arises from either of the following:
  1. Transactions and activities in the regular course of the taxpayer's trade or business.
  2. Tangible and intangible property if the acquisition, management, employment, development, or disposition of the property is or was related to the operation of the taxpayer's trade or business.
2. Business activity. - Any activity by a corporation that would establish nexus, except as limited by 15 U.S.C. § 381.
3. Casual sale of property. - The sale of any property that was not purchased, produced, or acquired primarily for sale in the corporation's regular trade or business.
4. Commercial domicile. - The principal place from which the trade or business of the taxpayer is directed or managed.
5. Compensation. - Wages, salaries, commissions and any other form of remuneration paid to employees for personal services.
6. Nonapportionable income. - All income other than apportionable income.
7. Sales. - All gross receipts of the corporation except for the following receipts:
  1. Receipts from a casual sale of property.
  2. Receipts allocated under subsections (c) through (h) of this section.
  3. Receipts exempt from taxation.
  4. The portion of receipts realized from the sale or maturity of securities or other obligations that represents a return of principal.
  5. The portion of receipts from financial swaps and other similar financial derivatives that represents the notional principal amount that generates the cash flow traded in the swap agreement.
  6. Receipts in the nature of dividends subtracted under G.S. 105-130.5(b)(3a), (3b), and dividends excluded for federal tax purposes.
8. State. - A 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.
Multistate Corporations. - 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 either of the following applies:
1. The corporation's business activity in that state subjects it to a net income tax or a tax measured by net income.
2. 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.
Nonapportionable Income. - 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.
Rents and Royalties. - Net rents and royalties are allocable to this State as follows:
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:
  1. If and to the extent that the property is utilized in this State, or
  2. 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 y